Feb 9/GLD and SLV remain constant in inventory/Greek crisis intensifies as many expect a GREXIT

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1240.80 up $6.90   (comex closing time)
Silver: $17.05 up 37 cents  (comex closing time)

In the access market 5:15 pm



Gold $1239.50
silver $17.00



Gold/silver trading:  see kitco charts on right side of the commentary.


Today gold and silver had a good day trading as both finished in positive territory.  The big news of the day is the Greek crisis and many are now believing that Greece will exit from the Euro as they will definitely run out of cash by the end of February.  The Greeks are steadfast in not wanting to continue the bailouts as the nations gets deeper and deeper into hardship.  The GREXIT will no doubt cause severe harm to the Western bankers as not only will 320 billion euros worth of debt  evaporate but also the trillions of dollars worth of derivatives which may bring down many of the bankers.  Remember also that the bankers are suffering major losses from oil and from hugh short dollar losses combined with yen carry losses.  This Wednesday should be exciting to watch as the EU and Greece decide each other’s fate!!.


Following is a brief outline on gold and silver comex figures for today:

The gold comex today had a poor delivery day, registering 4 notices served for 400 oz.  Silver comex registered 5 notices for 25,000 oz .


Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 251.00 tonnes for a loss of 52 tonnes over that period.


In silver, the open interest surprisingly rose by 1,429 contracts as Friday’s silver price was crushed by 46 cents. The total silver OI continues to  remain relatively high with today’s reading at 166,725. contracts. The bankers are not happy campers tonight with respect to the high OI in silver.

We had 5 notices filed  for 25,000 oz

In gold  we  had a huge fall in OI as gold was trashed by $28.10 on Friday.  The total comex gold OI rests tonight at 401,110 for a loss of 13,392 contracts.  Today we had a small 4 notices served upon for 400 oz.




Today, we had no changes in gold inventory at the GLD/Inventory at 773.31 tonnes



In silver, /SLV  no change in  of silver inventory to the SLV/Inventory 320.327



We have a few important stories to bring to your attention today…

Let’s head immediately to see the major data points for today


First: GOFO rates: the crooks are no longer reporting.



Let us now head over to the comex and assess trading over there today.

Here are today’s comex results:



The total gold comex open interest fell by a gigantic 13,392 today from 414,502 down to 401,110 with gold down by $28.10 on Friday (at the comex close).  We are now in the big delivery month of the active February contract  and here the OI fell by 56 contracts  from 842 down to 786. We had 57 contracts served on Friday.  Thus we gained 1  contract or 100 oz will stand for delivery for the February contract.  The next contract month of March saw it’s OI fall by 37 contracts down to 1344.  The next big active delivery month is April and here the OI fell by 11,298 contracts down to 276,159. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est)  was poor at 60,616. The confirmed volume on Friday ( which includes the volume during regular business hours  + access market sales the previous day) was fair at 216,068 contracts. However on Friday it has much help from the HFT boys. Today we had 4 notices filed for 400 oz .

And now for the wild silver comex results.  Silver OI surprisingly rose by a huge 1429 contracts from  165,296 up to 166,725 as silver was down by 46 cents on Friday. The bankers were not able to shake any silver leaves from the silver tree. I guess the CME needs to resort to another silver margin hike. We are now in the non active contract month of February and here the OI fell by 67 contracts down to 25.   We had 67 notices filed yesterday so we neither gained nor lost any silver contracts standing for delivery in this February contract month.   The next big active contract month is March and here the OI fell by only 2,731 contracts down to 90,242. The estimated volume today was awful at 21,361 contracts  (just comex sales during regular business hours). The confirmed volume on Friday was excellent (regular plus access market)  at 75,852 contracts. It is strange that with all that volume they cannot get the silver longs to budge from the tree. We had 5 notices filed for 25,000 oz today.

February initial standings


Feb 9.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz 99,869.807 oz (Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 5,281.195 oz  Scotia
No of oz served (contracts) today 4 contracts (400 oz)
No of oz to be served (notices)  782 contracts (78,200 oz)
Total monthly oz gold served (contracts) so far this month  549 contracts(54,900 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 105,335.4 oz

Today, we had 0 dealer transactions

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz



we had 0 dealer deposit:



total dealer deposit: nil oz



we had 1 customer withdrawals

i) Out of Scotia:  99,864.807 oz



total customer withdrawal: 99,864.807  oz



we had 1 customer deposit:

i) Into Scotia:  5,281.195 oz

total customer deposits;  5,281.195 oz

We had 0 adjustments



Today, 0 notices was issued from JPMorgan dealer account and 0  notices were issued from their client or customer account. The total of all issuance by all participants equates to 4 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 4 notices were stopped (received) by JPMorgan customer account.

To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (549) x 100 oz  or 54,900 oz , to which we add the difference between the OI for the front month of February (786 contracts)  minus the number of notices served today x 100 oz (4 contracts) x 100 oz = 133,100 oz, the amount of gold oz standing for the February contract month.( 4.1399 tonnes)

Thus the initial standings:

549 (notices filed for the month x( 100 oz) or 54,900 oz + { 786 (OI for the front month of Feb)- 4 (number of notices served upon today) x 100 oz per contract} = 133,100 oz total number of ounces standing for the February contract month. (4.14 tonnes)


we gained 1 contract or an additional 100 oz will  stand in this February contract month.



Total dealer inventory: 805,240.309 oz or 25.04 tonnes

Total gold inventory (dealer and customer) = 8.072 million oz. (251.07) tonnes)


Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 52 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real.  I cannot see continual additions of strictly kilobars.







And now for silver

 February silver: initial standings

feb 9 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 1,352,494.395  oz (CNT,Delaware, Scotia, HSBC )
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 7,124.79 oz (Delaware,Scotia)
No of oz served (contracts) 5 contracts  (25,000 oz)
No of oz to be served (notices) 20 contracts (100,000 oz)
Total monthly oz silver served (contracts) 381 contracts (1,905,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  2,221,374.4 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit: nil   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil oz


We had 2 customer deposits:


i) Into Scotia:  5,128.79

ii) Into Delaware:  1996.000 oz ???

total customer deposit 7,124.79 oz


We had 4 customer withdrawals:

i) Out of Delaware:  16,374.15 oz

ii) Out of Scotia:  685,929.200 oz


iii) Out of CNT: 50,176.79

iv) Out of HSBC: 600,014.25 oz


total customer withdrawal: 1,352,494.395 oz

we had 0 adjustments



Total dealer inventory: 67.890 million oz

Total of all silver inventory (dealer and customer) 176.601 million oz


The total number of notices filed today is represented by 5 contracts for 25,000 oz. To calculate the number of silver ounces that will stand for delivery in February, we take the total number of notices filed for the month (381) x 5,000 oz    = 1,905,000 oz  to which we add the difference between the OI for the front month of February (25)- the number of notices served upon today (5) x 5,000 oz per contract = 2,005,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

381 contracts x 5000 oz= 1,905,000 oz + (25) OI for the front month – (5) number of notices served upon x 5000 oz per contract =  2,005,000 oz, the number of silver ounces standing.

we neither gained nor lost any silver ounces standing in this February contract month.


for those wishing to see the rest of data today see:

http://www.harveyorgan.wordpress.com or http://www.harveyorganblog.com





The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.

There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders

ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.




And now the Gold inventory at the GLD:

Feb 9 no change in gold inventory at the GLD/Inventory 773.31 tonnes


feb 6/ no change in gold inventory tonight/inventory 773.31 tonnes

feb 5. we had another addition of 5.38 tonnes of gold to the GLD/Inventory tonight at 773.31 tonnes

Feb 4/2015; we had another addition of 2.99 tonnes added to the GLD inventory/Inventory tonight 767.93

Feb 3.2015: today a withdrawal  of 1.79 tonnes of  gold inventory removed from the GLD/Inventory at  764.94

feb 2/ a huge addition of 8.36 tonnes of “paper” gold inventory/Inventory tonight at 766.73 tonnes

jan 30. we had no change in gold inventory/Inventory at 758/37 tonnes

Jan 29/we had an addition of 5.67 tonnes of gold inventory at the GLD/Inventory at 758.37 tonnes

Jan 28/no changes in gold inventory at the GLD/Inventory at 952.44 tonnes

Jan 27.we had a monstrous “paper” addition of 9.26 tonnes of gold into the GLD tonight/Inventory at 952.44 tonnes

Jan 26.2015: another volatile day as they added  1.79 tonnes/743.44 tonnes of gold.

Jan 23/the action at the GLD is very volatile:  today they added 1.20 tonnes of gold to their inventory/Inventory 741.65

Jan 22 no change in gold inventory at the GLD/Inventory 740.45 tonnes

Jan 21.2015: Tonight, we lost 1.79 tonnes of gold from the GLD/Inventory 740.45 tonnes





Feb 9/2015 /no change in   gold inventory at the GLD/

inventory: 773.31 tonnes.

The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).

GLD : 771.31 tonnes.






And now for silver (SLV):



Feb 9  no change in silver inventory/SLV inventory at 320/327 million oz



Feb 6  no change in silver inventory/SLV’s silver inventory at 320.327 million oz.


Feb 5.we had no change in silver inventory/320.327 million oz/


Feb 4/we had a small withdrawal of 136,000 oz of silver from the SLV vaults/Inventory/320.327 million oz

feb 3.2015: we had a good addition of 1.149 million oz of silver inventory/inventory 320.463 million oz

Feb 2 no change in silver inventory at the SLV/inventory at 319.314

million oz.

jan 30  no change in silver inventory at the SLV/inventory at 319.314

million oz

Jan 29/no change in silver inventory/SLV inventory at 319.314 million oz

Jan 28/no changes in silver inventory/SLV inventory at 319.314 million oz

Jan 27/no change in silver inventory/SLV inventory at 319.314 million oz

Jan 26.2015: no change in silver inventory/SLV inventory at 319.314 million oz

jan 23/2015/ a  huge addition of 1.053 million oz.  This entity is also being quite volatile/Inventory at SLV 319.314 million oz.

Jan 22 a huge reduction of 6.75 million oz/Inventory at 318.261 million oz

Jan 21 no change in silver inventory/Inventory at 325.011 million oz




feb 9/2015 we had no change in silver inventory/

SLV inventory registers: 320.327 million oz






And now for our premiums to NAV for the funds I follow:

Note: Sprott silver fund now for the first time into the negative to NAV

Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded at Negative  4.5% percent to NAV in usa funds and Negative 4.4 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.4%

Percentage of fund in silver:38.2%

cash .4%


( feb9/2015)


2. Sprott silver fund (PSLV): Premium to NAV falls to + 3.28%!!!!! NAV (Feb 9/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to +.26% to NAV(feb 9 /2015)

Note: Sprott silver trust back  into positive territory at +3.28%.

Sprott physical gold trust is back into positive territory at +.26%

Central fund of Canada’s is still in jail.








And now for your most important physical stories on gold and silver today:




Early gold trading from Europe early Friday  morning:

(courtesy Mark O’Byrne)




Trade Data show China’s Credit Bubble is Bursting, USA to See Deflationary Effects – Global Depression Ahead?



– Chinese imports, primarily of raw materials, crashed 19.9% in January

– Exports fall 3.3% against expectations of 6.3% rise

– Total Chinese debt rose from $7.4 trillion in 2007 to $28.2 trillion in 2014

– Capital outflows last quarter were the highest on record

– China may devalue yuan to boost exports

– Currency depreciation by worlds biggest exporter may trigger global deflation and depression

China’s debt-driven economy and monumentally wasteful building boom which has created entire cities with no inhabitants looks set to unwind as figures show that Chinese imports of raw materials continue to decline.


Imports fell 19.9% year on year in January. While such a dramatic slump can largely be explained by considerably lower prices for raw materials the data shows that imports are down in terms of volume also.

Iron ore imports fell by 9.4% in volume (YoY) while coal imports fell almost 40% by volume and oil by 7.9% between December and January. Imports into China have been declining every month since October.

Last year the Chinese Lunar New Year fell in January which caused factories to close for a week. This year, Chinese New Year falls this month. So these figures are particularly shocking given that industrial capacity was roughly 25% higher this January than in January 2014.

Meanwhile, exports also fell 3.3%. A Reuters poll of analysts had expected a 6.3% increase.

China is showing signs of being “maxed out” on credit. In 2001, total Chinese debt was $2.1 trillion. By 2007 it had swelled to $7.4 trillion. By last year it had bloated to $28.2 trillion. In the same period (2007 – 2014) China’s GDP grew only $5 trillion.

So, as David Stockman points out in his excellent article “China’s Monumental Debt Trap – Why It Will Rock The Global Economy”, “The China Ponzi took on $4 of debt for every new dollar of freshly constructed GDP”.

China’s new leadership is trying to get China’s reckless borrowing under control. The policies by which this might be achieved are, unfortunately, diametrically opposed to the only policies that central planners believe can stimulate an economy.

From Bloomberg:
“As China grapples with its slowest growth in 24 years, President Xi Jinping is under pressure to stimulate the economy. Yet that would run afoul of his pledges to curb runaway debt and credit (the latter jumped about $20 trillion from 2009 to 2014).”

The PBOC has already cut interest rates this year and on Wednesday it announced a reduction on the amount of cash reserves that banks must keep to hand from 20% to 19.5%. That they did not lower the reserve requirements by a larger margin indicates that Beijing fear over-heating the economy – particularly the property sector.

China’s bloated property sector is collapsing under it’s own weight. Unless the manufacturing sector can pick up the slack – which is unlikely – there will likely be social unrest across China as unemployment soars.

With exports sluggish and the wider world in a deepening recession china’s capacity to export is unlikely to improve. It may be forced to wade into the currency wars and slash the value of the yuan in order to undercut it’s exporting rivals in the region, particular Japan who have forced the yen downward by 30% under “Abenomics”.

To compound it’s problems China is also haemorrhaging capital as investors see economic strife and possibly aggressive currency devaluation on the horizon.

“The latest balance of payments data show that china posted it’s biggest quarterly capital and financial account deficit on record in the fourth quarter last year, a trend that is likely to have continued in January,” the Financial Times reports.

The consequences of a currency devaluation by the worlds largest exporter cannot be understated. China would, in effect, export deflation globally as other exporting nations follow suit in a race to the bottom.

Developed world economies are already experiencing deflation. Producers in importing nations would be forced to reduce their prices and lay off staff to compete with cheap imports compounding the unemployment crisis in which the western world finds itself.

Soon, business loans and those of households would go into default exacerbating the deflationary spiral. The insolvent banking system would be again in crisis and this time deposits would be “bailed in.”

Chinese deflation pressures will heighten domestic economic pressures as US consumers experience persistent falling prices and put off major purchasing decisions in the expectation so cheaper prices. The risk is that as prices fall across the board, US labour earnings will also fall as profit margins contract for US companies.

Many US investors have been purchasing Gold Bullion in the USA over the past 6 months in expectation of economic dislocation caused by the depreciation of global currencies.

Indeed, the whole paper and digital currency system would be undermined and might not survive.

Throughout history, gold has retained it’s value. It has fluctuated in it’s appeal but it has never lost it’s function as an indestructible store of wealth. No paper currency can make the same claim.

In fact, the US dollar is the longest surviving paper currency in history. It became a purely paper currency in 1971 when President Nixon shut the “gold window”. It has outlived it’s predecessors but we do not expect it to do so for very much longer.

It is essential at his time to protect one’s wealth with physical gold stored outside of the banking system. See our guide to the “7 Key Gold Storage Must Haves.”


Today’s AM fix was USD 1,242.25, EUR 1,096.18 and GBP 816.20 per ounce.
Friday’s AM fix was USD 1,264, EUR 1,103.64  and GBP 824.74 per ounce.

Gold fell 2.72 percent or $34.50 and closed at  $1,235.70 on Friday, while silver slid  3.18 percent or $0.55 closing at $16.75. Gold and silver were both down for the week at 3.78 and 2.95 percent respectively.

In Singapore, gold climbed for the first time in three sessions on Monday hitting a session high of $1,238.60, boosted by safe-haven bids as Asian equity markets fell on disappointing Chinese trade data.

Spot gold in London moved slowly upward near $1,242 per ounce.

The U.S. employment data released on Friday showed non farm payrolls climbed by 257,000 in January, which surprised the markets since 236,000 were forecasted, however the unemployment rate ticked slightly higher to 5.7 percent.

The most recent CFTC report shows the gold net long position fell 620,000 ounces to 22.19 million ounces, while gross longs were down 1.2 million ounces.

In early trading in London, silver was up 37 cents at $17.04 per ounce, platinum was $4 higher at $1,222 and palladium up $2 at $781.

February 11th is Greece’s next meeting with EU ministers to discuss its rejection of their bailout program.

Get Breaking News and Updates Here





From the Mises institute, a fresh look at how a gold based rouble would be good for Russia


(courtesy Marcia Christoff Kurapovna/Mises Institute)


Is Russia Planning a Gold-Based Currency?

  • Daily article february 6 2015
FEBRUARY 6, 2015

TAGS Global EconomyWar and Foreign PolicyGold Standard

The “perfect-storm” of geopolitical instability, diplomatic isolation, severe currency depreciation, and economic decline now confronting Russia has profoundly damaged Moscow’s international standing, and possibly for the long-term. Yet, it is precisely such conditions that may push the country’s leadership into taking the radical step that will secure its world-player status once and for all: the adoption of a gold-exchange standard.

Though a far-fetched idea at first glance, many factors suggest that remonetization in gold may be a logical next step for Moscow.

First, for years Moscow has been expressing its unwillingness to remain at the monetary mercy of the US and its NATO allies and this view has been most vehemently expressed by President Putin’s long-time economic advisor, Sergei Glazyev. Russia is prepared to play strategic hardball with the West on the issue: the governor of Russia’s central bank took the unusual step last November of presenting to the international media details of the bank’s zealous gold-buying spree. The announcement, in sharp contrast to that institution’s more taciturn traditions, underscores Moscow’s outspoken dismay with dollar hegemony; its timing suggests coordination with the top rungs of government to present gold as a possible currency-war weapon.

Second, despite international pressure, Russia has been very wary of the sell-off policies that led the UK, France, Spain, and Italy to unload gold over the past decade during unsuccessful attempts to prop up their respective ailing economies — in particular, of then-Prime Minister Gordon Brown’s sell-off of 400 metric tons of the country’s reserves at stunningly low prices. Moscow’s surprise decision upon the onset of the ruble’s swift decline in early December 2014 to not tap into the country’s gold reserves, now the world’s sixth largest, highlights the ambitiousness of Russia’s stance on the gold issue. By the end of December, Russia added another 20.73 tons, according to the IMF in late January, capping a nine-month buying spree.

Third, while the Russian economy is structurally weak, enough of the country’s monetary fundamentals are sound, such that the timing of a move to gold, geopolitically and domestically, may be ideal. Russia is not a debtor nation. At this writing in January, Russia’s debt to GDP ratio is low and most of its external debt is private. Physical gold accounts for 10 percent of Russia’s foreign currency reserves. The budget deficit, as of a November 2014 projection, is likely to be around $10 billion, much less than 1 percent of GDP. The poverty ratefell from 35 percent in 2001 to 10 percent in 2010, while the middle class was projected in 2013 to reach 86 percent of the population by 2020.

Collapsing oil prices serve only to intensify the monetary attractiveness of gold. Given that oil exports, along with the rest of the energy sector, account for 45 percent of GDP, the depreciation of the ruble will continue; newly unstable fiscal conditions have devastated banks, and higher inflation looms, expected to reach 10 percent by the end of 2015. As Russia remains (for the foreseeable future) mainly a resource-based economy, only a move to gold, arguably, can make the currency stronger, even if it does limit Russia’s available currency.

In buying as much gold as it has, the country is, in part, ensuring that it will have enough money in circulation in the event of such fundamental transformation. In terms of re-establishing post-oil shock international prestige, a move to gold will allow the country to be seen as a more reliable and trustworthy trading partner.

The repercussions of Russia on a gold-exchange standard would be immense. Above all, it would mean the first major schism in the world’s monetary order. China would quite likely follow suit. It could mean the threat of a severe inflation in the United States should rafts of unwanted dollars make their way back across the Atlantic — the Fed’s ultimate nightmare. Above all, the country will avoid the extreme debt leverages which would not have happened had Western capitals remained on gold.

“A gold standard would be politically appealing, transforming the ruble to a formidable currency and reducing outflows significantly,” writes Dr. Enrico Colombatto, economics professor at the University of Turin, Italy.

He notes that the only major drawback would be that the imposed discipline of a gold standard would deprive authorities of discretionary political power. The other threat would be that of a new generation of Russian central bankers becoming too heavily influenced by the monetary mindset of the European Central Bank (ECB) and the Fed.

As Alisdair MacLeod, a two-decade veteran of off-shore banking consulting based in the UK,recently wrote, Russia (and China) will “hold all the aces” by moving away from any possible currency wars of the future into the physical gold market. In his article, he adds that there is currently a low appetite for physical gold in Western capital markets and longer-term foreign holders of rubles would be unlikely to exchange them for gold, preferring to sell them for other fiat currencies.

Mr. Macleod cites John Butler, CIO at Atom Capital in London, who sees great potential in a gold-exchange standard for Russia. With the establishment of a sound gold-exchange rate, he argues, the Central Bank of Russia would no longer be confined to buying and selling gold to maintain the rate of exchange. The bank could freely manage the liquidity of the ruble and be able to issue coupon-bearing bonds to the Russian public, allowing it a yield linked to gold rates. As the ruble stabilizes, the rate of the cost of living would drop; savings would grow, spurred on by long term stability and lower taxes.

Foreign exchange also would be favorable, Mr. Butler maintains. Owing to the Ukraine crises and commodities crises, rubles have been dumped for dollar/euro currencies. Upon the announcement of a gold-exchange, demand for the ruble would increase. London and New York markets would in turn be countered by provisions restricting gold-to-ruble exchanges of imports and exports.

The geopolitics of gold also figure into Russia’s increasingly close relations with China, a country that also has made clear its preference for gold over the dollar. (Russia recently edged out China as the world’s top buyer of the metal.) In the aftermath of the $400 billion, 30-year deal signed between Russian gas giant Gazprom and the China National Petroleum Company in November 2014, China turned its focus to the internationalization of its own gold market. On January 15, 2015, the Shanghai Gold Exchange, the largest physical gold exchange worldwide, and the World Gold Council, concluded a strategic cooperation deal to expand the Chinese gold market through the new Shanghai Free Trade Zone.

This is not the first time the gold standard has been seen as the ultimate cure for Russia’s economic problems. In September 1998, the noted economist Jude Wanninski predicted in afar-sighted essay for The Wall Street Journal that only a gold ruble would get the the country out of its then-debt crises. It was upon taking office about two years later, in May 2000, that President Putin embarked upon the country’s massive gold-buying campaign. At the time, it took twenty-eight barrels of crude just to buy an ounce of gold. The gold-backed ruble policy of those years was adopted to successfully pay down the country’s external debt.

As a pro-gold stance is, essentially, anti-dollar, speculation about how the US would react raises the question of whether an all-out currency war would follow. The West would have to keep Russia regionally and militarily marginalized, not to mention kept within the confines of the Fed, the ECB, and the Bank of England (BOE).

Nor is that prospect too far-fetched. As Dutch author Willem Middelkoop has written in his 2014 book The Big Reset: War on Gold and the Financial Endgame,

A system reset is imminent. Even before 2020 the world’s financial system will need to find a different anchor. … In a desperate attempt to maintain this dollar system, the United States waged a secret war on gold since the 1960s. China and Russia have pierced through the American smokescreen around gold and the dollar and are no longer willing to continue lending to the United States. Both countries have been accumulating enormous amounts of gold, positioning themselves for the next phase of the global financial system.

Image source: iStockphoto.






U.S. scrutiny of Barclays and UBS widens forex trading probe


Caroline and Gina Chon
Financial Times, London
Sunday, February 8, 2015

The U.S. Department of Justice is scrutinising currency-linked investments marketed by Barclays and UBS in an indication that the sprawling global probe into the foreign exchange market may become more troubling for banks.

The department is examining whether the two banks sold so-called structured products without disclosing the profit they were making from currency trades used to generate the products’ returns, said people familiar with the investigation. These products were sold to sophisticated investors, including several Swiss hedge funds.

… For the remainder of the report:






Turd Ferguson goes through the latest Banking Participation Report for Feb 2005 and it will probably make you sick. The bankers have massively increased their net short position:


(courtesy Turd Ferguson/GATA)



TF Metals Report: Banks on the run


11a ET Monday, February 9, 2015

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson today reviews futures market trading data to confirm again that big investment banks are tightly controlling the gold futures market and thus the gold price. Ferguson concludes that the banks are very scared of something. His commentary is headlined “Banks on the Run” and it’s posted at the TF Metals Report here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




Many Greeks turning to gold:  Two reports:


(courtesy zero hedge)


Fearing Grexit, Greeks Turn To Gold Again


It never fails: every time redenomination risks and the specter of the (New) Drachma rear its ugly heads, Greeks, like dutiful Austrian economists, realize that Neoliberal economics is nothing but a steaming pile of drivel that only works when everyone is “confident” and gets deeper in debt with a smile on their face while failing in every other instance, and decide that the time has come to convert their paper wealth into hard assets. It happened in 2010, in 2012, and now that Greece is on the verge of its third Grexit in the past 5 years, it is happening again.

As Bloomberg reports, “Greek demand for gold coins is rising as investors search for a safe haven from the country’s political turmoil, according to the U.K. Royal Mint.”

There has been a noticeable increase in demand in this last quarter,” Lisa Elward, head of bullion sales at the Royal Mint, said in an e-mail to Bloomberg News. “We tend to see an upsurge in sales at times of political and financial uncertainty.”

They said that with a straight face because in Greece “times of political and financial uncertainty” are now a monthly if not quarterly development. As a result, Greek investors are turning to gold. The Royal Mint declined to provide exact sales figures for the gold coins, known as Sovereigns.

Domestically, the Greek gold demand is currently run-rating at more than double that of Q4 2014: the Bank of Greece sold 5,849 Sovereign coins in January, according to an e-mail from the central bank. Bloomberg cites government data which show sales of 7,857 coins in the last quarter of 2014.

Why gold?  “The one thing everyone knows about gold is it is a good thing to hold if your currency is about to devalue,” Matthew Turner, an analyst at Macquarie Bank Ltd., said via phone. “It would be understandable for Greeks to buy gold because they are afraid of losing their money.

Hardly surprising, and yet one would think that with the entire world hell bent on destroying its currency now that, as we first observed earlier, for the first time ever global central banks are about to monetize more than 100% of global debt issuance…


… that everyone’s demand for gold would be higher instead of just those on the edge of completely monetary collapse. We suppose we should thank anyone who is actually surpressing the price of paper gold in their increasingly more desperate attempts to telegraph that central banks are still in control when with every passing day it becomes abundantly clear they are not.

But back to Greece, where withdrawals from banks may have exceeded 11 billion euros in January in the run-up to the elections that resulting in the dramatic victory for Tsipras and his anti-austerity Syriza. Expect withdrawals to accelerate to the point where ATM lines start forming. Of course, if there is no agreement on the Greek bailout continuation by Friday as the Eurozone warned, then those lines will only get bigger. As will Greek demand for gold:

Online retailer CoinInvest.com reported increased sales to Greece around the country’s elections in January, the Frankfurt-based director Daniel Marburger said in an interview last week.


During periods of monetary uncertainty people will always think gold is a useful addition to their portfolios,” Turner of Macquarie said.

But why: can’t they just BTFD and hope that while central bankers are unable to preserve the sanctity of a monetary union which as recently as 2014 was considered untouchable, they will have no problem with keeping the S&P at or near it all time high in perpetuity?





(courtesy Bloomberg)




Greek investors buying more gold coins from U.K. Royal Mint


By Eddie Van Der Walt
Bloomberg News
Monday, February 9, 2015

LONDON — Greek demand for gold coins is rising as investors search for a safe haven from the country’s political turmoil, according to the U.K. Royal Mint.

“There has been a noticeable increase in demand in this last quarter,” Lisa Elward, head of bullion sales at the Royal Mint, said in an e-mail to Bloomberg News. “We tend to see an upsurge in sales at times of political and financial uncertainty.” …

… For the remainder of the report:





The following is the first part of a two parter.  It is essential reading!


(courtesy Bill Holter/Miles Franklin)



“We didn’t leave, you kicked us out!”


We learned on Thursday about two very separate trips to be made on Friday.  Germany’s Angela Merkel and France’s Francois Hollande made a trek to Moscow which turned out to be a five hour meeting, while John Kerry flew into Kiev.  What were these meetings about?  Very little has been reported except http://www.bloomberg.com/news/articles/2015-02-06/merkel-putin-pledge-to-pursue-ukraine-cease-fire-after-talks

  What were the goals and what was accomplished?  Presumably Mr. Kerry offered arms and assistance to Ukraine because other than “dollars”, we have nothing else to offer.  The meeting in Moscow was not so simple.  Do Germany and France see the writing on the wall?  Did they make deals with Russia regarding natural gas and the delivery logistics?  Trade?  Did they pledge to stay neutral and hope Russia did not look towards them when the real fighting begins?  Were currencies discussed?  Maybe even new ones?  Did they put distance between themselves and NATO so as to escape the Russian crosshairs?  Lots of questions and as of yet, few answers but apparently some sort of press conference for Monday and another meeting this Wednesday.   I will add one more thought, when the heads of state meet with little to no press coverage and then followed by no statement of the results with any meat on the bone whatsoever, something REALLY big was discussed!  Make no mistake, this is not about a single country, nor countries plural.  They know this is entirely about “systems” themselves and whether they can work in harmony or not work at all.
  We do know one thing for sure, Russia has mobilized her ICBM rocket launchers and will begin full scale war games.  Are these only games or are they making ready for the real thing?  I would suggest if the U.S. does in fact rearm Ukraine, these may not be “games” any more, Russia will finally retaliate.  Another possibility is that of “discovery”.  As I understand it, there are now some foreign “boots on the ground”.  Ukrainian forces are surrounded in Mariupol http://www.reuters.com/article/2015/01/26/us-ukraine-crisis-military-idUSKBN0KZ0L920150126  , it looks like they will soon to be captured or killed.  What if it turns out some of these boots are of the type “made in USA”?  We have already seen one video clip of an American combatant in Ukraine, how many more are there?  This would be very bad and would give Mr. Putin a good and verifiable reason to escalate the shoving match into a hot war.  In my opinion, Mr. Putin will not attack unless provoked directly, I believe he will just sit back and wait.  In my opinion, he would prefer to wait until “the money runs out” which I will explain further shortly.
  On the financial side, last week was all about Greece.  First, they were given an ultimatum and a line in the sand drawn for the end of February to “accept financial aid” from the West, presumably the IMF and ECB.  On Friday, this ultimatum was fast forwarded and cut to only 10 days …or else!  They have a debt payment due at the beginning of March and do not have the money.  Simply put, they are broke.  More elegantly but no less to the point, Yanis Varoufakis, Greece’s new finance minister said of the Eurozone and I quote “A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet bombing the economy of proud European nations in order to save them”.  Do you see exactly what he is saying?  This is not about Greece, it’s not even about the Eurozone, this is about the systemic failure of the West’s policies and financial system.  I want to move along but this aspect of “systemic failure” will be tomorrow’s topic and why the West cannot in any fashion call a spade a spade.
  So Greece now has an ultimatum of 10 days, accept the terms of the Eurozone …or get out.  Greece doesn’t even need to request departure, the powers that be seem to be threatening to kick them out!  Let me point out another Western financial failure and one which will be “dis connected” in the future.  Ukraine now has two, possibly three weeks worth of cash left.  They also owe Russia several billion dollars for gas already delivered and used.  Mr. Putin knows this and as I said earlier, is just sitting back and waiting for the money to run out …or for them to “accept” aide from the West.  Both of these NATO countries are broke and unfortunately at the same time which obviously turns up the heat further in rather inconvenient fashion.
  Just so you didn’t miss my pun above, Russia is clearly “disconnecting” Ukraine.  Russia has already begun very seriously to divert gas shipments that were going through the Ukraine.  Russia was not being paid and some of her gas to Europe was being stolen, thus, turn off the spigot.  Geopolitically, Russia has already made a pipeline deal with Turkey which will end …you guessed it, at the Greek border!  Think this one through, Russia has already offered assistance to Greece …while Greece is being pressured by Europe to go further into debt.  Don’t you think it might be in Greece’s best interest to “do a deal” with Russia?
  What might any deal look like with Russia and thus out from under the Eurozone and NATO?  How about “connecting” to the Turkish pipeline for starters and running it through Greece to arrive in eastern Europe?  The Russians (Chinese) could finance the deal, Greece would then earn gas transit cash flows.  A pipeline would also create jobs and economic activity.  Greece would also be free to trade with Russia, their farmers could ship crops to Russia without being under the current ridiculous embargos and sanctions, again good for the Greek economy!  One last benefit might be “debt relief”.  Not that the West will forgive what the Greeks owe (because they cannot, I’ll include this in tomorrow’s piece), the Greeks can simply say “we are not paying you” …
  You see, this is what will surely happen, the Greeks will not pay and the debt will default.  First, they do not have the ability to pay, they are well and truly broke.  Second, what is the solution of the West?  Take on more debt “so you can pay us”?  The alternative?  Let Russia finance a pipeline deal through the country which provides jobs and badly needed revenue while helping the export sector, which one would you choose?
  Before finishing I’d like to also mention another NATO country in this mix, Turkey.  They have already agreed to build a pipeline through to Europe.  They are also another financially strapped country and their currency just imploded this past week.  Their lira collapsed 30% in just one day.  They are not in as poor a state as Ukraine or Greece but they are on their way …and (for now) a member of NATO.  Do you see where this is going?  NATO, the Eurozone, “the West” is being chipped away at one by one.  The weakest sisters are all going to fall and when they do, they will land in Russia’s lap!
  All of these war drums are being beaten with financial drumsticks.  It is all about “money” so to speak.  It is all about the financial system of the West remaining in power while the financial system of the East is rising.  Mr. Putin, China and the East merely have to sit back and wait, similar to a grand “Waterloo” where the weather sets in.  In this case, the “weather” is simply debt service, the inabilities to pay it and how interest crowds out real economic activity.  Both Greece and Ukraine are dying on the vine simultaneously, they are very public and visible signs of the West’s failing financial system.  Neither can fail, neither can “switch sides” and land in Russian arms ‘lest the rest of the world see the West’s fatal financial flaw.  You see, Greece and Ukraine are no different financially from the rest of the Eurozone or even the U.S. itself, they are just further along debtors curve.  Neither of these countries can fail economically because NO Western spade can EVER be called a spade …tomorrow’s topic.
  To finish, I would like to give you my opinion as a lead up to my writing for tomorrow.  I believe we will soon have a regional war in Ukraine which goes global very quickly.  The obvious question is “why”.  Why, if Mr. Putin has so far absorbed each slap and not made any aggressive moves?  Why, when little over a year ago, Russia temporarily diffused the Syrian situation so skillfully?  The answer is simple and right in front of our faces, the West is broke!  The Western financial system is already broke and this fact will soon be exposed… one way or the other.  The “exposure” will include the fact that anything and everything not nailed down has already been stolen, collateralized and used to keep the game going.  The theft cannot be exposed …so what better way of hiding it than to start a war?  What better way of being able to say “our policies would have worked if it weren’t for the war”.  War will be “used”, it will be blamed for the mathematically certain financial collapse that is coming!    Regards,  Bill Holter
The above was written Saturday, since then we have had several news items moving this along.  France has moved toward Russia, Germany and the U.S. are in disagreement in regards to arming Ukraine, Cyprus offered Russia the use of a military base and Greece has refused further “aid” in the ultimatum form of more debt.   http://www.zerohedge.com/news/2015-02-08/europe-fractures-france-pivots-putin-cyprus-offers-moscow-military-base-germany-us-s  All very big stuff which points toward reality being uncovered.  Sunset for hegemony?




Marc Faber believes that in 2015 Europe will break away from NATO and will not partake in the sanctions against Russia;


(courtesy Kingworldnews/Eric King/Marc Faber)




U.S. intervention is alienating Western Europe, Faber tells KWN


1p ET Monday, February 9, 2015

Dear Friend of GATA and Gold:

Financial letter writer Marc Faber today tells King World News that much of the world is tiring of U.S. government intervention all over the place and that it may drive Western Europe out of NATO and into alliance with Russia. An excerpt from the interview is posted at the KWN blog here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




David Malpass on the return of the drachma in Greece and what it might mean for honest money:


(courtesy David Malpass/New York Sun)




New York Sun: Return of the drachma?


From the New York Sun
Monday, February 9, 2015

A Greek exit from the euro is looking more likely to the economist David Malpass, according to the latest cable from the sage of Encima Global. …

We can’t wait. …

Greece may present us for the first time since the introduction of the euro a crisis of legal tender. …

The drachma apparently started as iron and moved, at its apogee, to gold and silver, much like the dollar at its apogee. We understand what a long-shot it is, but our own view is that the exit of Greece from the euro represents an opportunity to re-establish the glory of Greece on the back of an honest drachma.

… For the complete commentary:








And now for the important paper stories for today:



Early Monday morning trading from Europe/Asia

1. Stocks mixed on major Asian bourses  / the  yen rises  to 118.52

1b Chinese yuan vs USA dollar/ yuan slightly weakens  to 6.2472
2 Nikkei up 63.43  points or 0.36%

3. Europe stocks all in red   // USA dollar index up to 94.64/

3b Japan 10 year yield backup to .36%/ (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.52/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets.

3c Nikkei now  above 17,000/

3e The USA/Yen rate still well below the 120 barrier this morning/
3fOil: WTI 52.54 Brent: 58.19 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold up /yen up;

3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion

Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP

3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)

3j Oil rises this morning for  WTI  and Brent

3k UBS today stating that the SNB  intervening in the currency market suggests that European risk assets and the Euro  will fall with a GREXIT

3l  Greek 10 year bond yield :10.54% (up 43 basis points in yield)

3m Gold at $1240.50. dollars/ Silver: $16.97

3n USA vs Russian rouble:  ( Russian rouble  down 3/5 in roubles per dollar in value)  66.17!!!!!!

3 0  oil  into the 52 dollar handle for WTI and 58 handle for Brent

3p  ECB removes Greek sovereign collateral in their investment strategy (on Feb 11). This leaves only ELA funding for the next two weeks. Maximum allowed 60 billion euros for this funding. They also limit the amount of treasuries that Greek can issue.  Greece rejects any more EU funds and thus rejects the European ultimatum to accept this funding!!

3Q  SNB (Swiss National Bank) intervening again driving down the SF/window dressing/Swiss rumours of intervention to keep the  soft peg at 1.05 Swiss Francs/euro and major support for the Euro.


3s Merkel and Hollande in Moscow fail in trying to obtain a ceasefire in Eastern Ukraine/talks with Putin

4. USA 10 yr treasury bond at 1.91% early this morning. Thirty year rate well below 3%  (2.47%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid



(courtesy zero hedge)/your early morning trading from Asia and Europe)


Europe, US Risk Off After Greece Rejects European Ultimatum, Ukraine Peace Talks Falter


In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend,responded to Europe’s Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that “the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations” while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.

That, the ongoing Ukraine “peace talks” which are rapidly going nowhere and in fact have already managed to splinter Europe and the US (as well as sow internal European discord) and the collapse of Chinese imports, and weaker than expected exports, reported over the weekend leading to a record high trade surplus, is what is on traders’ minds this morning.

As a result European equities (Eurostoxx50 -1.21%) trade in the negative territory across the board with concerns and uncertainty surrounding Greece weighing on sentiment after Greek PM Tsipras rejected terms on the bailout extension. This also supported a bid in core fixed income as Bunds trade with gains of over 50 ticks breaking above Friday’s high, with the prospect of lower bond issuance this week also supporting upside. The GR/GE 10Y spread is wider by around 68bps and ASE down over 5% indicating the dampened optimism in Greece after being downgraded at S&P to B- from B whilst Moody’s put the country’s Caa1 rating on review for downgrade on Friday. Weakness in equities was further exacerbated after reports that Hannover, Hamburg & Stuttgart airports face delays due to strikes sent DAX heavyweight Deutsche Lufthansa (-2.4%) lower and caused selling in the DAX (-1.52%) after a technical break below 10,700. Furthermore, the DAX was further compounded by JPMorgan downgrading the index.

Despite the data printing a record surplus, exports and imports declined more than expectations, with the import reading falling the most since May’09. Hang Seng (-0.6%) and Shanghai Comp (+0.6%) initially fell, although the latter has now pared back its losses, with sentiment lifted by today’s trading trial of options on the China 50 ETF by the Shanghai Stock Exchange. Nikkei 225 (+0.4%) managed to eke out gains after benefiting from a weak JPY.

Despite the data printing a record surplus, exports and imports declined more than expectations, with the import reading falling the most since May’09. Hang Seng (-0.6%) and Shanghai Comp (+0.6%) initially fell, although the latter has now pared back its losses, with sentiment lifted by today’s trading trial of options on the China 50 ETF by the Shanghai Stock Exchange. Nikkei 225 (+0.4%) managed to eke out gains after benefiting from a weak JPY.

In FX, CHF saw some weakness in early trade with weekend comments from SNB’s Jordan stating that that the central bank are not yet at their limit in regards to negative interest rates prompting further speculation of additional action by the SNB. Overnight, AUD underperformed in the wake of Chinese trade data with imports from Australia to China falling by 35.3%, however has been bid in the wake of Australian PM Abbot winning the confidence vote by 61-39 votes. The USD-index (-0.11%) was initially weaker overnight but has trimmed some its earlier weakness on little fundamental news with major pairs coming off best levels.

WTI crude futures have remained around the USD 52.00 level during the European morning and trade in modest positive territory with the USD-index trading lower by 0.11%. Elsewhere Libya’s largest export port, Hariga, has been closed due to a strike by security personnel resulting in production falling to 300,000/bpd for the country. In precious metal markets, much of the movements have been technical with gold (+0.6%) higher after touching its 50DMA, while silver (+1.8%) outperforms the metals complex after failing to make a sustained break below its 50DMA and 100DMA. Following the rejection of the contract terms by the United Steelworkers union from Shell, discussions are set to resume on February 10th. (BBG)

In Summary: European shares stay lower, though above intraday lows, with the autos, banks underperforming and basic resources, oil & gas outperforming. Greece’s Tsipras reaffirms bailout program rejection in address to parliament yesterday. Ruble rallies, Russian inflation set to slow, central bank governor says. Merkel due to meet Obama today in Washington. The German and Italian markets are the worst-performing larger bourses, Switzerland’s is the best. The euro is little changed against the dollar. German 10-year bond yields fall, Greek yields increase. Commodities gain, with nickel, zinc underperforming and natural gas outperforming. U.S. mortgage delinquencies, foreclosures due later.

Market Wrap:

  • S&P 500 futures down 0.5% to 2043.2
  • Stoxx 600 down 0.8% to 370.2
  • US 10Yr yield down 6bps to 1.9%
  • German 10Yr yield down 5bps to 0.33%
  • MSCI Asia Pacific down 0.1% to 141.2
  • Gold spot up 0.6% to $1241.6/oz
  • 3 out of 19 Stoxx 600 sectors rise
  • 17.7% of members gain, 81.3% decline
  • Asian stocks little changed with the Shanghai Composite outperforming and the Sensex underperforming.
  • MSCI Asia Pacific down 0.1% to 141.2
  • Nikkei 225 up 0.4%, Hang Seng down 0.6%, Kospi down 0.4%, Shanghai Composite up 0.6%, ASX down 0.1%, Sensex down 1.7%
  • Euro down 0.04% to $1.1312
  • Dollar Index down 0.04% to 94.66
  • Italian 10Yr yield up 5bps to 1.63%
  • Spanish 10Yr yield up 3bps to 1.52%
  • French 10Yr yield up 3bps to 0.64%
  • S&P GSCI Index up 0.9% to 413.9
  • Brent Futures up 0.2% to $57.9/bbl, WTI Futures up 1.1% to $52.3/bbl
  • LME 3m Copper up 0.6% to $5683/MT
  • LME 3m Nickel down 0.2% to $15200/MT
  • Wheat futures down 0.6% to 523.8 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk:

  • European equities (Eurostoxx50 -1.21%) trade in the red amid Greek PM’s Tsipras refusal to accept the EU’s anti-austerity proposals ahead of the Feb 16th bailout extension deadline.
  • Looking forward, sees no tier 1 data scheduled with market focus solely on any ongoing developments regarding the discussion between the EU and Greece
  • Treasuries gain led by long end as global stocks decline amid Greece concern after the country’s prime minister reaffirmed his rejection of nation’s bailout before Wednesday’s emergency meeting of euro area finance ministers.
  • Greek prime minister Tsipras vowed to increase the minimum wage,restore the income tax-free threshold, halt infrastructure privatizations, and ask for World War II reparations from Germany
  • Germany posted a record current-account surplus in 2014, setting the stage for renewed international calls to address its economic imbalances
  • Ukraine’s almost yearlong conflict enters a pivotal week, with the outcome of more talks on a peace agreement potentially determining whether a wider war can be avoided as violence escalates
  • Intimidation of the Baltic states, pressure on the former Soviet republic of Kazakhstan, warmer ties with Greece as a way of dividing the European Union — all are  potential options for the former KGB agent bent on recasting the world order
  • Bank of England Governor Mark Carney said the U.K. is just beginning to see a pickup in wages, a key metric for policy makers as they debate the timing of the first interest-rate increase since 2007
  • Finance ministers and central bank chiefs from the G-20 agree that monetary policy needs to stay accommodative until the outlook for economic growth improves, according to a draft communique obtained by Bloomberg
  • Greece topped the list of worries for finance ministers and central bankers from the G-20, with concern rising that the Mediterranean nation’s membership of the euro has never been more tenuous
  • Sovereign yields mixed, with Greece 10Y surging nearly 70bps to 10.79%. Asian, European stocks, U.S. equity-index futures fall. Brent, WTI, gold, copper rise


DB’s Jim Reid concludes the overnight recap



If you haven’t left for work yet and like me you’re a big Breaking Bad fan then you may want to consider returning back to bed, firing up the internet and watching this morning’s world premier of hotly anticipated spin-off show “Better Call Saul”. After last night’s speech by new Greek PM Tsipras, even the infamous Breaking Bad lawyer might be scratching his head working out how we end up getting an imminent compromise between Greece and the EU. This week’s emergency Eurogroup meeting on Wednesday looks likely to be a tense affair. Tsipras confirmed that they won’t look to extend the existing MoU program and committed to reversing key parts of the old agreement (labour, taxes and pension changes were all in the firing line to be reversed).

Specifically Tsipras was reported on Reuters as saying that ‘the bailout failed’ and that ‘the new government is not justified in asking for an extension, because it cannot ask for an extension of mistakes’. Tsipras also said that he believes that a short term ‘bridge agreement’ can be put in place over the next 15 days to keep Greece afloat. Meanwhile, the Greek press Ekathimerini reports the Greek finance minister Varoufakis as saying that should Greece be forced out of the Eurozone then he expects other countries to follow suit leading to a collapse in the Euro. Specifically Varoufakis was quoted as saying that ‘the Euro is fragile, it’s like building a castle of cards, if you take out the Greek card the others will collapse’. With one eye also on the ongoing review of the ELA, the same news agency also reports that the CEO and chairman of the National Bank of Greece plan to step down from their roles over the next few days. The FT meanwhile has reported that the US is ‘pushing eurozone leaders to compromise more with Athens’.

Before this on Friday, the ASE closed 1.97% weaker after the Eurogroup had previously rejected a request from Greece for some sort of short term financing package, instead giving Greece until February 16th to request an extension on the current bailout agreement. Greek equities did in fact finish over 11% stronger last week to leave them around 3% down since the election on January 25th. Greek bonds however tell a different story, with 3y yields nearly 800bps wider since the election. As mentioned Wednesday’s Eurogroup meeting will be a key event given the political standoff. With Tsipras and the Eurogroup both appearing to stand firm it’ll be interesting to see how negotiations and talks advance – if at all – with time running out before the current programme expires at the end of the month. As we’ve mentioned the situation is very fluid so we expect more headlines in the lead up to Wednesday. In the mean time the former Fed Chairman Greenspan believes that a ‘Grexit’ is just a matter of time and was quoted in an interview with the BBC before Tsipras’s speech saying that ‘I believe Greece will eventually leave. I don’t think it helps them or the rest of the eurozone – it is only a matter of time before everyone recognizes that parting is the best strategy’. So all eyes once again on Greece.

Following Tsipras’s speech yesterday, bourses in Asia are generally trading mixed. The Hang-Seng (-0.62%) and Kospi (-0.26%) are weaker although the Nikkei (+0.21%) and Shanghai Composite (+0.12%) are currently trading firmer as we type. S&P 500 futures are trading 0.4% lower. Elsewhere data over the weekend showed China reporting the highest trade surplus on record – although the reading highlighted weak underlying demand. The $60bn surplus came in well above expectations ($48.9bn), supported by both a fall in exports (-3.3% vs. +5.9% expected) and a significant fall in imports during the month (-19.9% vs. -3.2% expected). DB’s China Chief Economist Zhiwei Zhang noted that the weak import data reinforces his view that the fiscal slide has led to a sharp contraction of domestic demand. Zhiwei now believes that there are rising downside risks to his GDP forecast of 7% in 2015 – particularly in the second half of this year given that the policy stance so far has been tight with little signal to change on the fiscal front.

The other main news over the weekend centered on the conflict in the Ukraine where talks are set to continue this morning in Berlin after Germany’s Merkel and France’s Hollande agreed to restart four-way peace talks with Russia and the Ukraine last Friday according to the FT. According to the report, Merkel is due to meet with Obama this morning following calls for the US administration to arm Ukraine given the failed ceasefire agreement initially made in September. Talks will then move onto Wednesday with Merkel looking for a diplomatic solution when she is due to meet Russia’s Putin and Ukrainian President Poroshenko.

Taking a look at markets on Friday, both the S&P 500 and Dow finished -0.34% despite a strong payrolls print in the US and better day for oil markets with both WTI and Brent firming over 2% higher. Treasuries however were weaker with the focus back on the Fed and potential rate ‘liftoff’ as 10y yields closed 14bps higher at 1.957% – the highest yield since January 8th. In terms of payrolls, the 257k reading was well ahead of the 228k expected whilst December’s print was revised significantly to 329k from 252k previously. The three month average of 336k is in fact the fast pace since 1997. Attention will now turn to Yellen’s upcoming semi-annual monetary policy testimony (formerly Humphrey-Hawkins) and then the FOMC statement in March with the latest reading having increased the chances that we see some changes or removal to the ‘patience’ language.

Following the data, the Fed’s Lockhart was quoted on Bloomberg as saying that ‘the economy is on a path to a satisfactory and desirable state of health’ although the Fed official did however say that ‘I’d like to see some evidence that what we believe to be transient factors driving recent weak inflation readings are, in fact, passing’. The Fed’s Plosser meanwhile was quoted on Reuters as saying that the Fed should have dropped the ‘patience’ language last month and ‘it never should have been there in the first place’. In terms of the other macro prints, unemployment ticked up slightly to 5.7% although average hour earnings improved to +2.2% yoy (from +1.9% previously) and the labour force participation rate was more or less in line at 62.9%.

Just wrapping up the market moves on Friday, equities in Europe were largely mixed on Friday although they recovered post the US payrolls print. The Stoxx 600 closed +0.21% firmer having traded as low as -0.4% on the day pre-payrolls. The DAX (-0.54%) and CAC (-0.26%) were weaker although the IBEX (+0.36%) was stronger. The Euro continues to trade with notable volatility, closing 1.4% weaker versus the Dollar at $1.132. The single currency has in fact closed either higher or lower by at least 1% over the last four sessions with Greece dominating the headlines and the US posting solid macro data. Fixed income markets meanwhile were subdued. Crossover finished unchanged and 10y Bunds were 1bp wider at 0.375%. Data largely took a backseat although the industrial production reading for Germany (-0.7% yoy vs. -0.3% expected) came in softer than expected.

Taking a look at this week’s calendar, we kick off this morning in Europe with trade data out of Germany along with the January business sentiment print for France and the investor confidence reading for the Euro-area. It’s the usual post-payrolls lull in the US this afternoon with just the labour market conditions index due. Turning to tomorrow, the China inflation print will be worth keeping an eye on whilst closer to home in Europe we’ve got industrial and manufacturing production prints for France and the UK, along with the industrial production reading for Italy. The ECB’s Praet and Costa speaking in Lisbon could also be worth keeping an eye on. Focus in the US on Tuesday will likely centre around the JOLTS report (although we note the lag in the reading versus recent employment prints) whilst wholesale inventories and sales along with the IBD/TIPP economic optimism survey for February are also due. We will also keep an eye on the Fed’s Lacker speaking on the US economy on Tuesday afternoon. The calendar slows down on Wednesday with no notable releases in Asia or Europe. Over in the US we get the monthly budget statement for January and the Fed’s Fisher due to speak. We kick Thursday off with machine tool orders for Japan whilst the attention in Europe will no doubt be on the final January CPI print for Germany with the market expecting a -0.3% yoy reading. It could also be worth keeping an eye on the Bank of England inflation report on Thursday morning. Industrial production for the Euro-area rounds off the day in Europe. Retail sales – where we expect a weak energy related headline print – jobless claims and business inventories are the highlights in the US on Thursday. It’s a busy end to the week in Europe with the highlight being the Q4 GDP print for the Euro-area and the market expecting a 0.8% yoy print. We’ll also get GDP numbers out of Germany, France and Italy. Away from the growth numbers, we also get trade data for the Euro-area, employment data out of France and construction output for France. We end the week in the US with the import price index and the University of Michigan Consumer Sentiment print.







During the night, the Swiss Franc continues to intervene by buying Euros. No doubt they were buying in full force last night, preventing the collapse in the Euro as it surely looks like we are going to have a GREXIT:


(courtesy zero hedge)


Is This Who Is Managing EURUSD “Turmoil” Tonight?



With SNB’s Danthine having proclaimed last week that, despite allowing Swissy to free-float again (with a soft corridor from 1.05 – 1.10), that “the SNB remains ready to intervene on foreign exchange markets” one could be forgiven for thinking that the Swiss National Bank is at it again tonight. The ‘stabilitee’ of EURUSD – trading in a narrow 45 pip range and holding very close to unchanged(as US equity futures slide, Treasuries rally and gold rises) seems a little too well managed tonight and one glance at EURCHF’s “spikey-ness” suggests the visible hand of intervention at play


EURUSD stabilitee proves: GREXIT no problem – “contained” – all fears should be dismissed…


Which for some context… spot the “odd event” out… Carnage on ECB pulling funding, Carnage on US Jobs data… and unch on Greece rejecting a bailout extension, threatening Grexit, and Ukraine tensions soaring… yep – normal.


Thanks to what seems like chaos in EURCHF…


And who is green on the long list of Bloomberg terminals that The SNB rents… The Head of the Singapore Office and The Head of Zurich’s Financial Markets group…


*  *  *

Of course – this is pure speculation…






And now for the major Greek stories today and during the weekend;



YanisV. the Finance Minister of Greece, has a PhD in Finance and his expertise is in the field of game theory.  He has written two books on the subject. It seems that we are heading into the “game of chicken” i.e. two cars heading towards each other at great speed. The one who veers first is the loser.

Greece knows that the losses to Europe will far exceed losses to itself. Greece needs to have its debt to be cut by at least 50%.  Europe knows that a default will cause massive derivative losses and Germany’s major bank Deutsche bank will feel the brunt on that derivative loss.  The ECB knowing how dire the financial position of Greece is right this minute has decided to up the ante by cutting off the roundabout sovereign Greek bond financing scheme as well as limit their Greek treasury bill refinancing.

We are not sure how much euros that have in the kitty but it is not much.  Will Greece turn to Russia for immediate bridge financing?

Will Greece turn east and shun the west?  Greece has vast oil and gas reserves in the ground and can serve as a conduit for Russian oil/gas through Turkey and onto Europe. Greece has wonderful warm ports which could serve the East quite well.


The game of chicken is upon us…


(courtesy zero hedge)





Greece Gambles On “Catastrophic Armageddon” For Europe, Warns It “Only Has Weeks Of Cash Left”

One of the bigger problems facing the new, upstart Greek government, which has set before itself the lofty goal of overturning 6 years of oppressive European policies and countless generations of Greek cronyism, corruption and tax-evasion is not so much the concern about deposit outflows and bank runs – even though it most certainly will be in the next few days unless the Tsipras government finds some resolution to the dramatic standoff with Merkel and the ECB – but something far more trivial: running out of money.

Recall that two weeks into the Greek elections, Greece was rocked by a dire, if entirely underappreciated development, when its already “tax-paying challenged” population decided to completely hold off paying any taxes in advance hopes that the Tsipras government will “overturn” austerity. We wrote:

… while there will be no official confirmation whether Greece did or did not have a bank run for months, unless of course some bank keels over and dies in the interim, one thing is certain: with an increasing probability they may not have a “continuity-promoting” government in less than two weeks, Greeks tax remittances to the government, which were almost non-existent to begin with, have ground to a halt!


According to a second Kathimerini report, budget revenues have slumped over the last few days as a result of the upcoming elections and taxpayers’ uncertainty about the future: “Most taxpayers have chosen to delay their payments, given that the positions of the two main parties leading the election polls are diametrically opposite: Poll leader SYRIZA promises to cancel the ENFIA and even write off bad loans, while ruling New Democracy acknowledges the difficulties but is avoiding raising issues that would generate problems and fiscal consequences.


The dwindling state revenues will not only hamper the next government’s fiscal moves, but, given that the fiscal gap will expand, also negotiations with the country’s creditors.


The tax collection mechanism appears to be largely out of action while expired debts are swelling due to taxpayers’ wait-and-see tactics and the reduction in inspections.

So for battered, depressed Europe “austerity” really meant “taxation” – it is no surprise then why so many in peripheral Europe, who for the past 7 years have not seen any benefits from Germany’s delay in reintroducing the Deutsche Mark (and keeping its export industry humming, and Deutsche Bank solvent, courtesy of the much lower Euro), hate “austerity” so much: after all there really should be no “austerity” without representation and most European voices hardly matter in a monetary “Union” where only bankers and unelected eurocrats are heard.

But going back to the main topic, namely the Greek liquidity situation, it was none other than the Eurogroup which late on Friday gave Greece a 10 day ultimatum to cede all demands and resume work under the Bailout program, or face a liquidity collapse and effective expulsion from the Eurozone. Which means suddenly Europe is engaged in the biggest bluff since 2012, as Greece and Europe both desperately try to outbluff each other that the “adversary” need it more than vice versa.

The problem is that Greece may not even have 10 days.As the WSJ reports, “Greece warned it was on course to run out of money within weeks if it doesn’t gain access to additional funds,effectively daring Germany and its other European creditors to let it fail and stumble out of the euro.”

Greek Economy Minister George Stathakis said in an interview with The Wall Street Journal that a recent drop in tax revenue and other government income had pushed the country’s finances to the brink of collapse.


“We will have liquidity problems in March if taxes don’t improve,” Mr. Stathakis said. “Then we’ll see how harsh Europe is.

As we reported last month, “Government revenue has declined sharply in recent weeks, as Greeks with unpaid tax bills hold back from settling arrears, hoping the new leftist government will cut them a better deal. Many also aren’t paying an unpopular property tax that their new leaders campaigned against. Tax revenue dropped 7%, or about €1.5 billion ($1.7 billion), in December from November and likely fell by a similar percentage in January, the minister said. Other senior Greek officials said the country would have trouble paying pensions and other charges beyond February.

Said otherwise, when Yanis Varoufakis responded to Europe that “Greece already is bankrupt” he knew exactly what he was talking about.

And as the WSJ further details, this means that the infamous ultimatum on Greece may have been set by none other than Greece itself!

Greece has made no secret of its precarious financial position, but the minister’s comments suggest the country has even less time than many policy makers thought to resolve its standoff with Europe.


Eurozone officials have asked Greece to come up with a specific funding plan by Wednesday, when finance ministers have called a special meeting to discuss the country’s financial situation.


The country needs €4 billion to €5 billion to tide it over until June, by which time it hopes to negotiate a broader deal with creditors, Mr. Stathakis said, adding that he believes “logic will prevail.” If it doesn’t, he warned, Greece “will be the first country to go bankrupt over €5 billion.”

What happens then: “If the Greek government runs out of cash, the country would be forced to default on its debts and reintroduce its own currency, thus abandoning the euro. Most of the €240 billion in aid that Europe and the International Monetary Fund have pumped into the country would be lost.”

Of course, Greece knows all this. The bigger question is what does a Grexit mean for Europe. Recall it was in May 2012, just around the time of the second Greek bailout, that Charles Dallara, who as head of the International Institute of Finance (IIF) spent months in Athens negotiating the largest ever sovereign debt restructuring, said that “the damage to the rest of Europe from Greece leaving the euro would be“somewhere between catastrophic and Armageddon.”

“I think that it (a Greek exit) is possible, but I wouldn’t call it inevitable and I wouldn’t even call it likely because the costs for Greece, for Europe and for the global economy are likely each in their own way to be immense.”


“The pressures on Spain, Portugal, even Italy and conceivably Ireland could be immense and the need for Europe to step up with much greater support for the banking systems would be substantial.”

If that isn’t enough here is what Willem Buiter predicted:

As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area. Any non-captive/financially sophisticated owner of a deposit account in that country (or in those countries) will withdraw his deposits from banks in countries deemed at risk – even a small risk – of exit.  Any non-captive depositor who fears a non-zero risk of the future introduction of a New Escudo, a New Punt, a New Peseta or a New Lira (to name but the most obvious candidates) would withdraw his deposits from the countries involved at the drop of a hat and deposit them in the handful of countries likely to remain in the euro area no matter what – Germany, Luxembourg, the Netherlands, Austria and Finland.


The funding strike and deposit run out of the periphery euro area member states (defined very broadly), would create financial havoc and mostly like cause a financial crisis followed by a deep recession in the euro area broad periphery.

A banking crisis in the euro area and in the EU would most likely result from an exit by Greece from the euro area. The fundamental financial and real economy linkages from the rest of the world to the euro area and the rest of the EU are strong enough to make this a global concern.

And of course, there was Carmel’s presentation from the summer of 2012, comparing the costs to Germany from a Euro staying together versus falling apart:


That is precisely the gambit the Greece is playing right now: in fact, that is the only gambit it has left – one final gamble that kicking Greece out of the Eurozone will have far more devastating consequences on the Eurozone, where not only is the ever-persistent threat of deposit bank run from the periphery one flashing red headline away, but where one after another anti-European party, from Spain’s Podemos to Marine Le Pen’s surge in France, are ascendent and may seek to recreate the Greek example unless Germany steps in in the last minute and concedes the Greek demands.

The problem is that as Merkel understands very well, should she concede to Greece, then she would be expected to concede to Italy, and Spain, and Portugal, and Ireland, and anyone else who came knocking at her door with a loaded gun and threatening to commit suicide. The WSJ picks up on this as well:

Europe wants Athens to commit to further labor-market and other reforms as a precondition for more money. The new government is refusing, arguing that it was elected to turn back many of the painful measures Europe and other creditors have demanded of it.


Berlin worries that the eurozone would lose leverage over Athens if it gives into its request for an interim loan. Without a binding agreement from Greece to continue its reform program, officials say Germany is unlikely to back down.


Berlin, which is counting on financial pressures to force the Greek government’s hand, believes time is on Germany’s side.

And for now, it is correct: “Those pressures are being felt across Greece’s economy. Its banks lost €8 billion to €10 billion in deposits in January alone, government officials say. The banking system’s woes were exacerbated by the ECB’s decision earlier in the week to no longer accept Greek government bonds as collateral from banks seeking funds.”

As Zero Hedge pointed out several times last week, both the ECB, the Eurogroup and even S&P, are no longer concerned about starting a bank run in Greece, as this would be the surest way to crush support for the new Greek government and force it to the negotiating table with its tale between its legs. Furthermore, in order to avoid giving the Greeks the satisfaction that their strong-arm policy is working, the central banks have done everything in their power to keep stock markets afloat and levitating this week, to avoid giving the impression that anyone in the world is concerned about contagion side-effects should Greece in fact exit the Eurozone. Or as we put it:

This strategy may, however, backfire and result in even more support for the government which unlike its predecessors who were perceived merely as Europe’s lackey muppets, refuses to concede to Merkel, which is a distinct risk for the German chancellor:

Germany’s strong-arm strategy carries substantial risk. In addition to possibly triggering Greece’s exit from the euro, it carries political overtones.


Many Europeans already view Germany as the continent’s unyielding paymaster. Refusing to compromise with Greece’s new government over a few billion euros would further cement that image and open Berlin to accusations that it is ignoring Greece’s plight and riding roughshod over the democratic process.


Such resentments could fuel Europe’s other ascendant anti-austerity movements, particularly in Spain, where the Podemos party, modeled on Greece’s governing leftists, has recently surged in the polls.

And that’s the gamble in a nutshell: Greece has already bluffed with everything it has (even raising the specter that it will cooperate with Russia if Europe kicks it out, giving Putin a foothold on the continent) while Europe desperately pretends that Charles Dallara’s warning from less than three years ago is no longer relevant and that a Grexit is not only neither “catastrophic” nor “Armageddon“, but instead is welcome and perfectly normal.

We should know who will crack first as soon as this week, just before or during the Eurogroup emergency meeting on February 11, although Greece already appears to be regretting its liquidity shortfall threat, asReuters reported earlier today it “will not face any cash crunch while negotiations with its euro zone partners on a new programme to roll back austerity take place, its deputy finance minister said on Saturday. “During the time span of the negotiations there is no problem (of liquidity). This does not mean that there will be a problem afterwards,” Deputy Finance Minister Dimitris Mardas said on Mega TV. “Asked whether state coffers may encounter a cash crunch if talks drag on until May, the minister said he did not expect the negotiations over a new deal to last that long.”

Indeed, if Greek negotiations fail, read if the bluff does not succeed, by May Greek state coffers will likely be getting funding from Beijing and or Moscow. Which then begs the question: has Greece indeed lost everything, allowing it to be finally free to do anything?

Additional reading: Game theory and euro breakup risk premium




This is the article that zero hedge references above.  The Wall Street Journal state that Greece can run out of cash in a few weeks;



(courtesy Wall Street Journal/Karnitschnig/Samouli/Benoit)


Greece Could Run Out of Cash in Weeks

Request by Athens to Raise an Extra $5 Billion in Short-Term Debt Rejected



Demonstrators marching in Athens Thursday to back the new government’s tough stance with its creditors.ENLARGE
Demonstrators marching in Athens Thursday to back the new government’s tough stance with its creditors. PHOTO: GETTY IMAGES

Greece warned it was on course to run out of money within weeks if it doesn’t gain access to additional funds, effectively daring Germany and its other European creditors to let it fail and stumble out of the euro.

Greek Economy Minister George Stathakis said in an interview with The Wall Street Journal that a recent drop in tax revenue and other government income had pushed the country’s finances to the brink of collapse.

“We will have liquidity problems in March if taxes don’t improve,” Mr. Stathakis said. “Then we’ll see how harsh Europe is.”

Government revenue has declined sharply in recent weeks, as Greeks with unpaid tax bills hold back from settling arrears, hoping the new leftist government will cut them a better deal. Many also aren’t paying an unpopular property tax that their new leaders campaigned against.

Tax revenue dropped 7%, or about €1.5 billion ($1.7 billion), in December from November and likely fell by a similar percentage in January, the minister said.

Other senior Greek officials said the country would have trouble paying pensions and other charges beyond February.

Eurogroup chief Jeroen Dijsselbloem, left, and Greek Finance Minister Yanis Varoufakis will meet Wednesday to discuss Greece’s bailout program with other eurozone finance ministers.ENLARGE
Eurogroup chief Jeroen Dijsselbloem, left, and Greek Finance Minister Yanis Varoufakis will meet Wednesday to discuss Greece’s bailout program with other eurozone finance ministers. PHOTO: EUROPEAN PRESSPHOTO AGENCY

Greece has made no secret of its precarious financial position, but the minister’s comments suggest the country has even less time than many policy makers thought to resolve its standoff with Europe.

Eurozone officials have asked Greece to come up with a specific funding plan by Wednesday, when finance ministers have called a special meeting to discuss the country’s financial situation.

The country needs €4 billion to €5 billion to tide it over until June, by which time it hopes to negotiate a broader deal with creditors, Mr. Stathakis said, adding that he believes “logic will prevail.”

If it doesn’t, he warned, Greece “will be the first country to go bankrupt over €5 billion.”

If the Greek government runs out of cash, the country would be forced to default on its debts and reintroduce its own currency, thus abandoning the euro. Most of the €240 billion in aid that Europe and the International Monetary Fund have pumped into the country would be lost.

Greece’s new, leftist government has been in a tug of war with its European creditors for days over relaxing strictures of its bailout program. Athens is pressing for less-onerous terms so it can reverse some of the austerity measures weighing on the country, but its partners in the euro currency area, led by Germany, have refused.

Before the two sides can address Greece’s broader bailout framework, however, they need to quickly find a way to keep the country solvent.

Mr. Stathakis said Athens has asked for €1.9 billion in profits from Greek bonds held by other eurozone governments. In addition, the government wants the eurozone to allow Greece to raise an additional €2 billion by issuing treasury bills, he said.

Both proposals clash with the rules governing Greece’s bailout and eurozone officials have dismissed them.

Europe wants Athens to commit to further labor-market and other reforms as a precondition for more money. The new government is refusing, arguing that it was elected to turn back many of the painful measures Europe and other creditors have demanded of it.

Berlin worries that the eurozone would lose leverage over Athens if it gives into its request for an interim loan. Without a binding agreement from Greece to continue its reform program, officials say Germany is unlikely to back down.

Berlin, which is counting on financial pressures to force the Greek government’s hand, believes time is on Germany’s side.

Greece is set to remain in the spotlight next week as European Union leaders plan to meet for a summit in Brussels where they are expected to discuss the best way to reach an agreement between Greece and its creditors. Photo: AP.

Those pressures are being felt across Greece’s economy. Its banks lost €8 billion to €10 billion in deposits in January alone, government officials say. The banking system’s woes were exacerbated by the ECB’s decision earlier in the week to no longer accept Greek government bonds as collateral from banks seeking funds.

Greek lenders will instead have to rely on emergency central-bank funding, which is more expensive and requires renewal every couple of weeks.

Germany’s strong-arm strategy carries substantial risk. In addition to possibly triggering Greece’s exit from the euro, it carries political overtones.

Many Europeans already view Germany as the continent’s unyielding paymaster. Refusing to compromise with Greece’s new government over a few billion euros would further cement that image and open Berlin to accusations that it is ignoring Greece’s plight and riding roughshod over the democratic process.

Such resentments could fuel Europe’s other ascendant antiausterity movements, particularly in Spain, where the Podemos party, modeled on Greece’s governing leftists, has recently surged in the polls.

Even if Germany backs down on refusing Greece short-term funding, the two sides remain far apart on revising the broader framework. In addition to far-reaching economic reforms, which the Greek government says it won’t stomach and Berlin insists are essential, there are a host of other obstacles.

In private, German officials say there may be some leeway in extending the repayment schedule for Greece’s debt to the eurozone’s bailout funds and individual member states, but Berlin is less willing to lower the interest payments due on this debt.

Yet nothing short of a substantial reduction in those interest payments would give Greece’s government the fiscal flexibility it needs to meet its promises to end austerity.

On another crucial issue, supervision, Berlin appears ready to accept some changes. Greece’s bailout is overseen by the European Commission, the European Central Bank and the International Monetary Fund—the so-called troika.

Many Greeks feel the troika has humiliated their country. Doing away with the group is one of the new government’s key demands.

“We don’t want to see the IMF coming back to Greece,” Mr. Stathakis said.

German officials insist such changes can only be cosmetic tweaks—the troika could be renamed and some of its meetings held outside of Greece—designed to make a new program easier for Athens to sell to Greek voters and lawmakers. But they point out that IMF programs have always involved minute scrutiny of recipient governments.

—Gabriele Steinhauser, Viktoria Dendrinou and Matthew Dalton contributed to this article.

Write to Matthew Karnitschnig at matthew.karnitschnig@wsj.com, Nektaria Stamouli at nektaria.stamouli@wsj.com and Bertrand Benoit at bertrand.benoit@wsj.com







Clive Hale also believes that the West should be worry about Greece as they have no other option:





(courtesy Clive Hale/A View from the Bridge)



Beware Greeks bearing spanners February 8th 2015

“A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet-bombing the economy of proud European nations in order to save them.” Yanis Varoufakis the current Greek finance minister on ECB, EU, German (take you pick) economic policy.

 This guy, and his boss Alexis Tsipras, are being portrayed in the massively manipulated “main stream press” as Marxist tyrants who will lead the Greek economy into ruin. Varoufakis’ argument is that, courtesy of the Troika, Greece is already in that condition, but the root of the problem goes back much further. To get to join the euro club in the first place “convergence” had to take place.

 By 2001, the year in which the first wave of Euroistas adopted the blighted currency as their own, even the Germans had worked out that interest rates across the member state would have to converge – to the rate enjoyed by Germany of course. Greek 10 year bond yields went from well over double digits to around 5% by the time the euro became a reality and hit a low around 3% in 2005.

 Not quite down to German levels, but borrowing costs had fallen dramatically to the point where every Greek shepherd boy was driving around in a Porsche Cayenne. German industry cannot be supported by its domestic economy, so it has to be a global exporter and by having a hand in lowering interest rates across Europe the great machine is thus fed.

 We are now rapidly approaching the day of reckoning. Like the shepherd boy the Greek government is not, and never was, in a position to repay the “generous” loans that were expeditiously foisted upon it. The correct medicine would have resulted in some serious problems for the banking system and not just in Greece. But instead of swallowing the red pill the good doctors prescribed the blue pill (piling on more debt) and everyone happily relaxed into a state of acquiescence and denial.

 Varoufakis is now saying, not too subtly, that the German emperor has no clothes. The body language displayed at his meeting with Wolfgang Schauble was a picture! Wolfie said that they had “agreed to disagree”; Varoufakis said that, “they hadn’t even begun to agree to disagree.” He has written two books on game theory and whilst that doesn’t make him an expert, in much the same way that a doctorate in economics doesn’t bestow on him all the answers, at least he understands the rules of the game which the euronauts quite patently don’t.

 The Germans have said stick to the agreement or we stick it to you. The French on the other hand, realising that breaking the rules is usually their prerogative, have at least acknowledged that the Greeks might have a point. So the two major powers in Europe are starting to face in different directions. Then the Americans weigh in and line up with France. Not because they like the French (French fries are still off the menu State side) but because Greece – and little Cyprus – have a ton of oil and gas reserves and have always been a buffer zone in the Balkans.

 The ECB has already cast the first stone by denying the use of Greek sovereign debt (which does not have investment grade status) as collateral in loan transactions. This means that they will, for the time being, have to go down a more expensive route (translating into an additional €60 million a month in interest payments) to borrow cash to prop up their banks. If there is no agreement by February 25th then even this facility will be withdrawn and Greece could be unceremoniously booted out of the club.

 In the past, resolution of euro “conflicts” has been achieved by a mixture of fudge, obfuscation and outright lying. This time around the Germans potentially have more to lose than the Greeks so get out your books on game theory and place your bets.






Sunday:  The Greek Prime Minister Tsipras rejects the EU ultimatum and demands only a “bridge deal” to help them finance its way out of its mess. They will not take orders by email and they want their sovereignty back.


Ladies and Gentlemen:  prepare for a GREXIT


important read…


(courtesy zero hedge)


Tsipras Rejects EU Ultimatum, Demands Bridge Deal: “Greeks Can’t Take More Disappointment”



Speaking defiant tone on Sunday evening, Greece’s new Prime Minister Alexis Tsipras showed no signs of backing away from the commitments and pledges he and his party made to the Greek people (and that so many staunch status-quo huggers believe he will back down from). Raging that Greece “won’t take orders by email” any more, Tsipras warned “Greeks can’t take any more disappointment, ” and pointedly stated that Syriza “will make Greece economically autonomous,” in about as strong a rejection of the EU’s ultimatum as is possible by not requesting a bailout extension and exclaiming unequivocally, “we will keep our pre-election promises. This is non-negotiable.” This is not just a Greek crisis but a European crisis “and the solution will be European.”


His speech began aggressively:

  • Tsipras “Winning back our sovereignty, restoring equal role in Europe, tackling humanitarian crisis are among our key targets”
  • Tsipras “I am fully aware of difficulties and responsibilities”

But then Tsipras appeared to take direct aim at Germany and the EU’s demands…

  • “We must build a new independent Greece which is equal to our partners in Europe.”
  • “We will keep our pre-election promises. This is non-negotiable.”
  • “We will put an end to presidential decrees and bring back respect for the constitution”

These seem about as strong a threat/promise as a leader can make that GREXIT is coming!


Then Tsipras takes aim at previous governmental decisions…

  • “The previous gov’t wanted its successor, but also Greece, to fail. They forgot to account for Greek people”
  • “The Greeks will take part in the negotiations – not just technocrats.”
  • “Our partners wanted 6-month extension of bailout but previous gov’t demanded two months”

Finally he concluding, fire and brimstone exuding…

  • “Things are difficult in Europe, but they are changing. Greece will play a leading role”
  • “The problem is not just Greek – it is European – and the solution will be European”

He ends with his demands, clearly rejecting Europe’s ultimatum by not asking for a bailout extension…

  • “We want a bridging deal – until June – to give us a chance to kickstart development.”
  • “We’re asking for bridge agreement until summer. Despite difficulties, this is possible”
  • Greek PM Alexis Tsipras says minimum wage will be raised to previous level of €751 but gradually until 2016

Here is Reuters’ take:

Greek PM Tsipras says EU bailout failed, rejects extension


Greek Prime Minister Alexis Tsipras on Sunday dismissed his country’s European Union and International Monetary Fund bailout and said he would not ask EU leaders for an extension.  But he said it was possible to negotiate a transitional agreement with lenders by the end of the month to tide Greece over until a new debt pact had been reached.  “The bailout failed,” he said in his first major speech to parliament as premier. “The new government is not justified in asking for an extension … because it cannot ask for an extension of mistakes,”


Greece’s current bailout expires on Feb. 28 and the EU wants Athens to apply for an extension, including the commitment to reforms. Greece has ruled that out, setting the stage for clashes in the coming week at an EU summit and finance ministers’ meeting.

In Tsipras’ own words:

In summary:


  • Greece cannot back down (mandate is clear)
  • Greece rejects bailout extension (implicit GREXIT unless EU backs down)
  • Europe cannot afford repeat mistakes – will not humiliate one nation.
  • Greece’s first priority: humanitarian disaster






The British are now making preparations for a GREXIT:


(courtesy zero hedge)



UK Begins Preparations For Grexit

As recently as two years ago, even the merest hint thatany entity was preparing for what then was unthinkable, namely the Greek exit from the Eurozone, was enough to get one burned at the stake. After all, recall what happened when none other than the head of the ECB liedon the record to Zero Hedge, saying there is no Plan B for an ex-Greece Eurozone (even if he was technically right: Europe defined it as “Plan Z”).

Now, supposedly just because the ECB started monetizing about 100% of German gross Bund issuance two weeks ago (and monetizing debt all across the Eurozone for as long as said Eurozone exists: at this rate it may not be too long) “things are different“, and no longer is it taboo to either incite bank runs in Greece (in fact it is encouraged as both the ECB, Germany and S&P have tried to do in the past week), but outright discussions about preparation for a Grexit are a daily occurrence.

From the WSJ:

The U.K. government is stepping up contingency planning to prepare for a possible Greek exit from the eurozone and the market instability such a move would create, U.K. Treasury chief George Osborne said on Sunday.


A spokeswoman for the Treasury declined comment on the details of the contingency planning.


The U.K. government has said the standoff between Greece’s new antiausterity government and the eurozone is increasing the risks to the global and U.K. economy.


“That’s why I’m going tomorrow to the G-20 [Group of 20] to encourage our partners to resolve this crisis. It’s why we’re stepping up the contingency planning here at home,” Mr. Osborne told the BBC in an interview. “We have got to make sure we don’t, at this critical time when Britain is also facing a critical choice, add to the instability abroad with instability at home.”

Then again, judging by Tsipras’ historic fire and brimstone speech in parliament, in which he just threw up all over the Eurozone ultimatum, and rejected all European demands for Syriza to concede any/all of its demands and is instead sticking to his party line and showing the world how “going all-in” is really done, the UK probably has good reason for its preparations. As of this moment it is not alone.

There are only two questions now: whether the ECB, the SNB and the BIS will be able to buy up all the Euros that will suddenly be put for sale, just to show the world how any fears of Grexit contagion are contained… if only by a central bank whose political capital, as we pointed out earlier, just ran out with what now appears to be the first Eurozone exit: an even that as recently as a year ago was absolutely unthinkable.

And question #2: what time does the Kremlin provide its own term sheet for a Greek bridge loan. Of particular interest: what currency and what interest rate.





Sunday night:  Yanis V warns that the Euro will collapse on a GREXIT. He claims that Italy will follow Greece if she is booted out:


(courtesy zero hedge)





Greek FinMin Warns “Euro Will Collapse If Greece Exits”, Says Italy Is Next


The time for the final all-in bet has arrived.

As we explained yesterday, when we wrote that “Greece Gambles On “Catastrophic Armageddon” For Europe, Warns It “Only Has Weeks Of Cash Left“”, and as confirmed further by today’s fire and brimstone speechby Greek PM Tsipras, in which he not only did notconcede one millimeter to Europe but raised the stakes even higher, by promising among other things to raise the minimum wage and to halt foreclosures, Greece is now betting everything that Europe will not allow it to exit, hoping that “this time is not different”, and the existential terror that would be heaped on the Eurozone as forecast in 2012 by the likes of Citi’s Buiter and IIF’s Charles Dallara, will still take place, and Europe will concede that spending a few more billion on Greece’s bridge program is worth to avoid what could potentially spiral into an out of control collapse.

To be sure, that is precisely what Yanis Vaourfakis implied today when he said that “if Greece is forced out of the euro zone, other countries will inevitably follow and the currency bloc will collapse, Greek Finance Minister Yanis Varoufakis said on Sunday, in comments which drew a rebuke from Italy.”

The comments emerged from an interview we commented on earlier with Italian state television network RAI, Varoufakis said Greece’s debt problems must be solved as part of a rejection of austerity policies for the euro zone as a whole. He called for a massive “new deal” investment program funded by the European Investment Bank.

From Reuters:

“The euro is fragile, it’s like building a castle of cards, if you take out the Greek card the others will collapse.” Varoufakis said according to an Italian transcript of the interview released by RAI ahead of broadcast.


The euro zone faces a risk of fragmentation and “de-construction” unless it faces up to the fact that Greece, and not only Greece, is unable to pay back its debt under the current terms, Varoufakis said.


“I would warn anyone who is considering strategically amputating Greece from Europe because this is very dangerous,” he said. “Who will be next after us? Portugal? What will happen when Italy discovers it is impossible to remain inside the straitjacket of austerity?

So now that Greece is all in, the time for even more truth has emerged, and if Greece is finally being honest, it may as well spook Italy and drag it down – or rather up – with it.

“Italian officials, I can’t tell you from which big institution, approached me to tell me they backed us but they can’t tell the truth because Italy also risks bankruptcy and they are afraid of the reaction from Germany,” he said.


Let’s face it, Italy’s debt situation is unsustainable,” he added, a comment that drew a sharp response from Italian Economy Minister Pier Carlo Padoan, who said in a tweet that Italy’s debt was “solid and sustainable.”


Varoufakis’s remarks were “out of place”, Padoan said, adding that Italy was working for a European solution to Greece’s problems, which requires “mutual trust”.


Italy’s public debt is the largest in the euro zone after Greece’s and Italian bond yields surged in 2011 at the height of the euro zone crisis. They have since fallen steeply and have so far come under little pressure from the renewed tensions in Greece.

And while the Greek “scorched earth” approach would have no doubt succeeded had it taken place three, two or even one year ago, when Europe still had some faint resemblance of an actual market, the difference this time is that by dint of its recently launched QE, which revealed that Germany’s staunch “anti money printing ” stance was nothing but melodramatic theater all along,it is the ECB that is in charge of every asset class in Europe: from the EUR, to the German Bund, to the Italian BTPs, to the DAX to, well, everything, and neither fundamentals nor non-central bank players matter any more.

Which is why Greece may have waited just three weeks to long with its final gambit, as Europe is confident that the ECB’s interventions can offset the loss of faith in an already crashing Eurozone (if only for a short period of time, of course). Because the alternative, ceding to Greece, means that all other European peripheral states will demand the same treatment.

Which brings us back to Greece, for whom the moment has finally arrived: the moment which was so eloquently described by a Chuck Palahniuk character when he said that “it is only after we have lost everything, that we are free to do anything.

“We” in this case being Greece. The only question is whether the freedom from its final loss has arrived just a few weeks too late…






Morgan Stanley who ought to know as they are a huge underwriter

of derivatives including credit default swaps on Greece, had this to say this morning:


(courtesy Morgan Stanley/zero hedge)


Morgan Stanley Says Grexit Would Send EURUSD Crashing To 0.90



Just as Mario Draghi was gaining traction with his latest plan to crush – but not too much so as to rekindle redenomination risk 0 the Euro “whatever it takes” courtesy of the recent launch of QE which sent the EURUSD to the lowest level in over a decade, something happened: Greece. And the problem for Draghi is that suddenly a loud, if confused, permabullish chorus has emerged screaming that a Grexit would actually be very bullish for the Euro. Of course, that’s a problem as it goes directly in the opposite direction with what Draghi is trying to achieve, in order to not only send the DAX to all time highs (a DAX which curiously was downgraded earlier today by JPM) but to promote German, and to a lesser extent, French exports. However, if the EUR were to revert fully to a regime where a Grexit is seen as an existential threat to the EUR, that too is unadvisable, as it would lead to an avalanche of selling across not only FX but all asset classes.

Enter the proposal for a “controlled descent”, first suggest today by Morgan Stanley FX strategy team.

Here is Morgan Stanley playing “good cop, bad cop” in setting the stage for Europe.

Greece exit risks rise: The credit impulse in European economies looks positive and leading indicators are looking better, but there are two risks: Greece and the Russia-Ukraine conflict. Both event risks have the potential to weaken the economic outlook.

Actually it depends on your definition of “risk” – after all the ECB would not have been able to launch QE had it not been for the Russian sanctions, and the tumble in European economic growth that resulted. We wonder: did Mario Draghi, and the entire Goldman central bank alumni team, remember to send Putin a nice thank you note for enabling Q€?

So back to next steps, and why – at least for Morgan Stanley – a Grexit is precisely the thing that German, French and other exporters ordered.

The Greek Prime Minister has reaffirmed his government’s rejection of the country’s international bailout programme two days before an emergency meeting with the euro area’s finance ministers on Wednesday. His declaration suggested increasing minimum wages, restoring the income tax-free threshold and halting infrastructure privatisations. Should Greece stay firm on its current anti-bailout course and with the ECB not accepting Greek T-bills as collateral, the position of ex-Fed Chairman Greenspan will gain increasing credibility. He forecast the eurozone to break as private investors will withdraw from providing short-term funding to Greece. Greece leaving the currency union would convert the union into a club of fixed exchange rates, a type of ERM III, leading to further fragmentation. Greek Fin Min Varoufakis said the euro will collapse if Greece exits, calling Italian debt unsustainable. Markets may gain the impression that Greece may not opt for a compromise, instead opting for an all or nothing approach when negotiating on Wednesday. It seems the risk premium of Greece leaving EMU is rising. Our scenario analysis suggests a Greek exit taking EURUSD down to 0.90.

So who will prevail: those who say a Grexit is bullish for the Euro as it removes tail risk and makes the Eurozone even stronger, or those who say a Grexit will lead to a plunge (controlled of course) in the Euro as the contagion risk never really went away, and now everyone will look to Italy and France, where anti-Europe movements have continued to rise from strength to strength, but nowhere more so than in Spain, where the Syriza peer, Podemos, is now tracking at top spot in polls:

This morning Greek bank bonds collapsed as did Greek stocks which are  now at record lows.  A huge change from 3 months ago.  Again there must be some huge derivative losses here!
(courtesy zero hedge)

Greek Bank Bonds & Stocks Crumble To Record Lows

Just 3 short months ago, Greek bank bonds were trading near par and every over-leveraged, over-confident, over-full-of-propaganda hedge fund was buying them “for the yield” – well, S&P had upgraded Greece and implied ‘all-clear’. Today, Greek bank bonds are trading at 60% of face-value, having dead-cat-bounced last week before re-collapsing today. Greek bank stocks are also careening lower with most at record lows (below the lows reached during the peak of the crisis). The reason to focus on these instruments is that, while somewhat illiquid, they are the most sensitive to the day-to-day headlines and overall sentiment on Greece (and Grexit) as a pure reflection (redenomination risk aside) of trouble ahead.


Greek bank stocks are down 65-75% from mid-Summer (interestingly peaking around the same time as oil…)


Greek bank bonds have cratered to fresh record lows…


Charts: Bloomberg




Contagion is spreading as Spanish and Italian bond risks rise. If Greece leaves the Euro Monetary union, then all of its debt is divided amongst the other 18 nations.  I can assure you that the citizens of Italy, Spain and Portugal are not happy with this..and this is the reason for their bond yields to rise:


(courtesy zero hedge)





Greek Contagion? Spanish/Italian Bond Risk Surge Most In 4 Months


With Spanish and Italian leaders desperately running around to any and every media outlet to proclaim themselves economically fit and deny deny deny what Greek FinMin Varoufakis said yesterday, it appears the market has a different perspective. Portuguese bond spreads are 16bps wider and Spanish and Italian bond spreads are 12bps wider – their worst day in almost 4 months – as it appears Grexit fears are starting to creep into the rest of the periphery.



Charts: Bloomberg





Now it is UBS’s turn to warn that the world is underestimating the risk of the GREXIT:


(courtesy zero hedge)





UBS Says “A Market Dislocation Is Necessary To Focus Minds” And Stop “Underestimating Grexit Risks”


Had the current Greek episode, where the terms “Grexit”, “bank runs”, and “funding freeze” are tossed around as casually as black tie event at the Tsipras household, taken place two years ago the S&P, Dax and the Nikkei would have been halted limit down. Today, however, there is barely any move in risk assets because, as conventional wisdom would have it, a Grexit is suddenly a “great thing”, and in fact will serve to not only push the EUR higher but send the DAX to all time-er highs (ignoring that it is just the ECB doing the buying).

However, according to UBS’ Larry Hatheway, as ever so often happens, conventional wisdom is wrong. Instead the UBS economist and his peers “believe investors are underestimating the risks associated with Greece’s difficult negotiating position with the troika. Matters are likely to ‘come to a head’ in the coming weeks, particularly as the current program must be re-approved and extended by mutual consent at the end of this month.”

Here are UBS’ conclusion:

  • The terms of a compromise are easier to see than the willingness to compromise. At the time of writing, Greece is deadlocked in its bilateral discussions, as well as with the troika members.
  • Breaking the deadlock voluntarily may not be easy. Political realities in the rest of Europe argue against granting the Syriza-led government concessions on debt or fiscal relief. Yet the Greek government feels it has a mandate to demand such relief.
  • Hence, outside pressure—in the form of financial and market dislocations—seems necessary to focus minds.
  • A Greek exit remains the worst case outcome, both for Greece and the rest of the Eurozone. But that logic, alone, may not drive parties to an easy or quick compromise.
  • The rising probability that financial pressures will increase—as has already been evident in depositor flight from Greek banks—makes us tactically cautious on risk assets. Our asset allocation team has accordingly cut its allocations to risk assets.
  • Contrary to some narratives, an escalation of the crisis or even a ‘Greek exit’ is unlikely to push the euro higher. We think contagion effects would have the opposite impact.
  • In the (still unlikely) event of a Greek exit, Greek banks would not have sufficient capital to address losses and bank lending would likely collapse.
  • In a scenario of Eurozone exit, we believe European cyclicals and financials would do worst, while safe haven markets such as the UK or Switzerland would outperform.

There is much to read, digest and ponder in UBS’ note “Can Europe avoid a Greek tragedy?” and we will touch on much of it in subsequent posts, although we immediately disagree with UBS’ chief contention namely that “outside pressure—in the form of financial and market dislocations—seems necessary to focus minds.” That may have been the case in 2012 but now it is precisely the opposite – after all the ECB wants to telegraph that it has not only Grexit but its associated contagion under control (thanks to Q€, OMT, you name it), and as such the worse the negotiations get, the higher the EUR is likely to rise (on ECB and SNB buying) coupled with a rise in risk assets.

Remember: it is all about leverage, and the way the Eurozone is telegraphing its leverage to Greece is by advising Varoufakis that he has none, and if stocks refuse to sell off on any Greek threats, no matter how credible, then Greece clearly has no leverage, and thus has to conceded.

Of course, once the negotiations are over one way or another, and assume Greece is out, at that point the ECB’s posturing can end, and the real selling begins once the realization of what just happened – a realization facilitated by the ECB’s intervention in the market – then, and only then, will UBS be correct. But the bottom line is that the calmer the market is, the more likely Greece is to actually exit, all courtesy of the now ubiquitous central planning which as we noted earlier, will result in central banks monetizing more than 100% of gross bond issuance for the first time ever in 2015.





I guess this symbolizes everything as the two sides are so far apart:


Yanis B blasts the ECB as the have lost control of monetary policy.

He is right.  To which Germany replies:  “there is no way out”

Greece will be forced out of the EU Monetary union.


(courtesy zero hedge)


Varoufakis Blasts ECB “Has Lost Control Of Monetary Policy” As Germany Tells Greece: “There Is No Way Out”


“There is no way out” for Greece from its treaty obligations warns German lawmaker Michael Fuchs (Angela Merkel’s deputy caucus chairman) telling Bloomberg TV that conditions set for Greece by The Troika (EU, ECB, IMF) for bailout funds “have to be fulfilled…. That’s it, very simple.” The Greeks remain adamant that they will not ask for an extension to the bailout mechanism with both Tsipras and Varoufakis confirming that a bridge agreement is required and the latter adding “the ECB has lost control of monetary policy,” demanding the Troika structure come to an end. Then German Finance Minister Wolfgang Schaeuble exclaimed at the G-20 meeting that “Greece either has to find a way to get bridge financing, or, if they want to do it with us, they need a program,” seeming to push the door open to possible Russian financial aid for Greece as Europe’s pivot to Putin appears to be rising.


Germany To Greece…

“Greece either has to find a way to get bridge financing, or, if they want to do it with us, they need a program,” German Finance Minister Wolfgang Schaeuble tells reporters at G-20 meeting in Istanbul.



German lawmaker Michael Fuchs, deputy caucus chairman of Chancellor Angela Merkel’s Christian Democrats in parliament, says “there is no way out” for Greece on its treaty obligations.


Conditions set for Greece by EU, ECB, IMF for bailout funds “have to be fulfilled,” Fuchs tells Bloomberg Television.


“That’s it, very simple.”

Greece To Germany…


Meanwhile, the Austrians are living in a fairy tale…


*  *  *







The Baltic Dry Index has now crashed to its lowest ever at 559.  It is now lower than the lows of 1986.  This shows that the global economy is deflating at a rapid pace.

(courtesy zero hedge)


The World’s Best Known Global Shipping Index has Crashed To Its Lowest Level Ever


Having fallen for 47 of the last 51 days, The Baltic Dry Index (tracking the cost of shipping dry bulk from iron ore to grains) has been collapsing in a well-documented manner by Zero Hedge (though not the mainstream media). With Cramer having told investors of its importance previously, it will be hard to ignore the fact that, as of this morning, the index of global shipping costs has never (ever) been lower at 554. We leave it to readers to decide what they think this means (but we already know what it means for shippers and ship-building companies).


Recovery? “Crisis has passed?” You decide…


On the back of the total collapse in Chinese imports and exports, is this any surprise?

Of course, stocks know best…


Charts: Bloomberg







The following is a terrific commentary from David Stockman.

He says that China is now arriving at the monumental debt trap similar to what Greece has experienced over the past decade.  This is a must read but it is long..


(courtesy David Stockman)





China’s Monumental Debt Trap – Why It Will Rock The Global Economy


Submitted by David Stockman via Contra Corner blog,

Bloomberg News finally did something useful this morning by publishing some startling graphs from McKinsey’s latest update on the worldwide debt tsunami. If you don’t mind a tad of rounding, the planetary debt total now stands at $200 trillion compared to world GDP of just $70 trillion.



Source: McKinsey 

The implied 2.9X global leverage ratio is daunting in itself. But now would be an excellent time to recall the lessons of Greece because the true implications are far more ominous.

Today’s raging crisis in Greece was hidden from view for many years in the run-up to its first EU bailout in 2010 because the denominator of its reported leverage ratio—national income or GDP—–was artificially inflated by the debt fueled boom underway in its economy.

In other words, it was caught in a feedback loop. The more it borrowed to finance government deficit spending and business investment, whether profitable or not, the more its Keynesian macro metrics—-that is, GDP accounts based on spending, not real wealth—-registered a falsely rising level of prosperity and capacity to carry its ballooning debt.

Five years later, of course, the picture is much different. Greece’s GDP has now shrunk by more than 25%. The abysmal picture depicted in the graph below explains what really happened. Namely, that the bloated denominator of GDP came crashing back to earth, exposing that Greece’s true leverage was dramatically higher than the 100% ratio reported in the years before the crisis.

In economic terms, the graph below simply documents how the false prosperity from Greece’s hand-over-fist borrowing binge was purged from the GDP accounts after the debt party came to a halt in 2009. Needless to say, the reason the Greek story is so relevant is that this condition is nearly universal, meaning that the 2.9X leverage ratio for the global economy pictured above is also drastically understated.

Historical Data Chart

The fact is, since 2010 Greece’s total debts outstanding have risen only modestly. The reason that the debt-to-GDP ratio shown below has gone parabolic is that Greece’s phony boom time GDP has been sharply deflated.

Historical Data Chart


To be sure, today’s Keynesian pettifoggers insist these pictures reflect a big policy mistake. Namely, that the consequence of “austerity” policies forced on Greece by the Germans was the evisceration of its “aggregate demand” and therefore an unnecessary intensification of its debt burden. By allegedly causing Greece’s GDP to fall, austerity policies forced its leverage ratio to keep rising—-even after a lid was placed on its borrowing.

That contention is not just baloney; its a stark example of the incendiary circular logic by which the Keynesian apparatchiks of the world’s governing class and their fellow travelers on Wall Street are pushing the global economy and financial system to the brink of disaster.

Put a ruler from the beginning to the end of the graph above, and you get a doubling of nominal GDP and a 14-year CAGR of 5.5%. That’s probably more nominal growth than could reasonably have been expected from the Greek economy at the turn of the century—–given the debilitating inefficiency and corruption of its long standing crony capitalist oligarchy and Athens’ devotion to mercantilist waste, bloated state payrolls and unaffordable welfare state pensions, among countless other economic sins.

Accordingly, the huge bulge in reported GDP from 2001-2009—reflecting a 13% annual gain—–did not even remotely reflect sustainable output growth; its was merely the feedback loop of exuberant debt financed spending that had not been earned by new inputs of labor, productivity and entrepreneurial activity.

Accordingly, the big hump of GDP recorded during the pre-crisis boom was phantom GDP; it was not remotely sustainable, and it most surely does not represent “aggregate demand” lost owing to “austerity” policies. Instead, the subsequent deflation merely tracks the permanent evaporation of public and private spending that could not be supported by current production and income.

The truth of the matter is that production and income come first. “Spending” or GDP growth can only exceed production growth when leverage ratios are rising. Indeed, the very concept of “aggregate demand” is nothing more than an academician’s word trick. It has no substance beyond the sum of changes in production and changes in leverage.


Consequently, when Keynesian economists jabber about “stimulating” or “recovering” putatively lost “aggregate demand” they are talking about an economic unicorn. Aggregate demand can only be accelerated beyond production by new borrowing, and that can’t happen when balance sheets are tapped out.

Needless to say, Greece is only the poster child. The McKinsey numbers above suggest that “peak debt” is becoming a universal condition, and that today’s Keynesian central bankers and policy apparatchiks are only pushing on a giant and dangerous global string.

Moreover, bad as this is, its only half the story. Not only do unsustainable debt booms eventually stop, as depicted in Greece GDP accounts above, but they also generate enormous deformations and malinvestments while they are inflating. That is, they cause economic waste in the form of capital investments which are latter written down or abandoned because they do not produce sufficient returns to cover their front-end financing cost; and they also result in the allocation of labor to activities and occupations that disappear when the debt boom ends, generating unemployment and skill redundancy that lowers output and efficiency.

In Greece’s case, its debt binge got up a full head of steam at the time of the 2004 Summer Olympics in Athens. I was there that summer and marveled at the skyline of construction cranes, the oppressive din of jackhammers and the bustling constructions sites that were so numerous and expansive that traffic had virtually ground to a halt.

The Greek government spent something like $15 billion on the Olympics, but that was just the tip of the iceberg. With cheap euro denominated debt literally falling from the northern skies of the French and German banking system, there was no end to the commercial construction of hotels, retail, offices and apartments designed to feed on the alleged multiplier effect of the Olympics and the belief that they were a catalyst for permanent growth.

Below is an epigrammatic picture of the 2004 Olympics boom today. In a narrow sense, the whole boom was a debt fueled national vanity project that is not atypical of these promotional event schemes.  But it illustrates a crucial point that has universal application in today’s global financial Ponzi. Namely, that the value of assets generated during the debt boom can shrink drastically or disappear entirely after the party ends if they do not produce useful services and a commensurate cash flow.

By contrast, the debt is fixed and contractual until its is written off and holders of the paper take a current loss. Upon that liquidation event, of course, balance sheets shrink and paper wealth evaporates. That’s why debt booms are inherently and ultimately deflationary.

Needless to say, the abandoned multi-million dollar Athens stadium pictured below is worth nothing, yet the debt which funded it has not been liquidated. It still hangs somewhere in financial hyperspace—- having been transferred by the EU superstate politicians and bureaucrats from the accounts of the banks or bond investors which originated the funding to Greece’s make pretend IOU accounts at the IMF and EU.

Call this financial constipation—-the end result of the current global game of “extend and pretend”. It amounts to a financial Ponzi in which current debt is serviced with more debt, and in which the unsustainability of the entire edifice is obfuscated by the zero interest rate policies and massive debt buying campaigns of the world’s central banks.

When bad debts are not liquidated—– we already know that you get a Greece calamity with $350 billion of debt that cannot possibly be serviced or repaid by its now ruptured economy. But what will only become evident with time is that the entire global economy is not too far behind. It is now burdened with $200 trillion in debt, but owing to debt-bloated GDP, its true leverage ratio, like that of Greece in 2009, is far higher than the 2.9X computed in the McKinsey charts above.


So now we get to ground zero of the global Ponzi. That is the monumental pile of construction and debt that is otherwise known on Wall Street as the miracle of “red capitalism”. In truth, however, China is not an economic miracle at all; its just a case of the above abandoned Athens stadium writ large.

The McKinsey graph on China tells it all. For the moment, forget about leverage ratios, debt carrying capacity and all the other fancy economic metrics. Does it seem likely that a country which is still run by a communist dictatorship and which was on the verge of mass starvation and utter impoverishment only 35 years ago could have prudently increased its outstanding total debt (public and private) from $2 trillion to $28 trillion or by 14X in the short span of 14 years? And especially when half of this period encompassed what is held to be the greatest global financial crisis of modern times

And don’t forget that most of this staggering sum of debt was issued by a “banking” system (and its shadow banking affiliates) which is bereft of any and every known mechanism of financial discipline and market constraints on risk and credit extension. In effect, it is simply a vast pyramidal appendage of the Chinese state in which credit is conjured from thin air by the trillions, and then cascaded in plans and quotas down through regions, counties, cities and towns.

When it reaches its end destination it finances the building of anything that local politicians, bureaucrats and red capitalists can dream up. That includes factories, roads, ports, subways, bridges, airports, malls, apartments and all the rest  of the construction projects being undertaken on Beijing’s Noah’s ark.

Undoubtedly, the plentitude of ghost cities, malls, apartment buildings and factories that are everywhere now evident in China do not look much different than Greece’s Olympic stadiums did circa 2006—-that is, gleaming but silent. It will take another decade for the weeds to spring up and the rust and decay to become visible.

So it might be a good time to  get a grip on the China Ponzi. There is virtually not a single honest price in the entire $28 trillion tower of debt shown below. When loans to coal mine operators got in trouble, for example, the so-called “bankers” at the big state banks simply invited their clients in the side door where they paid back the “bank” with a trust loan at 18% interest—-which “loan” was then resold to bank customers at 12%.

Hence, no NPLs and no need for new loss provisions. Indeed, China’s  big state banks book billions of profits each quarter—notwithstanding the absurd extent of the nation’s credit pyramid.

Likewise, how did the local party cadres use the loans that cascaded down the system to their town? Why they established non-governmental development agencies—thousands of them—- that paid hugely inflated prices for city lands in order to build empty luxury apartments and zoos that are bereft of both people and animals. Meanwhile, local governments run huge GDP enhancing budgets that are funded by the false revenue of hyper-bloated land sales.

The skunk in the woodpile is self evident even in the simplified chart below. At least prior to the 2008 crisis, it could be said that part of the China boom was being financed by the Fed and other DM central banks which enabled their domestic consumers to borrow themselves silly, thereby fueling the China export boom. That’s pretty much over in terms of growth owing to the tepid recoveries and outright economic stagnation in the US, Europe and Japan.

But never mind. The aging black-haired men who learned their economics from the Mao’s Little Red Book had a solution. They would lift GDP and jobs by their own bootstraps, dispensing virtually unlimited credit to build public pyramids, otherwise known as infrastructure, at rates not seen since the  Egyptian pharaohs.

Thus, since the eve of the crisis in 2007, China’s GDP has doubled, expanding by $5 trillion in 7 years. But as shown below, it took a $21 trillion expansion of debt outstanding to accomplish that outcome.

That’s right. The China Ponzi took on $4 of debt for every new dollar of freshly constructed GDP. And “constructed” is exactly the correct term  because all of this new debt funded a orgy of construction—-much of which is for public facilities that will never produce enough user revenues to service the debt or which are essentially owned by local governments which have no tax revenue.xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Source: McKinsey

In any event, China’s $10 trillion of GDP is exactly at the Greek bulge stage. Its not replicable and sustainable unless the bosses in Beijing truly do intend to pave the entire country.

In fact, the Chinese economy is addicted to construction, and its rulers can’t seem to let go—-even as they recognize they are heading straight toward the wall. At the present time, nearly 50% of GDP is accounted for by fixed asset investment—–that is, housing, commercial real estate, industry and public infrastructure. This ratio is so far off the historical and comparative charts as to be in a freakish class all of its own. Even during the peak “take-off” phase of economic development in Japan and South Korea this ratio never exceeded 30% and did not dwell there for long, either.

So China is caught in a monumental debt trap. Its rulers fear social upheaval unless they keep pumping GDP—and the associated rise of jobs, incomes and financial asset values—-with more credit and construction. Even then, they know better and have therefore hop-scotched from credit restraint to credit curtailment almost on alternate days of the week.

But now the edifice is beginning to roll over. Housing prices are falling and new footage put under construction has dropped by 30% over the last three months—something which has not even remotely happened during the last 15 years. At the same time, the consequent cooling of demand for construction materials and equipment is evident in China’s faltering industrial production numbers and the global commodity deflation that has resulted from its vast excess capacity in steel, shipbuilding, cement, aluminum, copper fabrication and all the rest.

The excruciating debt trap in China was addressed recently by the redoubtable Ambrose Evans-Pritchard of the Telegraph, who has never seen a deflation crisis that he believed could not be relieved by the central bank’s printing press. But in the case of China, even he has thrown in the towel:

China is trapped. The Communist authorities have discovered, like the Japanese in the early 1990s and the US in the inter-war years, that they cannot deflate a credit bubble safely……


China faces a Morton’s Fork. Li Keqiang has made it his life’s mission to stop his country drifting into the middle income trap. He says himself that the investment-led model of past 30 years is obsolete. The low-hanging fruit of catch-up growth has been picked.


For two years he has been trying to tame the state’s industrial behemoths, and trying to wean the economy off credit. Yet virtuous intent has run into cold reality. It cannot be done. China passed the point of no return five years ago.

Needless to say, this stunning conclusion from one of the world’s greatest and most erudite believes in the power of money printing has enormous implications for the global economy and financial system. It means that China is the New Greece—-but one sporting 40X more GDP and 70X more debt.

Indeed, last year China spent upwards of $5 trillion on fixed asset investment—-a figure that is greater than the sum total for Europe and the US combined. Behind that towering number is an immense caravan of cement, structural steel, glass, copper and all the rest of the industrial commodities.

So when the China Ponzi finally crashes, the deflationary gales will propagate violently through the global economy and financial system. China’s $28 trillion tower of debt will come tumbling down in the process; and a world floating on $200 trillion of the stuff will not be far behind.

By Ambrose Evans-Pritchard/UKTelegraph

China is trapped. The Communist authorities have discovered, like the Japanese in the early 1990s and the US in the inter-war years, that they cannot deflate a credit bubble safely.


A year of tight money from the People’s Bank and a $250bn crackdown on shadow banking have pushed the Chinese economy close to a debt-deflation crisis.


Wednesday’s surprise cut in the Reserve Requirement Ratio (RRR) – the main policy tool – comes in the nick of time. Factory gate deflation has reached -3.3pc. The official gauge of manufacturing fell below the “boom-bust” line to 49.8 in January.


Haibin Zhu, from JP Morgan, says the 50-point cut in the RRR from 20pc to 19.5pc injects roughly $100bn into the system.


This will not, in itself, change anything. The average one-year borrowing cost for Chinese companies has risen from zero to 5pc in real terms over the past three years as a result of falling inflation. UBS said the debt-servicing burden for these firms has doubled from 7.5pc to 15pc of GDP.


Yet the cut marks an inflection point. There will undoubtedly be a long series of cuts before China sweats out its hangover from a $26 trillion credit boom. Debt has risen from 100pc to 250pc of GDP in eight years. By comparison, Japan’s credit growth in the cycle preceding its Lost Decade was 50pc of GDP.


The People’s Bank may have to cut all the way to zero in the end – a $4 trillion reserve of emergency oxygen – but to do that is to play the last card.

Wednesday’s trigger was an amber warning sign in the jobs market. The employment component of the manufacturing survey contracted for the 15th month. Premier Li Keqiang targets jobs – not growth – and the labour market is looking faintly ominous for the first time.


Unemployment is supposed to be 4.1pc, a make-believe figure. A joint study by the International Monetary Fund and the International Labour Federation said it is really 6.3pc, high enough to cause sleepless nights for a one-party regime that depends on ever-rising prosperity to replace the lost elan of revolutionary Maoism.


Whether or not you call it a hard-landing, China is struggling. Home prices fell 4.3pc in December. New floor space started has slumped 30pc on a three-month basis. This packs a macro-economic punch.



A study by Jun Nie and Guangye Cao for the US Federal Reserve said that since 1998 property investment in China has risen from 4pc to 15pc of GDP, the same level as in Spain at the peak of the “burbuja”. The inventory overhang has risen to 18 months compared with 5.8 in the US.


The property slump is turning into a fiscal squeeze since land sales make up 25pc of local government money. Zhiwei Zhang, from Deutsche Bank, says land revenues crashed 21pc in the fourth quarter of last year. “The decline of fiscal revenue is the top risk in China and will lead to a sharp slowdown,” he said.


The IMF says China’s fiscal deficit is nearly 10pc of GDP once land sales are stripped out and all spending included, far higher than generally supposed. It warned two years ago that Beijing was running out of room and could ultimately face “a severe credit crunch”.


The gears are shifting across the Chinese policy spectrum. Shanghai Securities News reported that 14 Chinese provinces are preparing a $2.4 trillion blitz on infrastructure to combat the downturn, a reversion to the same policies of reflexive stimulus that President Xi Jinping forswore in his Third Plenum reforms.


How much of this is new money remains to be seen but there is no doubt that Beijing is blinking. It may be right to do so – given the choice of poisons – yet such a course stores up even greater problems for the future. The China Development Research Council, Li Keqiang’s brain-trust, has been shouting from the rooftops that the country must take its post-debt punishment “as soon possible”.


China is not alone in facing this dilemma as deflation spreads and beggar-thy-neighbour currency wars become the norm. Fifteen central banks have eased monetary policy so far this year.


Denmark’s National Bank has cut rates three times in two weeks to -0.5pc in an effort to defend its euro-peg, the latest casualty of the European Central Bank’s €1.1 trillion quantitative easing. The Swiss central bank has been blown away.


Asia is already in a currency cauldron, eerily like the onset of the 1998 crisis. The Japanese yen has fallen by half against the Chinese yuan since Abenomics burst upon the Pacific Rim. Japanese exporters pocketed the windfall gains of devaluation at first to boost margins. Now they are cutting prices to gain export share, exporting deflation.


China’s yuan is loosely pegged to a rocketing US dollar. Its trade-weighted exchange rate has jumped 10pc since July. This is eroding the wafer-thin profit margins of Chinese companies and tightening monetary conditions into the downturn.


David Woo, from Bank of America, says Beijing may be forced to join the currency wars to defend itself, even though this variant of the “Prisoner’s Dilemma” leaves everybody worse off. “We view a meaningful yuan devaluation as a major tail-risk for the global economy,” said.


If this were to happen, it would send a deflationary impulse worldwide. China spent $5 trillion on fixed investment last year, more than Europe and America combined, increasing its overcapacity in everything from shipping to steels, chemicals and solar panels, to even more unmanageable levels.


A yuan devaluation would dump this on everybody else. It would come at a moment when Europe is already in deflation at -0.6pc, and when Britain and the US are fast exhausting their inflation buffers as well.


Such a shock would be extremely hard to combat. Interest rates are already zero across the developed world. Five-year bond yields are negative in six European countries. The 10-year Bund has dropped to 0.31. These are no longer just 14th century lows. They are unprecedented.


My own guess is that we would have to tear up the script and start printing money to build roads, pay salaries and fund a vast New Deal. This form of helicopter money, or “fiscal dominance”, may be dangerous, but not nearly as dangerous as the alternative.


China faces a Morton’s Fork. Li Keqiang has made it his life’s mission to stop his country drifting into the middle income trap. He says himself that the investment-led model of past 30 years is obsolete. The low-hanging fruit of catch-up growth has been picked.


For two years he has been trying to tame the state’s industrial behemoths, and trying to wean the economy off credit. Yet virtuous intent has run into cold reality. It cannot be done. China passed the point of no return five years ago.

Over the weekend, the Swiss National Bank hinted at capital controls.
(courtesy zero hedge)


Swiss National Bank Hints At Capital Controls

Even as the whispers that the imposition of capital controls by Greece, which is now running out of both time, negotiating leverage and tax money is just a matter of time, get louder with every passing day if not acknowledged by Greek officials yet, it was none other than one of the supposedly most “rock-solid” central banks in the world that fired a shot across the bow of global financial stability when it hinted that not Greece but another country may be the first to engage in capital controls. The country: Switzerland.

The revelation came during an interview by SNB head Thomas Jordan who, as reported by Reuters, told Swiss radio station SRF on Saturday that “the Swiss National Bank is prepared to intervene in foreign exchange markets and has room to lower already negative interest rates if necessary to weaken the franc, the central bank’s chairman said.  “We are observing the exchange rate situation as a whole. If necessary we are active but as I said we do not speak about our transactions.”

Or as Bloomberg paraphrased it “negative rates haven’t yet hit rock bottom.” Of course they haven’t: by definition negative rates can go down to infinity, although the system will collapse long before the “rock bottom” is hit. The problem is what happens in the meantime. As a reminder, the NY Fed was kind enoughto break down some of the scariest possible outcomes as NIRP becomes NIRPer becomes NIRPest and so on:

  • if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing [or any other nation’s Treasury] will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances.
  • I might even go to my bank and withdraw funds in the form of a certified check made payable to myself, and then put that check in a drawer.
  • If bank liabilities shifted from deposits to certified checks to a significant degree, banks might be less willing to extend loans, because certified checks are likely to be less stable than deposits as a source of funding.
  • As interest rates go more negative, market participants will have increasing incentives to make payments quickly and to receive payments in forms that can be collected slowly
  • if interest rates go negative, the incentives reverse: people receiving payments will prefer checks (which can be held back from collection) to electronic transfers
  • we may see an epochal outburst of socially unproductive—even if individually beneficial—financial innovation

Then again, as Russell Napier explained simply yesterday, this is nothing more than central bankers losing control because In a world of currencies backed only by confidence, every failure is masqueraded as success.” As a result action becomes rhetoric (something the SNB already enacted when it moves from a credibility-backed hard Swiss Franc cap at EURCHF 1.20 to a “kinda, sorta” rumored 1.05-1.10 corridor), becomes attitude:

The key for investors today is to see behind the masquerade and the mask, the façade of those putting up a front behind a public face, and be able to tell the difference between the soaring flight of reflation and the perilous fall of deflation. The more attitude you hear from policy makers, the more you can be sure it’s style compensating for the lack of real substance and that this is falling and not flying. And as the attitude becomes more high-handed, the lower the altitude gets. The attitude quotient is rising rapidly.

Back to the Swiss and the ever increasing “attitude” and “style” (compensating for any substance) out of its central banker whose concerns about loss of credibility are becoming all too obvious.

In a bid to discourage investors from piling into the safe-haven Swiss franc, the SNB is charging negative interest rates of -0.75 percent on some of the banks which deposit overnight funds with it. Jordan said the negative interest rates are having a “strong impact” to make the franc less attractive, and signalled the central bank has room to push rates lower.


“There is certainly a limit for negative interest rates, but the question is where exactly that limit is,” Jordan said.


“However, I believe at the current level of -0.75 percent, the limit certainly isn’t reached yet.”

Translation: more threats, more style, more attitude. No substance.

But the punchline via BBG:

When asked about the prospect of using capital controls to weaken the franc, Jordan said that it was not a measure that is at the forefront at the moment.”

So at the non “forefront”? Because as everyone knows, the best way to admit the possibility of capital controls is to not explicitly, and unequivocally reject them. That there is even a possibility of capital controls in a  central bank’s arsenal, and everyone suddenly begins to pay attention.

And then there is the question how one defines a “moment” at the SNB: because when it comes to the Swiss National Bank, the answer is unclear. After all it was two days before the SNB scrapped the EURCHF floor that none other than SNB member Danthine said:

“We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy,” Jean-Pierre Danthine told RTS (on January 12)

Then again, desperate times call for deserpate soundbites, because when your central bank is perceived as a rock of stability in a sea of central banks whose credibility is crashing on a daily basis, forced to cut rates to zero or negative to offset the still soaring dollar, and where the fear of a Grexit may lead to a dissolution of the Eurozone and the collapse of the Euro, what better way to eliminate capital inflow than to hint at the nuclear option. And as Cyprus has “successfully” demonstrated in recent years, the blueprint of capital controls to preserve financial stability works wonders (if only for those outside of Cyprus).

Paradoxically, suddenly the question becomes who imposes capital controls first: Greece, where the specter of whoelsale bank insolvency is now raging across the nation, and where a capital lockout may well be imminent, or Switzerland, which knows that the moment Greece is pushed too far and a Grexit is perceived inevitable, is the moment it will be flooded with a tsunami of Euros desperate to find safe haven in a new, Swiss Franc denomination, somewhere deep in the vaults under the Swiss Alps. A tsunami which would crush SNB credibility all over again, and when capital controls will also become inevitable.

Perhaps the best way to preserve some of said credibility, especially if it is already borderline non-existent, is to frontrun capital controls tomorrow, by imposing them today. So keep a close eye on the CHF, and better yet, the USD. Because if Switzerland is suddenly isolated from the global capital system, said Tsunami will redirect itself straight to the central planners at the Marriner Eccles building, who still refuse to acknowledge that decoupling never works, and having a soaring currency in a world in which everyone else is desperate to crush theirs especially when there is some $9 trillion in offshore USD-denominated debt, always ends in tears.






And then this head of the largest Swiss Cantonal Bank says that Swiss Capital controls is certainly a possibility.


(courtesy zero hedge)





Head Of Largest Swiss Cantonal Bank Says Swiss Capital Controls Are “Certainly Possible”


Yesterday, when we reported that the SNB had hinted at that most dreaded of possibilities for central planners, one which always implies full loss of central bank credibility, namely capital control, for some inexplicable reason various readers and even contributors (“Another misleading headline by the Tylers. What yellow journalism“) got offended that we dared to point out that the central bank which two days before it crushed FX traders by ending its CHF cap had sworn that “we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy.”

Turns out “yellow journalism” as some call it – usually those who have conflicts of interest and/or put trades in the opposite direction – was spot on once again. Because if yesterday, the SNB’s Jordan merely hinted at capital controls when as he was quoted by Bloomberg (not Reuters), as saying that capital controls “was not a measure that is at the forefront at the moment“,which as we explained “the best way to admit the possibility of capital controls is to not explicitly, and unequivocally reject them. That there is even a possibility of capital controls in a  central bank’s arsenal, and everyone suddenly begins to pay attention” then today the head of the largest Swiss cantonal bank, and the fourth largest Swiss Bank, the Zurich Cantonal Bank or ZCB, came out and explicitly said what so many fear (and which warning they would ascribe to as the case may be “yellow journalism”), namely that “lowering Swiss National Bank’s already negative interest rate further or implementing capital controls would be “dramatic” but “certainly possible.

This is what Zuercher Kantonalbank CEO Martin Scholl said in interview with newspaper Neue Zuercher Zeitung am Sonntag.

And just so readers (and so-called contributors) can blame the NZZ of fanning “yellow journalism” here is the explit quote from the interview:

Würde sich das ändern, falls die Nationalbank die Zinsen noch weiter ins Negative drückt?


Die SNB soll die Massnahmen ergreifen, die langfristig aus ihrer Sicht für die Schweiz sinnvoll sind. Sie könnte noch einmal an der Zinsschraube drehen oder Kapitalverkehrskontrollen erheben. Das wäre in einer globalisierten Wirtschaft zwar dramatisch, aber sicher denkbar. Es ist nicht an uns, Ratschläge zu erteilen.

And in English:

The SNB will take the measures which, in their view are meaningful for Switzerland in the long term. You could again turn the interest rate screw (lower rates) or raise capital controls. That would be in a globalized economy is dramatic, but certainly possible. It is not up to us to give advice.

Why? Because admitting that anything is possible is the only option when your central bank has begun to lose control, and yes: it is up the SNB’s Jordan to make the decision on his own: a decision which as he said is not at the forefront “at the moment.” What about the “next moment”, in the proverbial “tomorrow”, if and when as Alan Greenspan predicted earlier today, Greece exits the Eurozone, and Switzerland is flooded with fresh billions in capital rushing to find a place where it won’t be denominated into the New Drachma, or New Lira, or New Peseta?

Or perhaps the same outraged readers expect to get an explicit warning from the SNB that beginning on date X all flows of (EUR and/or New Drachma) capital into Switzerland will be halted until further notice (just like Denmark’s recent and “completely expected” halt of bond issuance in attempting the first bizarro QE when instead of boosting demand it would push the price of its longer-dated bonds higher by ending their supply).

As usual, we merely present what’s out there, as crazy and illogical as it may seem to those who are still unaware that in the NIRP Normal, where as Zero Hedge for years, and most recently Russell Napier explained central banks are losing control, anything goes. It is up to others to decide how to best make use of the available information, or not at all.









This does not look good as the peace talks (on the Ukrainian civil war) between Russia, France and Germany are “in tatters”


(courtesy zero hedge)





Ukraine ‘Peace’ Talks In Tatters: Defiant Putin “Won’t Tolerate Unipolar World”; Hollande Proposes “Strong Autonomy” For Rebel Region


Just as the existing ‘truce’ in Ukraine has been made a total farce as 1000s of military and civilians have been killed, so any ‘hope’ that this weekend’s “peace efforts” will result in anything but more talk is rapidly diminishing… Germany’s Merkel exclaimed honestly that it’s “uncertain whether this will be successful,”seemingly resigned to the fact as she added, “but it’s at least worth making an attempt.” French PresidentHollande admitted that Ukraine’s eastern regions likely need “strong autonomy.” Ukraine’s Poroshenko blustered that he “trusts” Merkel, that the economy is collapsing (more money please), that the country does not need peacekeepers and a lack of arms is fueling conflict (so send us weapons) while pushing for a Russian withdrawal and quick cease-fire.  Finally Vladimir Putin blasted that Russia is unwilling to tolerate a post-Cold War global system dominated by one absolute leader, to which US VP Joe Biden remarked simply “get out of Ukraine.” But apart from that, talks are going great…


Stocks rallied after hours on Friday on a spurious headline that peace talks were progressing…


That appears to be entirely false…

Merkel… not optimistic… (via Bloomberg)

“It’s uncertain whether this will be successful, but in my view and in the view of the French president, it’s at least worth making an attempt,” Merkel says in speech at the Munich Security Conference. “I feel that we at least owe it to those affected in Ukraine.”


“Russia needs to show its contribution” in defusing Ukraine crisis, Merkel says.


“This conflict can’t be solved militarily,”Merkel says


Minsk accord must be fulfilled: Merkel

Hollande… does not see a united Ukraine anytime soon (via France24)

French President Francois Hollande called for “quite strong” autonomy for Ukraine’s eastern regions while speaking on France 2 TV. He also revealed part of the joint plan discussed in Moscow on the conflict’s solution. On Saturday, Hollande said that the eastern Ukrainian regions of Donetsk and Lugansk need “rather strong” autonomy from Kiev.


“These people have gone to war,” Hollande explained “It will be difficult to make them share a common life [with Kiev].”

Ukrainian President Poroshenko appears to demand more money and weapons…


Russia’s Lavrov slammed NATO…


NATO’s backing for crackdown by Ukrainian govt in southeast doesn’t facilitate peaceful settlement of conflict,Russian Foreign Minister Sergei Lavrov tells military alliance’s Secretary General Jens Stoltenberg.


NATO course to boost its military presence, infrastructure on its eastern flank, “substantial increase” in number of drills near Russia’s border worsen tension, provoke confrontation, undermine “entire system” of Euro-Atlantic security.

Putin added some more strategic spice… (via Bloomberg)

Russian President Vladimir Putin struck a defiant tone a day after talks in Moscow with the leaders of Germany and France failed to achieve a breakthrough in resolving the Ukraine crisis.


Russia won’t tolerate the post-Cold War global system dominated by a single leader, Putin said Saturday at a meeting with the Federation of Independent Trade Unions in Sochi.


“That type of world order has never been acceptable for Russia,” Putin said. “Maybe someone likes it and wants to live under a pseudo-occupation, but we won’t put up with it.”

To which US VP Joe Biden responded… (via CNN)

Vice President Joe Biden served up some blunt talk on Saturday, telling Russian PresidentVladimir Putin simply to “get out of Ukraine.”



Speaking at the Munich Security Conference in Germany, Biden said the conflict had moved beyond the need for a “reset” with the relationship, instead requiring a “re-assertion” of the “fundamental bedrock principles on which European freedom and stability rest.”


“We must judge … any future agreement with Russia by the actions Russia takes on the ground, not by the paper they sign,” Biden said. “Given Russia’s recent history, we need to judge it by its deeds, not its words. Don’t tell us, show us, President Putin. Too many times President Putin has promised peace and delivered tanks, troops, and weapons.”



“We will continue providing Ukraine with security assistance, not to encourage war, but to allow Ukraine to defend itself,” he said. “Let me be clear: We do not believe that there is a military solution in Ukraine. Let me be equally clear: We do not believe Russia has the right to do what they’re doing.”

*  *  *

But apart from that, talks are progressing nicely…


And as Daniel Hannan notes (via CapX.com),

…in a throwback to the Khruschev and Brezhnev eras, the Kremlin is seeking to detach Germany and France from Nato’s more hawkish Anglo-Saxon members.Angela Merkel and François Hollande oppose sending military or logistical support to Ukraine, and Vladimir Putin is now dealing directly with them, pointedly excluding Britain, the United States and Canada.


In theory, a peace settlement might be hammered out. While we don’t know the details of the current negotiations, the broad outlines of a deal were visible by the end of last year. Russia would, in effect, buy back the Crimea, possibly for a sum based on the capitalisation of its annual rent of the naval facilities there. The international community would recognise the new frontier – Crimea, after all, was the one part of Ukraine where there really was popular support for an Anschluss with Russia – and Russia, in exchange, would withdraw from the grim industrial towns of the Donets basin. Some form of local autonomy might well be part of the deal – a worthwhile reform in itself in a territory as large as Ukraine.


Here, though, is the question. Does Putin really want peace? Is his aim victory – and recognition of the annexation of Crimea would certainly constitute victory of a kind – or is it a continuation of the crisis? The conflict, after all, has sent his approval ratings above 80 per cent. When you are presiding over both poverty and autocracy, you need something else to legitimise your regime, and that something else, for Putin, is the sense of nationalism and unity engendered by a conflicts involving Russian irredenti.



The West never quite knows how to handle Vladimir Putin, and the crisis in Ukraine is, at least in part, a consequence of our prevarication.


Read more here…

*  *  *

Perhaps – in the same way – US leadership needs a ‘foreign’ boogey-man to focus national attention away from what is under the surface a weak and extremely divided economic ‘recovery’?

Nineteenth-century German historians had a phrase, Primat der Innenpolitik, meaning thatall foreign policy was essentially driven by domestic concerns. One government would pick a fight with another, not because of geopolitical imperatives, but in order to shore up its support at home.


Shakespeare has Henry IV give his son some advice from the deathbed: “Be it thy course to busy giddy minds with foreign quarrels”











Sunday night:  Europe fractures as France does an about face  and pivots towards Russia.  Cyprus offers Moscow bases.  Remember that Cyprus has found a mega discovery in natural gas and this could be quite intriguing for Russia. To boot: Germany also splinters from the west on arms being provided by the USA to the Ukrainians:


(courtesy zero hedge)





Europe Fractures: France Pivots To Putin, Cyprus Offers Moscow Military Base, Germany-US Splinter On Ukraine



Following yesterday’s summary of the utter farce that the Minsk Summit/Ukraine “peace” deal talks have become, the various parties involved appear to be fracturing even faster today. The headlines are coming thick and fast but most prescient appears to be: DespiteJohn Kerry’s denial of any split between Germany and US over arms deliveries to Ukraine, German Foreign Minister Steinmeier slammed Washington’s strategy for being “not just risky but counterproductive.” But perhaps most significantly isFrance’s continued apparent pivot towards Russia… Following Francois Hollande’s calls for greater autonomy for Eastern Ukraine, former French President Nicolas Sarkozy has come out in apparent support of Russia (and specifically against the US), “we are part of a common civilization with Russia,” adding, “the interests of the Americans with the Russians are not the interests of Europe and Russia.” Even NATO appears to have given up hope of peace as Stoltenberg’s statements show little optimism and the decision by Cyprus to allow Russia to use its soil for military facilities suggests all is not at all well in the European ‘union’.


German Foreign Minister Frank-Walter Steinmeier doubled down on Germany’s rejection of weapons deliveries to Ukraine in a speech here Sunday…


“I see this, to say it openly, as not just for risky but for counter-productive,”Mr. Steinmeier said at the Munich Security Conference. Mr. Steinmeier also hit back at open criticism of Germany’s position on weapons deliveries from U.S. Senators and others here on Saturday. The White House is mulling delivering weapons to Ukraine to support the country’s fight against pro-Russia separatists in the country’s east.


“Perhaps we are so insistent because we know the region a bit,” Mr. Steinmeier said.

But John Kerry says, everything’s fine… as he denies any split between U.S. and Europe on Russia policy…

Secretary of State John Kerry on Sunday denied any divisions between the U.S. and Europe over how to handle Russia, as Germany announced another high-level summit aimed at stemming the crisis in Ukraine.


Kerry told a security conference in Munich that he wanted to “assure everybody there is no division, there is no split”between Washington and its European allies amid the crisis in Ukraine.




“We are united, we are working closely together,” he told the conference following meetings with his French and German counterparts. “We all agree that this challenge will not end through military force. We are united in our diplomacy.”

But perhaps most significantly is France’s continued apparent pivot towards Russia… Following Francois Hollande’s calls for greater autonomy for Eastern Ukraine, former French President Nicolas Sarkozy has come out in apparent support of Russia (and specifically against the US).

“We are part of a common civilization with Russia,” said Sarkozy, speaking on Saturday at the congress of the Union for a Popular Movement Party (UMP), which the former president heads.


“The interests of the Americans with the Russians are not the interests of Europe and Russia,” he said adding that “we do not want the revival of a Cold War between Europe and Russia.”


“Crimea has chosen Russia, and we cannot blame it [for doing so],” he said pointing out that “we must find the means to create a peacekeeping force to protect Russian speakers in Ukraine.”

And then Cyprus joins the fracture party, offering to sign a military cooperation agreement on Feb 25th offering Russia the use of military facilities on its soil

The air force base at which Russian planes will use is about 40 kilometers from Britain’s sovereign Air Force base at Akrotiri, on the south shores of Cyprus, which provides support to NATO operations in the Middle and Near East regions

Even NATO appears to know the “peace deal” is not coming…


But there is still hope.. as Germany’s Vice-Chanceller hopes…




But adds…


We will know soon…



*  *  *






And the next country to move towards Russia is Turkey:


(courtesy zero hedge)





Turkey Deputy PM Warns “The Polarization Of The Masses Frightens Me”



In the face of Turkish President Recep Erdogan’s increasingly harsh rhetoric towards The West and slamming the central banks for its “independence” warning that it will “be held accountable” if the decision on interest rates is wrong – which has sent the Lira to record lows – Deputy Prime Minister Bulent Arinc appears to have come out today to try and calm the situation. Fearing that “Turkey could cease to be a governable country,” Arinc called for a softening of political language, as he warns “the polarization of the masses, frightens me.”


Another US ally appears un-impressed…


Erdogan’s statements on the central bank continue to slam the Lira…






Turkish President Recep Tayyip Erdogan says the central bank “will be held accountable” if it can’t manage foreign-exchange policy, state-run Anadolu news agency reports.


“The strengthening or weakening of dollar is not something for me to evaluate. If the central bank can’t manage this, then it will be held accountable for it,” Anadolu cites Erdogan as saying.


Erdogan criticizes bank for keeping interest rates too high, saying that “it’s not in Turkey’s interest to remain silent” to results of bank’s actions.

And so Deputy Prime Minister Bulent Arinc calls for a softening of political language… or else… (as Bloomberg reports)

Hatred of Turkey’s ruling party could make Turkey ungovernable, Deputy Prime Minister Bulent Arinc says in interview on CNN-Turk television.


We get 50% of the vote. But the other 50% is turning to hate speech. We used to go out into the streets and our supporters loved us. Opponents on the other side respected us. Now I sense looks of hatred. There’s a hardening, a dividing into camps.This won’t prevenut us from getting 50%. But it could make Turkey cease to be a governable country


“The polarization of the masses frightens me”


Says decision on changing Turkey to a presidential from a parliamentary system should be sent to a public referendumeven if ruling AK Party has the votes in parliament to enact it without a referendum.

Turkish Spring anyone?

*  *  *

One can’t help but wonder just how different the decisions of a central bank would be if there was actual accountability for their decisions…








Saudis are protecting their market share as they discount oil to China.

It looks like oil in the low 40’s is here for quite a while;


(courtesy zero hedge)





Saudis Re-Unleash Oil Weapon, Slash Asia Prices By Most In 14 Years

Protecting their market share in China,” warns one strategist as just when US talking-heads thought things were ‘stabilizing’ Saudi Aramco slashes its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks – the biggest discount in 14 years. As Bloomberg reports, the desert kingdom is continuing to fight for market share, and using the oil weapon by “trying to stay competitive in what is the biggest area of growth,” as Middle Eastern producers areincreasingly competing with cargoes from Latin America, Africa and Russia for buyers in Asia.

Biggest discouint to Asia since records began…


As Bloomberg reports,

Saudi Arabia, the world’s largest crude exporter, cut pricing for March oil sales to Asia, a sign that the desert kingdom is continuing to fight for market share.


State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude by 90 cents to $2.30 a barrel less than Middle East benchmarks, the company said in an e-mailed statement Thursday. That’s the lowest in at least the 14 years since Bloomberg began gathering data.


“This is further evidence that they are hellbent on protecting their market share in China,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone Thursday. “They are trying to stay competitive in what is the biggest area of growth.”


Middle Eastern producers are increasinglycompeting with cargoes from Latin America, Africa and Russia for buyers in Asia. China was the world’s second-biggest crude consumer after the U.S. in 2014, according to International Energy Agency data.



Saudi Aramco, as the producer is known, cut differentials on each of the four other grades it sells to Asia, its largest market, and raised them to the U.S., northwest Europe and the Mediterranean region,according to Thursday’s statement. The discount on Extra Light crude to Asia also dropped to a low of at least 14 years and Arab Medium was cut to within 10 cents of its record discount for buyers in Asia.


“Asia is still the market that they want to keep, so they are pricing to keep the crude attractive,” Olivier Jakob, managing director of Zug, Switzerland-based researcher Petromatrix GmbH, said by phone Friday.Saudi Aramco increased pricing to the Mediterranean region where “demand has been good because refining margins are good,” he said.



“The U.S. used to be the market the Saudis were most concerned about preserving market share in, but that’s no longer the case,” O’Grady said. “China is where they see growth coming from in the decades ahead and the U.S. is also producing a greater share of the oil it needs.”

*  *  *



This made 60 minutes last night.  This is a big story on huge tax evasion by the world’s richest


(courtesy zero hedge)




If Your Name Is On This List, Prepare To Be Audited (Or Worse)


0ver the weekend we got the latest confirmation that when it comes to enabling of tax evasion and parking of criminal money, HSBC is second only to US real estate in catering to shady offshore oligarchs, dictators, rock stars, monarchs, and even outright criminals.

What happened was the following: The French newspaper Le Monde obtained a version of the tax authority data, which covers accounts of more than 100,000 clients (individuals and legal entities) from more than 200 countries. The newspaper shared it with the International Consortium of Investigative Journalists with the agreement that it would assemble a global team of journalists to explore the data and produce this reporting project.

The data comes from three types of internal bank files from different time periods. One reflects clients and their associated private accounts at the Swiss branch of the bank mostly from 1988 to 2007. Another is a snapshot of the maximum amounts in the client accounts during 2006 and 2007. The third is of notes on clients and conversations with them made by bank employees during 2005.

The files show the accounts to hold more than $100 billion in total, from $12.6 billion held in the name of governmental institutions from the oil rich nation of Venezuela under the late former leader Hugh Chávez, to amounts recorded as zero. The confidential files also provide a wealth of other detail, such as secretive offshore companies linked to some accounts.

As Bloomberg reminds us today, the HSBC leak began as a rogue operation by a computer technician, Herve Falciani, who left the company in 2008 with five disks of confidential information. A self-described whistle-blower, Falciani provided details on the 100,000-plus accounts to French Finance Minister Christine Lagarde, now head of the International Monetary Fund. She passed details from the cache — which came to be known as the Falciani List or Lagarde List — to governments around the world.

The “Swiss Leak” was the topic of last night’s 60 Minutes (which was missed by pretty much everyone who was focusing on the brain mush that is the Grammys instead).

Here are some excerpts from the CBS interview:

A 37-year-old computer security specialist named Hervé Falciani stole the huge cache of data in 2007 and gave it to the French government. It’s now being used to go after tax cheats all over the world. 60 Minutes, working with a group called the International Consortium of Investigative Journalists, obtained the leaked files. They show the bank did business with a collection of international outlaws: tax dodgers, arms dealers and drug smugglers — offering a rare glimpse into the highly secretive world of Swiss banking.


This is the stolen data that is shaking the Swiss banking world to its core. It contains names, nationalities, account information, deposit amounts – but most remarkable are these detailed notes revealing the private dealings between HSBC and its clients.


Jack Blum: Well, the amount of information here that has come public is extraordinary. Absolutely extraordinary.


Few people know more about money laundering and tax evasion by banks than Jack Blum.


He’s a former U.S. Senate staff investigator. We asked him to analyze the files for us.


Jack Blum: If you read these notes, what you understand is the bank is trying to accommodate the secrecy needs of the client. And that’s the first concern.


Jack Blum: You get into the notes and you find that they offer various products: shell corporations, trusts, various ways of concealing the ownership of the account. They offer products that they’re gonna give to the customer that will help with a concealment.


Concealment is what Irish businessman John Cashell got from HSBC. His file contained these notes by a bank employee: Cashell’s “pre-occupation is with the risk of disclosure to the Irish authorities.” The employee went on, “I endeavored to reassure him that there is no risk of that happening.” Cashell was later convicted of tax evasion.


The bank files we examined contained more than 4,000 names of people with connections to the U.S., holding more than $13 billion in HSBC accounts.

One was a New Jersey realtor. The notes in her file reveal that she and her family wanted assurance that her assets would be well hidden from U.S. tax collectors.


Jack Blum: And she expresses concerns to the bank, which in turn reassure her that they will find ways to keep her name out of the sights of IRS.


Bill Whitaker: There seems to be evidence of the bank actively helping clients evade– if not cheat.


Jack Blum: Of course.


Bill Whitaker: You say, “Of course.” But for us, looking at these documents here, this is shocking.


Jack Blum: First of all, for the average American taxpayer it’s beyond shocking. But, perhaps, not that surprising. Swiss banks have been caught protecting tax dodgers before, but never has this much detail been revealed.


Jack Blum: Under U.S. law, any bank that does that, that assists a U.S. person in evading U.S. tax is guilty of a felony. And it doesn’t matter where the bank is located or where the bankers are located.


Bill Whitaker: So, we’re looking at evidence of a felony here?


Jack Blum: Potentially, yes.

The full interview is below: see zero hedge for many of the big names.





Your more important currency crosses early Monday morning:



Eur/USA 1.1317  up  .0005  (with every country on earth buying euros to support it due to the Greek crisis)

USA/JAPAN YEN 118.52  down .570

GBP/USA 1.5226 down .0005

USA/CAN 1.2495 down .0030

This morning in Europe, the euro is slightly up, trading now just above the 1.13 level at 1.1317 as Europe is supported by other nations keeping the Euro afloat,  Europe reacts to deflation, announcements of massive stimulation and today crumbling bourses.   In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled  up again in Japan by 57 basis points and settling just below the 118 barrier to 118.52 yen to the dollar. The pound was down this morning as it now trades well below the 1.52 level at 1.5226.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation/Dec  12 a new separate criminal investigation on gold,silver oil manipulation). The Canadian dollar stopped its descent and today it is up a fraction  and is trading  at 1.2495 to the dollar. It seems that the 4 major global carry  trades are being unwound. (1) The total dollar global short is 9 trillion USA, and as such we now witness a sea of red blood on the streets as derivatives blow up with the massive rise in the dollar against all paper currencies.We also have the second big yen carry trade unwind as the yen refuses to blow past the 120 level.(3) the Nikkei vs gold carry trade. (4) short Swiss Franc/long assets  (European housing), the Nikkei, etc. These massive carry trades are terribly offside as they are being unwound. It is  causing deflation as the world reacts to a lack of demand. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT.

The NIKKEI: Monday morning : up 63.43 points or 0.36%

Trading from Europe and Asia:
1. Europe stocks all in the red

2/ Asian bourses mixed  Australia  … Chinese bourses: Hang Sang in the red ,Shanghai in the green,  Australia in the red: /Nikkei (Japan) green/India’s Sensex in the red/

Gold very early morning trading: $1240.50



Early Monday morning USA 10 year bond yield: 1.91% !!!  down 5  in basis points from Friday night/

USA dollar index early Monday morning: 93.64  down 6 cents from Friday’s close.



This ends the early morning numbers.




And now for your closing numbers for Monday:




Closing Portuguese 10 year bond yield: 2.52% up 11 in basis points from Friday


Closing Japanese 10 year bond yield: .35% !!! up 1 in basis points from Friday


Your closing Spanish 10 year government bond,  Monday up 8 in basis points in yield from Friday night.

Spanish 10 year bond yield: 1.57% !!!!!!
Your Monday closing Italian 10 year bond yield: 1.66% up 8 in basis points from Friday:



trading 9 basis points higher than Spain.




Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond:

Euro/USA: 1.1327  up .0014

USA/Japan: 118.60 down .0049

Great Britain/USA: 1.5217 down .0015

USA/Canada: 1.2462 down .0023



The euro rose  this afternoon and it was up by 14 basis  points finishing the day well below  the 1.14 level to 1.1327. The yen was down in the afternoon, and it was up by closing  to the tune of 49 basis points and closing well above  the 118 cross at 118.60 and still causing much grief again to our yen carry traders who need a much lower yen (to surpass 120). The British pound lost considerable  ground during the afternoon session and was down on  the day closing at 1.5217. The Canadian dollar was up  again today.  It closed at 1.2462 to the uSA dollar

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are  causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front will no doubt produce many dead bodies.



Your closing 10 yr USA bond yield: 1.96 up 1 basis points from Friday

Your closing USA dollar index: 94.655 down 15 cents on the day.



European and Dow Jones stock index closes:

England FTSE  down 16.29 points or 0.24%

Paris CAC down 39.97 or 0.85%

German Dax down 182.88 or 1.69%

Spain’s Ibex down  208.20 or 1.97%

Italian FTSE-MIB down 394.10 or 1.90%



The Dow: down 95.08 or 0.53%

Nasdaq; down 18.39 or 0.39%



OIL: WTI 52.81 !!!!!!!

Brent: 58.18!!!!



Closing USA/Russian rouble cross: 65.74 up  1/4  rouble per dollar on the day. (oil rising)



And now for your more important USA economic stories for today:


Your New York trading for today:



Stocks Stumble As Greek Fears Trump Goldilocks Cheers


Remember Friday… Jobs were awesome, Ukraine ‘peace’, and Greece “contained”…. well that’s gone…


As is usual  – overnight weakness (China, Ukraine, Greece…) gave way to panic buying rip-a-thon in stocks the moment US equity markets opened… but once Europe closed, the algos shit the bed and USDJPY took us down…

Trannies were worst along with their high beta cousin Small Caps.. and we closed weak


after a late-day algo scramble which perfectly ticked VWAP…


From Friday’s jobs data…


Energy led the sectors today…


As Crude squeezed just a little higher… but note that it made a lower high…


An illiquid energy credit market has decoupled from a more liquid equity risk market… we’ve seen this before…


Treasury yields closed marginally higher on the day but sold off from European lunchtime…


The USDollar closed 0.25% lower as early EUR weakness (USD strength) was eradicated once US opened…


Just for $hits and giggles – here is the SNB in action managing to the 1.05 corridor… and then helping bring zee stabilitee to EUR…


A weaker dollar provided some support for commodities but copper closed weaker on crappy China trade data…


From payrolls, crude is green…


But oil and stocks decoupled and recoupled on the day..


Credit market participants have scrambled back into bonds as stocks ripped… but the advance-decline lines suggest that exuberance has run its course…


As the deja-vu-ness of the credit cycle continues to glare…



Charts: Bloomberg





The meeting between Obama and Merkel this afternoon:


(courtesy zero hedge)

Obama & Merkel ‘Agree’: No Prospect Of “Military Solution” In Ukraine


“Success is anything but certain,” warned Germany’s Merkel during the uncomfortably un-united joint press conference as both the leaders appeared to be able to agree on only one thing – that a military solution will not happen. This was followed by what appeared to be President Obama conceding to Merkel that the provision of arms to Ukraine was kinda sorta ‘off-the-table’ – though still under “ongoing analysis.”  Hopes remain for a diplomatic solution and President Obama even concluded, “we are not looking for Russia to fail. … Our preference is for a strong, vibrant, confident Russia.” Other items that caused some tension included Iran, Israel, NSA “trust” and US asking for “benefit of the doubt,” and Greek anti-austerity plans…



Obama’s comments…


Merkel’s comments…


*  *  *

And then there’s this…

The bottom line – whether for appearances or not –President Obama came across a lot less hawkish than we suspect Poroshenko and the Ukrainian military was hoping for him to be.







I would like to close with this excellent offering from Raul Meijer as he gives his views as to what is happening behind the scenes with respect to the Greek crisis


(courtesy Raul Meijer/the Automatic Earth Blog)






Behind The Global Game Of Thrones


Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Greek PM Alexis Tsipras yesterday laid out Syriza’s stance, and from what I saw he didn’t pull even one punch. Despite all the suggestions from the financial press throughout the past week that Tsipras and Varoufakis reneged on campaign promises to seek debt write-downs, they didn’t, and never have – other than perhaps in semantics.

Which I don’t find the slightest bit surprising. I would have been very surprised if they had. The misinterpretation, and the faulty expectations, are easily explained through the fact that – most of – these guys are not politicians, which they very deliberately expressed in the way they dressed for their meetings with ‘Europe’s finest’.

They don’t see the ‘space’ career politicians see to negotiate away the mandate their voters have given them. For them it’s simple: we were elected on our program – which in this case happens to be to end the misery forced upon Greece by the European and Troika schemes -, and we’re not going to move away from that just because ‘the other side’ starts threatening us, or (a crucial difference in politics) because our voters may not vote for us again in a next election.

In their view, trying to scare Greece into even more submission, which is the overlying message emanating from Brussels and beyond, is entirely null and void because Greece can’t – and shouldn’t – sink any lower than it has. Very and refreshingly simple. No surprise there, but, at least on my part, just support and admiration. Syriza is fighting the fight many others don’t have the intellect, the chutzpah and/or the courage for.

The first thing they did, apart from hiring back the government offices’ cleaning ladies the Troika got fired, was to say they wanted nothing to do with that same Troika. That to me is the most important statement so far by Yanis Varoufakis and his crew. Because that goes to the heart of why Greece is where it is, and why the entire world is.

I saw a headline last night that said something like ‘Greece doesn’t want to talk to the EU’. But that’s not true. Syriza merely wants the IMF out of the picture. And then it would prefer to talk to separate EU nations and offices, rather than top down Brussels bureaucrats. Not just because of the Colonel Blotto game theory I talked about before, but because they recognize how insidious and ruthless the IMF is. I’ll get back to that in a minute.

The most remarkable ‘news item’ for me yesterday came not from Tsipras (or Greenspan), but from former French President Nicolas Sarkozy, who did something he would never have when he was in office. Sarkozy went against the grain of the official western narrative vis à vis Ukraine and Russia. He said what no acting French president could possibly say (including himself), because as president he would have been beholden to the US and NATO dictated doctrine, that Putin is evil, and Ukraine should be ‘liberated’.

Sarkozy: Crimea Cannot Be Blamed For Joining Russia

Crimea cannot be blamed for seceding from Ukraine – a country in turmoil – and choosing to join Russia, said former president of France, Nicolas Sarkozy. He also added that Ukraine “is not destined to join the EU.” “We are part of a common civilization with Russia,” said Sarkozy [..]. “The interests of the Americans with the Russians are not the interests of Europe and Russia,” he said adding that “we do not want the revival of a Cold War between Europe and Russia.”


Regarding Crimea’s choice to secede from Ukraine when the country was in the midst of political turmoil, Sarkozy noted that the residents of the peninsula cannot be accused of doing so. “Crimea has chosen Russia, and we cannot blame it [for doing so],” he said pointing out that “we must find the means to create a peacekeeping force to protect Russian speakers in Ukraine.” In March 2014 over 96% of Crimea’s residents – the majority of whom are ethnic Russians – voted to secede from Ukraine to reunify with Russia.

That is pretty close to 180º different from what the official western position is. Putin has taken note. Because it destroys everything the West, as represented by Germany’s Merkel and France’s Hollande, brought to the talks in Moscow this weekend (and Minsk today). More importantly, it throws out what NATO wants and prepares for. In the exact same way that Greece seeks to throw out the IMF.

And that is no coincidence. Sarkozy reveals his dismay at being told what to do, when he was in office, by the supranational NATO. Tsipras and Varoufakis refuse being told what to do by the supranational IMF. Same difference. Well, to an extent: Sarkozy did the NATO and IMF’s bidding when he was in office, Syriza never has.

Merkel, meanwhile, ceased resisting Mario Draghi’s mad €1 trillion+ QE program recently, and along that same vein she may today, as she’s talking to Obama in Washington, give up her resistance to the west arming Kiev. Which would be equal to a declaration of war against Russia. The pressure on her is obviously huge and increasing, but Angela should be smart enough to know that it’s impossible for Russia to stop looking out for the Donbass.

Because just about every Russian citizen has family connections in the region, who’ve been shelled by their own government for close to a year now. And if Russia were to retreat, chances are these people will be obliterated in very ugly ways. What Merkel should be demanding at the ‘peace’ talks is for not-so-very-democratically-elected PM Yatsenyuk and his shady government to step down, and nationwide fair elections to be held that include the Donbass. But she won’t.

And then Greenspan came, in what will probably be noted as one of his final lucid moments. The man who did so much damage seeks to atone for that while he still can. And do note that the Oracle was in charge of the Fed during the entire set-up and launch of the euro (yeah, yeah, he was a long term ‘critic’ – but not while it made his Wall Street banks a lot of dough off the project, just remember Goldman in Athens).

Greenspan Predicts Greece Exit From Euro Inevitable

The former head of the US central bank, Alan Greenspan, has predicted that Greece will have to leave the eurozone. He told the BBC he could not see who would be willing to put up more loans to bolster Greece’s struggling economy. Greece wants to re-negotiate its bailout, but Mr Greenspan said “I don’t think it will be resolved without Greece leaving the eurozone”. Mr Greenspan, chairman of the Federal Reserve from 1987 to 2006, said: “I believe [Greece] will eventually leave. I don’t think it helps them or the rest of the eurozone – it is just a matter of time before everyone recognises that parting is the best strategy.


Alan Greenspan has long been a critic of the European single currency. Now, the 88-year-old former chairman of the US Fed has repeated a claim that nothing short of full political union – a United States of Europe – can save the euro from extinction. Given that few (if any) of the current 19 sovereign governments which make up the eurozone would choose to create such an entity at this time, that means – for Greenspan at least – the euro is doomed. Before all that, though, he foresees Greece quitting the single currency, but the euro surviving intact.

Greenspan turns against what the Troika – IMF – wants the same way Sarkozy turns against NATO.Once you get them out of their official roles, turns out they’re not as stupid as they pretend to be when they were ‘in function’. That says something about the capture the ‘leaders’ are in, and also about the extent to which they actually represent their voters. Which is not a lot. And that’s the core of the issue.

The entire system has been pre-empted by, first, the wrong kind of organizations, second, the wrong kind of people, and third, the wrong kind of multinational corporations. As in, Wall Street banks, Big Oil, Big Ag -including Monsanto and Sygenta – and a few handfuls of the likes of GE, Boeing, a bunch of carmakers, plus Halliburton etc. They control the planet, they send us to war, they decide what does and does not go. And we’re not going to get rid of them until and unless we realize, loudly and screamingly, that they must go or else.

To illustrate this, please allow me to quote myself a few times from last year:

Oct 7 2014

Germany’s Bad Numbers Are Great News For All Of Us

Nobody in Europe has anything to lose from the demise of the eurozone, at least nothing that they wouldn’t lose anyway, but every single European save for a cabal of power brokers and narcissists has a ton and a half of happiness and self-fulfillment and independence to lose from the continuation of the failed project. [..] What’s wrong with the EU is the same as what’s wrong with NATO, the IMF, the World Bank.


They are institutions that start with noble ideals, but soon start to gobble up ever more power, and with no-one to hold them to account. That kind of structure in turn attracts a certain kind of people, the ones who don’t like to be held to account. And though I’m a little hesitant to include the US in all this, since its so much older, I certainly wouldn’t discard Washington offhand as a place where the wrong kind of people have gathered far too much power.

Oct 18 2014

Wealth Inequality Is Not A Problem, It’s A Symptom

.. the IMF, the World Bank, UN, NATO and the EU absolutely all fit the picture of organizations that have – happily – grown beyond our range of view, and that exhibit the exact same inverted pyramid characteristics we see on wealth inequality, only for these organizations it’s not wealth that floats and concentrates increasingly from the bottom to the top, it’s power. Wealth comes after that. And one shouldn’t confuse that order. Becausepower buys wealth infinitely faster than wealth buys power.

..but then we forgot, ignored, to check on them, and they accumulated ever more power when we weren’t watching.. And what we see now is that any effort, any at all, to break up the IMF, World Bank, UN, NATO and EU would be met with the same derision that an effort to break up the USA would be met with. We have built, in true sorcerer’s apprentice or Frankenstein fashion, entities that we cannot control. And they have taken over our lives. They serve the interests of elites, not of the people. So why do we let them continue to exist?.

Nov 8 2014

The Broken Model Of The Eurozone

I stumbled upon these few words in an Ambrose Evans Pritchard article the other day, and they hit me almost like some sort of epiphany, which in turn made me feel a little stupid, because it’s all so obvious. What Ambrose wrote (and this time I’m not making fun of him), was about the eurozone (EMU), of which he said:


The North is competitive. The South is 20% overvalued.


And I realized that’s all you need to know about the eurozone, and about why it will fail. Or has already failed, to put it more accurately. [..] Northern Europeans see their lifestyles being cramped from many sides in the ongoing crisis, and they would not accept more being taken from them to be handed to Greece. Even if 50%+ of young Greeks have no jobs, and over 40% of Greek children grow up in poverty. That’s not how the union was explained to them. And they would not have agreed if it had been.


The fact that Brussels has attracted a highly dubious breed of politician and bureaucrat certainly hasn’t helped, and still doesn’t. But it’s not the core problem. The core problem is that there never was a mechanism to reconcile the 20% differences, which means we’re fast on our way to 30% and more. Nothing anybody can do about that other than to leave the union.

Nov 10 2014

A World Run On Broken Economic Models

Leaders of entities like the US, the EU or China have little in common with the people they supposedly represent, and they don’t have to, nobody expects them to. The US midterms were mostly a a battle of the bulge, as in candidates’ bulging wallets. And on top large scale national politics we have created yet another, even more anonymous layer of power. UN, World Bank, IMF, NATO, there’s an ever growing collection of supra-national organizations that keep on guzzling up more power and more money every single day.


Like ‘smaller’ entities such as the US and EU, only more, the supra-nationals attract a certain kind of people, those that like to assert power without being held directly accountable. In structures that far exceed the human scale, they are like fish in water. And that’s why we should never accept having them in those positions. IMF and World Bank have a history of at best disputable and at worst very bloody interventions in nations across the globe.


We should have today celebrated the end of NATO along with that of the Berlin Wall 25 years ago. But it’s still there, and playing an active role in the flaring up of the Ukraine civil war. As for the UN, there should be a place for an organization like it, but not with the money gobbling corporate structure, serving shady interests, that it has today.


Our political systems don’t work. Our economic systems don’t work. We live on a steady – but hardly nutritious – diet of debt and propaganda. Our societies are no longer productive enough to allow for the numbers of intermediaries they have given birth to. But it’s the intermediaries who have more often than not taken up the most powerful positions in our societies. So they will fight, and initially often successfully, to keep their positions, at the cost of the more productive segments. It’s a mechanism that’s much easier to understand than it is to fight.

We, as in mankind, the human species, didn’t develop to have just a few of us take decisions for hundreds of millions of us. It is simply too much for our brains to comprehend, and that is true for both the brains of the rulers and of the ruled. For some of us, though, the brains developed in such a way that they are geared towards seeking maximum power over others. Those people are called sociopaths or psychopaths, depending on the case.

We’re not going to solve this the way we are. We need a much deeper and more comprehensive change to how we’ve organized our societies. Syriza understand this, and they’re acting on it, but they can’t do it alone, and besides their priority must be the Greek population, not the systems that are strangling the world, because that’s what they were voted into office for. We need to support them much more than we have so far, or both their fight and ours will end in defeat.

Supranational organizations will all tend towards developing dictatorial traits, both because of their very structures, and because of the type of people they attract to rise in their ranks.

I’m by no means the only one to say that NATO should be disbanded, Ron Paul made a passionate speech about it in 2008. The problem is that if NATO is not disbanded, it will run amok (it already has). NATO’s purpose was to defend Europe from the Soviet Union’s communist threat. When Russia was no longer a threat, some 25 years ago, the whole apparatus was still left intact, albeit with a few budget cuts, and so NATO went looking for a purpose. I give you: Ukraine.

Whether it’s NATO, or the IMF, or the EU, they’re all part of the same problem. A problem that won’t be solved as long as these institutions are in place. That is not possible. They are organizations that find their purpose in NOT solving problems, because once they’re solves, they no longer have a reason to exist. And they’re not going to volunteer to become obsolete. They’re going to find a reason to find relevance, even if that hurts whoever it is they’re supposed to represent.

We’re never ever going to find a solution to problems like Ukraine or the Eurozone, because we’ve – all over the world – allowed an alphabet soup of institutions to build up that we have no control over, and that we claim can and will solve the issues for us.

We have put the sociopaths in charge, in an international and largely anonymous dictatorship.Who really pulls the levers in the IMF, or NATO etc? We have no way of knowing. And that’s the problem. And that is what Syriza, and precious few besides them, are set to fight. And why they deserve – and need – our support.Because if they don’t win, we don’t.


We  will see you on Tuesday.

bye for now



  1. Hello Harvey

    After reading articles like today, I feel like I am on the Titanic. And worse than that, I see so many innocent people suffering because of the arrogance and pride of a few who are in a position of authority.

    Thank you for your insights


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