Feb 18/Small withdrawal of .3 tonnes at GLD/no changes at SLV/Fed to keep “patience” longer before raising rates/ECB blinks and raises ELA for Greek banks by 3 billion euros/Sovereign Greece has only one week of cash left./Western ports in chaos/









Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1199.70 down $8.40   (comex closing time)
Silver: $16.25 down 11 cents  (comex closing time)



In the access market 5:15 pm



Gold $1212.30
silver $16.48


For the past two days, we have seen a lot of important stories on three fronts:


i) The Greek crisis

ii) the failed Ukrainian ceasefire.

iii) the turmoil at the West coast terminals as freighter backlogs continue to cripple the USA economy.


With respect to the Greek economy, the ECB decided to increase the ELA to 68 billion euros or an additional 3 billion will be granted to the banks due to the huge amount of bank runs in Greece this past week.  However  sovereign Greece announced that it has only one week’s worth of cash left which would put her out of money on Feb 24.2015. Headaches mount for our big underwriting banks who bet huge amounts of money on Greece’s survival. A Grexit will cause massive losses for the ECB bank and other official EU centres and the IMF.  A lot of these losses must be transferred to other members of the EMU.  Countries like Italy, Spain and France will not be available to absorb those losses.


The Ukrainian situation looks dire.  The big push by Poroshenko to capture Debaltseve has failed as 700 of his troops surrendered having been surrounded by the rebels. It certainly looks like sovereign Ukraine will fail and that will cause headaches again for the 5 big USA underwriting banks and, Deutsche bank.


And now for gold/silver trading today.


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


Today, we really had no change with respect to the Greek situation.


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



The gold comex today had a poor delivery day, registering 50 notices served for 5,000 oz.  Silver comex registered 0 notices for nil oz .


Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 256.81 tonnes for a loss of 46 tonnes over that period.


In silver, the open interest  rose by an astonishing 4178 contracts despite the fact that yesterday’s silver price was down by 92 cents. The total silver OI continues to remain relatively high with today’s reading at 175,193 contracts.  What is more surprising is the fact that the front month of March only contracted by 2850 contracts with only 7 days before  first day notice.

We had 0 notices filed  for nil oz



In gold we had another surprisingly rise in OI even though gold was down by $18.40 yesterday. The total comex gold OI rests tonight at 389,530 for a gain of 5,290 contracts. Today we had  50 notices served upon for 5,000 oz.  We are still pretty close to rock bottom OI gold support being around 359,000.




Today, we had a slight withdrawal of 0.3 tonnes with respect to inventory at the GLD no doubt to pay for fees/Inventory 767.96 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 rose by another 5290 contracts today from  384,240 all the way up to 389,530 even though gold was down by $18.40 on yesterday (at the comex close). We are now in the big delivery month of the active February contract and here the OI fell by 0 contracts remaining at 651. We had 0 contracts served upon yesterday. Thus we neither lost nor gained any gold ounces in this delivery month . The next contract month of March saw it’s OI fall by 102 contracts down to 910. The next big active delivery month is April and here the OI rose by 4743 contracts up to 262,024. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was awful at 48,344. The confirmed volume on Friday ( which includes the volume during regular business hours  + access market sales the previous day) was fair at 189,561 contracts  with mucho help from the HFT boys. Today we had 50 notices filed for 5,000 oz.

And now for the wild silver comex results.  Silver OI surprisingly rose by a whopping 4178 contracts from 171,0365 all the way up to 175,193 even though  silver was down by 92 cents yesterday. The bankers are still not able to shake any silver leaves from the silver tree and thus the reason for continuous raids by the bankers. I guess the CME needs to resort to another silver margin hike as this would be the only way to shake some longs to depart. The bankers are burning the midnight oil tonight trying to figure out what on earth is going on in silver. We are now in the non active contract month of February and here the OI remained constant at 56. We had 0 notices filed on yesterday so we neither gained  nor lost any silver ounces in this contract month. The next big active contract month is March and here the OI fell by only 2,850 contracts down to 70,791.  First day notice for the gold and silver February contract months is on Friday, Feb 27.2015 or 7 trading days away.  The March OI is extremely high. The estimated volume today was poor at 22,764 contracts  (just comex sales during regular business hours. The confirmed volume yesterday was unbelievable (regular plus access market) at 108,832 contracts with no appreciable rolls.  We had 0 notices filed for nil oz today.

February initial standings


Feb 18.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz   64.30  oz (Manfra/2 kilobars
Deposits to the Dealer Inventory in oz 5000.02 (Brinks)
Deposits to the Customer Inventory, in oz  3407.47 oz  (Brinks)
No of oz served (contracts) today 50 contracts (5,000 oz)
No of oz to be served (notices)  551 contracts (55,100 oz)
Total monthly oz gold served (contracts) so far this month  636 contracts(63,600 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 164,207.6 oz

Today, we had 1 dealer transactions

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz



we had 1 dealer deposit:


i) Into Brinks:  5000.02 oz  (is the xxx.02 to make me happy?)

total dealer deposit: 5,000.02 oz



we had 1 customer withdrawals

i ) Out of Manfra;  64.30 oz  (2 kilobars)


total customer withdrawal: 64.30 oz



we had 1 customer deposits:


i) Into Brinks:  3407.47 oz


total customer deposits;  3407.47 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 50 contract of which 0 notices were stopped (received) by JPMorgan dealer and 48 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 (636) x 100 oz  or 63,600 oz , to which we add the difference between the OI for the front month of February 601 contracts)  minus the number of notices served today x 100 oz (50 contracts) x 100 oz = 118,700 oz, the amount of gold oz standing for the February contract month.( 3.692 tonnes)

Thus the initial standings:

636 (notices filed for the month x( 100 oz) or 63,600 oz + { 601 (OI for the front month of Feb)- 50 (number of notices served upon today} x 100 oz per contract} = 118,700 oz total number of ounces standing for the February contract month. (3.692 tonnes)

we neither gained nor lost any gold ounces standing.



Total dealer inventory: 809,950.970 oz or 25.19 tonnes

Total gold inventory (dealer and customer) = 8.256 million oz. (256.80) tonnes)


Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 46 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 18 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 532,516.86  oz (Delaware, CNT HSBC,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 498,299.500  oz  (Scotia)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 56 contracts (280,000 oz)
Total monthly oz silver served (contracts) 384 contracts (1,920,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  5,170,861.0 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 0 customer deposits:



total customer deposit: nil oz


We had 4 customer withdrawals:

i) Out of CNT:  8,322.210 oz

ii) Out of HSBC: 30.097.24 oz


iii) Out of Scotia: 491,186.910 oz

iv) Out of Delaware;  2910.500 oz




total customer withdrawal: 532,516.86  oz


we had 1 adjustment


i) Out of Delaware:


249,855.93 oz was adjusted out of the customer and this landed into the dealer account at Delaware.


Total dealer inventory: 68,100 million oz

Total of all silver inventory (dealer and customer) 175.081 million oz


The total number of notices filed today is represented by 0 contracts for nil 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 (384) x 5,000 oz    = 1,920,000 oz  to which we add the difference between the OI for the front month of February (56)- the number of notices served upon today (0) x 5,000 oz per contract = 2,200,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

384 contracts x 5000 oz= 1,920,000 oz + (56) OI for the front month – (0) number of notices served upon x 5000 oz per contract =  2,200,000 oz, the number of silver ounces standing.

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

It sure looks like something is brewing inside the silver comex.  We are within a fraction of all time high in OI and yet the silver price is at all time lows.  Something must eventually give out!!


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 18/ a small withdrawal of .3 tonnes/no doubt to pay for fees/Inventory 767.96 tonnes


Feb 17/no changes in gold inventory at the GLD/Inventory 768.26 tonnes


feb 13. we another another withdrawal f 3.25 tonnes of gold from the GLD/Inventory 768.26 tonnes



Feb 12: we had a withdrawal of 1.8 tonnes of gold from the GLD/Inventory 771.51 tonnes


Feb 11.no change in gold inventory at the GLD/Inventory 773.31 tonnes


Feb 10 no change in gold inventory at the GLD/inventory 773.31 tonnes

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 19/2015 /we had a small withdrawal of .3 tonnes in gold inventory at the GLD

inventory: 767.96 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 : 767.96 tonnes.






And now for silver (SLV):



Feb 18.2015/ no change in silver inventory at the SLV/Inventory at 320.327 million oz


Feb 17 no changes in silver inventory at the SLV/Inventory at 320.327 million oz


Feb 13 no change in silver inventory at the SLV/inventory at 320.327 million oz.


Feb 12 no change in silver inventory at the SLV/inventory at 320.327 million oz


Feb 11 no change in silver inventory at the SLV/inventory at 320.327 million oz



Feb 10 no change in silver inventory at the SLV/inventory at 320.327 million oz



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 18/2015 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  5.0% percent to NAV in usa funds and Negative 5.4 % to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.5%

Percentage of fund in silver:38.0%

cash .5%


( feb18/2015)


2. Sprott silver fund (PSLV): Premium to NAV falls to + 3.24%!!!!! NAV (Feb 18/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to +.12% to NAV(feb 18 /2015)

Note: Sprott silver trust back  into positive territory at +3.24%.

Sprott physical gold trust is back into positive territory at +.12%

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 Wednesday  morning:



(courtesy Mark O’Byrne)



Gold Essential “Safe Haven” Due to Greece … Spain, Italy, Ukraine, Lehman and “Bad Stuff”



Newstalk interviewed GoldCore’s Mark O’Byrne this morning about the investment asset that is not well understood – gold.

The interview began with Nick Bullman of Newstalk asking Mark to explain the poor performance of gold in recent years as it has underperformed since 2008.

Click here to listen

Gold prices rose every single year from 2000 to 2013 responded O’Byrne.

It had “massively outperformed” due to many risks and on the expectation of major financial crisis and had as such had priced in the financial crisis of 2008 and protected investors during and after the crisis.

Mark said that it was a matter of a classic bull market which frequently see “two steps forward and one step back” and lengthy periods of correction and consolidation.

Gold in US Dollars - January 2007 to February 2015 (Thomson Reuters)

He pointed out that Goldcore had warned in 2013 that a sharp correction might be due as is normal in all bull markets. He referred to the severe retracement of the gold bull market of the 1970s where gold prices fell over 50% between 1975-76 before rising a further 800% in less than 4 years.

Similar price performance could be seen in the coming years.

Gold had not performed very well in recent years but he believes that the unfolding crisis in the Eurozone and the very uncertain economic picture globally would likely lead to higher gold prices in the coming years.

He explained that the cost of mining one ounce of gold was, on average globally, $1,200 per ounce and that prices therefore could not fall below that level for any extended period of time He acknowledged that lower oil prices may bring costs of production down to some extent but that the cost of protection should stay above $1,000 per ounce.

At the same time the current low prices relative to costs of production had caused some mining companies to fold or postpone production which will lead to tighter supply in the future.

When asked why one should buy gold in a strong dollar environment and with deflation taking hold around the world he said that gold acts as a hedge against dollar and all paper currency devaluations.

Monetary policy across that world is still incredibly loose with interest rates near 0% and with the EU about to begin its QE money printing program or “experiment”. He used the example of Russia whose gold owners have been very well protected during that country’s recent painful economic and currency crisis.

He referred to recent academic research and the views of asset allocation experts like Ibbotson and Mercer who have shown gold is a classic “hedging instrument.”

He said that gold’s ideal conditions are not those of deflation but that the degree of uncertainty in the world today was a compelling reason to own gold. Gold does in well in deflation as gold cannot go bust – “that’s why central banks are the biggest buyers of gold today.”

The interviewer questioned gold’s hedge status referring to the brief fall in the gold price during the 2008 crisis, suggesting that investors used liquidity in gold to cover their losses.

Mark responded by clarifying that it was not gold investors selling physical gold but speculators and hedge funds who deal in futures contracts liquidating all positions en masse.

The paper price of gold fell in the very short term after the Lehman crisis but within weeks prices had recovered and closed the year higher – from $838 at the start of 2008 to close the year at $872 per ounce for an annual gain of 4 per cent.

Gold in US Dollars - Full Year 2008 (Thomson Reuters)

Other assets were sharply lower in 2008 and so in a deflationary environment, gold outperformed and that outperformance continued in 2009, 2010, 2011 and 2012 prior to a sharp fall in 2013  (see chart above).

He added that gold had already anticipated and begun to price in the crisis. He clarified that gold is not an “absolute hedge” and that no such thing exists, but in the medium to long term gold always serves it’s purpose as essential financial insurance and a vital safe haven asset.

The short Newstalk interview can be listened to here  (From 7th minute to 15 minute, 20 seconds)


Today’s AM fix was USD 1,206.50, EUR 1,059.36 and GBP 781.77 per ounce.
Yesterday’s AM fix was USD 1,221.75, EUR 1,072.56 and GBP 793.86 per ounce.

Gold fell 1.63 percent or $20.00 and closed at $1,208.50 an ounce yesterday, while silver slid 4.51 percent or $0.78 closing at $16.51 an ounce.

Gold in US Dollars - 2015 Year To Date (Thomson Reuters)

Gold fell to a six week low in the prior session to $1,203.80 after opening at $1,231.30 as some speculators closed out positions ahead of the week long Lunar New Year holiday that began today in China.

Gold in London continued to fall but remained above the $1,200 level.

Spot gold was down 0.1 percent at $1,207.21 an ounce in early London trading and Comex U.S. gold futures for April delivery were down $1.20 an ounce at $1,207.40. Spot prices hit their lowest since early January on Tuesday at $1,203.30.

Silver was down 0.5 percent at $16.48 an ounce. Spot platinum was unchanged at $1,170.95 an ounce, close to the previous session’s 5 and a 1/2 year low, while spot palladium was flat at $779.05 an ounce.

Today the U.S. Fed releases its minutes from their policy meeting from January 27-28th at 1800 GMT. The U.S. dollar rose 0.2 percent against the euro on Wednesday ahead of the U.S. Fed minutes release.

The British pound is close to a seven year high versus the euro after it was reported that UK unemployment figures dropped and earnings rose. The Bank of England commented that it sees inflation climbing “fairly sharply” as the effects of cheaper oil prices fade.

Greece’s government confirmed it would ask for a six month extension to its loan agreement with the euro zone, which it rightfully distinguishes from its ‘bailout’ programme.

Greek Prime Minister Alexis Tsipras told Germany’s Stern magazine an economic war with Russia was in no-one’s interests and that imposing sanctions on Moscow over the crisis in Ukraine was “hypocritical”.

“If you want to punish Russia, you need to punish all the countries where Russian multi-billionaires have invested their assets,” he told Stern in an interview released today.

Currency wars continue as nations continue to seek competitive advantage by devaluing their currencies through QE and now negative real interest rates.

Last week, Sweden’s Riksbank slashed its main policy rate to negative. It thus became the 14th central bank to ease monetary policy so far this year, but the first to actually take its “repo rate” below zero to -0.1 per cent.

Incredibly and some would say insanely, this means that Sweden is now charging its banks to lend money. In Britain, the same interest rate currently stands at a historic low of 0.5 per cent, but could well be cut further according to Mark Carney.

Switzerland and Denmark have already sent their deposit rates into negative territory – to -0.75 per percent to prevent currency appreciation.

All of this is extremely bullish for gold and silver. Prudent buyers will use weakness to accumulate physical bullion.

Breaking News and Updates Here



We brought the Paul Mylchreest story to your attention a few months ago whereby it looked like gold was being used as the short vehicle and the long part of that carry trade was the Nikkei.  It now is true!!


(courtesy zero hedge/GATA)



Zero Hedge claims vindication for Mylchreest’s study of gold-suppressing yen trade


5:10p ET Tuesday, February 17, 2015

Dear Friend of GATA and Gold:

Zero Hedge today claims vindication for market analyst Paul Mylchreest’s study in December, conveyed to you by GATA —


— concluding that the price of gold has been suppressed for two years as part of a massive trade involving the Japanese yen and Japan’s stock index.

Zero Hedge’s commentary is headlined “Is The Bank Of Japan ‘Managing’ US Stocks Today?” and it’s posted here:


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







We now have a lawyer who is a consultant to the CFTC

give his opinion as to whether HFT trading constitutes manipulation.

He did this in his personal capacity and not necessarily for the CFTC.

His conclusions are remarkable!!


(courtesy Ted Butler)


A Remarkable Proposition


February 17, 2015 – 10:41am

A remarkable new paper by a Cornell law professor and CFTC staff counsel suggests that many aspects of high frequency computer trading (HFT) may be, in fact, illegal under various provisions of basic commodity law. Heretofore, it was generally assumed that HFT was legal, but disabused and impacted markets in disruptive manner on occasion. Many, like myself, never looked on HFT favorably, but few have tried to make the legal case against it. The author, Gregory Scopino, writes in his personal capacity and not on behalf of the CFTC. Not a short or easy read (at 90 pages), I feel Scopino makes a well-researched case and even offers answers to questions asked of me by readers, such as definitions for commodity terms and the like. Please take the time to scan the document.

If you would prefer a brief interpretation, try this.

There are many points to draw from this paper and I’ll offer my most salient takeaway. By looking at what is accepted by “everyone” as legally appropriate activity with a different perspective, the activity can instead look highly inappropriate and even illegal. Scopino looked at HFT not through the universal perspective of something that’s here to stay and that we must get used to; to looking at it through an interpretation that it might violate existing law. His conclusion appears to be that much of HFT is not properly aligned with existing commodity law. Not being a lawyer, I can only agree with him by what I’ve observed firsthand about the disruptive and manipulative effect of HFT. Not explicitly stated in the paper is my suggestion that only the one percent of market participants actively engaged in HFT seem to be for it, while the 99% of market participants not engaged in HFT wish it didn’t exist.

About the only difference I hold with Prof. Scopino is that he suggests that certain aspects of HFT may be manipulative on their face, where I consider HFT to be a manipulative price tool employed to extend the larger ongoing price manipulation in silver. He suggests HFT may be the manipulation; I claim the commercials first rig the price of silver (up or down) through HFT in order to force the technical funds and other price momentum speculators to buy or sell so that the commercials can take counterparty positions. I’ve alleged that the manipulation in silver existed long before HFT arrived on the scene some years ago, although I fully admit that HFT has made it easier for the silver commercial manipulators.

I was taken with something in the paper that is generally very hard to find – a good definition of the word “manipulation.” It’s a word, as you know, that I tend to overuse. Here is the definition in question (page 655) –

“The phrase price manipulation . . . means the elimination of effective price competition in a market for cash commodities or futures contracts (or both) through the domination of either supply or demand and the exercise of that domination intentionally to produce artificially high or low prices. Price manipulation is kindred to the exercise of monopoly power to dictate prices that would be unachievable in a truly competitive environment. The existence of price manipulation is largely a factual question involving determinations whether the requisite domination or of monopoly exists, whether an artificial price is caused by the exercise of that power and whether the dominant party specifically intended to bring about that artificial price.”

While Prof Scopino is referring to HFT only, I hope you recognize that “no competition, domination, monopoly and dictating prices” are words frequently used by me to describe the control of the 8 big short traders in COMEX silver. This definition clearly states that price manipulation first revolves around the factual question of whether the domination or monopoly exists, followed by the willful and successful exercise of that domination.

First things first – does a monopoly exist on the short side of COMEX silver? There would be no question of monopoly if one to eight traders controlled 100% of one side of any market; then it would be easy to prove manipulation as it would be self-evident. Conversely, if no one trader held more than 1% of any market, it would be absurd to allege manipulation by means of a dominant concentrated position. So, we know the range of domination (concentration) lies between 1% and 100% of market share. Because no one could argue that a 100% concentration by one or a small number of traders would not constitute manipulation on its face, it would never be allowed to exist despite any intent by the CFTC to ignore such an absurd market share. Therefore, the definition of domination or monopoly given above presupposes that some level less than 100% could determine manipulation. Otherwise no anti-manipulation statute would make sense.

Therefore, the question comes down to what degree of concentration, openly stipulated to be less than 100%, would constitute manipulation? The answer is not some specific hard number written in stone, like 30% or 70%; if it was that simple we wouldn’t need a body of law or a federal agency to safeguard against manipulation. Instead, the answer has to be some reasonable percentage supported by other evidence of artificial pricing. That is precisely the circumstance in silver.

For starters, the facts of concentration are not in dispute because they come from the CFTC in the form of the weekly Commitments of Traders Report (COT).  Concentration data is available and accurate and the CFTC compiles and publishes the data because it is the early warning system for manipulation. The problem is that the agency, at least in silver, stops at compiling and publishing the concentration data and refuses to consider the results. It’s as if a thousand incoming enemy ICBM’s were detected to hit the US on the NORAD missile defense system and the operators ignored the radar and clocked out for lunch.

The CFTC doesn’t publish concentration data just to give me something to write about; the system was set up to detect and eliminate the concentration that is a necessary component of domination, control and monopoly. What should the CFTC do with the concentration data in silver? At a minimum, it should consider its own data in relative and practical terms.

The trick is to convert the concentrated short positions published by the CFTC into the equivalent real world quantities the short positions represent and do that for every regulated physical commodity, including COMEX silver. After all, commodity law has established that a commodity’s price should be determined by changes in actual supply and demand and that futures trading must not dictate prices to the real world. Every physical commodity, from oil to cotton to copper to silver has easy to establish world annual production and consumption data. By converting the concentrated short positions of the four and eight largest traders in every regulated commodity futures market to what that represents in terms of actual days of world production, this normalizes the data in a reasonable and practical manner that allows an apples vs apples comparison for every commodity.


It’s not just that silver always has the largest concentrated short position in terms of days of world production of all commodities, in some cases standing with an equivalent short position fifty times larger than in some commodities, like crude oil or wheat. One has to look at the total picture – the rarity of a commodity priced below its average primary cost of production and documented net physical investment buying coupled with the most extreme relative concentrated short position of all physical commodities.

Add into the mix the certain knowledge the extraordinary and easily proved circumstances that in 2008 the former largest holder of the concentrated short position in silver (and gold), Bear Stearns, needed to be bailed out and acquired by JPMorgan, most likely because of losses Bear Stearns suffered on its massive silver and gold short positions. Since then it has been easy to track what JPMorgan has been up to because its concentrated silver short position has remained so large and manipulative.

What makes Prof. Scopino’s paper remarkable is that he is stating the obvious in the case that HFT may violate the law. And what could be more obvious than the documented case for manipulation in silver by virtue of a concentrated short position that can’t be explained in legitimate terms and stands far above any other short position?

Please don’t think I am depending on any action, immediate or otherwise, by the CFTC to Scopino’s paper, despite his affiliation with the agency. Likewise, there is zero chance of the agency ever doing anything about the silver manipulation. What’s great about the paper is that states, in legal terms, what the vast majority of market participants already know – that HFT appears manipulative on its face. If that is correct, the remedy must be a legal resolution.

It’s different with the silver manipulation where no legal resolution is likely, but as and when enough market participants and investors realize what the world’s largest concentrated short position has done to the price, the resolution will come when that newfound knowledge results in enough physical silver buying to break the back of the short paper manipulators.


This article is based on a commentary of Ted Butler’s premium service atwww.butlerresearch.com which contains the highest quality of gold and silver market analysis. Ted Butler is specialized in precious metals market analysis for over four decades.






John Hathaway discusses the price rigging suit against the London fix



(courtesy John Hathaway/Kingworldnews/Eric King/GATA).


Tocqueville’s Hathaway discusses price-rigging suit against London gold fix participants


7:25p ET Tuesday, February 17, 2015

Dear Friend of GATA and Gold:

Tocqueville Gold Fund manager John Hathaway today discusses with King World News his hopes for the pending class-action lawsuit against London gold fix participants for price rigging. Also discussed is today’s counterintuitive action in monetary metals prices. With Asia taking more gold than the world is producing, Hathaway says, eventually Asia will be setting prices and not the futures markets in London and New York. Hathaway’s interview is excerpted at the KWN blog here:


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





Dave and I think alike!1


(courtesy Dave Kranzler/IRD)


Comex Gold Open Interest Numbers Show Massive Manipulated Gold Hit In Progress

The Comex is a complete fraud.  It’s one of the biggest Ponzi schemes in history.

With China and Viet Nam (the latter being a major gold importing country) now closed until next Wednesday in observance of their Lunar New Year, the bullion banks have engaged in a major attempt to drive the price of gold lower.    Yesterday (Tuesday) 99,000 gold contracts  – 9.9 million ounces or 287 tonnes – were sold into the market between 9 a.m and 11 a.m. EST, which had the effect of driving the price of gold down over $26.  To put this into context, a total of 179,833 contracts traded between 6 p.m. Monday and 5 p.m. Tues. The entire daily trading period is 23 hours.But 55% of yesterday’s total trading volume – the volume used to slam gold – was traded in a two-hour window of NY trading.

Think about it this way:  in that two-hour window, 35 days worth of daily global gold mine production traded in the form of paper gold.  The open interest expanded by 5,290 contracts, which translates into just over 15 tonnes of gold.  The total amount of gold available for delivery – the “registered” account gold – is 804.9k ounces, or 23 tonnes.  In just one day, the bullion banks (JP Morgan, HSBC and Scotia) sold forward 65% of the entire stock of deliverable gold on the Comex.  And that’s if you really believe the unaudited bank reports which produce the gold warehouse stock reports.  I do not.

Gold was raided again today (Wednesday, Feb 18) – again at 11:00 a.m. EST. This time gold was slammed another $9 in the space of 30 minutes, most of it in the first seven minutes. Today 18,000 April gold contracts traded in the 30 minute space, representing 24% of the total volume in the April gold contract up to that point since 6:00 p.m EST the previous evening. This is 52 tonnes of paper gold – more than twice the amount of gold in Comex vaults available for delivery.

This is very painful for most of us to watch unfold because we understand how corrupt our entire system is and we also somewhat understand just how devasting the consequences will be for the entire population of the United States (and, really, the entire world) when this giant Ponzi scheme blows up.

Folks, these are not free markets by any remote stretch of the imagination. These are markets controlled by dangerous criminals who are in the process of stealing everyone’s wealth and, in the process, destroying our system. Unless something is done, your children’s lives will become a very unpleasant experience. I don’t have children so I don’t have equity in the future of this system other than I was raised with a very strong sense of “right” and “wrong.” I’m just the messenger.

Sometimes I wonder if I might have been better off being one of the 95%’ers who are oblivious to the size and the velocity of the giant two-by-four being swung at the back of their head by those in control of our system…

If you found this post to be value-added, please share it with others: (please share this with anyone who might care, if even just a little, we need to pry open any doors that are cracked open in the minds of those who care about our country)


Posted on 17 Feb 2015 by

Willem Middelkoop: A New Gold Standard In The Making

Written by Willem Middelkoop

“Putin is the biggest gold bug”, was the title of a recent Bloomberg op-ed by Leonid Bershidsky the founding editor of Vedomosti, Russia’s top business daily. He explains why the Russian central bank has accumulated almost 100 tons of gold in the last four months of 2014. It is an acceleration of the gold buying program which started in 2007, a year before the Lehman collapse.


Besides accumulating gold the Russians have been quite active sellers of US Treasuries. Between November 2013 and December 2014 they have sold around $30 billion of US government bonds while they grew their gold reserves from $43 to over $50 billion in a clear effort to de-Americanize the Russian economy. Just like the Chinese they as well signed bilateral currency-swap-deals in a move away from the dollar.


The Russian activities can be seen as part of an all-out financial war between Russia and the West as best described by Putin’s economic advisor Sergei Glazyev in a recent interview:

I believe that in a situation of growing military and political confrontation the gold price will move up again. And let’s not forget that America’s refusal to honour their debt will undermine trust in the dollar not just in this country but also in others. It will be a step towards the end of the American financial empire. It will give us a chance to be among the first to suggest a new configuration for the world financial system, in which the role of national currencies will be significantly higher.

The Chinese, who have shown all kind of financial and economic support for Russia in recent months, have been on a gold buying spree as well. In the last ten years Chinese buyers have accumulated over 10,000 tonnes of gold.

Total Estimated Chinese Gold Reserves 1995 - 2014

While Western banks are trying to scare customers away from buying gold, the Chinese have opened up over 100.000 retail outlets to promote gold and silver among the public. In my book I quote from an article by Sun Zhaoxue, the former president of both the China National Gold Corporation (CNG) and China Gold Association (CGA), first published by gold analyst Koos Jansen:

Individual investment demand is an important component of China’s gold reserve system; we should encourage individual investment demand for gold. Practice shows that gold possession by citizens is an effective supplement to national reserves and is very important to national financial security. Because gold possesses stable intrinsic value, it is both the cornerstone of countries’ currency and credit as well as a global strategic reserve. Without exception, world economic powers established and implement gold strategies at the national level.

Mr Sun outlines why substantial national gold reserves are so important for countries like China:

In the global financial crisis, countries in the world political and economic game, we once again clearly see that gold reserves have an important function for financial stability and are an ‘anchor’ for national economic security. Increasing gold reserves should become a central pillar in our country’s development strategy. International experience shows that a country requires 10% of foreign reserves in gold to ensure financial stability while achieving high economic growth concurrently. At the moment, the US, France, Italy and other countries’ gold accounts for 70%
 of forex reserves. After the international financial crisis erupted, (our) gold reserves were increased to 1054 tons
 but gold reserves account for less than 1.6% of financial reserves – a wide gap compared to developed countries.

According to him, the Chinese government is intent on accumulating additional high quality (gold) assets:

The state will need to elevate gold to an equal strategic resource as oil and energy, from the whole industry chain to develop industry planning and resource strategies… increasing proven reserves, merger and acquisitions, base construction and opening up offshore gold resources to accelerate increase of national gold reserves. Concurrently, actively implement a globalization strategy that will exploit overseas resources and increase channels to grow China’s gold reserves. We should achieve the highest gold reserves in the shortest time.

According to Bloomberg the Chinese have stopped buying US Treasuries as well. Instead the Chinese have signed contracts worth $100’s of billions with Russia; this is a strong diplomatic sign of support for Russia. The two countries even signed a contract for a $240 billion investment for a 7000 km high-speed link between Beijing and Moscow.

These developments illustrate a growing divide between the financial interest between East and West. Now sovereign bond and deposit yields at or below zero we have reached the financial endgame, as the Saxo bank and Deutsche Bankhave been writing recently. The IMF has published a report in which the economists Rogoff and Reinhart point to the need for debt restructurings in advanced economies. Debt restructurings and finding a new world reserve currency are the main aspects of a coming Monetary Reset.

Recently we have seen some more confirmation major countries are preparing for a new phase of the international monetary system. During two conferences in China last year, a coming financial reset has been discussed. At the 2014 edition of the Chinese International Finance Forum (IFF) “[..] a new global financial order has been discussed with China.” According to the former ECB President Jean-Claude Trichet. Chinese media reported the three days the forum (including U.N., World Bank, IMF participations) discussed “the new framework for the global financial and economic system”.

Preparations for a monetary reset were also confirmed by Zhou Ming, General Manager of the Precious Metals Department at ICBC during the LBMA Forum in Singapore;

With the status of the US dollar as the international reserve currency being shaky, a new global currency setup is being conceived.

In 2012 the former Bank of England Governor Mervyn King already predicted advanced economies would probably not be able to get out of the current crisis without large debt restructurings and a recapitalization of the financial system (banks):

I am not sure that advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values and recapitalization of their financial systems…. Only then will it be possible to return to a more normal provision of the vital banking services so crucial to an economic recovery.

Yes even Alan Greenspan acknowledged that, ‘It is mathematically impossible to cover future government promises’.The US unfunded liabilities (pension and health costs) are as high as $128 trillion.

Japan is the best and most worrying example of the sheer magnitude of public debt, which will reach 250% of GDP in 2015. At the end of 2014 the architect of Japan’s radical economic policies, often describe as ‘Abenomics’ Koichi Hamada called the aggressive moves by the Japanese central bank a Ponzi-scheme:

In a Ponzi game you exhaust the lenders eventually, and of course Japanese taxpayers may revolt. But otherwise there are always new taxpayers, so this is a feasible Ponzi game, though I’m not saying it’s good.

One more insider who is very vocal about the need for a monetary reset and who’s views we shouldn’t ignore, is the legendary hedge fund manager George Soros:

The system we now have has broken down, only we haven’t quite recognized it. So you need to create a new one and now is the time to do it… You need a new world order where China has to be part of the process of creating it. They have to buy in [which they are doing by buying gold] … And I think this would be a more stable one where you would have coordinated policies. I think the makings of it are already there because the G20 effectively is moving in that direction… So there is a general lack of confidence in currencies and a move away from currencies into real assets…. Especially in the area of commodities.

Gold Repatriations

The gold repatriation by several European countries is another sign we are reaching an end of a monetary calm period of over 40 years. The Europeans follow in the footsteps of other countries to repatriate their physical gold holdings from the US. According to a former Director of the United States Mint:

More countries are repatriating their gold. For them, an audit is not enough. They would like their gold back. Azerbaijan, Ecuador, Iran, Libya, Mexico, Romania and Venezuela is a short list of countries that have requests into their custodians to transfer some or all their gold back to their countries.

We can only conclude gold is making a remarkable comeback into our financial system and even that a new gold standard is being born without any formal decision. At least that’s how Ambrose Evans- Pritchard, an influential international business editor of The Telegraph, described the on-going efforts by countries to lay their hands on as much physical gold as possible:

The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project… Neither the euro nor the dollar can inspire full confidence, although for different reasons. EMU is a dysfunctional construct, covering two incompatible economies, prone to lurching from crisis to crisis, without a unified treasury to back it up. The dollar stands on a pyramid of debt. We all know that this debt will be inflated away over time – for better or worse. The only real disagreement is over the speed… The central bank (gold) buyers are of course the rising powers of Asia and the commodity bloc, now holders of two thirds of the world’s $11 trillion foreign reserves, and all its incremental reserves. It is no secret that China is buying the dips, seeking to raise the gold share of its reserves well above 2%. Russia has openly targeted a 10% share. Variants of this are occurring from the Pacific region to the Gulf and Latin America. And now the Bundesbank has chosen to pull part of its gold from New York and Paris. Personally, I doubt that Bundesbank had any secret agenda, or knows something hidden from the rest of us. It responded massive popular pressure and prodding from lawmakers in the Bundestag to bring home Germany’s gold. Yet that is not the story. The fact that this popular pressure exists – and is well organised – reflects a breakdown in trust between the major democracies and economic powers. It is a new political fact in the global system.

These latest development can have big repercussions in the future, just like the repatriation of gold in the 1960s lead to the implosion of the London gold Pool in 1968 and the rise of the gold price from $35 in 1969 to over $800 in 1980.

These indications about the coming changes for our monetary system don’t mean we have to expect a monetary reset earlier than previously expected. The planned changes will take time to discuss and to prepare. But we will experience them in the next decade for sure. They could be introduced as one worldwide monetary reset or in a series of smaller steps.

Willem Middelkoop is founder of the Commodity Discovery Fund and author of The Big Reset

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com









And now for the important paper stories for today:



Early Wednesday morning trading from Europe/Asia

1. Stocks up on major Asian bourses  / the  yen falls  to 119.33

1b Chinese yuan vs USA dollar/ yuan slightly weakens  to 6.2545
2 Nikkei up 212.08 or 1.18%

3. Europe stocks in the green  // USA dollar index up to 94.30/

3b Japan 10 year yield huge rise to .42%/ (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.77/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets. Poor Japanese auction causes the yield to rise

3c Nikkei now  above 17,000/

3e The USA/Yen rate still  below the 120 barrier this morning/
3fOil: WTI 52.67 Brent: 61.30 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold up /yen down;

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 falls this morning for  WTI  and Brent

3k  The EU and Greece fail to come to an agreement/ELA meeting today

Greece formally asks for an extension on the “loan agreement”.  Germany will obviously say no that they must seek extension on the “programme agreement”

3l  Greek 10 year bond yield :10.16% (down 8 basis points in yield)

3m Gold at $1206.00. dollars/ Silver: $16.48

3n USA vs Russian rouble:  ( Russian rouble  up 1/2 roubles per dollar in value)  62.08!!!!!!.  Ukraine’s UAH:26.42 flat

3 0  oil  into the 52 dollar handle for WTI and 61 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 65 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!!

(the ECB raised the limit on ELA for Greece to 65 billion Euros by raising the amount of treasury bills that can be purchased to 20 billion euros.)  Meeting today to discuss whether to remove this funding vehicle.

3Q  SNB (Swiss National Bank) still 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.

3r  UK unemployment improves jobless claims fall

3s    minutes of the FOMC meeting to be revealed today.

3t Battles rage on in Ukrainian city of Debaltseve.  Ceasefire ignored.


4. USA 10 yr treasury bond at 2.16% early this morning. Thirty year rate well below 3%  (2.72%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid



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



Stocks In Holding Pattern With All Eyes On Draghi And Whether ECB Will Pull Greek Liquidity


There was much confusion yesterday when algos went into a buying frenzy on news that Greece would submit a request for a 6 month loan extension, believing this means Greece has caved and will agree to a bailout programme extension as well. Nothing could have been further from the truth as we explained first moments after the headline struck, and also as Reuters validated moments ago when it said that “Greece will submit a request to the euro zone on Wednesday to extend a “loan agreement” for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout.” But since the political nuances of diplomacy are lost on the math Ph.Ds who program the market-moving algos, the S&P did manage to roar above 2100 on what was another headfake and then forgot to sell off on the reality.

As a result, the key event today is not the FOMC minutes which will have some nebulous discussion of just what “patient” means or doesn’t, as pundits bang their heads whether the Fed will hike in June completely oblivious to the “GDP-crushing” record cold weather outside and the West Coast Port strike that will lead to a plunge in February and March retail sales and Q1 GDP, but the ECB’s decision whether to boost, keep unchanged or even reduce Greek access to emergency funding, a step which will put the Greek endgame into play concluding with either a full capitulation by the government or a Grexit.

As previously noted, the impact on the market from all of the above was based on the headline kneejerk reaction, where algos read into the “bullish” and ignored the nuances between the lines. As a result, yesterday’s source reports suggested that Greece is to request an extension of the loan program for 6-months which was later confirmed at the open having already supported sentiment globally as the S&P closed at record highs and the Nikkei saw out the session higher by 1.2%. The improved sentiment filtered through to European equities as they reside in the green, however Bunds and UST’s have remained directionless and trade relatively flat on the session. Greek asset classes have also been buoyed by the news out of Athens with the ASE outperforming European stocks and Greek yields falling lower in the morning. In other news, the Swiss government is preparing tighter capital requirements for ‘too big too fail’ banks (UBS and Credit Suisse) which now see the SMI underperform albeit still in positive territory.

Sources indicated that the ECB is considering removing ELA for Greek banks in order to increase pressure on Greece to accept an extension of their current bailout programme. However, sources said the ECB are unlikely to do that immediately.

Asian equity markets rose led by a strong Wall Street close which saw the S&P 500 finish at a record high, amid reports that Greece could ask for a 6-month loan extension as early as today. Consequently, the Nikkei 225 (+1.2%) rallied to trade at its highest levels since Sept’07 while the ASX 200 (+0.7%) rose to levels last seen in May’08. The latter was further underpinned by M&A activity as Japan Post offered to buy Toll Holdings (+46%) for USD 5.1bln. As a reminder, Chinese, South Korean and Taiwanese markets are closed due to the New Lunar New Year, while the Hang Seng (+0.2%) was only open for the first half of trade.

Meanwhile, the overall positive UK jobs report which saw the UK Jobless Claims Change (Jan) M/M -38.6k vs Exp. -25.0k allied with hawkish comments from the BoE minutes, with two members of the MPC stating that a rate hike could occur in the year lifted GBP/USD by 53 pips on a break through 1.5400 and sent short sterling lower by 3 ticks. Elsewhere, EUR/USD was under selling pressure at the open spurred on by the recovery in the USD led by USD/JPY after RANsquawk sources note macro funds buying in the pair. However, upside was not sustained as the USD has since come off highs.

In the commodity complex, Brent and WTI crude have edged lower in the session breaking below USD 62.00 and USD 53.00 respectively in the process, ahead of the build expected in the DoE crude inventories data release tomorrow. Elsewhere, heightened risk appetite has sent Gold lower coupled by slowing demand for Gold due to the Chinese Lunar holiday as Chinese markets are closed for the week-long holiday. In the latest update, the United Steelworkers Union are considering increasing the scope of their strike to their Californian port.

In summary: European shares remain higher, close to session highs, with the media and bank sectors outperforming and food & beverage, utilities underperforming. Greece may request an extension of its loan agreement for six months, according to a person familiar with the matter. Bank of England sees U.K. inflation accelerating in 2016 on strengthening labor market. U.K. 4Q unemployment below estimates. FTSE 100 trades just below record reached in December 1999. Ukraine starts troop withdrawal from key town of Debaltseve, fighting was reported near coastal city of Mariupol, hryvnia weakens to record.  The Italian and Swedish markets are the best-performing larger bourses, U.K. the worst. The euro is weaker against the dollar. Italian 10yr bond yields fall; Spanish yields decline. Commodities decline, with Brent crude, WTI crude underperforming and wheat outperforming. U.S. mortgage applications, housing starts, industrial production, capacity utilization, PPI due later.

It’s a busy day in the US with January housing starts and building permits kicking off the economic reports, along with the latest PPI reading. Later we also get industrial and manufacturing production for January along with the capacity utilization print.

Market Wrap

  • S&P 500 futures down 0.1% to 2094.6
  • Stoxx 600 up 0.7% to 379.5
  • US 10Yr yield up 1bps to 2.14%
  • German 10Yr yield up 0bps to 0.38%
  • MSCI Asia Pacific up 0.6% to 144
  • Gold spot down 0.5% to $1204/oz
  • 16 out of 19 Stoxx 600 sectors rise; media, bank outperform, food & beverage, utilities underperform
  • Asian stocks rise with the Nikkei outperforming.
  • MSCI Asia Pacific up 0.6% to 144; Nikkei 225 up 1.2%, Hang Seng up 0.2%, Kospi closed, Shanghai Composite closed, ASX up 1%, Sensex up 0.6%
  • 9 out of 10 sectors rise with energy, health care outperforming and utilities, telcos underperforming
  • Euro down 0.19% to $1.1389
  • Dollar Index up 0.15% to 94.2
  • Italian 10Yr yield down 7bps to 1.6%
  • Spanish 10Yr yield down 6bps to 1.55%
  • French 10Yr yield down 1bps to 0.68%
  • S&P GSCI Index down 0.8% to 422.7
  • Brent Futures down 2% to $61.3/bbl, WTI Futures down 1.5% to $52.7/bbl
  • LME 3m Copper up 0.5% to $5676.5/MT
  • LME 3m Nickel down 1.2% to $14070/MT
  • Wheat futures up 0.8% to 536.3 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Positive sentiment continues to filter through in Europe after Athens confirmed that they wish to extend their loan agreement up to 6 months
  • Today’s FOMC minutes release is again expected to show the wide-ranging views on the FOMC between the more hawkish members who favour a hike in mid-2015
  • Looking ahead, sees US Housing starts, Building Permits, Industrial Production, US Fed minutes and API crude inventories, Fed’s Powell
  • Treasuries decline, 10Y yield approaches 2.161% 100-DMA before Fed releases minutes of Jan. meeting, seen as primer for Yellen’s Humphrey-Hawkins testimony next week.
  • Greece may today request an extension of its loan agreement for six months, according to a person familiar with the matter, a step that could ease a standoff with creditors over the country’s future financing
  • Greek state cash reserves will be depleted next week, Kathimerini reports, without citing anyone; Merkel adviser says ECB must stick to its own rules in struggle to find compromise for helping Greece, must not fund governments
  • U.K. unemployment fell to its lowest rate in more than six years as pay growth picked up in the fourth quarter in a sign that pressure on labor costs may be starting to build
  • U.K. Chancellor of the Exchequer George Osborne riled his European counterparts with a lecture on the consequences of failing to reach a deal with Greece, two people with knowledge of the meeting said
  • Ukraine started to withdraw its forces from an encirclement at the strategic crossroad town of Debaltseve, where heavy fighting with pro-Russian rebels is threatening a truce reached last week
  • The Bank of England said U.K. inflation may accelerate quickly in 2016 once the impact of plunging oil prices fades as wage and unemployment data showed labor-cost pressure is starting to build
  • The rebound in oil will reverse because rising U.S. production is deepening the global supply glut, according to UBS AG, Bank of America Corp. and Commerzbank AG
  • JPMorgan is reviewing the size of capital-intensive units such as rates trading, prime brokerage and its so-called delta-one equities desk, according to Daniel Pinto,   CEO of firm’s  corporate and investment bank
  • Kentucky Senator Rand Paul is looking to announce his presidential bid the second week of April—if he decides to run—a person familiar with his plans; Paul’s libertarian views provide a contrast to other top-tier GOP candidates
  • Sovereign yields mixed; Greece 10Y yield falls ~36bps to 9.924%. Asian, European stocks and U.S. equity-index futures rise. Brent and WTI fall, gold declines, copper gains


DB’s Jim Reid with the full overnight summary



Nervously we again lead on the latest on Greece. I say nervously as so far both bad and good news hasn’t really impacted the wider market that aggressively and perhaps we’ve been devoting too much space to it. Indeed we ourselves have been saying for several months that the ECB’s QE program and other central bank action would be the main story in 2015 and this continues to be the case. However if you don’t devote a lot of space to a scenario where one false move could possibly bring about the start of the end of the Euro then you might be failing to understand the wider repercussions of negotiations that are highly likely to come to a head this week. A ‘Grexit’ wouldn’t necessarily bring chaos in 2015, especially with QE providing firewalls, but it would set a dangerous precedent in the years ahead if and when other countries faced similar pressures.

Our base case remains some kind of compromise though and the latest twist in this saga is that press reports (Bloomberg, the FT, local papers and Reuters amongst others) last night suggested that Greece will today request a 6-month extension of its international bail-out along the same lines as the one rejected by EU finance ministers on Monday but similar to the one initially proposed by EU officials.

The headlines themselves are perhaps unsurprising after we heard that Varoufakis was reported to be willing to accept an extension on Monday (albeit under different terms) before the Eurogroup changed tact. Clearly the sticking point to any sort of extension will centre around the substance of the terms themselves. For now however, markets will probably see the news as a positive step with a view to a Friday Eurogroup meeting, although the more important and time-consuming details of it still need to be negotiated. Greek press Ekathimerini have noted that a proposal from Greece will be sent to Eurogroup Chief Dijsselbloem this morning who will then decide if it merits an extraordinary meeting on Friday. Given the necessary parliamentary ratification process required before February 28th, this is much closer to one minute to midnight than the other Eurogroup meetings held so far.

It’s also perhaps not a big surprise that the reports emerged ahead of today’s ECB review of the ELA facility. According to reports in the Greek press, deposit outflows in recent days have amounted to €300m-€500m per day. The reports and eventual request could well be a move to keep the ECB onside in the near term.

This breaking news late in the day yesterday gave a boost to markets. The Stoxx 600 recovered from an initial drop of -0.8% to finish +0.12%, the Euro finished +0.5% stronger versus the Dollar and in the US the S&P 500 also pared back earlier losses to finish +0.16% and at a fresh record high. Meanwhile Treasuries weakened ahead of today’s FOMC minutes with the 10y yield finishing 8.8bps wider at 2.138% and in fact back to levels not seen since the start of the year. Although Greece played a part, comments from the Philadelphia Fed’s Plosser perhaps also contributed to the moves. Specifically Plosser added to some more recent hawkish commentary and was quoted on Bloomberg saying ‘I think we’re really close’ with regards to raising rates and that ‘my own view would be the committee should try its best to get patient out of the statement in March’.

Our US colleagues believe that today’s minutes could well serve as a preview of what Fed Chair Yellen could say at her semi-annual monetary policy testimony next week, although it’s worth noting that the minutes were collated before the latest strong employment report. Looking ahead to the March meeting, our colleagues note that the majority of labour market indicators on Yellen’s ‘dashboard’ have improved and that since the last payrolls print, three voting Fed Presidents have reiterated that a June liftoff in rates should be in play. It’ll be worth seeing if we get much forward guidance from today’s minutes as a result. We’re still not convinced they’ll be able to pull the trigger in June but we accept that the Fed are appearing trigger happy at the moment. However a lot of water is still to flow under the bridge by then.

In other markets, Gold yesterday closed weaker (-1.84%) and is now over 7% down from the January highs. The Dollar also closed softer with the DXY finishing 0.14% lower. Macro data offered few surprises with the NY Fed empire manufacturing print coming in slightly below expectations for February (7.78 vs. 8 expected) and the NAHB housing market index dropping 2 points to 55 (vs. 58 expected). Elsewhere, oil markets continue to rise with WTI (+1.42%) and Brent (+1.84%) closing higher at $53.12/bbl and $62.53/bbl respectively, although not without some intraday volatility with WTI in particular trading nearly 4% lower during the session at one stage.

Closer to home yesterday, along with the better sentiment around Greek extension headlines, macro data yesterday was also supportive. The German ZEW survey of current situations improved 23.1pts to 45.5 and the expectations survey climbed 4.6pts to 53.0 – the highest reading in 12 months. In the UK meanwhile, headline CPI dropped to +0.3% yoy from +0.5% and was a tad below expectations of +0.4%. The month-on-month reading of -0.9% for January was in fact the lowest on record since Bloomberg began compiling data. Given the disinflationary effects of oil prices however, the core print actually ticked up one-tenth to +1.4% yoy which could well give the BoE some breathing room for now. UK PPI (-1.8% yoy vs. -1.1% previously) was also unsurprisingly softer although the core (+0.5% yoy vs. +0.8% previously) dropped less than expected (+0.4% expected).

Refreshing our screens this morning, bourses are following the US lead and trading higher as we go to print. The Nikkei (+0.98%), Hang Seng (+0.19%) and ASX (+0.98%) in particular are stronger. Markets in China meanwhile closed for a week long holiday today. In Japan, the BoJ has announced that it will continue to buy ¥80tn of assets per year as largely expected. In terms of the statement itself, the BoJ said that the economy ‘has continued its moderate recovery trend’ and that exports and production have ‘been picking up’. On inflation, the statement said that ‘inflation expectations appear to be rising on the whole from a somewhat longer-term perspective’.

The Bank of Indonesia meanwhile yesterday joined our growing list of Central Banks easing the year following a surprise 25bp cut in the benchmark rate to 7.5%. With that, our list now stands at 37 countries (assuming the ECB covers 19 nations).

Away from the obvious focus on Greece and also the release of the FOMC minutes later today, attention this morning will likely centre on the UK with employment data due along with the release of the Bank of England minutes. It’s a busy day in the US with January housing starts and building permits kicking off this afternoon activity, along with the latest PPI reading. Later this afternoon we also get industrial and manufacturing production for January along with the capacity utilization print.

So a busy day, especially if Greece make the extension request suggested by the media





As the ECB threatens Greece again, expect capital controls to be initiated inside Greece and maybe other peripheral European nations


(courtesy zero hedge)







“In The End Capital Controls Will Probably Have To Be Imposed” – Eurogroup Official


With less than 24 hours until the ECB’s meeting at which Mario Draghi and company are set to decide if i) they will increase the current Greek emergency liquidity allotment from €65 billion as a result of the ongoing bank deposit run or ii) reduce – or even outright cancel it – to send Tsipras a message that the time for negotiations is over, Europe is no longer playing Mr. nice guy. In fact, judging by the latest report in Reuters, which may well be nothing but another planted trial balloon (in the aftermath of today’s latest Telegraph revelations one should read everything presented in the media, here certainly included, with a cape-size ship full of salt) Greece can kiss goodbye not only any a loan extension without a bailout “programme” resumption, but also any hope that tomorrow’s its ELA will be increased.

The reason: ze Germans.

The European Central Bank faces resistance from Germany to allowing any extra emergency lending for Greek banks, people familiar with the matter said, increasing pressure on Athens to sign up to an extended aid-for-reform programme…. the ECB’s policymaking governing council will review on Wednesday how far the country may support its weak banks, which face rising deposit outflows.  While the ECB is unlikely to lower the ceiling on emergency lending assistance (ELA) by the Greek central bank, a refusal to increase it would nonetheless be bad news for Greek banks, which are close to using up the full 65 billion euros granted so far.


Bundesbank chief Jens Weidmann, who has warned against the misuse of the emergency funding to indirectly finance the Greek state,is set to stick to this stance at the ECB meeting, the sources said. Some other governors have similar reservations.

Which means that the standoff will may well continue past midnight tomorrow. Now, in the worst case scenario, should the ECB yank all Greek ELA, then all bets are off, and on Wednesday it is unlikely that any banks will reopen in Greece, which incidentally would likely lead to an immediate compromise by the new PM and FinMin, unless of course they are prepared for this contingency and reveal a new €100 billion or so loan from the BRIC bank, compliments of Vladimir Putin.

But even in the less Draconian case, one in which the ECB decides to remain merciful for 10 more days, the outcome is not much better: “Unless Athens agrees an extended aid programme soon, keeping ELA capped would put lenders in a funding squeeze that could require the introduction of capital controls to limit savers taking out more of their money, the sources said.

As noted earlier, the bank runs may (or may not: depending on one’s agenda), have accelerated in the past few days:

A senior Greek banker told Reuters up to 500 million euros ($571 million) had been withdrawn from Greek bank accounts on both Thursday and Friday last week.


There was a lull on Monday but deposit outflows picked up again on Tuesday after talks collapsed, the banker said.

One thing is clear however: Greece will almost certainly not last until the proverbial D-Day on February 28 before it either i) runs out of money, ii) is forced to sign a “bailout extension” deal with the Eurogroup thus crushing its credibility with the people, or iii) exits the Eurozone. Needless to say, two of the three above options are very unpleasant for Greek savers, assuming any are left. And it is those savers that the Eurozone is directly targeting when it does everything in its power to provoke a bank run with statement such as these:

“The situation of the banks is getting more and more difficult every day,” said a European official. “In the end, in order to safeguard the banking system, capital controls will probably have to be imposed.”

And to think a comparable statement about any other peripheral Eurozone country, all of which are as insolvent as Greece, would be met with howls of murderour rage and demands for a death penalty on account of provoking a bank run panic.

Not Greece though: for the small country that dared to provoke Goliath, anything and everything is fair game.

The ECB’s chief economist Peter Praet has cautioned that the funding is for the short term only, although Austria’s central bank chief Ewald Nowotny recently signalled that the ECB would resume direct funding if Athens struck a deal to extend its EU/IMF bailout.


Frustration with Greece is growing. Euro zone finance ministers have given Athens until the end of the week to request an extension or lose financial assistance when the bailout expires at the end of February.


Were the ECB to cancel all emergency funding for Greek banks, as it threatened to with Cyprus in 2013, it would leave Athens with no choice but to strike a new deal with its international backers or face bankruptcy.


But the ECB would be very reluctant to take such a step.

In short: Europe suggests Greek panic.

But here lies the rub, because despite the market’s complete lack of willingness to react, pardon “market”, since every risk asset is now exclusively controlled by the world’s “developed” central banks, kicking Greece out would – without doubt – lead to the worst possible of Mutual Assured Destruction outcomes.

“Pulling the plug on Greece would have potentially catastrophic consequences,” said Ashoka Mody, a former IMF official who helped design Ireland’s bailout.


“The ECB’s threats are completely empty. Despite all the bluster, it has no choice. The ECB has to ask itself how it can stabilize the financial system, not undermine it.”

And that particular game theory outcome is precisely what the non-game theory playing finance minister is betting the farm, and the nation on. The one where it ultimately costs Europe far, far less in current certain costs, than the “unknown unknowns” of the worst case scenario that will be revealed once the Eurozone is effectively no more. This is how Goldman described a world in which Greece is kicked out:

… ‘Grexit’ would constitute a non-diversifiable event, affecting all financial assets. This is because, upon the departure of one of its members, EMU would likely be seen as a fixed exchange rate arrangement between countries which can elect to adhere or leave. Convertibility risk would resurface, exposing the possibility of a collapse of the entire project.


To be sure, the ECB would not stand idle in the face of such a course of events. But the severity and persistence of the ‘shock’ from Grexit would depend on several factors, which include:

  • What has led to the departure of Greece (metaphorically, was the country pushed or did it jump?).
  • What institutional arrangements the remaining countries put in place to signal their commitment to stay together (presumably in the form of greater sovereignty sharing).
  • How does Greece perform outside of the single currency?

So even as Europe is throwing the kitchen sink at Greece in hopes of sparking a bank run, it should be very careful what it wishes for. Because a nation with nothing left, with no hope, is far more dangerous than the servile debt-slave Europe expects Greece to be. And if as Goldman suggests, a Grexit has far greater and far more negative consequences for Brussles than Athens, then Varoufakis’ gambit will be spot on, and Europe will be begging Greece to stay, or return, before all all is said and done and the European project is cast away on the every larger trash heap of failed neo-liberal ideas.





Early this morning, we learn that Greece has less than one week of cash left. This is sovereign cash and not bank cash!!  Check to Mr Draghi on the ELA:



(courtesy zero hedge)






Greece To Run Out Of Cash In Under One Week



One month ago, we wrote that the biggest threat to Greece is not so much the disastrous situation facing the country’s banks – after all that is merely a domino that would bring down the bulk of Europe’s insolvent banks and as such the ECB would certainly step in to prevent a full out collapse, blustering rhetoric and posturing on either side notwithstanding – but the fact that Greece no longer appears able to collect tax revenues. As in even more than before.

Back then we cited Kathimerini which said that “budget revenues have slumped over the last few days as a result of the upcoming elections and taxpayers’ uncertainty about the future.”

The Finance Ministry has recorded a remarkable slowdown in applications for settlement of debts to the state through the 100-installment program, as well as a reduction in revenues from the single property tax (ENFIA), while the payment of arrears to social security funds appears to have stalled. Most taxpayers have chosen to delay their payments…  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.


Speaking to Kathimerini, a top ministry official confirmed the major slowdown in the rate of applications for debt settlement, and referred to post-election consequences from the shortfall in state revenues. 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.

Less than two months later, the worst case scenario for Greek state cash has materialized, and as Kathimerini reported overnight, Greece now has less than one week of cash left!

To wit: “February 24 is expected to be the first crucial day for state finances, as projections of cash flows see state coffers starting to run dry on that date.”

Of course, conceding that Greece is out of funds would also mean it is fully out of leverage and give the ECB all the bargaining chips ahead of today’s critical ELA decision, so Greek officials quickly tried to spin the reality: “Finance Ministry officials, however, assure they have identified resources they could tap if a small extension on Greece’s bailout obligations, up to the first week of March, is granted from the eurozone.”


The state of cash reserves – not robust before – has deteriorated further in recent days due to a shortfall in revenues, as a 1-billion-euro hole in January revenues is putting the execution of the state budget in jeopardy and hampering the management of cash reserves.


According to figures released yesterday by the Bank of Greece, in January the net cash result of the central administration posted a deficit of 217 million euros, against a surplus of 603 million in January 2014. Budget revenues reached 3.1 billion euros, against 4.4 billion in January 2014, while expenditure dropped to 3.2 billion from 3.6 billion last year.


Given these figures, the Finance Ministry estimates that cash reserves will run out next Tuesday. It has the option, however, of using the reserves of general government entities kept in commercial banks in order to cover short-term needs next week. However, the problem that cannot be addressed as things stand concerns needs for the first week of March.


Unless something changes drastically to the country’s funding, Greece will not be able to fulfill all of its March obligations.

It would appear that among all the other things Samaras was lying about when touting the Grecovery in 2014, the Greek primary budget surplus was one of them: a surplus that only exists as long as the local population feels like paying its taxes. Which, nowadays, it does not.

In any event, what all this means is that the Greek D-Day of February 28 will have to come much sooner, as Greece simply does not have the funds to last that long. The only question is whether the Syriza leadership will finally fold to Europe (most likely within the next 24-48 hours), or exit the Eurozone.





Mr Draghi blinked.  He added another 3 billion euros in emergency ELA to 68.3 billion Euros as Greeks were taking the cash out of their banks and depositing the funds outside the country. It is obvious that Greece is having a massive bank run!!



(courtesy zero hedge)



ECB To Grant Greece Additional €3 Billion In Emergency Liquidity, €68.3 Billion Total



Those wondering if Draghi would be so bold as to precipitate a Greek bank run and funding crisis by yanking the country’s Emergency Liquidity Assistance program, which as of two weeks ago was boosted to €65 billion, now have an answer. According to Dow Jones, the ECB just boosted the Greek cash allottment to €68.3 billion, an increase of €3.3 billion:


Which means that the cat and mouse game between Greece and Europe will continue for at least one more week, because that’s when, according to Kathimerini’s Greek sources, the nation runs out of state cash which will have the same impact on the Greek negotiating leverage as a full-blown bank run, which of course has still not been mitigated and in factis likely only to get worse in the coming days absent a deal of some sort.

In retrospect, Draghi may not have had to do anything to accelerate the resolution in the Europe vs Greece standoff: it looks like Greece did that work for him.



A terrific commentary from Charles Hugh-Smith on the phoniness on the extend and pretend formula used by the ECB et al to hide the truth of sovereign solvency:



(courtesy Charles Hugh Smith/Two Minds Blog)


The Catastrophic Costs Of Extend-And-Pretend Are About To Crush Europe


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Like a star which has expanded and now cannot maintain its grand state, Europe’s extend-and-pretend economy is now poised to experience a supernova implosion.

The costs of ill-conceived policies are always paid by someone–usually those with the least political power. In ill-conceived wars, the costs are paid by the soldiers on the ground and their families, and the civilians who suffer collateral damage.
The costs of ill-conceived financial policies end up being paid by taxpayers, savers, borrowers and those who lose their jobs in the inevitable bust. Those who conjured up the disastrous policies slink away to plush villas or defend their stubborn addiction to failed ideologies in the media (see Keynesian Cargo Cult and Paul Krugman).
The most ill-conceived financial policy of all is extend-and-pretend: extend-and-pretend means if a debtor is bankrupt, then extend him more loans to maintain the illusion of solvency.
Here’s how extend-and-pretend works in the real world:
— If a homebuyer has defaulted, give him new loans, or shift his loan off the books into zombie mortgage status.
— If a student defaults on student loans, shift the loans into forbearance, i.e. mask the default by putting the defaulted debt into zombie mode.
— If a bank is insolvent, give it unlimited access to unlimited lines of central bank credit and lower interest rates to zero so the bank doesn’t have to pay interest on deposits.
— If a nation is bankrupt, extend it new loans.
The official reason for extend-and-pretend is the belief that time will heal all– that given enough time, all problems solve themselves via some sort of pixie dust. In essence, this faith that time will heal all is a delusional state of magical thinking, for extending and pretending only enables the kleptocrats and the elites benefiting from the failed Status Quo to continue holding power.
As painful as it would have been, Greece should have been refused loans in 2010 and 2011, and been ejected from the euro. The situation was visibly hopeless to everyone then, and extend-and-pretend was never going to solve the structural imbalances in the Greek economy that had been furthered or enabled by the euro and easy credit.
What did Europe buy with its $245 billion bailouts of Greece? Nothing. The $245 billion– equal to the entire GDP of Greece–squeezed the citizens of Greece while leaving the kleptocracy in charge–the worst possible outcome.
If policymakers had rejected extend-and-pretend and grasped the nettle in 2010/2011, Greece would be through the painful period of adjustment to its own currency. Deprived of the euro gravy train, its ruling kleptocracy would have collapsed or been ejected by the people as a failed regime.
Thanks to extend-and-pretend bailouts, the pain of adjusting to reality is now being dumped not just on the people of Greece but on the people of every nation in the EU. Frequent contributor Mark G. explains why: most of the debt owed by Greece doesn’t just vanish when Greece defaults–it must be paid by the other EU nations that guaranteed the debt.
Here’s Mark’s explanation:

The issue is not whether Greece’s European Financial Stability Facility (EFSF) backed debts will be repaid. The question is who will repay them.  European Financial Stability Facility (Wikipedia)

The structure of the EFSF and related packages means that if Greece will not/can not pay then every single guarantor country has to come up with fiscal appropriations to backstop any deficiency left by Greece in a default. This means going back to their national parliaments in most if not all cases for fiscal appropriations to do this. At this point what the Germans demonize as The Transfer Union will emerge stripped of all camouflage in all its hideousness.

This is going to be politically explosive in itself for every one of these Eurozone governments. Nor is this confined to so-called “creditor” states, except in the sense that every non-defaulting state will be a creditor.

So-called debtors and crisis states like Italy, Spain, Portugal and Ireland are all liable in large varying amounts as well as Finland, Holland, France and Germany. The first four, generally classed as being ‘debt crisis’ states themselves, are liable for a total of 240 billion euros as their end of the EFSF. Since Greece accounts for about 1/3 of the EFSF this works out to 80 billion euros for four weakened sates already experiencing their own Austerity.

I cannot imagine that at this moment any of these cabinet politicians could tolerate a second budgetary line item that decodes as Additional New Money & Guarantees For Greece Under Tsipras/Varoufakis/Syriza

Greece can indeed initiate that process. And having done so, no one will have any further tolerance for Greece at the table. Their leverage begins and ends with default.

The seeds of disaster were planted when Greece was first admitted to the ECB and euro under false pretenses.

Extending imprudently massive loans to marginal borrowers always plants the seeds of disaster, and extending and pretending turns a potentially containable disaster into an uncontainable financial calamity. Yet this is the game plan of policymakers everywhere, from Europe to the U.S. to China–extend enormous loans to marginal borrowers and then mask the inevitable defaults with extend-and-pretend policies that vastly increase the size of the debt.
By the time extend-and-pretend finally reaches its maximum limits, the resulting implosion is so large that the shock waves topple regimes, banks, currencies and entire nations.
Like a star which has expanded and now cannot maintain its grand state, Europe’s extend-and-pretend economy is now poised to experience a supernova implosion.


RT believes that a GREXIT is a win for both the EU and Greece.
I believe it is a win for Greece and death to the EU (just my opinion)
(courtesy RT)

Grexit: Win for both EU and Greece?

Published time: February 18, 2015 17:00
Edited time: February 18, 2015 20:21

If, in the next 48 hours, Athens and Brussels fail to strike a bailout deal, Greece could be forced to leave the eurozone, and that might not be so bad after all.

“I think at the end of the day, Greece will leave, there will be a so-called Grexit. I think it will be good for Greece, good for Europe because it will mean someone that takes a loss,” Steen Jakobsen, chief economist at Saxo Bank, told RT.

The odds that Greece will leave the eurozone are 20 percent, Eurasia Group’s European analyst Mujtaba Rahman told CNBC. Germany’s Commerzbank has upped their estimate to 50 percent.

“You have to remember that these two sides are in a battle with no solution,” the Saxo Bank economist said, adding that there is no ‘win-win’ situation.

Greece and the EU have less than 48 hours to reach a new bailout deal, and neither side seems prepared to make concessions. Greece doesn’t want more austerity, but the new Syriza government also doesn’t want the country to retain its massive €316 billion debt.

“No solution is on the table unless someone gives up,” Jakobsen said, adding that no one wants to lose.

The threat of a ‘Grexit’- a scenario in which Greece leaves the eurozone- has been on the rise since the new Syriza government won the general election in late January. The party campaigned on the promise of ending the terms of austerity the previous governments agreed with a Troika of lenders- the International Monetary Fund, the European Commission, and the European Central Bank.

“It’s not the Greek government or Greece that they are playing with, but Europe, and its future,” Greek Prime Minister Alexis Tsipras said on Wednesday.

Now, however, the banks are out of money, and the European Central Bank isn’t planning on dolling out more for free, but will charge high interest rates if banks, and the people of Greece, wants euro.

If Greece doesn’t accept what the EU offers – high interest loans – it will have to leave the euro and print its own currency to support Greek banks in desperate need of liquidity. This would put the country at a much greater risk of default, which is the reason it accepted EU aid in the first place.

“It will create short-term volatility in the marketplace… this is the beginning of something better for Greece and Europe,” Jakobsen said.

Doomed by Debt

Greece is buried in nearly €320 billion of debt. The EU came to Greece’s rescue in 2010 and 2014 with two bailouts totaling €240 billion, but not without any conditions.

Germany has warned no more disbursements will be released until Greece accepts the bailout terms.
Austerity measures, or less spending, have been the EU’s solution to fixing Greece’s heavily indebted economy.

The situation in Greece has become worse, not better, since the 2009 debt crisis, and only in 2014 began to show signs of economic growth after six years of recession.

In the last five years, the economy has lost a quarter of its value, and more than one in three Greeks live below the poverty line. Unemployment continues to hover near 30 percent, and nearly double for the young.

Syriza campaigned on the promise to end the EU bailout, and Germany, the biggest contributor to the bailout, as well as a number of other EU countries, want Greece to stand by the plan their predecessors agreed to.

German Finance Minister Wolfgang Schauble has openly blamed Greece for its own failed banks, and has threatened the European Central Bank can switch off emergency funding.

“At the end of the day, Germany cannot go back to its voters and ask for money for a country that doesn’t even want to sign the legal document already embedded in the talks,” Jakobsen said.

In 1981, Greece became the tenth country to join the European Union, and less than 20 years later; it switched from the drachma to the new euro, which it now shares with 18 other countries.




On the Ukrainian front:


Robert H to me explaining this important development:


“the reason the cauldron was not part of the agreement is that Kiev refused to admit such a thing existed.
In a short time without fresh supplies, they will run out of ammo and surrender will occur and hopefully Kiev will allow them to go home without persecution.
No doubt they will be placed back in uniform, if not jail for surrendering. What a mess and waste of lives and property for an outcome already determined.
The factions of the Ukrainian military are already fractionalized and some groups have broken away and are openly calling for new leadership. What could have been a productive nation will undergo much more pain before it gets better.
New leadership in Kiev will undoubtably shortly occur as the nation heads for the abyss financially.”


(courtesy Reuters)  late last night.



Putin tells Kiev to let troops surrender as Ukraine ceasefire unravels

Tue Feb 17, 2015 7:05pm EST


By Anton Zverev and Vladimir Soldatkin

NIKISHINE, Ukraine/BUDAPEST (Reuters) – Russian President Vladimir Putin told Kiev to let its soldiers surrender to pro-Russian rebels, who spurned a ceasefire in eastern Ukraine and fought their way on Tuesday into the town of Debaltseve, encircling thousands of government troops.

A peace deal reached at all-night talks in the Belarussian capital Minsk last week had all but unravelled, with both sides failing to begin pulling back heavy guns as required after the rebels refused to halt their advance.

Putin, whom Western countries accuse of directing the rebel assault with Russian soldiers and weapons, said Kiev should allow its soldiers to surrender to the advancing rebels.

“I hope that the responsible figures in the Ukrainian leadership will not hinder soldiers in the Ukrainian army from putting down their weapons,” Putin said.

“If they aren’t capable of taking that decision themselves and giving that order, then (I hope) that they won’t prosecute people who want to save their lives and the lives of others.”

He added that he hoped the rebels would allow the Ukrainians to return to their families, once they had surrendered the town.

Reuters journalists near the snowbound frontline said artillery rounds were rocking Debaltseve every five seconds and black smoke was rising skywards as Grad rockets pounded the town.

The rebels say the ceasefire announced last week does not apply at all to the main battle front at Debaltseve, a railway hub in a pocket between the two main rebel-held areas.


“Eighty percent of Debaltseve is already ours,” said Eduard Basurin, a rebel leader. “A clean-up of the town is under way.”

He later said negotiations were under way for 5,000 Ukrainian troops to surrender. “Hundreds” had been captured and would eventually be released to their families. Ukraine denied that the number of captives was that high.

Despite Putin’s public call for a surrender, Russia sponsored a resolution adopted by the U.N. Security Council that called on all sides to implement the truce agreement, expressing “grave concern” at the violence.

Putin was visiting Hungary on Tuesday, his first bilateral trip to an EU country since last July, when Moscow was left isolated after a Malaysian airliner was shot down over rebel-held territory with what Western countries say was a Russian-supplied missile.

Hopes that the deal reached last Thursday would end a conflict that has killed more than 5,000 people were always low after a rebel advance in January ended an earlier truce.

But Western countries appeared surprised that the rebels had refused even to pay lip service to the ceasefire at Debaltseve.

Russia has already annexed Ukraine’s Crimean Peninsula, and Western countries believe Putin’s goal is to establish a “frozen conflict” in eastern Ukraine, gaining permanent leverage over a country of 45 million people seeking integration with Europe.

Ukrainian President Petro Poroshenko called the rebel assault on the town a cynical attack on the Minsk agreement.


Kiev’s military denied that the town, which had a peacetime population of 25,000 but is now a bombed-out wasteland, had fallen, but acknowledged losing some of it.

Kiev and NATO say the rebel assault on Debaltseve is being reinforced by Russian tanks, artillery and soldiers. Moscow denies that it has sent its forces to participate in the battle for a region that Putin has dubbed “New Russia”.

Washington said it was “gravely concerned” by the fighting and was monitoring reports of a new column of Russian military equipment heading to the area.

The United States has been considering sending weapons to aid Kiev, although the State Department said on Tuesday getting into a proxy war with Russia was not in the interests of Ukraine or the world. Putin said he believed foreign weapons were already being supplied to Kiev.

EU foreign policy chief Francesca Mogherini said Tuesday’s battles were “not encouraging” but added: “As long as there is a signed deal to which the parties still refer as something that needs to be implemented, I will not say that there is a failure.”

The fighting meant both sides had spurned Tuesday’s deadline to being withdrawing heavy guns from the frontline. Kiev says it cannot pull back as long as the rebels continue their advance.

Military trucks and tanks came and went in the largely destroyed village of Nikishine as the rebels pounded nearby Debaltseve with rockets, heavy artillery and mortar bombs.

“We’ll take Debaltseve. It will all be ours. Our homeland will remain our homeland,” said a rebel tank operator who gave his name only as Bass, his nom de guerre.

Observers from the OSCE security group, delegated to monitor the ceasefire under last week’s agreement, have been kept out of Debaltseve by the rebels.

“We do not have the right (to stop fighting for Debaltseve). It’s even a moral thing. It’s internal territory,” said Denis Pushilin, a senior separatist figure. The goal would be “destroying the enemy’s fighting positions”.

(Additional reporting by Pavel Polityuk, Natalia Zinets, Alessandra Prentice and Richard Balmforth in Kiev, Polina Devitt in Moscow and Madeline Chambers in Berlin; Writing by Peter Graff; Editing by Kevin Liffey)







And then this morning:


(courtesy zero hedge)




Hundreds Of Ukraine Troops Surrender As Besieged Town Of Debaltseve Falls To Rebels


Last week, German equities soared to record highs with the Dax surpassing 11K, not only on the imminent arrival of the ECB’s Q€ which provides a risk-less bid to all asset classes, but on news that a second Ukraine ceasefire had been achieved in Minsk. Well, just like the first Minsk “ceasefire” in September, one can promptly forget the just as “successful” second one, because overnight, after a several week siege, the Ukraine town of Debaltseve finally fell to rebel forces with “troops of Ukraine’s Armed Forces laying down arms en masse,” according to Donetsk rebel official Maxim Leschenko says, cited by Tass news service.

According to Reuters government forces started pulling out of the east Ukraine town on Wednesday after a fierce assault by the rebel separatists which Europe said violated a crumbling ceasefire. President Petro Poroshenko said before flying to the town of Debaltseve that more than 80 percent of his troops in the rail hub had already left following a heavy bombardment and street-by-street fighting despite the truce that took effect on Sunday.

As previously reported, according to the pro-separatists rebels the ceasefire does not apply to Debaltseve, which links the two rebel-controlled regions of eastern Ukraine, Donetsk and Luhansk.

Bloomberg adds, that “some Ukrainian troops are leaving the town as “full scale” street fighting continues following a small tank battle, Ilya Kyva, a deputy police chief of the Donetsk region, said by phone on Wednesday. Kyva wouldn’t say how many Ukrainian soldiers had left or how many still remained surrounded by the rebels. Ukrainian Eurobonds fell to a record as fighting was also reported near the coastal city of Mariupol.”

And indeed, as the following map shows, the town’s critical position between the key centers of Donetsk and Luhansk, made it inevitable that as east Ukraine seeks to consolidate its territory, the small city would fall.


By now the long-running spin on both sides is well-known: Poroshenko and the West say the rebel assault is being reinforced by Russian tanks, artillery and soldiers, though Moscow denies sending forces to join the battle for a region that President Vladimir Putin has called “New Russia”.

“The actions by the Russia-backed separatists in Debaltseve are a clear violation of the ceasefire,” European Union foreign policy chief Federica Mogherini said in Brussels, stepping up Western criticism of the rebel offensive on Debaltseve. “The EU stands ready to take appropriate action in case the fighting and other negative developments in violation of the Minsk agreements continue,” she said, making an apparent threat of further economic sanctions on Moscow.


A German government spokesman said the Minsk agreement had been damaged though it made sense to try to implement it.

Putin showed no sign of backing down over Ukraine on Tuesday evening, when he urged Kiev’s pro-Western leaders to let their soldiers surrender to avoid more bloodshed, adding that Ukraine troops already have access to US weapons.

Hours later, the Ukrainian troop withdrawal was under way. A Reuters witness saw weary Ukrainian troops, their faces blackened, some in columns, some in cars, arriving in Artemivsk, about 30 km (20 miles) north of Debaltseve.

“The withdrawal of forces from Debaltseve is taking place in a planned and organized way,” said Semen Semenchenko, who heads the Donbass paramilitary battalion. “The enemy is trying to cut the roads and prevent the exit of the troops,” he said on Facebook.

News of the withdrawal hit markets, as Ukraine CDS soared while sovereign bonds crashed, pushing the entire nation even further into pre-bankruptcy and hyperinflation limbo.

So much for the ceasefire, although now that the entire industrial heavy east Ukraine region belongs to the separatists, the next step appears clear: a referendum whether or not to join Russia, a la Crimea, with an implementation shortly thereafter. This decision will be only facilitated following Bloomberg news that Kiev has decided to halt electricity supplies to the rebel region in the east.  Perhaps the only question is whether fighting continues around Mariupol which would enable Russia to have a land corridor all the way to Crimea.








Global Research confirms that  there has been no Russian invasion

and no troops entered the Ukraine:


(courtesy Global Research)





Ukraine Military High Command Confirms: “No Russian Invasion or Regular Troops”. Presence of NATO Forces in Donbass



In an interview with Ukrainian Espesso TV, Ukrainian military expert Major Aleksander Taran confirmed what General Muzenko head of the Ukrainian Armed Forces had to say on the subject.

During a briefing with General Muzenko he announced that “To date, we have only the involvement of some members of the Armed Forces of the Russian Federation and Russian citizens that are part of illegal armed groups involved in the fighting. We are not fighting with the regular Russian Army. We have enough forces and means in order to inflict a final defeat even with illegal armed formation present. “- he said.

https://www.youtube-nocookie.com/embed/t_iZKJ0tJN0Both of these statements further confirmed the head of the SBU position.

November 6th in an interview with Gromadske.TV, Markian Lubkivsky, the adviser to the head of the SBU (the Ukrainian version of the CIA) stated there are NO RUSSIAN TROOPS ON UKRANIAN SOIL! This unexpected announcement came as he fumbled with reporters’ questions on the subject. According to his statement, he said the SBU confirmed that there were some 5000 Russian nationals [volunteers], but no Russian soldiers in Donetsk and Lugansk Peoples Republics.

All of these statements add weight to the otherwise untrustworthy comments of Alexander Torchynov back in June of 2014.

According to speaker of the Verkhovna Rada of Ukraine Alexander Turchynov, representatives of security agencies deliberately whipped up the situation systematically misinforming the country’s leadership about Russia’s possible military intervention, which had never happened.

“Our intelligence agencies have about ten times a month reported that the time of a military attack on the part of the Russian Federation was defined – usually it was at three or four in the morning. And we sat in combat readiness at the command post… and the rest of the army was preparing for an open war with the Eastern neighbor. But it did not happen,” Alexander Turchinov said in an interview with Novoye Vremya, which is to be released tomorrow.

It would seem we have a long and illustrious history of Russia NOT attacking Ukraine in 2014.

Who is attacking then, that’s the question.

This morning NAF scouts spotted NATO tanks inside the encirclement (Cauldron) at Debaltseve. According to their information the possibility is strong that up to 25% of the trapped army may be NATO.

Shell remnants marked clearly with US identifying numbers from 155mm shells, shot by the Paladin artillery system have been recovered from areas the Ukrainian army have attacked civilian targets. If the NATO troops are there, and who else would be running the complicated military equipment, the possibility that they won’t make it home is in the same government’s hands that brought the world a non-existent Russian invasion and is pushing the world to the brink.

This would explain both the US and EU trying to push a new peace initiative. If NATO troops are taken captive, what then? If hundreds of NATO troops are fighting for Ukraine in a war that even John McCain says is using prohibited weapons, what are the liabilities after? American troops in this case and just based on McCain’s admission are by any definition War Criminals for participating.

Support our Troops and keep them home.

What will Russia’s Reaction Be?

Until this point Russia has been the only country to show restraint and a desire to stop the conflict. The US and EU have wholeheartedly helped Kiev go forward knowing it was committing war crimes; terrorist bombings of buses, rockets and missiles at cities, and phosphorus bombs. The west knows the volunteer battalions are committing mass war crimes.

If NATO soldiers are captured or their remains recovered and confirmed it will certainly change the nature of the war. The Russian weapons that the entire MSM have insisted are here will no doubt show up. If NATO pushes back, where ever isn’t far enough. It will be the brink of WWIII.




Oh great!! Let’s get Putin annoyed!!


(courtesy zero hedge)



US Sends “Tankbuster” Jets To Europe Over Russia Fears After Germany Says “A Large Scale War Could Develop”


Karl-Georg Wellmann, a lawmaker in Angela Merkel’s Christian Democratic Union has warned that, despite its efforts to avoid arms being provided to Ukraine,Germany “will no longer be able to stop weapons deliveries from from the U.S. and Canada.” Almost too coincidental to these comments, CNN reports, the U.S. Air Force is sending its A-10 “tankbusters” back to Europe in order to “increase rotational presence in Europe to reassure our allies and partner nations that our commitment to European security is a priority.” As Wellmann ominously concludes, seemingly confirming Putin’s warning yesterday that if Kiev aims at a military solution, war will never end, “a large-scale war could develop out of that.”


As Bloomberg reports, Germany May Be Unable to Stop Weapons to Ukraine, Lawmaker Says

Karl-Georg Wellmann, a lawmaker in Angela Merkel’s Christian Democratic Union and chairman of the German-Ukrainian parliamentary group, tells newspaper Tagesspiegel that Germany won’t be able to halt U.S. weapons deliveries to Ukraine to fight Russian-supported separatists.


“We will no longer be able to stop weapons deliveries from from the U.S. and Canada” after rebel gains in the strategic town of Debaltseve in eastern Ukraine, Wellmann tells Tagesspiegel in interview


“A large-scale war could develop out of that,” Wellmann says


Wellmann says further economic sanctions against Russia are “unavoidable,” Tagesspiegel says

And so, as CNN reports, The US is sending in the Warthogs…

The U.S. Air Force is sending its “tankbusters” back to Europe.


The service’s European Command said this week that 12 A-10 Thunderbolts would be deployed to Spangdahlem Air Base, Germany, as part of Operation Atlantic Resolve, which was formed after Russia’s intervention in Ukraine over the past year.



“The Air Force is increasing rotational presence in Europe to reassure our allies and partner nations that our commitment to European security is a priority,” Lt. Gen. Tom Jones, vice commander, United States Air Forces in Europe — Air Forces Africa, said in a statement.


The Air Force said besides operating in Germany, the A-10s will be forward deployed to other partner nations in Eastern Europe. U.S. forces have operated out of bases in Lithuania, Estonia, Latvia and Poland, among others, in the past year.



The A-10, also known as the “Warthog,” was designed in the 1970s to support ground troops in Europe against the tanks and armored vehicles of the then-Soviet Union. Though the jets can carry a variety of bombs and missiles, they are best known for their nose-mounted, seven-barrel 30 mm Gatling gun that can fire almost 4,000 rounds per minute, enough to quickly blow apart a tank. The planes are also durable, with the pilot protected from ground fire by a wrapping of titanium often called “the bathtub.” And they are designed for easy maintenance in battlefield areas, with interchangeable parts for the right and left sides of the aircraft.

*  *  *

Not exactly the act of a peace-seeking force following a “truce”? But then again… Washington was not included in the Minsk Summit so apparently feels free to stir things up explicitly.





Russia and China dumped a huge amount of USA treasuries.  We know that Russia bought gold with the proceeds..we wonder what China did with its proceeds



(courtesy zero hedge)



Russia Dumps Most US Paper Ever As China Reduces Treasurys Holdings To January 2013 Levels


Back in December, Socgen spread a rumor that Russia has begun selling its gold. Subsequent IMF data showed that not only was this not correct, Russia in fact added to its gold holdings. But there was one thing it was selling: some $22 billion in US Treasurys, a record 20% of its total holdings, bringing its US paper inventory to just $86 billion in December – the lowest since June 2008.


It wasn’t just Russia: the country that has ever more frequently been said to be in the same camp as Russia – and against the US – namely China, also sold another $6 billion in Treasurys in the last month of 2014, which would have made its US treasury holdings equal with those of Japan, if only Tokyo hadn’t also sold over $10 billion in the same month.

And while we know that Russia used at least some of the proceeds to buy gold, the bigger question is: just what is China buying with all these stealthy USD-denominated liquidations, and how much gold does the PBOC really have as of this moment.







Have fun with this!!  Fisticuffs inside the Turkish parliament:


(courtesy zero hedge)



Caught On Tape – Erdogan’s ‘Kingmaker’ Bill Sparks Mass Brawl In Turkish Parliament


Chairs flew and lawmakers traded punches as AP reports a brawl in the Turkish Parliament over a new security bill (dubbed the ‘kingmaker‘) has forced the spotlight on mounting suspicions that President Recep Tayyip Erdogan’s real goal is to hand himself more tools to crush dissent. Five lawmakers were injured early Wednesday in the fight that broke out as opposition leaders tried to delay a debate on the legislation.



The Fight…


The Aftermath…


More seriously, As AP reports,

The government says the measures to give police heightened powers to break up demonstrations are aimed at preventing violence such as the deadly clashes that broke out last year between Kurds, supporters of an Islamist group and police. Critics say that the new measures are part of a steady march toward blocking mass demonstrations that threaten Erdogan’s iron grip over Turkish politics.


The bill would expand police rights to use firearms, allow them to search people or vehicles without a court order and detain people for up to 48 hours without prosecutor authorization. Police would also be permitted to use firearms against demonstrators who hurl Molotov cocktails. Demonstrators who cover their faces with masks or scarves during violent demonstrations could face four years in prison.


Crucially, the measures would give governors — not just prosecutors and judges — the right to order arrests.


In defending the bill, Erdogan said it was “aimed at protecting social order and social peace.” Prime Minister Ahmet Davutoglu dismissed accusations that the measures will violate civil liberties, saying the goal is to protect society: “No one will be able to demonstrate with Molotov cocktails,” he said over the weekend.


Metin Feyzioglu, the head of the Turkish Bar Association, said that giving local governors even limited powers to order arrests without going court orders is tantamount to martial law. “This is an extremely dangerous development,” he said.


In recent years, Turkey has curbed media freedoms, cracked down on critical social media postings and prosecuted hundreds of people who took part in violent mass protests against the government in 2013 that centered on Istanbul’s Taksim Gezi Square. In one case, Turkish prosecutors are seeking possible jail time for a former television presenter who posted a tweet suggesting a cover-up in a government corruption scandal. A Turkish schoolboy was also charged for publicly criticizing Erdogan over the scandal — falling afoul of a law against insulting the president.


“Erdogan is aware that he is not going to be able to achieve his goals through purely democratic means,” said Gareth Jenkins, an Istanbul-based analyst with the Institute for Security and Development Policy.“If you are trying to stop people from expressing their opinions, it is a sign that you are not accountable.”



“We will do all in our power to stop the bill,” said pro-Kurdish party leader Selahattin Demirtas. “We will act together with all opposition legislators and cause a gridlock in parliament that will last for months.”


But few believe the opposition effort will succeed: Erdogan’s ruling Justice and Development Party has a strong majority in Parliament — and is likely to eventually find a way to ram through the bill.

*  *  *

Your control and surveillance is for your own protection.








On the oil front today:




(courtesy zero hedge)






WTI Crude Slumps To $50 Handle On Larger-Than-Expected Inventory Build


API released its crude oil inventory data to subscribers and it printed an enormous 14.3 million barrel build(EIA tomorrow forecast at 3 million barrel build). This has sparked further weakness in WTI (not helped by refinery strikes, refinery fires, and storage capacities), pushing it to a $50 handle…


Now, the Fed itself is changing its tune with respect to how oil will dampen and not help the economy:
In the minutes of the FOMC meeting:
(courtesy zero hedge)

Fed Destroys Mainstream Meme, Admits Low Oil Prices “Could Dampen Economic Expansion”

When even The Fed is unable to keep its story straight on the impact of low oil prices, the entire facade of ‘household spending’ enhancement must collapse (as the data shows). After six months of lower prices, retail spending is still tumbling… and it appears The Fed is finally fessing up… “persistently low energy prices… could damp the overall expansion of economic activity for a period, especially if the slowing took place after most of the positive effects of lower energy prices on growth in household spending had occurred.”

 Wait what!?


From The Fed Minutes:

“Several participants noted that there were signs of layoffs in the oil and gas industries, and that persistently low energy prices might prompt a larger retrenchment of employment in these industries.


In addition, it was observed that if capital investment in energy-producing industries slowed significantly, it could damp the overall expansion of economic activity for a period, especially if the slowing took place after most of the positive effects of lower energy prices on growth in household spending had occurred.

* * *


This is what hyperinflation will do to a country


(courtesy Bloomberg)




Venezuela Squanders Its Oil Wealth


Empty shelves at a supermarket in Caracas, Venezuela.









(Bloomberg) — By packing bags for $1 a day and with tips at a Caracas supermarket, Luis has managed to save up for a Japanese sports motorbike. His secret? Getting hold of scarce food before it hits the shelves.

Luis offers preferential access to detergent, milk and sugar to his clientele of about 100 diplomats at a Centro Madeirense shop in the south of the capital. In return, they offer him occasional work as a handyman or courier and loan him money during dry patches.

“Times are tough. We have to spin to survive,” Luis, 30, said in an interview in Caracas last month. “We have to be creative with the opportunities at hand to make ends meet.”

Price controls have emptied stores of most goods, while the world’s highest inflation has pushed what is available beyond the means of most Venezuelans. To make ends meet, they exploit the perks of their jobs to trade goods and services informally, mirroring networks that developed amid the scarcities in the former Soviet Union and came to be known as “blat.”

The prevalence and spread of such small-scale graft shows the failure of President Nicolas Maduro’s strategy of expropriation, arrests and inspections to boost production and end shortages, said Anabella Abadi, a public policy analyst at Caracas-based ODH Grupo Consultor.

“State intervention at all levels of economic activity is driving employers out of business, slashing the number and quality of formal jobs,” Abadi said by telephone from Caracas Feb. 12. “This is pushing Venezuelans to the informal activities authorities set out to eradicate in the first place.”

‘Economic War’

Maduro has blamed the shortages on the “economic war” waged against him by capitalists with U.S. aid and has seized shops and jailed their owners to force down prices.

Luis doesn’t feel like part of a global conspiracy. The minimum monthly wage of 5,600 bolivars ($32 on a new exchange market created last week) is close to useless, forcing people like him to supplement their incomes, said Luis, who asked not to use his last name for fear of government reprisals.

He sells scarce products at regulated prices to his friends, distancing himself from the black market re-sellers known as “buhoneros” who are blamed by the government for the shortages. Instead, he benefits from grateful customers’ favors later on.

“The use of personal contacts to get things done is a prominent feature of Socialist societies,” said Alena Ledeneva, a political scientist at University College London and author of a 1998 book “Russia’s Economy of Favours.” “In an economy of shortage, if you got a job, you got something to trade.”

Blat Economy

Maduro’s ban on firing means most Venezuelans can join the “blat” economy. The country had 5.5 percent unemployment in December, the lowest in South America, according to the National Institute of Statistics.

A bank employee can fast-track a credit card application and an airline office worker can help reserve a ticket.

“This can be seen in practically all formal positions in Venezuela that have power to facilitate a bureaucratic errand or secure a product,” said Abadi.

It is a far cry from the oil boom of the early 2000s, when social programs were pulling millions out of poverty and generous dollar allowances subsidized foreign shopping trips for the middle class. Spending sprees in Miami by Venezuelans had earned them the nickname “give me two” in the local shops.

Getting Worse

A 50 percent decline in oil prices in the past seven months has slashed the amount of dollars available to Maduro to import basic goods. Shortages of everything from medicine to beef reached record levels this year, with hundreds of people lining up outside supermarkets and pharmacies.

Gross domestic product will contract 7 percent in 2015, the biggest decline in Latin America, according to the International Monetary Fund.

The South American country’s benchmark bonds reached a 17-year low of about 35 cents on the dollar last month, before a rebound in oil prices and a partial relaxation of currency controls helped them recover to about 43 cents on Tuesday.

The government on Feb. 12 allowed the bolivar to weaken 69 percent against the dollar in the first day of trading on a new, alternative currency market.

Meanwhile, the government has said it is taking action to protect regulated products imported at a stronger preferential exchange rate from hoarding by big companies. In the past month inspectors have seized retailers and sent troops to smash down warehouse doors and uncover hidden stocks.

‘Only Way’

“This is our only way to effectively combat the speculative actions causing so much anxiety to our people,” Congress head Diosdado Cabello told state television Feb. 2 in front of corn flour stacked at an expropriated supermarket warehouse. “This food will now be sold to the people at fair prices” in state shops.

Those in the “blat” economy don’t see themselves as criminals waging war on the government, said Ledeneva.

“These people see what they are doing as friendship, loyalty — not as corruption,” she said. “When you’re the one benefiting, you don’t see it as dishonest.”

Alejandro, 32, keeps a shelf stacked with heart pills, antibiotics and cancer drugs reserved for friends in the back of his pharmacy in the town of Los Teques on the outskirts of Caracas. His store front display is nearly empty.

“All day long I get calls from friends, acquaintances, friends of friends. I have a list of people I save things for,” said Alejandro, who also asked not to use his last name.

Price controls mean he makes a maximum margin of two bolivars (about 1 cent) on every box of regulated medicine. “It’s not even worth selling it. Better to save it for friends.”

After the last delivery, Alejandro said he traded antibiotics for shampoo and toilet paper with a mini-market owner next door.

“This is the way everything functions here these days: I help them out, they help me.”

To contact the reporter on this story: Anatoly Kurmanaev in Caracas atakurmanaev1@bloomberg.net






Your more important currency crosses early Wednesday morning:



Eur/USA 1.1370  down  .0035  (with every country on earth buying euros to support it due to the Greek crisis)

USA/JAPAN YEN 119.33  up .120

GBP/USA 1.5432 up .0080

USA/CAN 1.2434 up .0043

This morning in Europe, the euro is down, trading now well below the 1.14 level at 1.1370 as Europe is supported by other nations keeping the Euro afloat,  Europe reacts to deflation, announcements of massive stimulation,  and the Greek crisis .   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 down again in Japan by 12 basis points and settling just below the 120 barrier to 119.33 yen to the dollar. The pound was up this morning as it now trades well above the 1.54 level at 1.5432.(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 was well down again  and is trading  at 1.2434 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: Tuesday morning : up 212.08 or 1.18%

Trading from Europe and Asia:
1. Europe stocks all green

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

Gold very early morning trading: $1207.00



Early Wednesday morning USA 10 year bond yield: 2.16% !!!  up another 2  in basis points from Tuesday night/ (getting ominous)


USA dollar index early Wednesday morning: 94.30  up 24 cents from Tuesday’s close.



This ends the early morning numbers, Wednesday morning




And now for your closing numbers for Wednesday:







Closing Portuguese 10 year bond yield: 2.32% down 5 in basis points from Tuesday


Closing Japanese 10 year bond yield: .41% !!! up 1 in basis points from Tuesday and this is worth watching


Your closing Spanish 10 year government bond,  Wednesday down 3 in basis points in yield from Tuesday night.

Spanish 10 year bond yield: 1.58% !!!!!!


Your Wednesday closing Italian 10 year bond yield: 1.62% down 5 in basis points from Tuesday:



trading 4 basis points higher than Spain.




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

Euro/USA: 1.1393  down .0010

USA/Japan: 118.65 down .564

Great Britain/USA: 1.5441 up .0088

USA/Canada: 1.2431 up .0040



The euro rose quite a bit  this afternoon despite the negative news on the Greece crisis and the continual war raging in the Ukraine  (the ceasefire announced for Sunday has been violated).  It however was down on the day by 10 basis  points finishing the day just below the 1.14 level to 1.1393. The yen was well up in the afternoon, and it was up by closing to the tune of 56 basis points and closing well below the 119 cross at 118.65. The British pound gained a lot of ground during the afternoon session and was up on  the day closing at 1.5441. The Canadian dollar was down again today due to the lower oil price.  It closed at 1.2431 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. The last asset still rising are the stock exchanges.



Your closing 10 yr USA bond yield: 2.06 down 7 in basis points from Tuesday


Your closing USA dollar index: 94.15 up 9 cents on the day.



European and Dow Jones stock index closes:


England FTSE  down .05 points or 0.00%

Paris CAC up 45.04 or 0.95%

German Dax up 65.38 or 0.60%

Spain’s Ibex up  105.30 or 1.00%

Italian FTSE-MIB up 393.08 or 1.85%



The Dow: down 17.73. or 0.10%

Nasdaq; up 7.10 or 0.14%



OIL: WTI 51.59 !!!!!!!

Brent: 59.99!!!!



Closing USA/Russian rouble cross: 61.55 up  1  rouble per dollar on the day.


closing UKrainian UAH:  (hryvnia)  26.90 UAH to the dollar. (down 1/2 UAH)

Since November the currency has lost half its value.




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


Your New York trading for today:


(courtesy zero hedge)



Fearful Fed Sparks Mass Confusion But S&P ‘Rigged’ To 2,100 Close



Everything was fine until zee Germans spoiled the overnight party (artist’s impression of Schaeuble’s phone call to Varoufakis)…


But entirely confusing Fed Minutes – dovish with a mix of bubble warnings and cluelessness (which were interpreted only one way by the dollar and bonds) left stocks whiplashing… but there was only one thing that mattered…

And sure enough…


Noisy day overall…


Post-FOMC, stocks could not make their minds up…


Stocks dropped to pre-EU-Greek Talks Fail levels pre-FOMC then oscillated…


Stock volume is absolutely terrible…


Treasury yields had generally drifted lower intraday before dumping at the FOMC dovishness (but 30Y yields ramped back higher into the close)…


which pushed 2s30s another 5bps steeper…



With the Dollar roundtripping to unch on the day (after dumping following the FOMC minutes)… note that Swissy was dumped today…


Gold and Silver jumped back to unchanged and copper higher but crude kept sliding…


Yesterday’s V-shaped recovery now seems a long way off with the Torrance fire and inventory concerns weighing on it…


Across the asset classes, here is the post-FOMC reaction…



Charts: Bloomberg




The following is a huge story and this can set damage to the USA economy i.e. the massive congestion at the Western ports where there is a huge slowdown!!



(courtesy zero hedge)



Track The Massive Congestion At The Port Of Long Beach In Real Time


Things on the West Coast Ports are going from bad to worse (for those who missed it read “Catastrophic Shutdown Of America’s Supply Chain” Begins: Stunning Photos Of West Coast Port Congestion), and with no resolution in sight, it is now beginning to cripple the US economy. Here is a brief summary, courtesy of the WSJ, of how the near-strike is already impacting various businesses across the US:

  • Ocean carrier Maersk Line has canceled some sailings, while China Ocean Shipping (Group) Co. said it will skip at least one port
  • Shipping line CMA CGM Group said it has “adapted its schedule and has been modifying its ports call order.” China Ocean Shipping said it has canceled some port stops.
  • Truckers that normally haul an average of five containers a day away from the Port of Oakland, Calif., are lucky to haul one.
  • At the Port of Oakland, truck drivers can spend up to three days waiting in line before hauling one container out of the yard, says Henry Osaki, an employee at an Oakland-based trucking company.
  • A West Coast customs broker said that her customers are being assessed as much as $300 a day for containers that sit too long on the docks, though the containers are trapped there.
  • Levi Strauss & Co. said it was concerned it wouldn’t receive some products in time for spring deliveries.
  • As of Monday, Honda Motor Co. was experiencing parts shortages at plants in Ohio, Indiana and Canada that will affect its production on multiple days over the next week.
  • The Agriculture Transportation Coalition estimates that port delays and congestion have reduced U.S. agricultural exports by $1.75 billion a month, while the North American Meat Institute put losses to U.S. meat and poultry producers at more than $85 million a week, including hides and skins.
  • The delays could cost retailers alone as much as $3.8 billion this year, according to an analysis by consulting firm Kurt Salmon. Adding in rerouting and carrying costs and other expenses could bring retailers’ total costs to $7 billion this year, the firm said.
  • Bert von Roemer, owner of Serengeti Trading Co., a Dripping Springs, Texas, coffee importer began rerouting coffee beans he intended to ship to the West Coast to Houston, Norfolk, Virginia and New York. “I’m railing the coffee across” to roasters in California, he said. “It’s costing me about $2,000 extra per container,”

And so on, as more and more distributors, retailers, producers, manufacturers, and ordinary mom and pop business, decide that the time has come to blame something – last year it was the Polar Vortex which compared to the current climate conditions was a spring breeze – for what is a global economic depression, one from which the US is not decoupling. That something being the west coast port strike this time, coming soon to a Wall Street scapegoating “analyst” near you soon.

For those interested in tracking the port congestion as it gets progressively worse, here is a live map courtesy of MarineTraffic:

The Fed releases its minutes and shows that they may wish to be patient a lot longer.  They state foreign risks are present.  They basically have no idea where they are going!!
(courtesy zero hedge)

FOMC Minutes Show Patient-er-For-Longer, “Foreign Risks”-Fearful Fed

The January statement had only modest changes so reading the tea leaves of the FOMC Minutes ‘should’ provide little additional color with the main focus on the meaning of ‘patient‘, fears over ‘international developments‘, the ‘right’ gauge of inflation, and pace of rate lift-off


It appears The Fed is ‘worried’ again… lower for longerer…

Pre-FOMC Minutes: S&P Futs 2091.25, 10Y 2.122%, Gold $1201.50, WTI $52.05

*  *  *

It’s been a good 3 weeks for stocks and oil since The FOMC Meeting…(and not for Bonds and PMs)


Additional headlines:


The key sections from the minutes:

Many participants indicated that their assessment of the balance of risks associated with the timing of the begin-ning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.

Not everyone agreed:

Some observed that, even with these risks taken into consideration, the federal funds rate may have already been kept at its lower bound for a sufficient length of time, and that it might be appropriate to begin policy firming in the near term.

But even the Fed knows that many > some. Still, can’t backtrack fully now while the facade of the US recovery is about to crash and burn, so the Fed has to do it step by step.

Regardless of the particular strategy undertaken, it was noted that, provided that the data-dependent nature of the path for the federal funds rate after its initial increase could be communicated to financial markets and the general public in an effective manner, the precise date at which firming commenced would have a less important bearing on eco-nomic outcomes.

It gets better: the Fed no longer has any idea what indicators to point to in order to keep rates at zero with the S&P at 2100:

There was wide agreement that it would be difficult to specify in advance an exhaustive list of economic indicators and the values that these indicators would need to take. Nonetheless, a number of participants suggested that they would need to see further improvement in labor market conditions and data pointing to continued growth in real activity at a pace sufficient to support additional labor market gains before beginning policy normalization.

In other words, just like porn, the Fed will know a recovery when it sees it.

And here is something odd: apparently the Fed and the BLS don’t look at the same data:

Several participants noted that there were signs of layoffs in the oil and gas industries, and that persistently low energy prices might prompt a larger retrenchment of employment in these industries. In addition, it was observed that if capital investment in energy-producing in-dustries slowed significantly, it could damp the overall expansion of economic activity for a period, especially if the slowing took place after most of the positive effects of lower energy prices on growth in household spending had occurred.

Lastly, none other than the Fed now appears displeased with the definition of inflation, or as the case may be, deflation:

A number of participants observed that, with anchored inflation expectations, the fall in energy prices should not leave an enduring imprint on aggregate inflation. It was pointed out that the recent intensification of downward pressure on inflation reflected price movements that were concentrated in a narrow range of items in households’ consumption basket, a pattern borne out by trimmed mean measures of inflation.

We could go on but the gist is clear: the Fed has no idea what it is doing, and finally realized with the entire world lowering rate, the Fed simply can’t hike.

And with that, German and Japanese pension funds are delighted they can resume buying Treasurys.

Full Minutes: see zero hedge for the complete minutes.





Housing starts and permit miss expectations:


(courtesy zero hedge)

Housing Starts, Permit Miss Expectations On Drop In Single-Family Housing



Earlier today, we got a hint that hopes that the 5th dead cat “housing rebound” bounce have been indefinitely delayed after Mortgage Applications cratered by over 13% after tumbling 9% in the week before on even the most fractional of 10 Year yield increases. That hope suffered another embarrassing defeat moments ago when the Census Bureau reported that in January both housing starts and permits missed expectations, rising at 1070K and 1053K, respectively, once again missing Wall Street consensus of 1089K and 1067K. The reason: yet another drop in single-family housing. Because while multi-family, i.e., rental units, remained brisk and rose from 340K to 381K for the starts and from 360K to 372K for the permits…

… the single-family starts declined right back to November levels, sliding from 727K to 678K, while permits dropped from 675K in December to 654K.

Finally, broken down by region, the biggest drop in total Starts took place in the Midwest, from 180K to 140K, while the biggest increase was in the South, from 496K to 528K. For permits, total units in the South dropped from 162K to 136K while the biggest increase took place in the West, where 278K permits were authorized compared to 238K the month before.




Three big misses:


i. Industrial production

ii Manufacturing

iii construction growth


(courtesy zero hedge)




US Industrial Production Misses (Again) As Manufacturing & Construction Growth Disappoint


With a mere 0.2% rise in manufacturing production (missing expectations of a 0.4% rise), and capacity utilization printing 79.4%, missing expectations of a rise to 79.9%, it is no surprise that overall industrial production missed expectations for the second month in a row. Motor vehicle production fell 0.6% in January and construction supply fell 0.3% – the most in 10 months.

2nd miss in a row for IP…


With Construction Supply dropping by the most since April 2014…


Not exactly the data that confirms the decoupling narrative.

This is very worrisome as PPI tumbles the most since 2009 as the economy crumbles. No wonder the Fed was worried!!
(courtesy zero hedge)

US Producer Prices Tumble Most Since 2009 (And It Wasn’t All Energy-Related)

The drop in the price of energy will be initially blamed for the 0.8% MoM drop in Producer Prices Final Demand (far more than 0.4% drop expected) and the most on record. However, ex-food-and-energy, PPI also fell 0.1% (missing expectations of a 0.1% rise) and ex-food-and-energy-and-trade-services, PPI fell 0.3% – so it’s not just the energy price drop (even though fuels and lubricants dropped 9.3% MoM). In fact the biggest MoM drop was in furnishings, computer hardware, and TV, video, and photo equipment.


PPI Final Demand saw its biggest MoM drop on record…


Perhaps just as problematic for The Fed… YoY PPI is unchanged – its worst level on record…


PPI Ex-food-and-energy also dropped – missing expectations of a 0.1% rise…



And while it will come as no surprise to anyone that final demand for goods cratered as a result of the tumble in crude prices which now appears to have reversed, it was a surprising drop of -0.2% in Final Demand Services that some may have a problem explaining:

Final demand services: The index for final demand services decreased 0.2 percent in January, the first
decline since falling 0.3 percent in September 2014. In January, prices for final demand services less trade,
transportation, and warehousing moved down 0.4 percent, and the index for final demand transportation and
warehousing services dropped 0.8 percent. In contrast, margins for final demand trade services advanced 0.5
percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)


Product detail: In January, a major contributor to the decline in the index for final demand services was
prices for outpatient care (partial), which fell 0.7 percent. The indexes for automotive fuels and lubricants
retailing; securities brokerage, dealing, investment advice, and related services; television, video, and
photographic equipment and supplies retailing; mining services; and truck transportation of freight also
decreased. Conversely, margins for apparel, jewelry, footwear, and accessories retailing advanced 3.6
percent. The indexes for machinery, equipment, parts, and supplies wholesaling and for loan services
(partial) also increased.

Today Janet Yellen warns of irrational exuberance again due to a buildup of valuation pressures.   She is worried that the stock market is
terribly over-valued!
(courtesy zero hedge)

Irrational Exuberance 3.0: Fed Again Warns Of A Build Up In “Valuation Pressures”

The last time Janet Yellen, Series 7, 63 certified, warned of asset bubbles, aka the Fed’s “Irrational Exuberance 2.0” moment, was back in July 2014, when the smallest of utterances led to a selling avalanche in biotech and social media stocks. This is what the Fed said back then:

“Nevertheless, valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year. Moreover, implied volatility for the overall S&P 500 index, as calculated from option prices, has declined in recent months to low levels last recorded in the mid-1990s and mid-2000s, reflecting improved market sentiment and, perhaps, the influence of “reach for yield” behavior by some investors….”


… signs of risk-taking have increased in some asset classes. Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched, with ratios of prices to forward earnings remaining high relative to historical norms. Beyond equities, risk spreads for corporate bonds have narrowed and yields have reached all-time lows. Issuance of speculative-grade corporate bonds and leveraged loans has been very robust, and underwriting standards have loosened. For example, average debt-to-earnings multiples have risen, and the share rated B or below has moved up further for leveraged loans.

It’s time for the Fed’s shot across the bow, this time explicitly warning of the “potential risks to financial stability.” From the just released minutes.

Relatively high levels of capital and liquidity in the banking sector, moderate levels of maturity transformation in the financial sector, and a relatively subdued pace of borrowing by the nonfinancial sector continued to be seen as important factors limiting the vulnerability of the financial system to adverse shocks. However, the staff report noted valuation pressures in some asset markets. Such pressures were most notable in corporate debt markets, despite some easing in recent months. In addition, valuation pressures appear to be building in the CRE sector, as indicated by rising prices and the easing in lending standards on CRE loans.Finally, the increased role of bond and loan mutual funds, in conjunction with other factors, may have increased the risk thatliquidity pressures could emerge in related markets if investor appetite for such assets wanes. The effects on the largest banking firms of the sharp decline in oil prices and developments in foreign exchange markets appeared limited, although other institutions with more concentrated exposures could face strains if oil prices remain at current levels for a prolonged period.

It’s ok though: as the IMF previewed earlier today, asset managers may be responsible for the next bubble but it is only because of “rational bubble-riding” – you know, the kind that the Fed’s macroprudential policies will promptly spot and fix post haste.

As for the other institutions whose “concentrated oil exposures” will rock the boat, we – like the Fed – just can’t wait to find out who they are…

Today, we surely had a lot of developments on our 3 major black swan
i. the potential for a GREXIT
ii) the potential for a default in the Ukraine and a separation of the country
iii/ the huge backlog at the West coast docks, causing turmoil for the USA economy.  Let us see what tomorrow will bring us

We  will see you on Wednesday.

bye for now




  1. You are slowly returning to increased use of light blue typeface. It wouldn’t be so bad if you reserved it for the parts not worth reading. That would then coincide with the parts that can’t be read. Please, if black won’t do then switch to bright red typeface.


  2. nora sullivan · · Reply

    Informative ideas ! I am thankful for the facts – Does someone know if my company could possibly find a fillable a form document to fill in ?


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