Feb 24






Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1196.90 down $3.40   (comex closing time)
Silver: $16.18 down 6 cents  (comex closing time)



In the access market 5:15 pm



Gold $1201.50
silver $16.31


I would like to point out that the Chinese traders have been absent from gold/silver trading as this is their New Year.  They will be back Wednesday.

No doubt that due to their absence our bankers are having an easy time of knocking our metals down.  What will end on Wednesday.


The two big stories which will shape the paper world are the Greece crisis and the Ukraine crisis.


The New York Times reports that the citizens of Greece are ready to revolt against the agreement signed.  Wait until they see that the actual agreement was not written by the Greek politicians but by the EU staff.


In the UKraine today, the UAH hit 33.05 to the dollar.  The 17 billion USA financing by the IMF will not be enough.  This country is a basket case.




And now for gold/silver trading today.


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



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



The gold comex today had a fair delivery day, registering 0 notices served for nil 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 256.08 tonnes for a loss of 46 tonnes over that period.


In silver, the open interest fell by 2399 contracts as Monday’s silver price was down by 2 cents. The total silver OI continues to remain relatively high with today’s reading at 166,123 contracts. The front month of March contracted by only 6,369 contracts with only 3 days before  first day notice.

Also the entire silver complex has not collapsed yet as is their usual procedure when we approach the first day notice for an active contract month. We had 0 notices served upon for 15,000 oz.





In gold we had a good rise in OI even though gold was down by $4.10 on Monday. The total comex gold OI rests tonight at 398,568 for a gain of 4506 contracts. Today we had 0 notices served upon for nil oz.




Today,  no change in gold inventory at the GLD/Inventory at 771.25 tonnes



In silver, /SLV  we had another addition of 1.435 million oz of silver inventory to the SLV/Inventory 325.734 million oz



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

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





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

Here are today’s comex results:



The total gold comex open interest fell rose by 4506 contracts today from  394,062 all the way down to 398,568 as gold was down by $4.10 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 119 contracts falling to 362. We had 96 contracts served upon yesterday, thus we lost 23 gold contract or an additional 2300 ounces will not stand in this delivery month . The next contract month of March saw it’s OI fall by 83 contracts down to 758. The next big active delivery month is April and here the OI rise by 2157 contracts up to 265,018. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was awful at 35,718. The confirmed volume yesterday ( which includes the volume during regular business hours  + access market sales the previous day) was poor at 124,146 contracts even  with mucho help from the HFT boys. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI fell by 2399 contracts from 168,522 down to 166,123 as silver was down by 2 cents with yesterday’s trading. The bankers are still not able to shake many silver leaves from the silver tree. We are still awaiting the usual collapse in OI as we get closer to first day notice. We are now in the non active contract month of February and here the OI fell from 23 down to 12 for a loss of 11 contracts. We had 3 notices filed on yesterday so we lost 8 contracts or an additional 40,000 ounces will not stand in this February contract month . The next big active contract month is March and here the OI fell by only 6.369 contracts down to 33,856.  First day notice for the gold and silver February contract months is on Friday, Feb 27.2015 or 3 trading days away.  The March OI is still extremely high. The estimated volume today was poor at 20,437 contracts  (just comex sales during regular business hours. The confirmed volume on Friday was excellent (regular plus access market) at 67,856 contracts. We had 0 notices filed for nil oz today.

February initial standings


Feb 24.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz   128.60 oz  4 kilobars(Manfra,Brinks)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  643.00 oz   20 kilobars (Manfra)
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)  385 contracts (38,500 oz)
Total monthly oz gold served (contracts) so far this month 813 contracts(81,300 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 228,435.6 oz

Today, we had 0 dealer transactions

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz



we had 0 dealer deposits:




we had 2 customer withdrawals

i) Out of Manfra: 96.45 oz  3 kilobars

ii) Out of Brinks: 32.15 oz   1 kilobars


total customer withdrawal: 128.60 oz



we had 1 customer deposit:


i) Into Manfra; 643.000 oz  (20 kilobars)

total customer deposits;  643.000 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 0 contract of which 0 notices were stopped (received) by JPMorgan dealer and 0 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 (813) x 100 oz  or 81,300 oz , to which we add the difference between the OI for the front month of February (362 contracts)  minus the number of notices served today x 100 oz (0 contracts) x 100 oz = 117,500 oz, the amount of gold oz standing for the February contract month.( 3.654 tonnes)

Thus the initial standings:

813 (notices filed for the month x( 100 oz) or 81,300 oz + { 362 (OI for the front month of Feb)- 0 (number of notices served upon today} x 100 oz per contract} = 117,500 oz total number of ounces standing for the February contract month. (3.654 tonnes)

we lost 2300 oz of gold standing in this February contract month.



Total dealer inventory: 810,047.429 oz or 25.195 tonnes

Total gold inventory (dealer and customer) = 8.233 million oz. (256.08) 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 24 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 20,180.85  oz (HSBC,)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  886,249.75 (Brinks, Scotia)  oz
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 20 contracts (100,000 oz)
Total monthly oz silver served (contracts) 423 contracts (2,115,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  5,933,933.1 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit: nil   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil oz


We had 2 customer deposits:


i) Into Brinks:  300,761.99oz

ii) Into Scotia:  585,487.76

total customer deposit: 886,249.75 oz


We had 1 customer withdrawals:


i) Out of HSBC: 20,180.85 oz



total customer withdrawal: 349,820.29  oz


we had 0 adjustments




Total dealer inventory: 68.059 million oz

Total of all silver inventory (dealer and customer) 176.391 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 (423) x 5,000 oz    = 2,115,000 oz  to which we add the difference between the OI for the front month of February (12)- the number of notices served upon today (0) x 5,000 oz per contract = 2,175,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

423 contracts x 5000 oz= 2,115,000 oz + (12) OI for the front month – (0) number of notices served upon x 5000 oz per contract =  2,175,000 oz, the number of silver ounces standing.

we  gained 3 contracts or an additional 15,000  silver ounces will stand in this February contract month.


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

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





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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.




And now the Gold inventory at the GLD:



Feb 24.2015: no change in gold inventory at the GLD/Inventory at 771.25 tonnes


Feb 23.2015: no change in gold inventory at the GLD/Inventory at 771.25 tonnes



Feb 20/we had another good addition of 1.79 tonnes of gold into the GLD.  Inventory 771.25 tonnes


Feb 19/ a huge addition of 1.5 tonnes of gold into the GLD/Inventory 769.46


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 24/2015 / no change in gold inventory at the GLD/

inventory: 771.25 tonnes.

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

GLD : 771.25 tonnes.






And now for silver (SLV):

Feb 24.we had an addition of 1.435 million oz of silver to the SLV/SLV inventory at 725.734 million oz


Feb 23 no change in silver inventory/324.299 million oz

Feb 20 no change in silver inventory/324.299 million oz


Fen 19/ we had a huge addition of 4.082 million oz of silver into the SLV/Inventory 324.299 milllion oz



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 24/2015  an addition of 1.435 milion oz of  silver inventory at  the SLV

SLV inventory registers: 325.735 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  6.8% percent to NAV in usa funds and Negative 7.8% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.4%

Percentage of fund in silver:38.2%

cash .4%


( feb24/2015)


Sprott gold fund finally rising in NAV


2. Sprott silver fund (PSLV): Premium to NAV falls to + 3.27%!!!!! NAV (Feb 24/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to +.33% to NAV(feb 24 /2015)

Note: Sprott silver trust back  into positive territory at +3.27%.

Sprott physical gold trust is back into positive territory at +.33%

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 Tuesday  morning:



(courtesy Mark O’Byrne)


Gold Holdings of Eurozone Rise to 10,792 Tonnes – ECB’s “Reserve of Safety” Accumulated



The Euro zone raised its gold holdings by 7.437 tonnes to 10,791.885 tonnes in January, International Monetary Fund data released overnight showed.

The rise in gold holdings was small in tonnage terms and in percentage terms  – especially when viewed in the light of the recently launched ECB’s EUR 1 trillion QE monetary experiment.

Nevertheless, the rise in Euro-area gold holdings shows how the ECB continue to view gold as an important monetary asset. Mario Draghi said of gold in October 2013 that gold is a “reserve of safety” that “gives you a value-protection against fluctuations against the dollar.”

Draghi told an open forum at Harvard’s Kennedy School of Government, why central banks want gold and what value it offers. He said that there were “several reasons” to own gold including “risk diversification”.

The increase in reserves came at a time, January, of rising gold prices amidst the reemergence of the Greek debt crisis.

It may signal that the ECB and Eurozone are set to embark on a gold accumulation programme. More likely, it is simply a way to bolster confidence in the euro due to increasing doubts about the viability of the single currency.


Russia sold a very small amount of gold in January for the first time since March. Russia lowered its reserves to 1,207.7 tons from 1,208.2 tons, ending nine months of consecutive purchases, the IMF data showed.

Russia, the world’s fifth-biggest gold holder, had been adding to its holdings for many years in order to bolster the rouble.

Before last month, Russia had bought at least 18 tons a month since September and more than tripled its holdings since 2005.

Turkey’s gold reserves fell marginally last month along with Mexico and Belarus, the data showed.

Kazakhstan increased gold reserves for the 28th straight month, while Ukraine added to holdings for the first time since August, the data showed. Kazakhstan boosted holdings to about 193.5 metric tons from 191.8 tons a month earlier as Ukraine’s rose to 23.9 tons from 23.6 metric tons.

Kazakhstan’s hoard rose 33 percent in the past year alone and more than doubled in the past three years.

Ukraine’s assets dropped in November to the lowest level since 2005 as its foreign currency reserves contracted and the hryvnia slumped amid the conflict and collapsing economy. There were also concerns that the newly installed government had acquired the gold and moved it offshore, out of Ukraine.

Central banks are some of the largest buyers of gold today – see table above. Central banks have been adding to their gold reserves for the past five years, a reversal from two decades of selling since the late 1980s. They were net buyers in 2014 and are set to be net buyers again 2015.

Governments bought 477.2 tons of gold bullion in 2014, the second-biggest increase in 50 years, and purchases will be at least 400 tons this year, the World Gold Council has estimated.

The smart money will continue to follow the lead of central banks internationally and gradually accumulate gold and dollar, euro or pound cost averaging into an allocated and segregated physical gold position.

Daily and Weekly Updates Here

Today’s AM fix was USD 1,195.50, EUR 1,057.97 and GBP 774.59 per ounce.
Yesterday’s AM fix was USD 1,193.50, EUR 1,055.17 and GBP 777.12 per ounce.

Gold rose 0.09% percent or $1.10 and closed at $1,202.10 an ounce on yesterday, while silver climbed 0.56% percent or $0.09 closing at $16.32 an ounce.

Gold in US Dollars - 5 Years (GoldCore)

Spot gold was down 0.4 percent at $1,196.80 an ounce in late morning in London, after prices were flat in Singapore. Silver was down 0.3 percent at $16.24 an ounce, platinum slipped by 0.2 percent to $1,158.55 and palladium fell 0.2 percent to $783.15.

Gold slipped below $1,200 an ounce today but recovered from its 7 week low hit yesterday as optimism is abound that the Greek bail-out deal will be finalized today.

The close above $1,200/oz yesterday was encouraging from a technical perspective.

Some speculated that Federal Reserve Chairperson Janet Yellen’s pending congressional testimony added some pressure on the yellow metal and strengthened the U.S. dollar.

Yellen will address the Senate Banking, Housing and Urban Affairs Committee at 10 a.m. on Tuesday (EST) and the House Financial Services Committee on Wednesday.

Market participants are looking for any further guidance on the timing of when the U.S. Fed may raise interest rates.

Yellen’s European counterpart ECB chief Mario Draghi is also set to make a speech today at 3 p.m. CET unveiling the new €20 banknote in Frankfurt.

The world’s second largest consumer of gold, China, is still celebrating its Lunar New Year holiday today and returns tomorrow which should be gold supportive.

Gold had its biggest monthly advance in three years in January prior to giving up those gains in recent weeks.

Gold climbed 8.4 percent in January in London as policy makers in Europe and Asia signaled more stimulus to battle slowing economic growth and investors speculated that Greece may be forced to quit the euro.

Bullion traded at $1,195.80 an ounce on today. With gold being some 37 percent below the nominal record high set in 2011, contrarian investors continue to accumulate on weakness.







Now we have accurate demand for gold from Chinese citizens


(courtesy Koos Jansen)



SGE Chairman: India Will Become SGE’s Largest Partner

The latest Indian Bullion Bulletin has just been released wherein the chairman of the Shanghai Gold Exchange (SGE) Xu Luode presents the SGE’s international ambitions – read below.

The Chinese government regards the gold market as an indispensable component of China’s financial market and attaches great importance to its growth and development.

The Shanghai International Gold Exchange

Xu provides an excellent all round update of the SGE, though he’s somewhat exaggerating the performances of the SGE International Board (SGEI) up until now IMVHO. I don’t blame him though, the SGEI has great potential!

One way to enhance SGEI trading would be to allow individual foreign investors to have easy access to the international exchange and its wide range of products, which is currently limited to SGEI members (banks, refineries, etc). Xu notes this will change soon.

I’ve gotten numerous questions by email from investors worldwide that would like to trade on the SGEI, but can’t get through. At this stage it’s simply not possible, but my contacts at ICBC will timely notify me when everybody can trade at the SGEI. I’ll keep you posted.

SGE Withdrawals

To keep track more precisely of what’s going on in the Chinese domestic market Xu drops some fit numbers that help analyze what has happened in between the Shanghai Free Trade Zone (FTZ) and China mainland in 2014. Xu notes:

As of November 2014, international members have traded more than 100 metric tons of gold in aggregate with a total turnover of around RMB 25 billion; imported gold tipped in at around 12 metric tons, and a total of 15 metric tons of gold have been deposited into the International Board Certified Vault.

As the SGE does not publish withdrawal data from the International Board (in the FTZ) and the Main Board (in the mainland) separate, domestic withdrawal data – used as a proxy for Chinese wholesale demand – lost some of its precision since the inception of the SGEI (read this post for a comprehensive explanation of the relationship between SGEI trading volume and withdrawals).

However, with the numbers disclosed by Xu we can make a far better estimate of Chinese wholesale demand in 2014. Previously we knew total withdrawals for 2014 accounted for 2,102 tonnes, but these could have been influenced by SGEI withdrawals of which some could have been imported into the mainland or exported abroad. We didn’t know by how much, all we knew was SGEI trading volume that set the limits.

Now we know 15 tonnes had been deposited in the FTZ, of which 12 tonnes was withdrawn and imported into the mainland (by one of the 15 licensed banks). Meaning, Chinese wholesale demand (SGE withdrawals) could not have ben lower than 2,099 tonnes.

2,102 – (15 – 12) = 2,099

It’s possible all the gold deposited in the FTZ (15 tonnes) was withdrawn, but for sure 12 tonnes was imported into the mainland. So, theoretically only 3 tonnes could have distorted domestic withdrawals.

For a detailed explanation on the working of the Shanghai International Gold Exchange click here.

Governor of the central bank of China (PBOC) Zhou speaking at the opening of the Shanghai International Gold Exchange.

Xu Luode from the Bullion Bulletin:

Embrace Global Markets, Strengthen International Cooperation, Share China Opportunities, Advocate Mutual Benefits

Shanghai Gold Exchange, A Market-based and Global Exchange Center

Xu Luode, Chairman, Shanghai Gold Exchange

The Shanghai Gold Exchange (“Exchange” or “SGE”) was officially established on October 30, 2002 by the People’s Bank of China (“PBC”) under the approval of the State Council. In just little over a decade, the SGE has firmly placed itself as the most important domestic trading platform and central hub for spot and investment products in gold, silver and platinum. SGE’s success also extends to the international stage: it has been ranked as the world’s largest exchange for physical gold bullions for seven years in a row, and its trading volume in gold and silver reached 11.6 and 430.5 thousand metric tons respectively in 2013, which puts it as the fourth largest exchange in the world for gold and third largest in silver.

I. Background and Significance of the Launch of the International Board

The official launch of SGE’s International Board on September 18, 2014 has unveiled a new chapter in the reform and development of China’s gold market, and marked a solid step in the opening up of the China’s gold market to global investors. Its strategic launch underscores both SGE’s own development needs and its desire for greater integration with international markets. The background and significance of the International Board are:

Xu Luode 21. China has an enormous market base for gold products and harbors great potential.

In recent years, we have witnessed the trend of “oriental gold” playing an increasingly important role in the global market attributable to the rapid development of the China’s gold market: in 2013 alone, the gold produced and imported by China exceeded 50 percent of the world’s gold production and 60 percent of the world’s gold consumption, respectively. As the world’s biggest gold producer, consumer, and importer, China is gradually integrating itself into the global gold market. Meanwhile, China is still a relatively young market as compared to its more established siblings in the world; similarly, SGE has been operating for less than 12 years and is still in its early development stage. But the future is bright: as the urbanization spreads to far corners of China and national income level surges, the development and growth potential of the China’s gold market has never been stronger.

2. Chinese government has been a major proponent for advancing China’s gold market and ushering in its era of internationalization.

Chinese government regards the gold market as an indispensable component of China’s financial market and attaches great importance to its growth and development. PBC has laid a solid foundation for transforming it from a domestic commodity market based on spot products to an international investment market based on derivatives. On another front, the Chinese government established the Shanghai Pilot Free Trade Zone (“Shanghai FTZ”) in September 2013, signaling its determination to introduce more innovations and reforms to the domestic financial system. As national efforts to internationalize RMB reach their crescendo, China’s domestic gold market is facing an auspicious window and timing for pursuing its internationalization and greater openness.

The significance of the launch of the International Board is manifest in the following three aspects:

(1) The International Board provides a vital link between the domestic and international gold markets.

By inviting foreign investors to trade in China’s domestic market, the International Board has greatly expanded the size of the market and increased market liquidity. Foreign investors can take advantage of the diverse range of trading, pricing, and hedging instruments as well as the arbitrage opportunities of “RMB-denominated gold price, RMB interest rates, and RMB exchange rates” provides, and share in the benefits and wealth brought about by China’s market reforms and development.

(2) The International Board provides a new investment channel for offshore RMB.

The International Board offers an attractive investment channel for foreigners holding offshore RMB and imbues offshore RMB with greater investment value and liquidity than ever before. At the same time, the International Board has spurred innovations in FX and interest rate products, improved the visibility and standing of RMB as an international money of account and settlement currency, and accelerated RMB’s march to becoming an international currency.

(3) The International Board lends greater weight to the importance of Asian gold market on the international stage.

China, India, Dubai and Singapore all enjoy vibrant trading scenes andAsia gold 2comparative advantages; however, in the eyes of many investors, the influence wielded by the Asian markets is still very limited as a whole. Using the International Board as a launch pad, China’s gold market will embrace greater openness and foster stronger ties with its neighbors and, together, elevate the trading and pricing influence of Asia in the world’s gold market.

II. Key Features of the International Board

The launch of the International Board has attracted major spotlights from international markets due to its five prominent features:

1. Internationalization of market participants.

SGE’s first 40 highprofile international members include major global commercial banks, investment banks, gold refiners, and investment firms such as HSBC, Standard Chartered, Scotia Mocatta, Goldman Sachs, ANZ, Metalor, Heraeus and PAMP. International members are permitted to trade in all products listed on the Exchange through proprietary accounts and on behalf of international investors.

2. Internationalization of funds.

Offshore RMB and offshore convertible currencies can be used in the trading of RMB-quoted precious metals products offered by the Exchange via the PBC’s Free Trade Accounting Unit.

3. Internationalization of pricing.

All products listed on the Exchange are denominated in RMB. As more market participants gather to trade on the Exchange, and onshore investors and domestic funds become more intertwined with offshore investors and offshore funds, the sphere of influence of trading prices on the Exchange will gradually expand from nearby regions to the whole world and, at the same time, RMB-denominated gold benchmark price will emerge as another financial index of global significance.

4. Internationalization of products.

SGE integrates the Main Board with the International Board so that domestic and foreign investors can trade in the same arena. After being admitted to the Exchange, international investors are allowed to trade in a wide array of products, including the three spot gold products listed on the International Board as well as spot and deferred products on the Main Board. In addition, to better meet the needs of the market, the Exchange has further optimized the structure of products and recently introduced (T+N) deferred products as a new choice for the investors. SGE has also embedded bullion leasing service in its design of the International Board. SGE will concentrate on the launch of this service as its next step toward offering the full range of services that international investors demand.

5. Internationalization of delivery, storage and transportation services.

SGE provides delivery, storage, logistics and other supporting services for the importation and transit of gold through its fully modernized vault in the Shanghai FTZ that is capable of holding thousands of metric tons of gold.International investors may choose to conduct the delivery of physical gold at this vault at their own discretion. The physical gold so delivered may be imported into China by any qualified entity commissioned by the Exchange, or transited without restriction to any other country in the world.

III. Market Performance and Development Outlook of the International Board

As of November 2014, international members have traded more than 100 metric tons of gold in aggregate with a total turnover of around RMB 25 billion; imported gold tipped in at around 12 metric tons, and a total of 15 metric tons of gold have been deposited into the International Board Certified Vault. The market functions of the International Board are beginning to take root and contribute positively to the national economy. As is widely expected, the International Board has shown a promising start, but SGE’s internationalization initiative has just taken its first step, more efforts and time will be needed to realize the full market functions and economic impacts of the International Board.

1. Strengthen international cooperation and seek mutual benefits.

SGE and CME have recently signed a Memorandum of Understanding with regards to future cooperation efforts. As a perennial major consumer of gold and a close neighbor of China, India will undoubtedly become one of SGE’s most important partners in the coming years. SGE looks forward to forming close partnerships with the Indian market.

2. Attract more foreign entities and investors to participate.

At present, a large number of international organizations have expressed their strong desire to join in the SGE and the Exchange itself has started the admission process for a second group of international members. Looking ahead, SGE will continue to admit competitive foreign entities as its members in accordance with market needs, and will allow international members to conduct brokerage services when the time is ripe and accelerate the preparatory steps for the eventual admittance of foreign individual investors.

3. Further tap into market potentials and improve investor service.

In the future, the SGE will continue to optimize and enrich its range of bullion products, gradually open its silver, platinum, palladium and other precious metals products as well as price asking products and derivatives such as forwards and options to international investors. Furthermore, the SGE will focus on enhancing its transit and leasing businesses, gradually roll out foreign currency-based collateral services and FX swaps, accept offshore funds from more varied sources for International Board transactions, further improve the financial services offered to international members and customers in regards to account opening and cross-border funds transfers, provide customized and streamlined financial solutions to international members, and, by adopting a top-down design, offer exceptional and expedient services to international investors.


Mr. Xu Luode, Bachelor of Economics and senior accountant, is the Chairman of Shanghai Gold Exchange. He is also the Vice Chairman of China Gold Association, the Vice Chairman of China Payment and Settlement Association, the Executive Member of China Finance Society, and the Executive Member of China Numismatic Society.

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




This is interesting:  (another slap on the wrist?)


(courtesy Wall Street Journal/ GATA)



Big banks face scrutiny over pricing of metals


By Jean Eaglesham and Christopher M. Matthews
The Wall Street Journal
Monday, February 23, 2015

U.S. officials are investigating at least 10 major banks for possible rigging of precious-metals markets, even though European regulators dropped a similar probe after finding no evidence of wrongdoing, according to people close to the inquiries.

Prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum, and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday.

HSBC also said the Justice Department sought documents related to the antitrust investigation in November. The two probes “are at an early stage,” the bank added, saying it is cooperating with U.S. regulators.

Also under scrutiny are Bank of Nova Scotia, Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Societe Generale SA, Standard Bank Group Ltd., and UBS AG, according to one of the people close to the investigation. …

… For the remainder of the report:






And now zero hedge discusses the above story:



Ten Banks, Including JPM, Goldman, Deutsche, Barclays, SocGen And UBS, Probed For Gold Rigging


No matter how many times the big banks are caught red-handed manipulating precious metals, some failed former Deutsche Bank prop-trader (you know who you are) will take a vociferous stand based on ad hominemattacks and zero facts that no, what you see in front of you is not precious metal rigging at all but a one-off event that has nothing to do with a criminal banking syndicate hell bent on taking advantage of anyone who is naive and dumb enough to still believe in fair and efficient markets.

The last time this happened was in November when we learned that “UBS Settles Over Gold Rigging, Many More Banks To Follow“, and sure enough many more banks did follow, because in Europe, where the stench of gold market manipulation stretches far beyond merely commercial banks, and rises through the central banks, namely the BOE and ECB, culminating with the Head of Foreign Exchange & Gold at the BIS itself, all such allegations have to be promptly settled or else the discovery that the manipulation cartel in Europe involves absolutely everybody will shock and stun the world, which heretofore was led to believe that such things as gold market (not to be confused with Libor or FX) manipulation only exist in the paranoid delusions of a few tinfoil fringe-blogging lunatics.

However, as usually happens, someone always fails to read the memo that when it comes to gold-market manipulation one must i) find nothing at all incriminating if one is a paid spokesman for the entities doing the manipulation such as former CFTC-sellout Bart Chilton or ii) if one can’t cover it, then one must settle immediately or else the chain of revelations will implication everyone.

This time, that someone is the US Department of Justice, which as the WSJ just reported, is investigating at least 10 major banks for possible rigging of precious-metals markets. The DOJ is shockingly doing so “even though European regulators dropped a similar probe after finding no evidence of wrongdoing, according to people close to the inquiries.” Of course, the reason why said probe was dropped in Europe is because it would have implicated virtually the entire trading desk at the biggest and most important European bank: Deustche Bank, as well as the biggest bank in Switzerland, UBS and UK’s own Barclays, reveal a manipulation cartel rivaling even that of Libor. And once traders at the commercial banks turned sides and squealed for the prosection, well then it would be the central banks’ turn next. Which is why it was imperative to bring this investigation to a quiet end.

But not in the US.

According to the WSJ, “prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday.

HSBC also said the Justice Department sought documents related to the antitrust investigation in November. The two probes “are at an early stage,” the bank added, saying it is cooperating with U.S. regulators.

Who is involved in this latest gold-rigging scandal? Why everyone! … which makes it immediately obvious why the European regulator had to promptly cover up the whole affair. Under scrutiny are Bank of Nova Scotia , Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Société Générale SA, Standard Bank Group Ltd. and UBS AG , according to one of the people close to the investigation.

Robert Hockett, a law professor at Cornell University, said it is “not particularly surprising” that the Justice Department is plowing ahead despite the decision by European regulators. Recent scrutiny of big banks’ operations in the physical commodities markets and criticism of the Justice Department’s financial-crisis track record make it “quite understandable” that the agency would investigate allegations of precious metals price-rigging.


Last year, the FCA fined Barclays £26 million ($40.2 million) for lax controls after one of its traders allegedly manipulated the gold fix at the expense of a client.


Swiss regulator Finma settled last year allegations of foreign-currency manipulation with UBS. The regulator said it found “serious misconduct” among precious-metals traders at UBS, including “front running,” or trading ahead of, the silver-fix orders of one client. A spokeswoman for UBS, which said at the time that it “instituted significant cultural and compliance changes,”declined further comment.

You mean to say that the banks that were for decades rigging Libor… and FX… and bonds… and stocks… oh, and gold, were let go with a slap on the wrist and a promise to “change their ways” and not to do it again?  Yup, that’s exactly right.

So what happens next? Well, we finally will find just how much of a banker-controlled muppet the so-called US attorney general truly is. Recall that a week ago hegave his subordinates 90 days to being cases against individuals for their role in the financial crisis.

Well here is the perfect opportunity.  Should Holder let this latest mass criminal ring go without any incarecration, one can officially stick a fork in the US justice system, which is meant for everyone, but the rule-flouting bankers who can clearly get away with absolutely anything.

As for the rigging in the gold market, rigging which begins with the lowliest prop-traders at Deutsche Bank and involves every single central bank and High Frequency trading outfit and is now a proven fact, we have explained over the years and thousands of times just how to end it all, so instead of wasting readers’ time on this topic yet again, here are just two very simple solutions how to fix this one particular market:


So simple, even the most corrupt US Attorney General caveman can do it.







(courtesy John Embry/Eric King/Kingworldnews?



Greece can’t pay but EU can’t let Greece go, Embry tells KWN


3:16p ET Tuesday, February 24, 2015

Dear Friend of GATA and Gold:

Greece can’t pay its European Union creditors but the EU can’t let Greece go because default would wreck the EU banking system, Sprott Asset Management’s John Embry tells King World News today, adding that nothing about the Greek situation has been solved. An excerpt from Embry’s interview is posted at the KWN blog here:


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


Sprott Money interviews Hugo Salinas Price


(courtesy Sprott Money/GATA/Hugo Salinas Price)


Sprott Money News interviews Hugo Salinas Price on silver’s return as money


11:25p ET Monday, February 23, 2015

Dear Friend of GATA and Gold:

In an interview with Geoff Rutherford of Sprott Money News, Hugo Salinas Price, president of the Mexican Civic Association for Silver, describes his plan for introducing an undenominated silver coin for savings and emergency money in Mexico. He adds that countries buying gold, as Russia and China are, are preparing for war, if one that is being forced on them by Western meddling, and don’t want to have to rely on the currency of a potential enemy. The interview with Salinas Price is posted as both audio and text at the Sprott Money Internet site here:


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




Bank of England denies secret futures trading on CME Group exchanges in U.S.


11a ET Tuesday, February 24, 2015

Dear Friend of GATA and Gold:

Bank of England Governor Mark Carney today told the Treasury Committee of the House of Commons that the bank is not participating in CME Group’s program by which central banks receive discounts for their secret trading in all major U.S. futures markets.

The CME Group’s “central bank incentive program” is described here:




Carney’s denial came in response to a question from committee member Steve Baker, Conservative for Wycombe in England.

The exchange can be viewed at the 11:38:50 mark of the video of the hearing at Parliament’s Internet site here:


While no mainstream financial news organizations will question central banks about their secret trading in the markets, at least the issue seems to have come to the attention of some elected officials in Britain.

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



Mother Nature always prevails with “re sets”!



This past week my sister flew in to see us for a few days.  I had not seen her in a couple of years so it was great to catch up and spend some face time. She had not been to see us since we returned from Costa Rica and since the wildfire took our home in 2011.  We drove through the burn zone to show her how large it was and how extensive.  It’s been nearly a year since I had driven through simply because I don’t really like the memory and how depressing it is to see.  This past Friday was different, there are literally MILLIONS of new pine saplings sprouting up everywhere!  It took three years but Mother Nature has not failed us once again.
  It is in this theme I’d like to write today.  Without going into the mechanics and logic of “why” or really even how the current Ponzi schemes will fail, I will assume that you understand the current “dollar system” is untenable, unfair, unstable and will fail in very grand fashion.  If you do not believe this, you might stop reading here.  If you don’t believe this and do continue to read, the following math will be quite scary but is correct in both numbers and logic.
  After “failure”, after a wildfire, forests regrow saplings and new vegetation.  Is it a miracle?  Yes, absolutely yes!  Is it something we should come to expect?  Again, yes.  The very same holds true for economies and financial systems.  After every popped bubble, after every deflationary default wave, hyperinflation and currency collapse, and even after every war …as long as humans still exist there will always be a new economy and financial system that “rises from the ashes”.  ALWAYS!
  Without trying to bore you, forests will not regrow if there is no rain nor sunshine.  Financial regrowth cannot flourish unless there is “money”, the equivalent of rain.  But we already have money now, plenty of it if not too much of it.  Globally, the world is glutted with central bank created “money”.  I would submit to you, there is far too much of it …and it is “poisonous”.  The fire hose spigots of money were opened in 2008, more and more of it was produced …but, it was “bad” money.  It is this revelation the world is now struggling with and why the BRICS and rest of the world are looking to move away from the dollar and towards gold, “clean” or even “good” money.  The important thing here is that gold is money you can trust no matter what language you speak or read, no matter what form of economy or government you have or what religion you practice.  Gold is “universal money” and this is the beauty of it!
  Doing just a little bit of math compared to today’s gold price of $1,200, we can see at what price level “gold” can (and will eventually) extinguish debt.  Let’s look at Greece for example.  They have just over $4 billion worth of gold in relation to $350 billion worth of debt.  Gold would need to be priced at nearly $100,000 for their debt to be covered by their gold holdings.  We could do the same exercise for the U.S., we supposedly have over 8,000 tons (262 million ounces), in order to cover $18 trillion worth of debt, gold would need to be priced at nearly $68,000 per ounce.  If we did the math on total obligations we arrive at an unthinkable number.  Covering all debt and derivatives outstanding brings us to a number with “lots of zeroes”, I won’t go there because too many brains will shut down from disbelief.
  I know what you might be thinking, “but gold isn’t money and who says the debt has to be ‘covered’?”.  You may be right but if debt isn’t covered by gold, then what is it covered with?  Another way of saying this and easier to understand it that the “debt must be paid back and if it isn’t …someone is going to lose a lot of money”.  Do you see how this works?  The “money” (debt currency) must have value in order to pay back the original loan, if it does not then there is a loser somewhere (the debt holder).  If the Treasury or the central bank wants to make good on the borrowed money, then by what means do they have?  The ONLY true asset that central banks hold is gold.  If this is the only thing they can truly extinguish their debt with, then we can do these calculations all over the world and with all central banks.
  Going another step forward and equating the financial to the natural, once the pyramid falls over, by necessity “something” will be needed to fill the black holes of default.  Can the Fed, the ECB, BOJ, Bank of England and all the rest just “print” to pay off the debts?  Can’t they just “give” money to banks or even drop it from helicopters and enrich the population?  They can try but the one thing they cannot do is “force the confidence” in this new money.  As I mentioned above, gold is THE only money with universal confidence and willfully rather than forcefully (as fiat is) accepted for transactional settlement.
  Fortunately, economic and financial collapse unlike a forest fire leaves production capacity and infrastructure intact…but, with new owners.  A soap factory will still be capable of producing soap.  The soap will still have value relative to other goods, however, after default there will be a new owner.  I have written many times regarding Harry Dent’s deflation/dollar is king theory and will not rehash it here except to say dollars are debt… debt is the core problem and dollars will lead, join and follow debt into this deflationary hole that he foretells of.  Dollars will need to be created in the $ trillions upon $ trillions to “settle” all of the trades outstanding, over $1.5 quadrillion of derivatives on top of $100 trillion of sovereign debt.
  Please remember this, we are talking about the “dollar price” of gold.  I am not saying your gold ounces will all of a sudden start to puff up like an excited horse on steroids and become bigger than an ounce.  What I am saying here is that the dollar is headed into oblivion.  It very well could be a number like $10 million per ounce turns out to be ridiculously low!  This entire saga is and has been about the dollar and its forced global use.  Do not write me to say this is ridiculous as all historical fiats have gone to zero …which means they went “no offer” in terms of gold.  Simply put, gold has gone to infinity in all historical fiat currencies, the dollar will ultimately be no different.
  Several countries were bombed, toppled and their rulers murdered because they tried to move off of the dollar standard and toward gold.  Can this happen were Russia to move off of using dollars and ratio back the ruble?  What about the Chinese?  Or better yet, what about the BRICS nations …and if they are followed by some 135 other countries?  What about the Middle East’s new gold dinar?  Will they go along with the paper markets of West valuing gold and thus their money?  Gold is being remonetized right before our eyes, not by the U.S. but by the rest of the world.  Western paper markets where 100 paper ounces are sold for every one real ounce will be exposed as the frauds they are, foreigners will see to it.  (After penning this piece, it looks like our regulators may try to get out in front of this but I’m not holding my breath) http://www.zerohedge.com/news/2015-02-23/ten-banks-including-jpm-goldman-deutsche-barclays-socgen-and-ubs-probed-gold-rigging
  As I started with, Mother Nature and human nature will together decide and price “where” and at what level “money” will be priced at.  They will also decide what is “good money and bad”, what to use and what not to use.  We are now in my opinion well past the point in time where the U.S. can militarily force the rest of the world to use dollars.  If the powers in the U.S. do not believe this then war will follow, may God help us all and all bets are off.  If we somehow do avoid war, the world will because of human nature, soon demand fair money with which to settle…and no longer trade with those who refuse.  Just as the millions of little pine saplings have popped up in the burnt forest need rain, gold will be a very key element to the regrowth of the world economy and financial systems!  Gold is honest settlement.  At the correct “price” it is plentiful enough to give the financial ground a good soaking to restart growth and commerce.  It’s merely Mother Nature’s way.  Her forest fire to cleanse the system of bad debt will be furious and complete, gold and silver will survive this intact.  Holding gold now will make you a charter member of the next global central bank, this is also Mother Nature’s way.  Regards,  Bill Holter


And now for the important paper stories for today:



Early Tuesday morning trading from Europe/Asia

1. Stocks mixed on major Asian bourses  / the  yen falls  to 119.47

1b Chinese yuan vs USA dollar/ yuan slightly strengthens  to 6.2551
2 Nikkei up 136.56 or 0.74%

3. Europe stocks mostly up  // USA dollar index up to 94.73/

3b Japan 10 year yield huge rise to .38%/ (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.69/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets.

3c Nikkei now  above 17,000/

3e The USA/Yen rate still  below the 120 barrier this morning/
3fOil: WTI 49.64 Brent: 59.39 /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 constant this morning for  WTI  and Brent

3k   Greece to provide list of reforms today to the Troika/


3l  Greek 10 year bond yield :9.30% (down 9 basis points in yield)

3m Gold at $1200.50. dollars/ Silver: $16.34

3n USA vs Russian rouble:  ( Russian rouble  up 1 rouble  per dollar in value)  63.15!!!!!!.  Ukraine’s UAH:27.80 flat from last Monday night

3 0  oil  into the 49 dollar handle for WTI and 59 handle for Brent

3p  Troika happy with Greece’s reform list


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  USA justice department investigating 10 major USA banks in the manipulation of gold and silver pricing

3s  rebel groups remove heavy weaponry ahead of meeting in France

3t  Humphrey Hawkins testimony by Janet Yellen tomorrow night

4. USA 10 yr treasury bond at 2.07% early this morning. Thirty year rate well below 3%  (2.67%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid




With Greece Swept Under The Rug, Focus Turns To Janet Yellen’s Congressional Testimony


There was an expectation that today’s receipt by the Troika of the revised Greek “reform proposal” would send risk and the EUR higher, which is probably precisely why nothing has happened so far, and US equity futures are unchanged ahead of what the HFT algos’ new attention focus is today, namely Yellen’s semi-annual testimony to Congress. As a result, the only thing that has seen notable strength this morning is the USD, which has surged to 119.50 against the Yen, and briefly pushed the EURUSD under 1.1300. which also means that WTI has also gone nowhere overnight and remains under $50. One wonders just what OPEC “rumor” those long crude will leak today.

Asian equities traded mixed following a lacklustre Wall Street close as participants await details on Greece’s reforms after missing yesterday’s deadline. Nikkei 225 (+0.74%) outperformed underpinned by a weak JPY while the ASX 200 (+0.2%) rose, led by basic materials in the wake of better than expected earnings from BHP Billiton (+2.5%). Hang Seng (-0.6%) fell for a 2nd day dragged lower by HSBC (-3.3%) after the Co.’s pre-tax profit fell by 56%. JGBs gained 9 ticks, as the long-end outperformed once again, supported by month-end durations adjustments and today’s well received 40yr auction.

European equities traded mostly lower albeit modestly so in what has been a relatively light session thus far from a macro perspective. In terms of the latest developments for Greece, according to an EU source, the EU Commission is said to believe that the list submitted by Greece is sufficient enough to be a good starting point to move forward. This positive sentiment has subsequently filtered through to Greek assets with the ASE higher by 6.5% and Greek 3yr yield lower by 116bps at the time of writing. Elsewhere, European participants now await Fed Yellen’s semi-annual testimony at 1500GMT, while on a sector specific basis for Europe, telecom names lead the way lower after Vodafone were downgraded at BofAML. Bunds also trade modestly lower this morning, although volumes are particularly light ahead of upcoming key risk events.

In FX markets, antipodeans slumped overnight led by NZD in the wake of tame New Zealand inflation data (Q1 2yr Inflation Expectation 1.80% vs. Prev. 2.06%), with AUD also on the back foot in sympathy. Consequently, NZD/USD and AUD/USD broke key technical levels at 0.7500 and 0.7800, with losses in AUD/USD stemmed by the 0.7750 long-term support level. Elsewhere, GBP has been supported by comments from BoE’s Forbes who said gradual increases in interest rates should support the economy in the UK, adding that low inflation present at the moment will fade quickly. These comments subsequently saw EUR/GBP print a fresh 7yr low, while GBP/USD pared its gains as a result of the broadly stronger USD, alongside the move higher in US yields and USD/JPY breaking above 119.42; the high seen on 17th and 18th Feb. Also from a UK perspective, today saw BoE’s Carney testify at the Treasury Select Committee hearing but these comments were a reiteration of the February QIR. Furthermore, BoE’s Weale was also on the wires saying the BoE may have to lift rates before the timeframe which markets are currently expecting, this saw a brief spell of upside in GBP/USD before being pared as these comments were largely a reiteration of MPC member comments over the past few weeks.

In commodities markets, WTI crude futures have held below USD 50/bbl overnight after yesterday’s sharp-sell off, ahead of today’s weekly API crude oil inventory report, with the stronger USD also weighing on prices. In metals markets, despite spot gold initially holding on to yesterday’s gains amid dampened risk sentiment in the US, prices have now ebbed lower alongside movements in the USD. Elsewhere, Copper prices saw a mild decline overnight with the world’s largest buyer China still away for holidays and LME inventories rising to its highest in over a year of 299,675 tonnes.


Bulletin Headline Summary from Bloomberg and RanSquawk

  • The Greek reform proposal has now been formally received with EU sources suggesting the list is sufficient enough to be a good starting point to move forward
  • The stronger USD is dictating a bulk of the price action so far while EUR/GBP hit a 7yr low following hawkish comments from BoE’s Forbes
  • Elsewhere, European participants sit on the sidelines ahead of Fed Yellen’s Semi-Annual Testimony at 1500GMT. A full preview of the event can be viewed here
  • Treasuries decline before week’s auctions begin with $26b 2Y notes; WI yield 0.645% vs 0.54% in January, 0.703% in Dec.; Yellen due to begin testimony before U.S. Senate Banking Committee at 10am ET.
  • Greece moved closer to winning an extension of financial aid after the head of the group of euro-region finance ministers said creditors were favorable toward the government’s package of new economic measures
  • Bank of England Governor Mark Carney said policy makers can look beyond the current bout of weak inflation as he pledged to return price growth to target “within a reasonable horizon”
  • The U.S. Justice Department is investigating whether the world’s biggest banks manipulated prices of precious metals such as silver and gold, according to people with knowledge of the matter
  • Rebel groups said they are withdrawing heavy weapons from the conflict zone in eastern Ukraine as the foreign ministers of France, Germany, Russia and Ukraine gather in Paris to discuss the cease-fire agreement
  • U.S. Senate Majority Leader Mitch McConnell proposed legislation that separates the immigration issue from funding for Department of Homeland Security after the Senate failed again to advance a House-passed bill that linked the two matters
  • Sovereign 10Y yields mixed. Asian stocks gain, European stocks mixed; U.S. equity-index futures steady. Crude and copper higher, gold declines


Central Banks

  • 9:00am: ECB’s Draghi speaks in Frankfurt
  • 10:00am: Fed’s Yellen testifies to Senate committee
  • 1:45pm: Bank of Canada’s Poloz speaks in London, Ontario
  • 1:00pm: U.S. to sell $26b 2Y notes

DB’s Jim Reid concludes the overnight summary


The first (and main market moving) part of Yellen’s semi-annual testimony starts today at 10am EST / 3pm London and is to the Senate Banking Committee. Given the February reversal in US rates, which has seen the 10yr rise a little under 50bps in less than a month, it will be interesting to see whether Yellen alters the message much from that in the January FOMC minutes which were read as being broadly dovish. On a call yesterday, DB’s Peter Hooper argued that whilst Yellen may not vary too much from the recent minutes she may be slightly more hawkish, possibly attempting to downgrade the significance of the FOMC’s word of the moment – ‚patience? – without directly modifying it, possibly with an eye towards a more meaningful change in March. This view doesn’t seem too far off the consensus in the market with the general bias being towards expecting a slightly more hawkish Yellen then we have seen on previous outings.

We’re not quite so sure she’ll lean towards a more hawkish bent. Obviously the most recent strong employment report gets a lot of attention but the reality is that it’s been a disappointing year for US data so far. Positive economic surprises are currently running at the lowest levels since the middle of 2012 which isn’t getting much focus at the moment. Maybe bad weather is being used as a factor. Also yesterday saw yet another surprise central bank easing as the Bank of Israel cut rates from 0.25% to 0.1%. This brings our tally of countries easing in 2015 to 40 (including 19 under the ECB). Indeed we think at least 10 of these were a surprise and although the ECB wasn’t a surprise you can say that they went beyond what the market was expecting. Surely these international moves have to influence the Fed? In a beggar thy neighbour world they are likely to find it difficult to act in the same way as they planned without conceding ground in the global currency war. So one could argue that doing nothing is slightly tightening policy relative to many other regions. Anyway all eyes on Mrs Yellen today.

Turning our attention to Greece now, it was actually a fairly quiet day yesterday with the notable news being that Greece is now expected to present a list of reform measures to the Eurogroup this morning after an initial draft shown last night to the IMF, ECB and European Commission. The proposals are expected to be assessed by finance ministers today so we should start to see headlines as the day goes on. The general rhetoric from Dutch finance minister Dijsselbloem was encouraging after he was quoted as saying on Bloomberg that ‘I am very confident’ and that the ‘Greek government has been very serious, working very hard the last couple days’. An FT article noted a Greek government official as saying that the measures will include raising revenues through ‘more progressive taxes and crackdowns on tax fraud and smuggling’ however the submission could keep the government’s promise to spend €1.9bn on social services payments as well as taxpayer relief measures. Although approval of the measures would be a welcome and positive step forward, the detailed and likely more debated negotiations – for which Greece has been set an end of April deadline – will then only just begin.

Markets in Europe yesterday played catch-up to the better news on Friday night around Greece with equity markets closing higher. Indeed, the Stoxx 600 (+0.74%), DAX (+0.73%) and CAC (+0.65%) all finished firmer. There was a better sentiment in peripheral government bond markets too. 10y yields in Spain (-8.1bps), Italy (-8.1bps) and Portugal (-9.1bps) all tightened. In fact 10y Portugal sovereign bonds briefly joined Spain and Italy as trading tighter than equivalent maturity US Treasuries, before closing just wider after Treasuries rallied in the US session. Elsewhere equity markets in Greece were closed for a public holiday, however both 3y (-191bps) and 10y (-65bps) yields finished tighter.

In terms of data yesterday, German IFO prints disappointed relative to expectations but continued to trend positively. The IFO business climate print for February of 106.8, was up a touch higher from January (106.7) but came in short of the 107.7 expected. The reading was, however, the fourth consecutive monthly increase. Meanwhile the expectations print of 102.5 also came in below expectations (103.0), but again rose from 102.0 previously whilst the current assessment print declined 0.4pts to 111.3 (vs. 112.5 expected). Our colleagues in Europe noted that that at these levels, the IFO expectations is pointing towards a +0.5% qoq GDP growth in Q1 whilst the composite PMI points to +0.4% – both of which is an upside risk to their +0.3% forecast.

Ahead of Yellen’s speech today, equity markets in the US yesterday were relatively subdued with the S&P 500 more or less unchanged (-0.03%). There was a more notable bid for Treasuries however as the 10y benchmark yield tightened 5.4bps to close at 2.057%. A weaker day for macro data perhaps supported the move. The Chicago Fed National activity index rose to 0.13 in January, however was slightly behind expectations of 0.15. Existing home sales disappointed. The -4.9% mom print was weaker than the -1.8% expected and the annualized 4.82m rate was the lowest since April 2014. Finally the Dallas Fed manufacturing activity index declined sharply to -11.2 in February from -4.4 in January. The print was in fact the lowest since April 2013. Finally comments out of the Fed’s Lacker lent further support to the hawks yesterday. Lacker was noted as saying that the FOMC could raise rates in April or June regardless of whether or not it keeps the ‘patience’ language as well as saying that the ‘statement is well enough qualified that we’d have flexibility to move’.

Just wrapping up the rest of the market moves yesterday, oil markets declined as WTI (-2.68%) and Brent (-2.19%) both fell. The decline for WTI to $49.45/bbl in fact marked the fourth consecutive down day falling nearly $5 from the recent highs. Oil did however spike around 2.5% off the intraday lows at one point, before quickly giving up those gains again, after reports on the FT quoting the Nigerian oil minister as saying that OPEC have discussed holding an emergency meeting in the face of declining prices. A report published later on Bloomberg however downplayed the comments saying that there had been no such discussions and that a meeting would require approval from all 12 members.

Quickly refreshing our screens this morning, bourses in Asia this morning are largely trading firmer as we go to print. The Nikkei (+0.52%), Kospi (+0.38%) and ASX (+0.32%) are all higher whilst the Hang Seng (-0.58%) has weakened. Credit markets this morning in Asia are largely unchanged.

Away from the obvious focus on Greece and Yellen today, attention this morning will be on Germany where we get the Q4 GDP print and also on the Euro-area where we get the final CPI reading. As well as this, focus will also be on France where we get confidence indicators with both the business and manufacturing prints. Over in the US this afternoon we get the S&P/Case-Shiller house price index along with the services PMI, consumer confidence and Richmond Fed manufacturing index. So a busy day ahead and one where I just might have to stay late to bring myself up to speed with the action!!!





The EU kicked the can for another 4 months:


(courtesy zero hedge)



Troika “Happy” With Revised List Of Greek Reform Promises: Full Varoufakis Letter




So one can say that can has been kicked for another four months.

* * *

There was the usual dollop of confusion yesterday, when the dispatch of the Greek list of reform proposals was delayed from Monday to Tuesday, after what in retrospect was the Troika throwing up all over the preliminary, very “broad terms” 3-pager (much like Congress did to the original Hank Paulson 3-page “blank check” term sheet).


Well, as it appears Greece did actually manage to sneak the revised list through in time just before midnight on Monday, yet another indication that someone was lying becase as the WSJ reported “Dijsselbloem said he received the list of reforms at 11:15 on Monday evening. That means Athens submitted the list in time,despite an announcement by the Greek government on Monday night that it wouldn’t send the measures until Tuesday morning. Greek Finance Minister Yanis Varoufakis also sent the list of reforms to the commission, the ECB and the IMF” aka the Troika, although in Greece “fish has now been renamed to meat.”

As a result, as DPA and various other outlets report, the Troika is now “happy” with the Greek reform list.According to the WSJ, the “list of proposals submitted by the Greek government on how to overhaul the country’s economy appears to be in line with the principles set out by Eurozone finance ministers”

However, as also expected, the “bloc’s governments will require more detail on the proposals before giving Greece more money and possibly before approving its extension request.”

“In the commission’s view, this list is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review, as called for by [eurozone finance ministers],” the official said. “We are notably encouraged by the strong commitment to combat tax evasion and corruption.” However, Jeroen Dijsselbloem, the Dutch finance minister who leads meetings of the eurozone ministers, said the proposals represented “just a first step.”

In other words, once Greece started down the path of concessions merely to obtain a bailout extension, something it swore it would never even contemplate, there is no reason to believe it will end any time soon especially as the threat of a terminal bank run hanging over the head of Tsipras.

So what happens next?

Eurozone finance ministers will hold a phone conference at 13:00 GMT to discuss the measures, Mr. Dijsselbloem said, and, if they pass their scrutiny, approve the extension. That means national parliaments in countries including Germany and Finland can vote on the changes to the bailout program before it expires on Saturday.


The Greek list is six pages long and appears to set out the proposed measures in satisfactory detail, a European official who had seen the document said. Notably, the proposals include measures to “unify and streamline” Greece’s pension policy, the official said—despite resistance from the government in Athens until now to make further changes to its pension system. The government also pledged to fight early retirement, the official said, but also laid out plans to create a “basic income scheme” for early retirees, which would cushion some of the hardship brought on by the changes.

So what are the revised Greek reform promises? Here are some of the key proposals:

  • Work toward creating a new culture of tax compliance.
  • Reform VAT policy, administration and enforcement.
  • Modernising the income tax code.
  • Resolutely enforce and improve legislation on transfer pricing.
  • Greece will modernise the tax and custom administrations benefiting from available technical assistance.
  • Work toward drastically improving the efficiency of central and local government administered departments.
  • Validate benefits through cross checks within the relevant authorities and registries.
  • Phase out charges on behalf of ‘third parties’ (nuisance charges) in a fiscally neutral manner.
  • Unify and streamline pension policies and eliminate loopholes and incentives that give rise to an excessive rate of early retirements throughout the economy.

Good luck with any/all of these.

Furthermore, in the entire qualitative list of egregious promises none of which will be satisfied, there is not a single number to anchor any expectation, not a single benchmark, target milestone or timeline. In short, a big-picture bulletin of promises which the Troika will gladly accept just to kick the can for another 4 months now that the Tsipras government which was given just enough rope with which to hang itself, has been reduced to a shell, and merely an extension of the Samaras government, having reneged on virtually all its promises to the people.

As for the Syriza government’s “mandate”, what has happened over the past week is that the new government’s list of unfulfillable promises to the Greek people has been replaced with a new list of unfulfillable promises to the Troika.

In other words, back to square one. Only this time Greece has even freely available cash than ever before!


Just for the record, here is the letter of more promises Varoufakis sent to the Troika, pardon, Institutions.  (see zero hedge for the letter)




The approval by the EU:


(courtesy zero hedge)


Greek Bailout Extension Approved By Euroarea



Just over a week ago, Yanis Varoufakis would have crushed and mangled anyone who would dare suggest that Greece would extend its current bailout program,because, the myth went, the new Syriza government had a mandate to end the Troika (since renamed to “Institutions”) and to crush the Memorandum (aka “existing bailout programme”). Since then much has changed, and confirming that the new government is really the old government, Europe can now rejoice, because as Bloomberg blasted moments ago:


Which means that as the “valiant” in words, if not deeds, new Greek government rolls over, the DAX is about to jump to new all time highs making rich Germans even richer. As for Greeks, not so much






My Goodness!!  The draft sent by the Greeks was not written by Greece at all but by the E.C.


Greek citizens are just going to love this:


(courtesy zero hedge)




The Stunning Reason Why The Eurogroup Rushed To Approve The “Greek” “Reform Package”

As we noted earlier today, there was some confusion over the plight of the Greek reform proposal document, which initially was said to have been delayed until today, only for the Troika, pardon, Institutions, to flip around and say they had actually received it before midnight on Monday. How could the two be possible? Courtesy of Yannis Koutsomitis, who had the simple but brilliant idea of looking at the properties tab in the leaked Varoufakis draft of the agreed to proposals, we now know.

As it turns out, the reason why not only the Troika received an agreed to version of the Greek reform proposals “before midnight on Monday”, but rushed these through with a favorable agreement today, is that, drumroll, the European Commission drafted the entire letter!


All Yanis Varoufakis had to do was agree to the letter that the Troika had agreed in advance was agreeable to it, and send it back. Don’t believe us? Feel free to play around the original pdf “leak” found here.

As for the actual author of the “Greek” reform package, a document which was created at 10:09 pm on Monday, February 23, 2014 (so technically, yes, before midnighton Monday) was one Declan Costello of the European Commission.

Who is Declan? Here is his bio courtesy of the CEPR’s Policy Portal, VOX:

Declan Costello


Declan Costello is an Economist working in the Directorate General for Economic and Financial Affairs of the European Commission since 1991. Currently he is Head of Unit in the department responsible for the ‘Coordination of structural refroms and of the economic service, which is involved in developing the economic framework for analysing progress with structural reforms at EU and Member State level towards raising growth potential (the so-called Lisbon strategy), and developing EU policies in response to the economic crisis. Prior to this, he was Head of Unit dealing with economic analysis of labour markets and social welfare systems, where he co-ordinated a project to make projections on the economic and budgetary impact of ageing populations for EU Member States. He has a degree in economics from Trinity College Dublin and a Masters degree for the College of Europe, Bruges. Representing the European Commission, Mr. Costello is also an alternate member of the Economic Policy Committee (EPC) which advises and prepares the EU’s Council of Economics and Finance Ministers (ECOFIN).



Behold the “new Greece” – exactly the same as the old Greece?


But the biggest joke in all this? As the FT’s Peter Spiegel revealed, the IMF, which is an integral part of the Institutional Troika, now pretends to not be on board with the very letter it drafted, just to give the process some aura of legitimacy.

Because the tragicomedy must go on!






The whole story behind the huge failure of Syriza:


(courtesy zero hedge)


Revolt In Athens: Syriza Central Committee Member Says “Leadership Strategy Has Failed Miserably”


Not everybody is ignoring that fact that just days after the new Prime Minister promised the Greek population on prime time TV that the loathed bailout program wouldn’t be extended and that Greece would have a fresh start – i.e., the mandate it was elected on – one without austerity, Greece folded on virtually every demand, to the point where the European Commission may itself have drafted the “reform agreement” that the Greek finance minister was said to have created.

One person who may be starting a splinter revolt within Syriza itself is Stathis Kouvelakis, a member of the central committee of the leftist organization, a teacher of political theory at King’s College, and the latest to demonstrate that the Syriza facade of cohesive acceptance of the past week’s “negotiations”, is starting to crumble.

From his post “The Alternative In Greece“, translated by Wayne Hall, and appearing first in Jacobinmag.

The strategy of Syriza’s leadership has failed miserably. But it’s not too late to avert total defeat.

Let us begin with what should be indisputable: the Eurogroup agreement that the Greek government was dragged into on Friday amounts to a headlong retreat.

The memorandum regime is to be extended, the loan agreement and the totality of debt recognized, “supervision,” another word for troika rule, is to be continued under another name, and there is now little chance Syriza’s program can be implemented.

Such a thorough failure is not, and cannot be, a matter of chance, or the product of an ill-devised tactical maneuver. It represents the defeat of a specific political line that has underlain the government’s current approach.

Friday’s Agreement

In the spirit of the popular mandate for a break with the memorandum regime and liberation from debt, the Greek side entered negotiations rejecting the extension of the current “program,” agreed to by the Samaras government, along with the €7 billion tranche, with the exception of the €1.9 billion return on Greek bonds to which it was entitled.

Not consenting to any supervisory or assessment procedures, it requested a four-month transitional “bridge program,” without austerity measures, to secure liquidity and implement at least part of its program within balanced budgets. It also asked that lenders recognize the non-viability of the debt and the need for an immediate new round of across-the-board negotiations.

But the final agreement amounts to a point-by-point rejection of all these demands. Furthermore, it entails another set of measures aimed at tying the hands of the government and thwarting any measure that might signify a break with memorandum policies.

In the Eurogroup’s Friday statement, the existing program is referred to as an “arrangement,” but this changes absolutely nothing essential. The “extension” that the Greek side is now requesting (under the “Master Financial Assistance Facility Agreement”) is to be enacted “in the framework of the existing arrangement” and aims at “successful completion of the review on the basis of the conditions in the current arrangement.”

It is also clearly stated that

only approval of the conclusion of the review of the extended arrangement by the institutions … will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits [these are the 1.9 billion of profits out of Greek bonds to which Greece is entitled]. Both are again subject to approval by the Eurogroup.

So Greece will be receiving the tranche it had initially refused, but on the condition of sticking to the commitments of its predecessors.

What we have then is a reaffirmation of the typical German stance of imposing — as a precondition for any agreement and any future disbursement of funding — completion of the “assessment” procedure by the tripartite mechanism (whether this is called “troika” or “institutions”) for supervision of every past and future agreement.

Moreover, to make it abundantly clear that the use of the term “institutions” instead of the term “troika” is window-dressing, the text specifically reaffirms the tripartite composition of the supervisory mechanism, emphasizing that the “institutions” include the ECB (“against this background we recall the independence of the European Central Bank”) and the International Monetary Fund (“we also agreed that the IMF would continue to play its role”).

As regards the debt, the text mentions that “the Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.” In other words forget any discussion of “haircuts,” “debt reduction,” let alone “writing off of the greater part of the debt,” as is Syriza’s programmatic commitment.

Any future “debt relief” is possible only on the basis of what was proposed in the November 2012 Eurogroup decision, that is to say a reduction in interest rates and a rescheduling, which as is well-known makes little difference to the burden of servicing debt, affecting only payment of interest that is already very low.

But this is not all, because for repayment of debt the Greek side is now fully accepting the same framework of Eurogroup decisions of November 2012, at the time of the three-party government of Antonis Samaras. It included the following commitments: 4.5% primary surpluses from 2016, accelerated privatizations, and the establishment of a special account for servicing the debt — to which the Greek public sector was to transfer all the income from the privatizations, the primary surpluses, and 30% of any excess surpluses.

It was for this reason too that Friday’s text mentioned not only surpluses but also “financing proceeds.” In any case, the heart of the memorandum heist, namely the accomplishment of outrageous primary surpluses and the selling-off of public property for the exclusive purpose of lining lenders’ pockets, remains intact. The sole hint of relaxation of pressure is a vague assurance that “the institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.”

But it was not enough that the Europeans should reject all the Greek demands. They had, in every way, to bind the Syriza government hand and foot in order to demonstrate in practice that whatever the electoral result and the political profile of the government that might emerge, no reversal of austerity is feasible within the existing European framework. As European Commission President Jean-Claude Juncker stated, “there can be no democratic choice against the European treaties.”

And the provision for this is to take place in two ways. Firstly, as indicated in the text: “The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.”

So no dismantling of the memorandum regime either (“rollback of measures”), and no “unilateral changes,” and indeed not only as regards measures with a budgetary cost (such as abolition of taxes, raising of the tax-free threshold, increases in pensions, and “humanitarian” assistance) as had been stated initially, but in a much more wide-ranging sense, including anything that could have a “negative impact” on “economic recovery or financial stability,” always in accordance with the decisive judgment of the “institutions.”

Needless to say this is relevant not only to the reintroduction of a minimum wage and the reestablishment of the labor legislation that has been dismantled these last years, but also to changes in the banking system that might strengthen public control (not a word, of course, about “public property” as outlined in Syriza’s founding declaration).

Moreover, the agreement specifies that

the funds so far available in the Hellenic Financial Stability Fund (HFSF) buffer should be held by European Financial Stability Facility (EFSF), free of third party rights for the duration of the MFFA extension. The funds continue to be available for the duration of the MFFA extension and can only be used for bank recapitalisation and resolution costs. They will only be released on request by the ECB/SSM.

This clause shows how it has not escaped the attention of the Europeans that Syriza’s Thessaloniki program stated that “seed money for the public sector and an intermediary body and seed money for the establishment of special purpose banks, amounting to a total in the order of €3 billion, will be provided through the HFSF’s so-called ‘cushion’ of around €11 billion for the banks.”

In other words, goodbye to any thought of using HFSF funds for growth-oriented objectives. Whatever illusions still existed regarding the possibility of using European funds for purposes outside of the straitjacket of those for which they had been earmarked — and even more that they should be placed under the Greek government’s jurisdiction — have thus been dispelled.

Defeat of the “Good Euro” Strategy

Can the Greek side possibly believe that it has achieved something beyond the impressive verbal inventiveness of the text? Theoretically yes, insofar as there are no longer any explicit references to austerity measures, and the “structural changes” mentioned (administrative reforms and a clampdown on tax evasion) do not pertain to this category, a modification which of course needs cross-checking against the list of measures that can be expected to emerge in the coming days.

But given that the target of the outrageous budgetary surpluses has been retained, along with the totality of the troika machinery of supervision and assessment, any notion of relaxation of austerity appears out of touch with reality. New measures, and of course stabilization of the existing “memorandum acquis” are a one-way street as long as the present regime prevails, is renamed, and is perpetuated.

It is clear from the above that in the course of the “negotiations,” with the revolver of the ECB up against its head and resultant panic in the banks, the Greek positions underwent near-total collapse. This helps to explain the verbal innovations (“institutions” instead of “troika,” “current arrangements” instead of “current program,” “Master Financial Assistance Facility Agreement” instead of “Memorandum,” etc.). Symbolic consolation or further trickery, depending on how you look at it.

The question that emerges, of course, is how we landed in this quandary. How is it possible that, only a few weeks after the historic result of January 25, we have this countermanding of the popular mandate for the overthrow of the memorandum?

The answer is simple: what collapsed in the last two weeks is a specific strategic option that has underlaid the entire approach of SYRIZA, particularly after 2012: the strategy that excluded “unilateral moves” such as suspension of payments and, even more so, exit from the euro, and argued that:

  • On the issue of the debt, a favorable solution for the debtor can be found with the concurrence of the lender, following the model of the London agreements of 1953 for the debts of Germany — ignoring of course the fact that the reasons the Allies behaved generously towards Germany do not in any way apply to the Europeans today vis à vis the Greek debt, and more generally the public debt of the over-indebted states of today’s EU.
  • Overthrow of the memoranda, expulsion of the troika, and a different model of economic policy (in other words implementation of the Thessaloniki program) could be implemented irrespective of the outcome of debt negotiations and, above all, without triggering any real reaction from the Europeans, above and beyond the initial threats, which were dismissed as bluffing. Indeed, half of the funding for the Thessaloniki program was envisaged as coming from European resources. In other words, not only would the Europeans not have reacted, but they would have generously funded the opposite policies they had been imposing for the last five years.
  • Finally, the “good euro” scenario presupposed the existence of allies of some significance at the level of governments and/or institutions (the reference here is not to the support from social movements or other leftist forces). The governments of France and Italy, the German social democrats, and finally, in a veritable frenzy of fantasy, Mario Draghi himself were from time to time invoked as such potential allies.

All of this came crashing down within the space of a few days. On February 4 the ECB announced the suspension of the main source of liquidity to Greek banks. The outflow that had already started rapidly acquired uncontrollable dimensions, while the Greek authorities, fearing that such a reaction would mark the commencement of the Grexit, didn’t take the slightest “unilateral” measure (such as imposition of capital controls).

The words “writing-off” of debt and even “haircut” were rejected in the most categorical manner possible by lenders who became enraged even hearing them (with the result that they were almost immediately withdrawn from circulation). Instead of their overthrow, it turned out that the only “non-negotiable” element was that of keeping the memoranda and supervision by the troika.Not a single country supported the Greek positions, above and beyond some diplomatic courtesies from those who wanted the Greek government to be able, marginally, to save face.

Fearing the Grexit more than it feared its interlocutors, entirely unprepared in the face of the absolutely predictable contingency of bank destabilization (the system’s classical weapon internationally for almost a century when faced by leftist governments), the Greek side was essentially left without any bargaining tools whatsoever. It found itself with its back to the wall and with only bad options at its disposal. Friday’s defeat was inevitable and marks the end of the strategy of “a positive solution inside the euro,” or to be more accurate “a positive solution at all costs inside the euro.”

How to Avert Total Defeat

Rarely has a strategy been confuted so unequivocally and so rapidly. Syriza’s Manolis Glezos was therefore right to speak of “illusion” and, rising to the occasion, apologize to the people for having contributed to cultivating it. Precisely for the same reason, but conversely, and with the assistance of some of the local media, the government has attempted to represent this devastating outcome as a “negotiating success,” confirming that “Europe is an arena for negotiation,” that it is “leaving behind the Troika and the Memoranda” and other similar assertions.

Afraid to do what Glezos has dared to do — i.e. acknowledge the failure of its entire strategy — the leadership is attempting a cover-up, “passing off meat as fish,” to cite the popular Greek saying.

But to present a defeat as a success is perhaps worse than the defeat itself. On the one hand it turns governmental discourse into cant, into a string of clichés and platitudes that is simply summoned up to legitimate any decision retrospectively, turning black into white; and on the other because it prepares the ground, ineluctably, for the next, more definitive, defeats, because it dissolves the criteria by which success can be distinguished from retreat.

To make the point through recourse to a historical precedent well-known to leftists, if the Treaty of Brest-Litovsk, under which Soviet Russia secured peace with Germany, accepting huge territorial losses, had been proclaimed a “victory,” there is no doubt that the October Revolution would have been defeated.

If, therefore, we wish to avert a second, and this time decisive, defeat — which would put an end to the Greek leftist experiment, with incalculable consequences for society and for the Left inside and outside this country — we must look reality in the face and speak the language of honesty. The debate on strategy must finally recommence, without taboos and on the basis of the congress resolutions of Syriza, which for some time now have been turned into innocuous icons.

If Syriza still has a reason for existing as a political subject, a force for the elaboration of emancipatory politics, and for contribution to the struggles of the subordinated classes, it must be a part of this effort to initiate an in-depth analysis of the present situation and the means of overcoming it.

“The truth is revolutionary,” to cite the words of a famous leader who knew what he was talking about. And only the truth is revolutionary, we may now add, with the historical experience we have since acquired.





Gazprom is now beginning to ship gas directly to eastern Ukraine:


(courtesy zero hedge)



Russia’s Gazprom Begins Shipping Gas Directly to East Ukraine



Rebel Leader Confirms Deal Reached With Russia

by Jason Ditz, February 19, 2015

A cold winter in Ukraine’s rebel east has gotten a bit more manageable today, with OAO Gazprom CEO Alexei Miller announcing that hiscompany will be shipping 12 million cubic meters per day into Donetsk and Luhansk.

Exactly how this is going to work, financially, for the world’s largest natural gas company is unclear. Miller said the shipments were made according to the existing purchase agreement with Ukraine’s Naftogaz monopoly.

But the shipments are going to rebel territory, outside of Naftogaz control, and Luhansk rebel leader Gennady Tsypkalov claimed to have reached a separate agreement with Russia on allowing Gazprom to sell to them.

Russian Premier Dmitry Medvedev had suggested earlier today that his government was considering “humanitarian aid” to the eastern rebels in the form of natural gas shipments, which may ultimately be the basis for Gazprom’s shipments.

Meanwhile, western Ukraine is struggling through a fresh natural gas shortage, as their offensives against the east badly damaged the pipelines through which the gas is shipped from Russia, effectively cutting their territory off from Gazprom shipments.







The UAH  or Hryvnia, the currency of the Ukraine collapses again to over 33.00 to the dollar as the country is in a total mess:


(courtesy zero hedge)





Former Ukraine Deputy PM Says “Another Coup Can Not Be Ruled Out” Among Currency Implosion, Central Bank Charges

A year or so on from the last coup in Ukraine, Ukraine’s former Prime Minister Sergey Arbuzov told TASS, with growing popular discontent, “another state coup can’t be ruled out in Ukraine.” As the cease-fire deal hangs torn and tattered in the Debaltseve winds, the nation is a mess: a new gas dispute looms as Gazprom demands up front payments; capital controls have been tightened as the $17.5bn IMF loan may not be enough; and the central bank governor faces prosecution as the economy craters. All of these factors have driven massive outflows from Ukraine and the Hryvnia has crashed to over 33 to the USD – a record high (and 70% devaluation from the last coup).

The Hryvnia has crashed…


As EmergingEquity reports, another state coup can’t be ruled out in Ukraine, with growing popular discontent, including among the leaders of the last year’s protests, Ukraine’s former Prime Minister Sergey Arbuzov told TASS on Friday.

“It is not ruled out that another state coup might occur in Ukraine,” Arbuzov said following a meeting of the Center for Studies of Economic and Socio-cultural Development of CIS Countries, Central and Eastern Europe.


“Maidan leaders and field commanders are voicing their discontent more and more loudly,” he said.


The current situation in Ukraine is characterized by an atmosphere of fear and repressions, Arbuzov said, adding that “people are afraid to voice their opinion.”


Sergey Arbuzov was the Prime Minister of Ukraine between January 28, 2014 and February 27, 2014 following the resignation of Mykola Azarov. Prior to that, he was the governor of Ukraine’s Central Bank.

*  *  *

But don’t worry, Britain’s David Cameron is sending “military advisers” to help…

British military personnel are to be deployed to Ukraine over the next few weeks to provide advice and training to government troops, David Cameron has said.


The announcement came as the prime minister stated that Britain would be “the strongest pole in the tent” over the crisis, arguing for tougher sanctions against Moscow if Russian-backed militias in eastern Ukraine failed to observe the provisions of the ceasefire agreed earlier this month with the Ukrainian president, Petro Poroshenko.


Giving evidence to the Commons liaison committee, Cameron said: “We are not at the stage of supplying lethal equipment.We have announced a whole series of non-lethal equipment, night-vision goggles, body armour, which we have already said that we will give to Ukraine.


“Over the course of the next month we are going to be deploying British service personnel to provide advice and a range of training, from tactical intelligence to logistics to medical care, which is something else they have asked for.


“We will also be developing an infantry training programme with Ukraine to improve the durability of their forces. This will involve a number of British service personnel; they will be away from the area of conflict but I think this is the sort of thing we should be helping with.”


Up to 75 personnel will begin to deploy to Ukraine from next month as part of the training mission, the Ministry of Defence said.

*  *  *

A new Gas Dispute looms…

Russia demanded Ukraine pay for natural gas shipped directly to rebel-held areas of the country, re-igniting a long-running dispute over energy supplies and raising the prospect of a total halt.


Without cash upfront, OAO Gazprom will cut off Ukraine when prepaid supplies run out, which the Russian exporter said could be a matter of days. There will be no more advance payments until Gazprom follows all its supply agreements, Ukraine’s state energy company said Tuesday in a statement.


“A new gas dispute is inevitable before the end of this week,” said Alexander Paraschiy, an analyst at Ukrainian Concorde Capital in Kiev.

*  *  *

Capital Controls tighten…



Help can’t come fast enough for Ukraine.


Conditions are deteriorating so quickly that the International Monetary Fund’s $17.5 billion bailout, pledged less than two weeks ago, may no longer be sufficient.


While Ukraine waits for the IMF loan, central bank Governor Valeriya Gontareva is tightening the amount of foreign currencies available to importers and banning banks from lending money for clients to buy currencies other than the hryvnia. More restrictions may follow as the country’s economy contracts amid a deadly conflict with pro-Russian rebels in the country’s east, Gontareva said Monday.


With its foreign reserves dropping 61 percent to $6.4 billion in the four months through January, the “cupboard is basically bare,”said Timothy Ash, Standard Bank Group Plc’s London-based chief economist for emerging markets. The hryvnia has fallen 71 percent against the dollar over the past year.

*  *  *

And, echoing Turkey, the central bank governor faces prosecution…

Ukrainian Prosecutor General’s Office has opened a criminal cases against National Bank governor Valeriya Gontareva, the Vesti publication said on Tuesday.



The Vesti said the case had been launched on February 16, 2015. An entry to this effect was put on the unified register of pre-trial investigations.


Kiev’s Pechersky district court on December 1, 2014 bound prosecutors to launch a criminal case against Gontareva on charges of office abuse to derive unlawful profits.


The Vesti claimed that the charges referred to the National Bank’s currency interventions in August 2014.

*  *  *

But do not worry American taxpayers… your politicians will merely provide more of your government-debt-guaranteeing money to prop up the regime they installed… until they need a new one…






Mr Putin is not excited about this:






Western “Boots On The Ground” In Ukraine: Britain Sends 75 “Military Advisers” To Combat “Russia-Backed Aggression”



In what we believe is the first touchdown of Western ‘boots-on-the-ground’ in Ukraine, Britain’s David Cameron stated today that British military personnel are to be deployed to Ukraine for the first time in the next few weeks to provide advice and training to government troops. As The Guardian reports, Britain would be “the strongest pole in the tent”, and argued for tougher sanctions against Moscow if Russian-backed militias in eastern Ukraine failed to observe the ceasefire. The MoD said up to 75 personnel would begin to deploy to Ukraine from next month as Cameron warned sanctions could become “materially different” and held out SWIFT exclusion once again.


As The Guardian reports,

British military personnel are to be deployed to Ukraine for the first time in the next few weeks to provide advice and training to government troops, David Cameron announced before a committee of MPs.


The prime minister said Britain would be “the strongest pole in the tent”, and argued for tougher sanctions against Moscow if Russian-backed militias in eastern Ukraine failed to observe the provisions of a ceasefire agreement reached this month with the Ukrainian president, Petro Poroshenko.


The Ministry of Defence said up to 75 personnel would begin to deploy to Ukraine from next month as part of the training mission… for up to six months.



Cameron said Europe listened to Britain on how to implement sanctions, and he said the level of sanctions “might become materially different” in the future . He held out the possibility of excluding Russia from the international Swift banking payments system, saying there was a logic to such a move if Moscow continued trying to “dismember” Ukraine.


“I think what we should be putting in to place is a sense that if there is another Debaltseve [a Ukrainian town seized by pro-Russia forces this month] then that will trigger a round of sanctions that will be materially different to what we have seen so far,” he said.



He suggested it would be “miraculous” if the terms of the 12 February ceasefire agreement brokered in Minsk by Merkel and Hollande were met in full.


The prime minister said the UK was not at the stage of providing “lethal weapons” to Ukraine, but hinted that might change if the US changed its view.


“We have announced a whole series of non-lethal equipment – night-vision goggles, body armour – which we have already said that we will give to Ukraine,” he said. “Over the course of the next month we are going to bedeploying British service personnel to provide advice and a range of training, from tactical intelligence to logistics to medical care, which is something else they have asked for.



He said there was no doubt about Russian support for the rebels. “What we are seeing is Russian-backed aggression, often these are Russian troops, they are Russian tanks, they are Russian Grad missiles. You can’t buy these things on eBay, they are coming from Russia, people shouldn’t be in any doubt about that.


“We have got the intelligence, we have got the pictures and the world knows that.Sometimes people don’t want to see that but that is the fact.”

*  *  *

We suspect Putin will not be impressed at the ‘encroachment’.






Azerbaijan’s currency the manat devalues by 1/3




Azerbaijan devalues currency by a third over falling oil price


Azeribaijan’s central bank devalued the manat on Saturday (21 February) by 33.5% to the dollar and by 30% to the euro, as slumping oil prices and an economic crisis in major trading partner Russia put pressure on the currency.

The bank abandoned the manat’s dollar peg on 16 February and began using a dollar-euro basket to manage the exchange rate after a nearly 60% drop in crude prices since June and Western sanctions against Russia over its annexation of Crimea.

Azerbaijan has been less affected than other former Soviet states by Russia’s economic problems but its economy is heavily exposed to price swings on global energy markets.

The manat was set at 1.05 to the dollar and 1.19 to the euro, down from Friday’s 0.78 and 0.89 manats respectively.

“This decision was made in order to support diversification of Azerbaijan’s economy, strengthen its international compatibility and export potential as well as to provide balance of payments sustainability,” a central bank statement said.

The bank said it would continue to take part in the foreign exchange market and that it would target a corridor for the manat against the dual-currency basket. The manat has been pegged at just over 0.78 per dollar since mid-2011.

Azerbaijan is becoming an increasingly important partner to the EU, largely in the context of the Southern Gas Corridor, project. The term stands for a project to bring Azeri gas from the Shah Deniz offshore field to Europe via the planned TANAP pipeline through Turkey and the Trans-Adriatic TAP pipeline via Greece and Albania to Italy. An interconnector in Greece is planned to bring Azeri gas also to Bulgaria and further

Oil and gas sales account for 95% of Azerbaijan’s exports and more than 70% of government revenues.



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



Your more important currency crosses early Tuesday morning:



Eur/USA 1.1323  down  .0011

USA/JAPAN YEN 119.47  up .561

GBP/USA 1.5437 down .0014

USA/CAN 1.2629 up .0055

This morning in Europe, the euro is  down, trading now well below the 1.14 level at 1.1323 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 56 basis points and settling just below the 120 barrier to 119.47 yen to the dollar. The pound was down this morning as it now trades just above the 1.54 level at 1.5437.(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 and now the HSBC criminal probe). The Canadian dollar was well down again reacting to the lower oil price and is trading  at 1.2629 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 136.56 or 0.74%

Trading from Europe and Asia:
1. Europe stocks mostly up

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

Gold very early morning trading: $1200.50



Early Tuesday morning USA 10 year bond yield: 2.07% !!!  up 1  in basis points from Monday night/


USA dollar index early Tuesday morning: 94.73  up 16 cents from Monday’s close.



This ends the early morning numbers, Tuesday morning




And now for your closing numbers for Tuesday:







Closing Portuguese 10 year bond yield: 2.14% down 9 in basis points from Monday


Closing Japanese 10 year bond yield: .38% !!! down 1 in basis points from Monday


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


Spanish 10 year bond yield: 1.42% !!!!!!


Your Tuesday closing Italian 10 year bond yield: 1.50% down 8 in basis points from Monday:



trading 8 basis points higher than Spain.




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

Euro/USA: 1.1342  up .0008

USA/Japan: 118.90 down .018

Great Britain/USA: 1.5459 up .0008

USA/Canada: 1.2487 up .0088



The euro rose a bit quite  this afternoon but it was up on the day by 8 basis points finishing the day well below the 1.14 level to 1.1342. The yen was well up in the afternoon, and it was up by closing to the tune of 2 basis points and closing just below the 119 cross at 118.90. The British pound gained a lot of ground during the afternoon session and was up on  the day closing at 1.5459. The Canadian dollar was up again today even though the oil price was down.  It closed at 1.2487 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: 1.99 down 7 in basis points from Monday (reacting to bad economic indicators)




Your closing USA dollar index: 94.47 down 10 cents on the day.



European and Dow Jones stock index closes:


England FTSE  up 37.47 points or 0.54%

Paris CAC  up 24.14 or 0.50%

German Dax up 74.82 or 0.67%

Spain’s Ibex up  74.40 or .68%

Italian FTSE-MIB up 185.46 or 0.84%



The Dow: up 92.35 or 0.51%

Nasdaq; up 7.15 or 0.14%



OIL: WTI 49.08 !!!!!!!

Brent: 58.68!!!!



Closing USA/Russian rouble cross: 62.84 up almost 3/4   roubles per dollar on the day.


closing UKrainian UAH:  (hryvnia) 33.15 UAH to the dollar. (lost another .25 UAH per dollar./Monday 28.25 UAH/per dollar)

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:



Nasdaq Rises For 10th Day In A Row, Bonds Rally Most In A Month


This seemed quite appropriate – from both the “bubble risk is contained” perspective as well as “dangerous things creeping up on you when you least expect them”…


Stocks melted-er up-er today – extending Nasdaq’s win streak to 10 days in a row… the Nasdaq  nearly dipped into the red with a few minutes to go as AAPL dumped but the last minute rescued it…


By way of interest – the entire 2015 points gain of the Nasdaq is accounted for by just 5 stocks.. breadth?


But AAPL had a very active day… ugly open rescued by Yellen then selling pressure off new highs, bounce and ugly close… AAPL closed red


Quite a day in stocks… all centered on Yellen… (just proves that everything is awesome) – notice the quick dump at 1230ET (930PT on chart) – when 10Y yields broke 2% for the first time it triggered some inst-algo-selling…



From Yellen’s testimony…


VIX collapsed today with short-term VIX testing a 12 handle and ‘normal’ VIX 13.50.


But it seemed the bond market was just as ebulliently signaling no growth… the biggest 2-day drop in 10Y yields in 6 weeks… 10Y now back under 2%!!


Or just the all-clear to squeeze few more bond shorts…


Yellen’s testimony sparked a Dollar dump – but it remains positive on the week still…


Despite the USD weakness, gold and silver flatlined (though note the pump and dump in silver around Yellen), copper jumped and crude dumped into the NYMEX close and held losses…


From Yellen’s testimony, Gold and Copper rallied notably, silver was flat, crude was dumped…


Yet again big selling pressure into the NYMEX close…


Charts: Bloomberg

Bonus Chart: 2000?


Bonus Bonus Chart:Or 1998?


Bonus Bonus Bonus Chart: The Nikkei 225 is now the most ‘expensive’ to the Dow since its big plunge in 2013…






Negative interest rates are now officially in the uSA as JPMorgan begins the practice of charging you for placing your money in the bank:





NIRP Officially Arrives In The US As JPM Starts Charging Fees On Deposits


Technically, NIRP arrived in the US back in December when as the WSJ reported at the time, America’s largest banks at that time urged “some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits.” The banks included J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America.However, at the time, the NIRP threat was rather nebulous, with the banks telling clients, which range from large companies to hedge funds, insurers and smaller banks, that they will begin charging fees on accounts that have been free for big customers at some point eventually. Nothing was imminent.

That changed overnight, when as the WSJ once again reported, the nebulous became tangible after J.P. Morgan Chase, the largest US bank by assets (and second largest in the US by total derivative notional) is preparing to charge large institutional customers for some deposits.
WSJ adds that JPM “is aiming to reduce the affected deposits by
billions of dollars, with a focus on bringing the number down this year.

The details on this latest dramatic, and until central-planning arrived, unthinkable, monetary experiment:

The move is the latest in a series of steps large global banks have been discussing in recent months to discourage certain deposits due to new regulations and low interest rates.


J.P. Morgan’s steps are among the most detailed and widespread. Specifics are likely to be unveiled Tuesday by J.P. Morgan executives at the bank’s annual strategy outlook with investors, these people said. Among other points, the bank is expected to stress alternatives customers affected by the deposit moves can use for their excess cash.


The plan won’t affect the bank’s retail customers, but some corporate clients and especially an array of financial firms, including hedge funds, private-equity firms and foreign banks, will feel the impact, according to the memo. J.P. Morgan is making the moves because certain deposits are less profitable to handle than they used to be. New federal rules essentially penalize banks for holding deposits viewed as prone to fleeing during a crisis or a stressed environment.


“We are adapting to a changing regulatory environment across our company,” according to the J.P. Morgan memo sent Monday and signed by the bank’s asset-management, commercial-bank and corporate and investment-bank heads.



J.P. Morgan is one of the most affected by new capital and liquidity rules, in part because it is one of the largest banks and has a variety of complex businesses, including trading and serving hedge funds. The memo notes that the changes are necessary to deal with clients deemed more interconnected and risky by regulators. In addition to J.P. Morgan’s relationships with hedge funds, foreign banks and private-equity firms, its dealings with central-bank clients could be also affected.


Under the bank’s new push, those clients will be asked to adjust certain deposits viewed as more temporary by either paying a new fee or moving the proceeds to a similar J.P. Morgan product such as a money-fund sweep account. In some cases, the bank will likely ask clients to hold these so-called nonoperational deposits at a different firm.

The WSJ punchline: “The moves have thrown into question a cornerstone of banking, in which deposits have been seen as one of the industry’s most attractive forms of funding.

And therein lies the rub, because as the Fed is preparing to raise short-term rates, which most directly affect the cost of deposits to banks (we hardly need to remind readers that the “interest rate” on the general unsecured claim that is a deposit has been ~0.00% for the past 6 years), banks are telegraphing that they have more than enough funding on the liability side of the balance sheet, and that they are comfortable enough with procuring other sources of funding that are not deposits – whose cost of capital may rise if indeed Yellen hikes rates in June – that the entire Fed rate hike process will be moot.

Of course, none of this is new to readers. Recall from April of 2013 our “One-Chart Summary Of All That Is Wrong With The US Financial System: JPM Deposits Over Loans” in which we showed that JPM, together with the other Big 4 deposit-taking TBTF megabanks have about $3 trillion in deposits over loans: the same amount as the liquidity injected by the Fed over the same time period.


Last November, the WSJ observed as much when it noticed the relentless increase in bank deposits unaccompanied by a matched increase in loans:


So now that the Fed may be finally pushing back on the commercial banks, and telling them that the cost of deposit funding is about to go up, banks themselves are pushing back on the Fed, and signalling that thanks to the trillions in fungible QE liquidity, they don’t care if the Fed hikes rates, as they are now proactively seeking to purge deposits from their balance sheets.

Paradoxically, in the New Normal, even the veiled threat that one item of a bank’s capitalization may have a non-zero cost of capital, is enough for the bank to do everything in its power to eliminate said cost of funding – i.e., deposits – and replace it with other sources of cheaper funds, mostly emerging from the vastly unregulated shadow banking system.

In any event, NIRP is now officially in the US, which means that one after another US commercial banks will join what has already become a NIRP free-for-all across most of continental Europe where NIRP now reigns supreme, and where trillions in government bonds yield negative rates.

Why all of the above is most amusing is that it was in August of 2012 when none other than staffer of the New York Federal Reserve warned that “If Interest Rates Go Negative . . . Be Careful What You Wish For.

These were some of the highlights of the perverted, broken monetary system that NIRP would unleash in the US as per the Fed’s warning from less than 3 years ago:

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

And the punchline:

  • we may see an epochal outburst of socially unproductive—even if individually beneficial—financial innovation

In short, things in the already insane monetary realm are about to get a whole lot insane-er. But don’t worry, the central banks are in full control.





Housing sector continues to remain weak:


(courtesy zero hedge)

Case-Shiller Says “Housing Recovery Is Faltering” Despite December Home Prices Jumping Most Since March


Home prices, according to Case-Shiller, rose 0.87% MoM in December (better than the expected 0.6% gain) for the biggest seasonally adjusted monthly gain since March, likely bringing the ‘housing recovery is back on track’ meme back into play (despite affordablity being a major driver of the slump in home sales). However, non-seasonally-adjusted the rise was a mere 0.1%, which nonetheless managed to snap the 3 consecutive months of sequential price declines.

Seasonally-adjusted home prices jumped most since March in December.

On an annual basis, the increase was 4.46%, above the 4.30%, and the highest annual growth since September.


And yet, despite all this, Case Shiller was anything but optimistic:

“The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence.


“Movements in home prices show clear regional patterns. The western half of the nation plus Miami and Atlanta enjoyed year-over-year increases of 5% or more. San Francisco and Miami were the strongest. Dallas, Denver, Las Vegas and Atlanta also experienced solid gains. Phoenix was an exception to the western strength with only a 2.4% increase; San Diego was a bit under 5% at 4.8%. The Midwest and Northeast lagged. Boston was the strongest among this weak group with prices up 3.8%. The regional patterns and the weakness in new construction and new sales may reflect decreasing mobility – fewer people moving to different parts of the country or seeking jobs in different regions.”

Here is the full breakdown by major MSA:

The private Gallup USA confidence index tumbles into negative territory.
This is quite significant.  Pay more attention to this data than from the manipulated data coming from USA government sources:
(courtesy zero hedge)

US Economic Confidence Tumbles Back Into Negative Territory As “Hope” Fades

With economic data serially disappointing in 2015, it is probably not entirely surprising that Gallup’s U.S. Economic Confidence Index fell to an average of -2 last week (with the biggest drop since July). This is the first time the index has had a negative weekly average since late December. Both the current conditions and outlook sub-indices tumbled but it was the future ‘hope’ index that fell the most with more people now saying the future will be ‘poor’ than believe it will be ‘good’.


As Gallup reports, the U.S. Economic Confidence Index fell to an average of -2 for the week ending Feb. 22

This is the first time the index has had a negative weekly average since late December. Prior to that, the index had consistently been in negative territory since Gallup began tracking it daily in 2008.



The Economic Confidence Index fell five points from the week prior, the largest drop since July. The weekly index numbers are usually fairly stable, not changing more than a couple of points unless there is some significant event. It is not clear what is behind last week’s decline in confidence, although quickly rising gas prices last week may have played a role — given that the drop in gas prices coincided with the rise in confidence in late 2014. The index had more or less leveled off in early 2015 before this decline.


Gallup’s Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they say the economy is getting better or getting worse. Last week, both components dropped from the prior week, falling into negative territory.



For the week ending Feb. 22, 27% of Americans said the economy was “excellent” or “good,” while 29% said it was “poor.” This resulted in a current conditions score of -2, compared with +2 the week prior. Meanwhile, the economic outlook score also was -2, the result of 47% of Americans saying the economy is “getting better” while 49% said it is “getting worse.” The economic outlook score is down from +3 the previous week.

*  *  *
Suddenly higher gas prices? Cold weather? Stagnant wages? Higher Disneyworld prices? We assume those surveyed have not been watching CNBC and looking at their 401(k)s…







Service PMI surges and this puts pressure on Yellen to hike interest rates:
(courtesy zero hedge)

Services PMI Surge “Puts June Rate Hike Firmly Back On Table”


Worst. Case. Scenario. Markit US Services (flash) PMI printed an impressive 57.0 (smashing 54.5 expectations), well up from January’s 54.2 as combined with the Manufacturing (soft survey data) suggests, according to Markit, that GDP is growuing around 3.0% annualised. Of course both these ‘surveys’ print positive amid one of the biggest declines and series of misses in US macro data of the last few years. As Markit notes, “The Fed will no doubt be encouraged by the resilience of the economy…and increasingly minded to start the process of normalising monetary policy in June.”



As Markit reports,

“Stronger growth of service sector activity in February puts a June Fed rate rise firmly back on the table.


“While parts of the East coast have struggled in the face of adverse weather, other regions basked in unusually warm temperatures, boosting business above seasonal norms. Activity levels surged higher and inflows of new business boomed as a result.


“Alongside the upturn signalled by the sister ‘flash manufacturing PMI survey, the improved performance of the service sector in February means the economy looks to be enjoying yet another spell of robust growth in the first quarter.


The two PMI surveys are so far running at a level consistent with at least 3.0% annualised GDP growth. While the overall rate of business expansion has cooled from the surging pace seen in the middle of last year, growth remains buoyant and, importantly, strong enough to drive yet another month of impressive job creation.


“The Fed will no doubt be encouraged by the resilience of the economy in the face of global headwinds such as the Greek and Russian crises, and increasingly minded to start the process of normalising monetary policy in June

*  *  *

Which is odd given the total carnage in US macro data in Feb…


US macro at 11-month lows… (note that the data cliff-dives at end Sept 2014 – which corresponds with the government’s fiscal-year-end)




  • Personal Spending
  • Construction Spending
  • ISM New York
  • Factory Orders
  • Ward’s Domestic Vehicle Sales
  • ADP Employment
  • Challenger Job Cuts
  • Initial Jobless Claims
  • Nonfarm Productivity
  • Trade Balance
  • Unemployment Rate
  • Labor Market Conditions Index
  • NFIB Small Business Optimism
  • Wholesale Inventories
  • Wholesale Sales
  • IBD Economic Optimism
  • Mortgage Apps
  • Retail Sales
  • Bloomberg Consumer Comfort
  • Business Inventories
  • UMich Consumer Sentiment
  • Empire Manufacturing
  • NAHB Homebuilder Confidence
  • Housing Starts
  • Building Permits
  • PPI
  • Industrial Production
  • Capacity Utilization
  • Manufacturing Production
  • Dallas Fed
  • Existing Home Sales


  • Personal Income
  • Markit Services PMI
  • Nonfarm Payrolls






USA data running at a 90% miss rate:


(courtesy zero hedge)


US Macro Crashes Near 1-Year Lows, February Running At 90% Data Miss Rate


Despite this morning’s US Services PMI rise, US macro data is running at a 90% miss rate in February andRichmond Fed’s tumble from 6 to 0 (11mo lows)along with The Conference Board’s Consumer Confidence dropping the most since Oct 2013 merely confirm this trend. This is the biggest 4-month slump in Richmond Fed since 2010 as practically every sub index deteriorated. California, Florida and New York saw over consumer confidence collapse and Texas saw ‘present situation’ plunge. US Macro data is now nearing its lowest in a year…


Consumer Confidence slumps…


and Richmond Fed sees biggest 4 month drop since 2010




Obama will have no friends in either house:


(courtesy zero hedge)


Obama Vetoes Keystone Pipeline Bill


Remember when shortly after the avalanche victory of the GOP in both the House and the Senate the pundits said that with the lame duck president in his final stretch, now is the time when long-overdue legislation would finally get passed? They were wrong.


The Republican reaction:


As Bloomberg adds, Obama’s action sets up new round of votes in Congress that will likely fail as supporters don’t have enough backing to override veto. As a reminder, the Senate vote was 62-36, while House vote was 270-152; with a two-thirds majority required to override veto.

Of course, when the Fed gives a greenlight to keep pumping up the wealth effect and make the rich richer, who actually needs any laws getting passed. Indeed, in the immortal words of Chuck Schumer, when the Mr. Chairmanwoman is “getting to work”, Congress is no longer even relevant.






We  will see you on Wednesday.

bye for now



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