Let us head over and see the comex results for today.

“That is real gold. The alternative is paper gold…other people’s promises.”

end

My good friend has commented today:

(courtesy Reg Howe/GoldenSextant/GATA)

Reg Howe: Pray for the pope of gold

(courtesy Reg Howe/Golden Sextant)

Pray for The Pope of Gold “Permit me to issue and control the money of a nation, and I care not who makes its laws.” Mayer Amschel Rothschild (1744-1812, attributed) “The best way to destroy the capitalist system is to debauch the currency.” Lenin (1870-1924, attributed by Lord Keynes in The Economic Consequences of the Peace, 1919) “Money has to serve, not rule.” Pope Francis (May 16, 2013)

Pope Francis makes his first ever visit to the United States this month, and America’s elite are uncomfortable at the prospect. His criticisms of modern global capitalism, not to mention his recent encyclical on climate change, have struck a sensitive chord. As the former Soviet Union learned, an informed and charismatic pope is a dangerous opponent. Francis, whose education included training in hard science (chemical technician), urges action on the environment: “Human beings, while capable of the worst, are also capable of rising above themselves, choosing again what is good, and making a new start.”

Just as John Paul II had personal experience with the evils of communism in his home country, Francis lived through fascism and extreme monetary disorder in his. Few countries in the last century have declined as much as Argentina. In Philadelphia, Francis will visit Independence Mall, where at the National Constitution Center he will find much information about our nation’s founding charter, adopted after its first disastrous experience with fiat money, the continental currency. There, if he had the time, he could peruse The Federalist Papers, and ponder whether in No. 44 James Madison had not elucidated the fundamental truth about unlimited paper money:

The extension of the prohibition to bills of credit must give pleasure to every citizen, in proportion to his love of justice and his knowledge of the true springs of public prosperity. The loss which America has sustained since the peace, from the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government, constitutes an enormous debt against the States chargeable with this unadvised measure, which must long remain unsatisfied; or rather an accumulation of guilt, which can be expiated no otherwise than by a voluntary sacrifice on the altar of justice, of the power which has been the instrument of it.

Indeed, the Holy Father might reflect on whether Madison’s indictment of fiat money is not equally applicable today. After all, the Fed’s goal of two percent inflation would have appeared to the Founding Fathers as simple coin clipping, a capital offense. His Holiness might ask himself whether much of what he criticizes in “unfettered” capitalism flows not so much from free markets as from bad money freed from the discipline of precious metal. And he might then conclude, as he did with respect to the environment, that the best remedy is to make a new start and to choose again money credibly linked to silver or gold, or to borrow some of Madison’s words, to expiate theaccumulated guilt for the pestilent effects of fiat money by sacrificing the power which has been the instrument of it.

Today that power resides in the banks and central banks, which finance governments and other spendthrifts at the expense of savers and pensioners, Wall Street in preference to Main Street, malinvestment to the detriment of the environment, and that most expensive of all government endeavors: the military-industrial complex and war. It is no accident that what Raymond Aron labeled The Century of Total War (Doubleday, 1954) coincided with the demise of the classical gold standard and the rise of central banking.

Unfortunately, as well-documented at this site and elsewhere, the monetary provisions of Constitution of the United States have been turned upside down, and the people no longer enjoy their constitutional right to the use and benefits of sound money linked to silver or gold. As a constitutional crisis, Watergate’s long term impact has proved trivial compared to President Nixon’s closing of the gold window in 1971, when the demands of financing the Vietnam War finally overpowered the fixed $35 per ounce gold price. Since then, and especially over the past 25 years, Western governments and their central bankers have waged an undeclared but nevertheless savage war on gold — a war against sound money — to preserve and extend their own powers and privileges to dominate the planet. The casualties are uncounted; advocates of honest money — isolated and scorned as gold bugs — comprise but a tiny fraction.

It is sometimes said that there are no atheists in foxholes. At the height of the Battle of the Bulge, desperate for air cover to help rescue the beleaguered defenders at Bastogne, General Patton ordered the composition of a prayer for good flying weather. So taking a page from his wartime strategy, and recognizing that honest money is as much if not more a moral than an economic issue, we make bold to offer a prayer for the rescue of sound money:

Our Father in Heaven, lead Francis, Your vicar on Earth, To fight the sins of fiat money, Which impoverishes the honest, Enriches the wicked, and funds Wars and discord among nations. Inspire him to work for the return of Sound money based on metals Put on Earth for this purpose — Silver and gold — permanent natural Money, and by right and design, The universal monetary standard. Direct witness in his home country To monetary promiscuity causing Economic, social and moral decay, Give the former bishop from Argentina Strength and guidance to champion a Worldwide campaign for sound money. So should success crown his efforts, Francis may in the fullness of time Take his place among the saints, Known forever as The Pope of Gold.

end

Dave Kranzler: Gold futures market position data means little now

end

(courtesy Kip Keen/Mineweb)

And now Bill Holter

(courtesy Holter/Sinclair collaberation)

The Ravages of War…the only way to win is not to play the game!

China Stocks Drop Most Since Late August, BOJ Disappoints Bailout Addicts; US Futures Flat

Almost two weeks after we explained why any hope for a QQE boost by the BOJ is a myth, and that any increase in monetization will simply lead to a faster tapering and ultimately halt of Kuroda’s bond purchases…

… the market finally grasped this, when overnight the BOJ not only did not easy further as some – certainly the USDJPY – had expected, but kept its QE at the JPY80 trillion level and failed to offer any hints of further easing that many had hoped for, pushing the Nikkei down from up almost 400 point intraday to virtually unchanged and sending the USDJPY back under 120. JGBs also traded lower on concerns there may not be much more QE to frontrun.

As Bloomberg reports, “the move by Governor Haruhiko Kuroda and his colleagues leaves the onus on Prime Minister Shinzo Abe’s government to compile a stimulus package to boost what evidence indicates is a lackluster recovery in the second half of the year so far. Kuroda repeatedly told reporters on Tuesday that the bank sees a gradual recovery continuing in the economy.” Which is ironic considering many now see Japan’s GDP sliding in Q3 confirming the 5th recession in the past 8 years. 

Still, the “experts” continue calling for further bailouts: economists from Goldman Sachs Group Inc. and Citigroup Inc. are among those who project a boost in stimulus on Oct. 30. “If the downside risks worsen the BOJ will need to take action,” said Yasuhiro Takahashi, an economist at Nomura Holdings Inc. who forecasts further stimulus in April. “The BOJ had been optimistic about the outlook for Japan’s economy but in today’s statement it lowered its view on exports and production.”

Good luck: soon the realization that a supply constrained world is the biggest nightmare for central banks is the biggest story will dawn but not for another 6-9 months as we previewed ten days ago.

What, however, is dawning right now on traders is that China has once again lost control of its market, and days after crushing index futures trading by hiking margins to unprecedented levels, the SHCOMP resumed its old acrobatics tumbling as much as 4.2% in final hour of trading, and dropping below 3,000 for the first time since Aug. 27, before closing 3.5% lower at 3,005.172.

The good news: the plunge protection team held 3000, just barely. The bad news: the drop was the biggest since August 25 and follows yesterday’s 2.7% fall, dragging the decline 2015 back to 7.1%.

However, what’s even worse this time is that unlike before, the plunge was on very low volume with trading ~53% below 100-day avg. If the National Team can’t contain this it may as well resign.

Other indices fares just as badly: CSI 300 -3.9%; ChiNext -5.7% to lowest in 7 months.“Investor confidence deteriorated following the decline yesterday and the index fell further in the absence of rebound momentum in the market. It’s a vicious cycle,” Shenwan Hongyuan Group analyst Qian Qimin says by phone, adding that “sentiment still an important factor moving stocks.” That and central bank buying of course.

Asian weakness has for now not spilled over across to Europe and the Atlantic: for the second day running, market participants largely disregarded the cautious sentiment which dominated the price action over in Asia amid the ongoing concerns regarding China and after the BoJ refrained from easing its monetary policy further to kick off the session in the green, before falling into negative territory during the European morning (Euro Stoxx: -0.3%).

The biggest news in Europe today was Germany’s ZEW Investor Confidence which tumbled for a six month in September to 12.1, from 25 in August, and well below the 18.3 expected. Surely, this was as good a reason as any to send the DAX into overdrive moments ago: the market may be realizing that the BOJ’s QE expansion is limited, but it still has a long way to go before grasping the same about the ECB, as such Mario Draghi may now be the market’s only hope for more bailouts.

In spite of the recent upside by EU equities, gains have been led by health care and other defensive based sectors. At the same time, materials sector underperformed, in reaction to lower base metal prices and also as market participants used yesterday’s gains to book profits and in turn saw commodities giant Glencore (-5.0%) trade at record lows. It’s time for Doomsday 2.0 scenario for Mr. Glasenberg. 

As a result, the FTSE-100 index (-0.6%) underperformed since the open, while pharma heavy CAC outperformed.

Bunds have remain in negative territory throughout the European morning , with tomorrow set for first major batch of supply of the week, as Germany is set to come to market with their longer-duration Bund offering before Spain and France enter the market on Thursday.

In FX, the JPY strengthened across the board, with shorter-dated JPY swap tenors rising to late August levels as bets of IOER cut and further easing were unwound after the BoJ kept the policy mix unchanged . While elsewhere AUD failed to hold onto early gains following the release of the RBA September minutes, where the central bank kept the door open for a rate cut as it stated that it will observe incoming data in determining whether policy is appropriate.

In terms of the European session, UK CPI data saw upside in GBP after avoiding falling into deflationary territory (Y/Y 0.0% vs. Exp. 0.0%), while RPI printed higher than expected (Y/Y 1.10% vs. Exp. 0.90%) . In terms of mainland Europe, the German ZEW survey saw mixed results and as such failed to have a notable effect on any major EU asset class.

In commodities, Both WTI and Brent futures trade in modest positive territory heading into the NYMEX pit open amid relatively light newsflow, with the commodity bolstered by modest weakness in USD . Elsewhere metals have seen some weakness today, weighing on commodity names to see Glencore reach all time lows. Looking ahead today sees the release of the API crude oil inventories, with last week showing a build of 2100k, also of note, there is a Brent Oct’15 futures due to expire at 1930BST/1330CDT.

Overnight Media Digest

• European market participants initially disregarded the cautious sentiment which dominated the price action in Asia to see stocks kick off in the green, before falling into negative territory during the European morning
• JPY has strengthened across the board, with shorter-dated JPY swap tenors rising to late August levels as bets of IOER cut and further easing were unwound after the BoJ kept the policy mix unchanged
• Highlights today include retail sales advance, empire manufacturing and industrial production
• Treasuries gain amid losses in Chinese stocks on growth concerns; European stocks also lower as German investor confidence falls for a sixth month in Sept., declining to 12.1 (est. 18.3) from 25 in August.
• Markets likely to remain rangebound before FOMC decision Thursday; economists/analysts remain split on prospect of 1st rate increase in more than 9 yrs, based on published research
• The Bank of Japan refrained from boosting stimulus even after the economy shrank last quarter, betting that a resumption in growth will be enough to rekindle inflation
• U.K. inflation returned to zero in August, driven down by the cost of motor fuel and clothing. A measure of core price pressures also eased
• Top leaders from China’s Communist Party recently consulted former premier Zhu Rongji for his thoughts on President Xi Jinping’s plan for overhauling the country’s $16t state-run sector, according to people with knowledge of the matter
• The last time China launched such a shakeup, the charge was led by Zhu: Some 60,000 firms were closed and 40m workers let go, according to government data
• Sovereign 10Y bond yields mostly higher. Asian stocks lower, European stocks and U.S. equity-index futures decline. Crude oil higher, gold and copper lower

DB’s Jim Reid completes the overnight wrap

We start this morning in Japan where the BoJ has left its monetary policy stance and monetary base target unchanged with for now is in line with Bloomberg’s consensus poll. The BoJ expects the economy to continue to recover moderately but acknowledges that exports and production have been affected by the slowdown in Emerging Markets. The JPY is a touch stronger against the dollar at 120.08, the Nikkei is off its intraday highs but still 0.6% up on the day, the 10yr JGB yield is about 1.5bp higher on the day. All eyes will be on Kuroda’s press briefing later at around 7.30am UK time. Will he hint that recent China/EM woes are pushing the BoJ towards further easing? Like with the ECB we think there’s a high likelihood they’ll eventually be forced into doing more.

Away from Japan, investors were mostly on the back foot overnight with our screens showing the Hang Seng, Shanghai Composite and ASX 200 are down -0.3%, -2.5% and -1.2%, respectively as we go to print. Asian equities are perhaps taking cues from the softer risk session in the US overnight.

Talking of the US, whilst risk assets were generally lower trading volumes (at least on the equity side) were on the low side. Total NYSE trading volumes were the lowest in about 4 weeks which in some ways shows how busy the latter half of August was. There was a perhaps some calm ahead of the Fed storm on Thursday but investors were also staying on the sidelines given there was the Rosh Hashanah holiday and a ‘lack of US data’ Monday. The S&P 500 finished 0.41% lower on the day led by declines in 9 out of the 10 key sector groups (only Utilities finished touch higher). Energy (-0.8%) and Materials (-1.3%) suffered the most not helped by the weakness in commodities. Brent and WTI fell -3.7% and -1.4% to around US$46/bbl and US$44/bbl, respectively.

Copper lost around 2% as sentiment was somewhat affected by the softer-than-expected FAI data from China over the weekend even though Copper is now 7% off its lows of about 3 weeks ago. Perhaps Glencore’s move to shut down production may provide some base support. Elsewhere the broader CRB commodity index finished about half a percent lower on the day.

Amid the risk off tone credit continued to hold in relatively well which is impressive given the recent supply. Primary markets were reasonably active with nearly US$5bn in new issues (across 9 tranches) being priced in the US session yesterday. Our US colleagues noted that accounts continued to remain engaged in new issues with order books around 3x oversubscribed on average. Secondary credit spreads were also unchanged to a touch wider with TRACE data showing that dealers were net sellers of bonds yesterday. US 10yr Treasuries were little changed at around 2.18%. Fed Fund futures implied probability of a Fed liftoff stands at around 28% and has been steady now for a few days.

On the other side of the pond, it was a relatively weak European session yesterday with equities down around -0.5% across the board largely on the back of a weak open following on from Asia. Credit widened with Xover moving +4bps with government bonds closing the day flat outside of the Periphery which saw some widening (e.g. Portugal +5bps, Greece +9bps). Looking at yesterday’s data the main release was the Eurozone July IP which came in noticeably better than expected (+0.6% MoM vs +0.3% expected and -0.4% previous read).

Looking to the day ahead after Kuroda’s press conference it’s set to be a busy day on the data front. In Europe we have the French August inflation print (expected in at +0.2% YoY), UK inflation (expected in at 0% YoY), the July Eurozone trade balance (expected to fall slightly to +€21.4bn) and finally the September German ZEW survey which is expected to weaken. However given the approaching FOMC meeting much of the focus today will likely be on the US data. We have August retail sales (with the MoM growth rate expected to slip to +0.3%), September Empire manufacturing which is expected to rebound from its big drop in August although remain in negative territory and also August IP which is expected to slip into negative territory.

USDJPY Surges Ahead Of BoJ Statement, China Strengthens Yuan As Washington Folds On Cybersecurity Sanctions

It appears someone is betting on Kuroda and his cronies to do something later this evening (just like they did as The Fed stopped QE3 back in October) in some weird monetary policy quid pro quo of – dump Yen all you like as long as the carry trade is alive and well. USDJPY is up from 119.85 to 120.50 (and NKY up over 400 points from US session lows), as perhaps the fact that The BoJ’s ETF-buying kitty is running dry at a crucial time. Chinese equity markets are extending yesterday’s losses as margin debt declines to a 9 month low (still +62% YoY), injects another CNY50bn and strengthens the Yuan fix for the 3rd day in a row; but in a somewhat embarrassing move, Washington has decided not to impose sanctions on China ahead of Xi’s first state visit next week.

Japan was excited…

JPY dumping against the USD is some odd anticipation of moar QQE from Kuroda...

Because the last 10 have worked so well.

This is what the big banks think…

Goldman Sachs: A key focus point in BOJ Governor Kuroda’s press conference will be the potential influence of the US FOMC rate hike on the BOJ’s decision making on its own monetary policy given that the FOMC will have its policy meeting on Sep 16-17. The other point is the impact of the renewed crude oil price decline and foreign demand risk on the BOJ’s 2% inflation target and the BOJ’s responses to this impact

 

We can find little in the way of hard data to corroborate the BOJ’s “virtuous circle” between wages and consumption. BOJ governor Haruhiko Kuroda spoke recently in New York about a second virtuous circle which sees rising corporate earnings spurring capex, but this is also looking somewhat tenuous, in our view. The BOJ has tended to focus only on the fall in crude oil prices as a reason for the recent CPI slowdown. That said, we think the BOJ will be eventually acknowledge rising downside risks in the much more fundamental form of the output gap, wages and inflation expectations, all of which the BOJ itself has said will be key to gauging the medium-term price outlook. Accordingly, our base scenario is still premised on the BOJ easing monetary policy further at its end-October monetary policy meeting.

 

The exhaustion of additional monetary stimulus options is something of a problem. We think it would be difficult for the central bank to accelerate JGB purchases from the current ¥80 tn per year given the gradual reduction in the scope for purchasing.

 

BoAML: Taking a broader view of Japan’s economic outlook, we identify three check-points for maintaining our (and probably BoJ’s) optimistic view. First, non-financial corporations’ profit margins reached an all-time high in 2Q, as shown in Financial Statements Statistics of Corporations by Industry, and conditions for corporate earnings are good. Although margin improvement has started to feed through to capital expenditure and household income / consumption, the current pace is still moderate. Whether or not this benign cycle of earnings translating into expenditure accelerates far enough in 3Q onwards for the government and BoJ to achieve their policy targets will be one key element to watch. Second, trends in the US economy here on. We believe contribution of external demand to 3Q growth will be zero or slightly negative. Japan’s exports to China are expected to remain weak, affected by the slowdown in China. In this context we believe the extent to which a revival in Japan’s exports to the US (via the economic recovery there) can offset the weak exports to China will be a key aspect in external demand outlook. Third, impact of the turmoil in the financial markets since mid-August. Our main scenario is for heightened risk-aversion in the financial markets proving temporary. However, if a 10%-plus rise in the yen and/or a fall in the stock market were to persist (Nikkei 225 drops below 18,000, or yen appreciates and approaches ¥115/$), this will likely have a material impact on Japan’s economy, and hence, merits continued vigilance.

 

Citi: With renewed weakness in crude oil prices since summer partly reflecting worrisome developments in the Chinese economy, the BoJ’s scenario for the CPI reaching the vicinity of 2% YoY around the first half of FY2016 now looks even less likely to materialize, in our view. However, if inflation does not pick up as policymakers anticipate solely because of declining energy prices, the BoJ may not take additional easing measures unless inflationary expectations are affected negatively. We note, however, there are already early signs for declining inflationary expectations, albeit still tentative at the moment.

 

Deutsche: The question is whether the BoJ will ease further, but we see little likelihood of this. The BoJ will probably only ease further in response to events that would make the outlook for 2% inflation impossible. Inflation expectations could fall due to a decline in oil prices like last year, but oil prices have not fallen to the extent they did in 2014. In addition, regarding the output gap, BoJ Governor Haruhiko Kuroda at the Upper House Financial Affairs Committee on the 10th said “There is a good chance that GDP will be positive in Jul-Sep”, indicating that he does not anticipate a decline in the underlying trend in inflation due to economic deterioration. If the BoJ does ease further we expect it would focus on qualitative measures such as increasing ETF purchases and extending the duration of JGB purchases. In that case, we expect the superlong sector would outperform. Kuroda indicated on the 10th that the Bank was not considering reducing or abolishing the IOER rate. A rate cut, including negative rates, is unlikely. BoJ Board Member Sayuri Shirai’s panel discussion remarks on the 8th gave numerous reasons for maintaining the IOER rate, but we see one compelling explanation for why the Bank cannot use negative rates. Excluding the BoJ, the banks’ surplus deposits have enabled the smooth absorption of JGBs equaling over 200% of GDP. The probability that negative rates would destabilize the JGB market therefore makes such a policy unlikely from the perspective of managing national risk.

Which can all be summed up thus – “we do not think The BoJ has any good reason to ease tonight… but then again, you never know!”

So, of course, where USDJPY goes – so goes Nikkei 225…Up 400 points from US session lows…

*  *  *

Then China slams open…

With an immediate ban on anything that doesn’t say “everything is awesome”

• *CHINA TO SHUT STATE CULTURE COS. WITH IMPROPER CONTENT: XINHUA

More open mouth operations…

• *CHINA SHOULD STABILIZE YUAN INSTEAD OF LET IT FALL: INFO DAILY
• *UNCERTAINTY BROUGHT BY YUAN FALL WOULD HURT EXPORTS: INFO DAILY

China strengthens the Yuan fix for the 3rd day in a row and inject snoather CNY50bn

• *CHINA SETS YUAN REFERENCE RATE AT 6.3665 AGAINST U.S. DOLLAR
• *PBOC TO INJECT 50B YUAN WITH 7-DAY REVERSE REPOS: TRADER
• *HONG KONG DOLLAR QUOTED NEAR UPPER END OF PERMITTED RANGE

After last night’s tumble…

Chinese equity markets are extending losses at the open...

• *FTSE CHINA A50 SEPT. FUTURES ADVANCE 0.5%
• *CHINA’S CSI 300 INDEX SET TO OPEN DOWN 2.2% TO 3,208.74
• *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 2.3% TO 3,043.80

But flows continue to leave…

• *CHINA END-AUG. EQUITY FUNDS NET VALUE FALLS 44% ON MONTH

As delveraging continues…

• *SHANGHAI MARGIN DEBT BALANCE FALLS TO NINE-MONTH LOW

But bear in mind, margin debt remains +62% YoY...

*  *  *

And finally, Washington folds ahead of China’s visit…(as WaPo reports)

The United States will not impose economic sanctions on Chinese businesses and individuals before the visit of China President Xi Jinping next week, a senior administration official said Monday.

 

The decision followed an all-night meeting on Friday in which senior U.S. and Chinese officials reached “substantial agreement” on several cybersecurity issues, said the administration official, who spoke on the condition of anonymity because of the topic’s sensitivity.

 

The potential for sanctions in response to Chinese economic cyberespionage is not off the table and China’s behavior in cyberspace is still an issue, the official said. “But there is an agreement, and there are not going to be any sanctions” before Xi arrives on Sept. 24, the official said.

 

The breakthrough averted what would have raised a new point of tension with the Chinese that could have overshadowed the meeting — and Xi’s first state visit.

 

“They came up with enough of a framework that the visit will proceed and this issue should not disrupt the visit,” the official said. “That was clearly [the Chinese] goal.” 

end

And now on to Europe where the refugee crisis is getting worse and more dangerous that at any time:

(courtesy zero hedge)

Refugee Crises At Dangerous Tipping Point As Hungary Makes Arrests, Germany Loses Patience

“I’m not happy. I had to leave Syria — I love Syria, but so much killing there.”

That’s from 17-year old Mohammed Al-Hamdan who made it across the Hungarian border with Serbia at a railroad crossing near the village of Roszke before it was closed on Tuesday. As NBC reports, “just before Hungarian police closed the railroad crossing, a Syrian family ran down the tracks trying to make it through, the patriarch screaming to his wife and small children, ‘Yallah, yallah!’ — Arabic for ‘Let’s go!’” Before closing the “popular” passage, Hungary had reportedly begun hauling migrants on to trains and shipping them straight to the Austrian border. “The situation is that after crossing the border these people have arrived at the collection point in Roszke, where there is no official procedure, people are just being collected. Earlier these people were being taken to the registration points … this is not happening now, but rather, buses are taking people from the collection point to the Roszke train station according to our information,” a UNHCR spokesman told Reuters.

Of course even for the migrants who were “lucky” enough to be rounded up and shipped to Austria as opposed to being stranded behind Hungary’s new migrant-be-gone fence, their fate is far from certain. As The New York Times noted on Monday, Austrian officials have now sent “2,200 soldiers to help reinforce the eastern border.”

The rush to get into the Hungary came as the country largely completed a four meter, razor wire fence meant to cut off the flow of refugees and channel them to official registration centers where they can apply for asylum. “If their applications are refused,” BBC says,“they will now be returned to Serbia rather than being given passage through Hungary.”

Government spokesman Zoltan Kovacs says “official and legal ways to come to Hungary and therefore to the European Union remain open.”

“All we ask from all migrants [is] that they should comply with international and European law,” he added.

There’s a certain extent to which Hungary’s frustrations are understandable. For many refugees, the path to the German “promised land” goes through Hungary, and the means the flow of people is daunting.

That said, Kovacs’ comments seem to perhaps overstate the government’s desire to help asylum seekers enter and/or traverse the country legally. New laws that went into effect at midnight now permit police to arrest anyone who attempts to breach the razor wire fence. Damaging the fence is now punishable by imprisonment or deportation and mounted police have been deployed to the border. Here are the images:

Meanwhile, Prime Minister Viktor Orban’s rhetoric suggests little tolerance for any meaningful demographic shift in Hungary. “Hungary is a country with a 1,000-year-old Christian culture. We Hungarians don’t want the global-sized movement of people to change Hungary,” Orban said on Monday. He also told border police that “illegal border crossings will no longer be misdemeanors but felonies punishable with prison terms or bans.” Showing his generous side, Orban did say police should treat the migrants like human beings.

But anyone sent to Serbia faces the terrifying possibility that they will be denied asylum there as well. Here’sReuters:

Serbia, an impoverished ex-Yugoslav republic years away from joining the EU, says it is readying more temporary accommodation, but warned it would not accept anyone turned back from Hungarian territory.

 

The United Nations refugee agency, UNHCR, reiterated on Tuesday that it advised against sending refugees back to Serbia. “Safe third country” status implies refugees have a fair chance of being granted asylum and would receive the necessary protections and support.

 

Rights groups say Serbia meets none of the criteria and is still finding homes for thousands of its own refugees from the collapse of Yugoslavia in the 1990s, the last time Europe confronted displacement of people on such a scale.

 

“That’s no longer our responsibility,” Aleksandar Vulin, the minister in charge of policy on migrants, told the Tanjug state news agency. “They are on Hungarian territory and I expect the Hungarian state to behave accordingly towards them.”

So too, apparently, does Germany, where Vice Chancellor Sigmar Gabriel looks to be reaching the end of his patience with some countries’ perceived recalcitrance. “Germany can’t be there as the paymaster in Europe and everybody is around when they need money, but no one participates when responsibility must be taken. If this goes on then that’s the end of the current funding basis.”

There was no consensus to be found on Tuesday on a plan to use a quota system proposed by Jeane Claude-Juncker last week to settle some 160,000 refugees – for now, only 40,000 will be relocated. Hungary was one of three countries in opposition. Echoing Gabriel, Germany’s Interior Minister Thomas de Maiziere suggested that Berlin may soon be forced to “exert pressure” on countries that refuse to cooperate.

As should be clear from the above, this has the potential to create a very dangerous situation in EU countries who oppose quotas but are pressured by Berline, Paris, and Brussels to comply. Where there are already elements of xenophobia in place, and where those feelings are being amplified and perpetuated by the government, the perception that Germany is forcing an unwanted demographic shift might well serve to fan the flames not only of nationalism but of religious intolerance, especially given the likelihood that those opposed to settling the migrants will be predisposed to stirring up fears of ISIS operatives slipping into Europe disguised as refugees.

And just as we said last week when we documented the construction of the anti-mirgrant fence in Hungary, “it’s not clear whether 12 feet of razor wire will be enough to dissuade those who are fleeing from bullets, tanks, barrel bombs, and sword-weilding jihadists, meaning the question really isn’t how to keep migrants out, but rather how to handle the situation once migrants get in.” On that note, we’ll close with the following account from Reuters:

Having spent the night in the open, families with small children sat in fields beneath a new 3.5-metre high fence running almost the length of the EU’s external border with Serbia, halted by a right-wing government that hailed a “new era”.

 

Others pressed against gates, confused and demanding passage. More still sat on the main highway from Serbia to Hungary. “I will sit here until they open the border. I cannot go back to Syria. Life in Syria is finished,” said a Kurd from Syria who gave his name as Bower.

A panicky Brazil promises austerity.  It is probably too late:

(courtesy zero hedge)

A Panicked Brazil Promises Billions In Austerity, Does 180 On Budget After Downgrade

WTI Crude Just Plunged Back To Unchanged After White House Un-Supports Lifting Crude Export Ban

Well that escalated quickly… WTI back to a $43 handle again as The White House comments that it does not support The House bill to lift a ban on crude exports. Reuters reports that The White House says The Commerce Department should make the policy decision.

House Majority Leader Kevin McCarthy to announce that he’ll schedule
vote on bill to lift U.S. crude-export ban in last week of Sept.: WSJ.

The comment sparked selling in WTI (as Brent-WTI hit an 8-month tight)

end

Late in the day oil jumps as API reports an unexpected inventory draw.

This will be shortlived:

(courtesy zero hedge)

WTI Crude Jumps After API Reports Unexpected Inventory Draw

After 2 weeks of inventory builds (and production drops),API reports an unexpected 3.1 million barrel inventory draw (with Cushing drawing down 1.5mm bbl). Crude surged back above $45 on the news…

and the reaction…

Charts: Bloomberg

Despite some strangely optimistic expectation of a -0.5 print, September Empire Manufacturing printed -14.67, showing absolutely no hockeynesian dead-cat bounce mean-reversion. Hovering at the worst levels since April 2009, the underlying data is a total disaster. New Orders remain firmly negative and inventories collapse (who could have seen that coming?), and even more concerningly, employment and average workweek plunged into negative territory for the first time in over a year.

The read through the inflation outlook and for jobs – non-hamburger flipping jobs that is – from this report was simply abysmal:

Price changes were quite modest. The prices paid index slipped to 4.1, its lowest level since the Great Recession. The prices received index dipped below zero, falling six points to -5.2 in a sign that selling prices declined. Labor market conditions worsened,
with declines in employment levels and hours worked. The index for number of employees fell below zero for the first time in well over two years, slipping eight points to -6.2, and the average workweek index dropped to -10.3.

There was no silver lining pretty much anywhere in either the 6 month outlook or the current conditions:

Worst of all: the optimism is now gone. From the report:

Indexes for the six-month outlook displayed less optimism about future conditions than in August. The index for future business  conditions fell ten points to 23.2.

 

 

Indexes for expected new orders and shipments dropped to similar levels, and the indexes for both  future prices paid and future prices received declined. The index for expected number of employees edged up to 7.2, while the index for future average workweek turned negative. The index for expected capital expenditures fell six points to 11.3, and the technology spending index dropped to 2.1, indicating that tech spending plans were essentially flat.

Simply put, this report suggests total carnage in the manufacturing sector and, just as we have pointed out (most recently here and here), the exuberant inventory over-accumulation of the past few years – from Fed-deluded malinvestment – is about to come crashing down.

Charts: Bloomberg

Oh oH!!  this is getting good!!

(courtesy zero hedge)

Explosive Allegation: Citigroup Leaked Central Bank Trading ACTIVITY

For years we had been wondering when it would start: by “it” we mean angry ex-bankers, disgruntled due to either the terms of their termination, their compensation, or generally unhappy with their treatment by their former employee, standing up and blowing the whistle on crimes they witnessed while (un)happily employed.

Then, over the past month, the answer has emerged as not one, not two, but at least six individual case have emerged in which former currency traders at Citigroup, HSBC, Lloyds and other banks have seen former employees sue their previous bosses. As Bloomberg reports, “some of the traders say they were unfairly swept up in clear-outs of currency desks at the center of regulatory probes into the manipulation of foreign-exchange markets.”

And now they want revenge.

The reason for the wrath is that as a result of the crackdown on FX manipulation more than 30 traders were fired, suspended or put on leave over the last two years. However, as the Tim Hayes of Libor manipulation “rain man” fame has shown, in many cases those fired were merely the lowest men on the totem pole, and their termination was meant to cover up the crimes of individuals much higher up in the food, and value, chain. Indeed, Bloomberg adds, in the years after the 2008 financial crisis, fired bankers were telling London employment judges they had been made scapegoats for systemic failings.

Since most employment claims in the U.K. must be filed within three months of a dismissal to be allowed to proceed, they tend to come in clusters: and once one former worker shows there is little to lose, others quickly join in.

More importantly, since damages in employment cases are normally capped at about 78,300 pounds ($121,000), unless there is a finding of discrimination or the claimant wins status as a whistle-blower, employees are suddenly incentivized to expose all the crime they have been directly or indirectly witnessed to make sure their last potential parting gift from the financial industry is large enough.

And since few have the desire or eligibility to work in finance, they may as well go out with a bang: currency traders have little to lose by filing employment claims, according to James Davies, a London-based employment lawyer at Lewis Silkin. “If your reputation is already tarnished in the financial services sector then you’re less likely to be concerned by any adverse publicity arising from making a claim,” he said. “You’re also more likely to have the resources to make it possible to litigate.”

Here are some examples of the already filed cases, chronicled by Bloomberg:

Carly McWilliams, Perry Stimpson, David Madaras and Robert Hoodless all filed suits against Citigroup after they were fired amid the bank’s internal rigging investigation. Serge Sarramegna and Paul Carlier are suing HSBC and Lloyds for unfair dismissal and so-called public interest disclosure, or whistle-blowing, in relation to foreign-exchange practices. Only Stimpson’s case has reached trial so far. Carlier’s case could start as soon as Wednesday, the same day as a trial involving another Lloyds employee, Andrew Reed, is scheduled to begin. Including two discrimination complaints, as many as four banker lawsuits could be heard in London employment tribunals tomorrow.

Of all those, the case of Stimpson is by far the most interesting one.

Perry Stimpson Photographer: Luke MacGregor/Bloomberg

Testifying at a London tribunal last week, Stimpson alleged improper conduct was endemic in the bank’s currency-trading and claimed he saw managers deliberately flout the bank’s code of conduct. The former FX trader spored nobody, and named former managers and specific examples of their misbehavior. Rules of client confidentiality could “be bent at the request of senior management,” he said.

“I’m not here to mudsling, I’m here so the truth about foreign exchange at Citigroup is heard once and for all,” Stimpson said at the start of the case. The bank and the managers say his allegations are unfounded.

Maybe they are, but a deeper dive into his allegations reveals something far more troubling: Citigroup may have been sending details of its central bank customers’ trading activity to other clients, Stimpson said in a witness statement to a London court on Thursday.

Here is the kicker according to Reuters:

“Our Investor Desk would comply with a weekly request from (a client) for details of Central Bank activity that Citi had transacted,” Stimpson said in his witness statement to an employment tribunal in London. Stimpson did not specify which central banks he was referring to.

If anyone is confused, this means that not only do central banks trade FX on a day to day basis, something which has become increasingly clear in the past couple of years by merely observing the rigged market, but Citi was actively leaking this data to select clients!

Stimpson adds that Jeff Feig, who was Citi’s global head of trading at the time, called a halt to sending round the “central bank survey”, as Stimpson said it was referred to, in mid-2013 because he decided it was wrong. He did not elaborate.

Jeff Feig quit Citi in a hurry when the FX manipulation scandal was just getting started last September to join Fortress Macro as co-investment chief. He “unexpectedly” quit Fortress in this July, less than a year on the job, for “reasons unknown.” Surprisingly, it may not just be the FX manipulation catching up with him: his biggest position had been a EURCHF bet which blew up in January after the shocking SNB peg-breaker announcement. Guess he didn’t see that one coming.

Other unprecedented and criminal violations was Citigroup’s “common practice on the Investor Desk to cut and paste details of Citibank’s order book on to Bloomberg chats at the request of customers.” Stimpson said in his statement.

While unproven yet, these allegations are nothing short of a bombshell, and explain why Citigroup and its peers have rushed in an epic scramble to settle all FX manipulation allegations as fast as possible, to avoid precisely details such as these from coming out.

They did not , however, anticipate scapegoats such as Perry daring to fight back.

Of course, Citi has neither seen, nor heard, nor said nothing: a Citi spokesman said: “All of the allegations of wrongdoing being made by Mr Stimpson have been investigated and were found to be without merit.”

You mean to say the bank investigated itself and found that it did not engage in grossly criminal behavior such as leaking central bank trades to private clients? Unpossible!

On the other hand, Citi has its scapegoating narrative well laid out: it said Stimpson was dismissed for serious breaches of contract, alleging he shared confidential client information with traders at other banks via electronic chatrooms. Stimpson was dismissed last November in the wake of an industry scandal that resulted in banks paying more than $10 billion in fines for failing to stop traders attempting to manipulate the $5 trillion-a-day forex market.

Because where there is gross currency manipulation, it is always just one or two traders who did it. Nobody else! They never got the idea by watching their bosses and superiors do just that, and greenlight their own manipulation. Duh.

Ironically, Citi’s story falls apart when one digs through the evidence: Stimpson said he was strongly encouraged to gather and share more market information with colleagues and traders at other banks in order to have a broader understanding of market conditions to help the bank in its trading.  Maintaining contacts to gather information became one of his annual goals that would help dictate his year-end bonuses.

“Dude, get yourself on a chat,” his then line manager Bob de Groot told him in 2009, according to Stimpson’s statement. “Perry has made a good effort to talk to other participants in the market, he could give a little more effort in sharing information and ideas across the business,” is what de Groot wrote in his 2009 year-end review, Stimpson claimed in his statement.

It gets worse:

In his testimony, Stimpson said Citigroup staff breached confidentiality around some clients and that some senior staff used inside information to trade, in contravention of the bank’s own code of conduct.

 

In his witness statement, Stimpson said Michael Plavnik, then head of the short-term interest rate trading desk, looked to profit from trading euros around that day’s “fixing”, the daily process of setting what are effectively benchmark exchange rates used by many funds, companies and central banks around the world.

 

Plavnik had heard Citi’s spot FX desk had a large order to buy euros at the fix. Armed with that knowledge, he bought 200 million euros before the fix to sell them back into the market at the fixing rate, Stimpson claimed in his statement.

And, lo and behold, a Citi spokesman told Reuters that “Plavnik has not been found to have committed any misconduct.”  That is to say, who knows how many more senior bankers Plavnik could take down with him if charges were filed against even a mid-level maret rigger.

Instead he was rewarded, more for not getting caught than any other reason: Plavnik has since been promoted to global head of short-term interest rate trading.

That said, Stimpson is not innocent either: “Stimpson, who is representing himself, admitted that he had signed Citi codes of conduct, which covered a wide range of issues from ethics to client confidentiality, but barely paid any attention to their content.”

Neither did anybody else, and until all these market manipulators finally end up in jail, nobody ever will.

In the meantime, however, expect many more such scapegoats to emerge and explain to the world how all such former “conspiracy theories” were really “conspiracy fact” – who knows, maybe one day a former Fed trader will give the full explanation of just how the NY Fed’s market group manipulates the S&P500 on a day to day basis with the generous help of Citadel’s E-mini spoofing algorithms…

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