July 6/GLD ADDS AN ASTONISHING 28.53 TONNES INTO ITS WAREHOUSE: NOTHING BUT A PAPER ENTRY/SLV ADDS 7.909 MILLION OZ: ALSO A PAPER ENTRY/GOLD AND SILVER RISE DESPITE CONTINUAL ATTACKS BY THE CROOKED BANKERS/IN eUROPE: PANIC IN THE BANKING SYSTEM: ITALIAN BANKS NEAR COLLAPSE/RENZI ATTACKS MERKEL IN A HUGE SHOUTING MATCH: ITALY WANTS A BAILOUT, GERMANY WANTS BAIL IN/2 MORE DOMINOES FALLS IN GREAT BRITAIN AS TWO FUNDS STOP REDEMPTIONS/RELEASE OF FOMC MEETING IN JUNE AND ALL THEY CAN SAY IS THINGS ARE UNCERTAIN!/

Good evening Ladies and Gentlemen:

Gold:  $1,364.80 UP $8.40    (comex closing time)

Silver 20.16  UP 29 cents

In the access market 5:15 pm

Gold: 1363.00

Silver: 20.07

.

And now for the July contract month

For the July gold contract month,  we had  4 notices served upon for 400 ounces.  The total number of notices filed so far for delivery:  4023 for 402,300 oz or 12.51 tonnes

In silver we had 165 notices served upon for 825,000 oz.  The total number of notices filed so far this month for delivery:  847 for 4,235,000 oz

Let us have a look at the data for today

.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 293.802 tonnes for a loss of 9 tonnes over that period

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest fell by a considerable 3321 contracts down to 211,347, AND STILL CLOSE TO AN  ALL TIME RECORD. THE OI FELL DESPITE THE FACT THAT THE  PRICE OF SILVER GALLOPED HIGHER BY 33 CENTS IN TUESDAY’S TRADING.In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.055 BILLION TO BE EXACT or 151% of annual global silver production (ex Russia &ex China).

In silver we had 165 notices served upon for 825,000 oz.

In gold, the total comex gold ROSE BY A WHOPPING  12,156 contracts with gold’s RISE in price YESTERDAY to the tune of $19.70. iT IS FASCINATING THAT THE BANKERS ARE REFUSING TO SUPPLY MUCH OF NEW SILVER COMEX PAPER AS THEY KNOW SOMETHING IS UP!

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

With respect to our two criminal funds, the GLD and the SLV:

WHAT A MOCKERY!

GLD

 

WHAT!!!! we had A GIGANTIC DEPOSIT OF 28.53 TONNES in gold inventory./

Total gold inventory rest tonight at: 982.44 tonnes

SLV

A MASSIVE 7.909 MILLION OZ ADDED IN SILVER INVENTORY TO THE SLV

Inventory rests at 341.453 million oz.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver fell by 3321 contracts DOWN to 211,347 despite the fact that the price of silver galloped higher by 33 cents with TUESDAY’S trading. The gold open interest rose by a huge 12,156 contracts up to 652,971 as  the price of gold ROSE by $19.70  YESTERDAY.

(report Harvey).

 

2 a) Gold/silver trading overnight Europe, Goldcore

(Mark OByrne/zerohedge

3. ASIAN AFFAIRS

 i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed UP 10.90 POINTS OR 0.36% AND ONLY BOURSE IN THE GREEN THROUGHOUT THE GLOBE / /Hang Sang closed DOWN 255.43 OR 1.23%. The Nikkei closed DOWN 290.34 POINTS OR 1.85% Australia’s all ordinaires  CLOSED DOWN 0.53% Chinese yuan (ONSHORE) closed DOWN at 6.6900 /Oil FELL to 45.99dollars per barrel for WTI and 47.30 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades  6.69900 yuan to the dollar vs 6.6900 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AS MORE USA DOLLARS LEAVES CHINA’S SHORE

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

Two reasons why Japan has lower inflation expectations:

i) huge deflation coming onto their shores from the devaluation of the Chinese yuan

ii) Japanese companies are not spending on infrastructure (capital expenditures) as they see no growth in their economy:

b) REPORT ON CHINA

Gold trading, yuan devalues again, Japanese bond yields, USA YIELDS, GERMAN YIELDS plummet across the board

 

last night: Chinageddon!!

( ZERO HEDGE)

4. EUROPEAN AFFAIRS

i)Panic everywhere.  Two extremely important events: a)Deutsche bank and Credit Suisse two huge derivative players are crashing , and b) the yen is rising as investors bail out of assets bought, having shorted the yen.  Thus we witness London properties fall in value as investors exit.

The other key signal is the Euro-USA swaps which are rising exponentially. This is a signal of huge USA DOLLAR demand which also signals a huge downdraft in asset prices. Also the Great Britain pound libor/Ted spread is rising indicating huge stress in the British financial system as banks do not want to loan to one another!

 

(zero hedge)

ii)No banker bonuses for our friends over in England:

( zero hedge)

iii)Today,  France’s Societe Generale’s Chairman, Bini Smaghi stoked huge European banking panic by stating that people are starting to withdraw from the market.  He also commented on the huge problems in the Italian banking sector.  He also hints that what is needed is bail ins!

( former ECB banker, Smaghi, Bloomberg/zero hedge)

 

iiib) Your humour story of the day:

 Italy bans short selling in Monte de Paschi for 3 months but forgets to ban credit default swaps on Monte Paschi (BMPS).  Also Renzi opens his mouth and again Italian bank stocks fall!

( zero hedge)

 

iiic)Wow!! Renzi goes to war with the Germans.  He basically states that if they think Italy has a problem wait until you see what is behind the scene at Deutsche bank. Renzi wants a bailout. The Germans want a bail in where depositors gets hosed.

Let us see who will win!

( zero hedge)

iv)We now have a 4th domino as Henderson has suspended trading in its 5 billion UK property fund:

( zerohedge)

v)BOY! this is escalating fast:  We have both domino NO 5 and dominoNO 6suspend property fund redemptions:

( zerohedge)

v b)The biggest loser in all of these dominoes falling in England is Royal Bank of Scotland, this once proud central bank and probably Europe’s first central bank. On unification with Gr Britain in 1711, it became an ordinary bank.  It sure looks like it will fail!( zero hedge)

vi)This is huge:  Spain’s social security program will go bust in 2018 as revenues fall  far from payments.( Mish Shedlock/Mishtalk.com)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6.GLOBAL ISSUES

 

Now Black Rock downgrades all the European banks to a sell and they now expect a huge global slowdown! No kidding!

(courtesy BlackRock/zero hedge)

7.OIL ISSUES

Who is winning the oil export war:  Russia or the Saudis?

Looks like Russia is winning;

(courtesy Calcuttawala/OilPrice.com

8.EMERGING MARKETS

none today

9. PHYSICAL STORIES

i)Gold trading, yuan devalues again,Japanese bond yields plummet across the board

(zero hedge)

ii)A huge paper.  I brought this to your attention yesterday but it is worth repeating. The detonation of the gold LBMA

( David Jensen)

 

iii)Another must read from lawyer Avery Goodman. Here he describes a very easy way to calculate the correct value of gold  by taking the monetary base increase since 1944 and multiplying the gain by the old price of gold of 35.00 and he comes to a value of 5,000 plus. Of course he is assuming that the USA still has its gold:

( Avery Goodman/GATA)

 

iv)A must read..as the bankers are desperate.  They are short 25 million oz or approx 780 metric tonnes of gold/  This represents 25% of annual global production.  A 40 dollar move from 1350 to 1390 would cost 24 big banks almost 1 billion in losses.  This is why they are desperate.

(CRAIG HEMKE)

v)China is desperately trying to manage its currency but in the wake of BREXIT we have seen a considerable devaluation:

(Mullen/CNN)

vi)For those of you who are following gold in the native currencies, it seems he has reached record levels or are very close to it:

( Harvey)

10.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD/SILVER

i)“It Feels Like 2008”

(zerohedge)

ii)The strong USA dollar is certainly having an effect on exports:  The USA trade deficit jumped in May to 41.1 billion up from 37.4 billion in April:

( David Stockman/ContraCorner)

 

v)With the release of the June FOMC meeting, where the Fed was terribly uncertain of events and also they wanted to see what would happen with the BREXIT.  Well bonds are well bid and yet no other material reaction to the minutes:

Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 652,971 for a huge gain of  12,156 contracts AS THE PRICE OF GOLD ROSE CONSIDERABLY BY $19.70 with respect to YESTERDAY’S TRADING. We are now in the non active month is July.  We  are again witnessing the same scenario as in May and June whereby the front delivery month increases in OI standing for metal or a slight contraction. We  had 4 notices served upon our commercials late last night for today’s delivery.  Somebody big is continually standing for the gold metal as July is generally a poor delivery month. The open interest for the front July contract stands at 1048 for a loss of 1022 contracts. We had 1019 notices filed yesterday night for today’s delivery, so we lost a tiny 3 contracts or an additional 300 oz willnot stand for delivery in this non active month of July. The next big active contract month is August and here the OI ROSE by only 371 contracts up to 440,793  as this month starts its wind down until first day notice for the August contract, Friday,July 29/2016: 4 weeks away. Most of the gain went into December and October. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was very good at 273,278. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was huge at 393,817 contracts. The comex is not in backwardation.

Today, we had 4 notices filed for 400 oz in gold

And now for the wild silver comex results. Total silver OI FELL by A CONSIDERABLE 3,321 contracts from 214,668 down to 211,347.  We are still close to the new all time record high for silver open interest set on June 24.     The front active delivery month is July and here the OI fell BY 433 contracts down to 1586. We had 326 notices served on yesterday so we lost 107 contracts or 535,000 silver ounces that will not stand for delivery as they no doubt were cash settled. The next non active month of August saw it’s OI RISE by 14 contracts up to 393. The next big active month is September and here the OI fell by 3541 contracts up to 15,821.   The volume on the comex today (just comex) came in at 87,379 which is huge. The confirmed volume YESTERDAY (comex + globex) was enormous at 182,112. Silver is not in backwardation . London is in backwardation for several months.
 
We had 165 notices filed for 825,000 oz. in silver
 

JULY contract month:

INITIAL standings for JULY

July 6.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil  1607.500 oz

 

50 KILOBARS

SCOTIA

 

Deposits to the Dealer Inventory in oz NIL
Deposits to the Customer Inventory, in oz  niL
No of oz served (contracts) today 4 notices 

400 oz

No of oz to be served (notices) 1044 contracts

104400 oz

Total monthly oz gold served (contracts) so far this month 4023 contracts (402,300 oz)

(12.51 tonnes)

Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL
Total accumulative withdrawal of gold from the Customer inventory this month   33,742.537 OZ

Today we had 0 dealer DEPOSIT

total dealer deposit:  NIL   0z

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 0 customer deposits:

i

Total customer deposits; nil   OZ

Today we had 1 customer withdrawal:

i) Out of Scotia: 1607.500 oz

Total customer withdrawals: 1607.500  oz

Today we had 1  adjustments:

ii) Out of HSBC:  39,256.371 oz were transferred out of the CUSTOMER and into the DEALER

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 4 contracts of which 0 notices was stopped (received) by JPMorgan dealer and 0 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the JULY contract month, we take the total number of notices filed so far for the month (4023) x 100 oz  or NIL oz , to which we  add the difference between the open interest for the front month of JULY (xxx CONTRACTS) minus the number of notices served upon today (4) x 100 oz   x 100 oz per contract equals 506,700 oz, the number of ounces standing in this active month. 
 
Thus the INITIAL standings for gold for the JULY. contract month:
No of notices served so far (4023) x 100 oz  or ounces + {OI for the front month (xxx) minus the number of  notices served upon today (4) x 100 oz which equals xxx oz standing in this non   active delivery month of JULY  (15.760 tonnes).
We lost 300 additional oz of gold that will not stand for delivery in this non active month of July.
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
 
We now have partial evidence of gold settling for last months deliveries We now have 6.889 TONNES FOR MAY + 49.09 TONNES FOR JUNE +  15.760 TONNES FOR JULY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes-May 27 .0185 – .024 TONNES MAY 31 -jUNE 4: .5044 ; june 10 -.0008 / June 22:0.48 tonnes /June 23: 0489 tonnes, June 24..018; june 29 .036 tonnes; JUNE 30 2.49 /july 1 17.78 tonnes = 45.645 tonnes still standing against 45.979 tonnes available.
 Total dealer inventor 1,478,242.822 tonnes or 45.979 tonnes
Total gold inventory (dealer and customer) =9,445,739.924 or 293.802 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 293.802 tonnes for a loss of 9 tonnes over that period. 
 
JPMorgan has only 25.70 tonnes of gold total (both dealer and customer)
JPMorgan now has only .900 tonnes left in its dealer account.

THE GOLD COMEX IS AN ABSOLUTE FRAUD. THE USE OF KILOBARS AND EXACT WEIGHTS MAKES THE DATA TOTALLY ABSURD AND FRAUDULENT!!

 

 
 end
GOOD ACTIVITY AGAIN INSIDE THE SILVER COMEX
And now for silver
 

JULY INITIAL standings

 July 6.2016

Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory  NIL

 

Deposits to the Dealer Inventory 393,432.35 OZ

BRINKS

Deposits to the Customer Inventory  684,812.440 oz

BRINKS,SCOTIA

No of oz served today (contracts) 165 CONTRACTS 

(825,000 OZ)

No of oz to be served (notices) 1391 contracts

(6,955,000 oz)

Total monthly oz silver served (contracts) 847 contracts (4,235,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  NIL oz
Total accumulative withdrawal  of silver from the Customer inventory this month  684,998.9 oz

today we had 1 deposit into the dealer account

i) Into Brinks:  393,432.35 oz

total dealer deposit :393,432.35 oz

we had 0 dealer withdrawal:

:

total dealer withdrawals:  NIL oz

we had 2 customer deposit:

i) Into BRINKS:  85,518.55 OZ

ii) INTO SCOTIA: 599,293.89 oz

Total customer deposit: 684,812.440 oz

 

We had 0 customer withdrawals

 

:

total customer withdrawals:  nil  oz

 
 

 

 we had 0 adjustment

The total number of notices filed today for the JULY contract month is represented by 165 contracts for 825,000  oz. To calculate the number of silver ounces that will stand for delivery in JULY., we take the total number of notices filed for the month so far at (847) x 5,000 oz  = 4,235,000 oz to which we add the difference between the open interest for the front month of JULY (1556) and the number of notices served upon today (165) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the JULY contract month:  847 (notices served so far)x 5000 oz +{1556 OI for front month of JULY ) -number of notices served upon today (165)x 5000 oz  equals  11,190,000 oz  of silver standing for the JULY contract month.
We lost 107 contracts or 535,000 oz will not stand and most likely they were cash settled.
 
Total dealer silver:  25.055 million (close to record low inventory  
Total number of dealer and customer silver:   152.750 million oz
The total open interest on silver is NOW NEAR its all time high with the record of 218,979 being set June 24.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
END
And now the Gold inventory at the GLD
JULY 6/WHAT A FRAUD!! A MASSIVE 28.53 TONNES OF PAPER GOLD ADDED INTO THE GLD
July 5/no change in inventory/rests tonight at 982.44
July 1/a huge change in the gold inventory/ a deposit of 3.86 tonnes/rests tonight at 953.91 tonnes
JUNE 30/no change in gold inventory /inventory rests tonight at 950.05 tonnes
June 29/ a good sized deposit of 2.67 tonnes/inventory rests at 950.05 tonnes
June 28/ a huge deposit of 13.067 tonnes into inventory/new inventory rests so far at 947.38 tonnes.  This was a paper addition
June 27/a huge deposit of 18.415 tonnes into the GLD inventory/the new inventory rests at 934.313 tonnes.  The addition was a paper addition and not physical
june 24./strange!! no additions to gold with its huge 58 dollar advance??
june 23/no change in gold inventory tonight/rests at 915.90 tonnese
June 22/with gold down badly again, we had another huge deposit of 3.57 tonnes into the GLD/Inventory rests at 915.90 tonnes
June 21/ with gold down badly, we had a huge deposit of 3.56 tonnes into the GLD/Inventory rests at 912.33 tonnes
June 20/we had one deposit of .890 tonnes of gold into the GLD inventory/Inventory.
rests at 908.77 tonnes.
June 17./we had two huge deposits: last night: 1.782 tonnes and this afternoon: 5.3480 tonnes/Inventory rests at 907.88 tonnes
JUNE 16/no changes in GLD/Inventory rests at 900.75 tonnes.
June 15/the farce continues:  another paper deposit of 2.08 tonnes into the GLD/Inventory rests at 900.75 tonnes. Wait until you see tomorrow’s level!!
June 14./ANOTHER HUGE “PAPER” DEPOSIT OF 2.38 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 898.67 TONNES
JUNE 13/ANOTHER GOOD SIZED PAPER GOLD DEPOSIT OF 2.47 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS 896.29 TONNES
June 10/a huge “paper” deposit of 6.54 tonnes of gold into the GLD/Inventory rests at 893.92 tonnes
JUNE 9. a huge deposit of 6.23 tonnes of gold into the GLD/Inventory rests at 887.38 tones
June 8/no change in inventory at the GLD/Inventory rests at 881.15 tonnes
june 7/ a tiny withdrawal of .29 tonnes of inventory/probably to pay for fees/Inventory rests at 881.15 tonnes
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
July 6 / Inventory rests tonight at 982.44 tonnes

end

Now the SLV Inventory
JULY 6/AND ANOTHER FRAUD!! A MASSIVE 7.909 MILLION OZ ADDED INTO THE SLV/INVENTORY RESTS AT 341.453 MILLION OZ
july 5/no change in silver inventory/inventory rests at 333.554 milllion oz
july 1/no change in silver inventory/inventory rests at 333.544 million oz
JUNE 30/no changes in silver inventory/inventory rests at 333.544 million oz
June 29/ a small deposit of 760,000 oz/Inventory rests tonight at 333.544 million oz/
June 28/no change in silver inventory/rests tonight at 332.784 million oz
June 27/ a small deposit of 570,000 oz in the SLV inventory/Inventory rests at 332.784 million oz
June 24/This makes no sense!! 855,000 oz of silver leaves the SLV headed straight to Shanghai/Inventory rests at 332.214 million oz
June 23/ no change in silver inventory/rests tonight at 333.069 million oz
June 22.2016/no change in inventory at the SLV/Inventory rests at 333.069 million oz/
June 21/ we had another 2.67 million oz of silver withdrawn from the SLV.  This no doubt is real silver leaving and heading straight to China/Inventory at 333.069 million oz
June 20/we had another 2.852 million oz of silver withdrawn from the SLV. Again this is probably real silver leaving and heading straight to China. Inventory rests at 334.495
June 17/a monstrous 5.418 million oz of silver withdrawn from the SLV.  This may be some real silver and thus it is heading for China which is massively importing silver/inventory rests at 337.347 million oz
JUNE 16./no changes in silver inventory/rests tonight at 342.765 million oz
June 15and the dfarce continues for the SLV/we had a massive 2.376 million oz of a paper deposit into the SLV/Inventory rests at 342.765 million oz
June 14./NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY REMAINS AT 340.389 MILLION OZ
JUNE 13/A HUGE PAPER SILVER ADDITION OF 1.664 MILLION OZ/INVENTORY RESTS AT 340.389 MILLION OZ
June 10/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
JUNE 9/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz.
June 8/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
.
July 6.2016: Inventory 341.453 million oz
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 2.8 percent to NAV usa funds and Negative 3.4% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 59.0%
Percentage of fund in silver:39.8%
cash .+1.2%( July 6/2016). 
2. Sprott silver fund (PSLV): Premium RISES  to +1.58%!!!! NAV (July 6/2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO  0.93% to NAV  ( July 6/2016)
Note: Sprott silver trust back  into POSITIVE territory at +1.58% /Sprott physical gold trust is back into positive territory at +0.93%/Central fund of Canada’s is still in jail.
 
 
 

END

And now your overnight trading in gold,WEDNESDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne/David Russell (Goldcore)

“Gold Has Entered a New Phase” Says UBS

GoldCore's picture

With gold prices having risen by 24% in dollar terms already this year, UBS analyst Joni Teves declared in a note to clients yesterday that; “gold has entered a new phase”.

gold ytd ubs
Here’s the key reasoning behind that forecast, from UBS’ Global Precious Metals Comment note according to Business Insider today:

Key drivers include: 1) low/negative real rates, 2) the view that the dollar has peaked against DM currencies, and 3) lingering macro risks. We expect the next leg to be driven by an extension of the trend of strategic portfolio allocation into gold from a diverse set of investors. This trend should now deepen, attracting more participants and encouraging those who have been hesitating to get more involved. Relatively orderly retracements, which have typically been shallow and brief indicates strong buying interest. This suggests that gold’s floor is likely higher now given an even stronger fundamental argument for holding gold.

Teves continues:

The UK’s vote to leave the EU further underpins gold’s macro narrative, reinforcing the themes of further dovish shifts in monetary policies, consequently lower yields, and heightened uncertainty. We continue to expect US real rates to fall from here and ultimately for equilibrium real rates to settle lower and have limited upside. These factors justify strategic gold allocations across different types of investors and we expect this trend to continue.

The full report can be read here

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Gold and Silver News

Read More Here

Gold Prices (LBMA AM)
06 July: USD 1,347.00, EUR 1,239.71 & GBP 1,059.01 per ounce
05 July: USD 1,344.75, EUR 1,207.05 & GBP 1,023.89 per ounce
04 July: USD 1,348.75, EUR 1,213.07 & GBP 1,016.42 per ounce
01 July: USD 1,331.75, EUR 1,199.51 & GBP 1,001.34 per ounce
30 June: USD 1,317.00, EUR 1,183.59 & GBP 976.82 per ounce
29 June: USD 1,318.00, EUR 1,191.64 & GBP 984.36 per ounce
28 June: USD 1,312.00, EUR 1,185.79 & GBP 985.84 per ounce

Silver Prices (LBMA)
06 July: USD 20.43, EUR 18.46 & GBP 15.75 per ounce
05 July: USD 19.73, EUR 17.69 & GBP 14.99 per ounce
04 July: USD 20.36, EUR 18.31 & GBP 15.36 per ounce
01 July: USD 19.24, EUR 17.29 & GBP 14.48 per ounce
30 June: USD 18.36, EUR 16.48 & GBP 13.61 per ounce
29 June: USD 18.21, EUR 16.42 & GBP 13.55 per ounce
28 June: USD 17.57, EUR 15.84 & GBP 13.17 per ounce

Recent Market Updates

– “In Gold We Trust” Annual Report – New Bull Market “Emerging”
– 3 Charts Show “How Precious Brexit Is” for Gold and Silver Bullion
– Gold, Silver Best Performing Assets In H1, 2016 – Up 26% & 38%
– BREXIT Creates EU Contagion Risk – Ramifications for Investors, Savers and Companies In Ireland
– BREXIT Day – Markets Becalmed – Gold Panic Prelude – Trading Hours
– Gold Lower Despite “Panic” Due To “Supply Issues” In Inter Bank Gold Market
– Gold Slips Despite UK Gold Demand Surging – Investors “Seek Stability”
– Gold Prices Surge to Highest in Nearly Two Years On FED and Brexit Haven Demand
– Gold Bullion Has Little Downside, Brexit Or Not, Says HSBC
– Central Bank of Ireland Warns Risks are Debt, Brexit, Geopolitical Tensions and Migration
– Gold In Euros Surges 6.5% In June and 17% YTD On BREXIT Concerns
– Soros Buying Gold On BREXIT, EU “Collapse” Risk
– UK Gold Demand Rises On BREXIT “Nerves”
– Pensions Timebomb in “Slow Motion Detonation” In UK, EU, U.S.
– Silver – Perfect Storm Brewing in the Market

END

Gold trading, yuan devalues again,Japanese bond yields plummet across the board

last night:

Chinageddon – Gold Spikes As USDJPY, Yuan, Bond Yields Plunge

For the first time since March 2014, Gold is back above $1370, spiking higher as China opens. While silver has been celebrating way above Brexit spike highs, gold’s initial reaction was far bigger and that spike high has now been taken out.

Across Asia things are moving fast. Bond yields in Taiwan are breaking to record lows, JGBs are at fresh record lows with 20Y yields reaching zero for the first time...

Across Asia things are moving fast. Bond yields in Taiwan are breaking to record lows, JGBs are at fresh record lows with 20Y yields reaching zero for the first time…

  • *JAPAN’S 30-YEAR YIELD FALLS TO RECORD 0.015%
  • *JAPAN’S 10-YEAR YIELD FALLS TO RECORD MINUS 0.27%
  • *TAIWAN 10-YEAR GOVT BOND YIELD FALLS TO RECORD-LOW 0.695%

And USDJPY plunged to a 100 handle again

And then China devalued The Yuan fix significantly…to the weakest agaionst the USD since Nov 2010

Which is rippling through to US Equity futures… Dow -230 from earlier highs..

A huge paper.  I brought this to your attention yesterday but it is worth repeating. The detonation of the gold LBMA

(courtesy David Jensen)

David Jensen: Detonation of the LBMA — it wasn’t Brexit, Governor Carney

Section:

9:25a ET Tuesday, July 5, 2016

Dear Friend of GATA and Gold:

The Bank of England has been suppressing gold prices by facilitating the London Bullion Market Association’s creation of unbacked “paper gold” but the market has figured out the scheme and may be about the destroy the LBMA, market analyst and mining executive David Jensen writes.

“Leverage works in both directions,” Jensen writes. “The end result is spiking metals prices, interest rates, and consumer goods prices (inflation) as wealth flees from market artifice into goods of innate value coupled with market and social upheaval as discontinuous interest rate movements disrupt the hundreds of trillions in the interest rate derivatives market and collapse the global banks that hold them.”

Jensen’s analysis is headlined “Detonation of the LBMA — It Wasn’t Brexit, Governor Carney” and it’s posted at 24hGold here:

http://www.24hgold.com/english/news-gold-silver-detonation-of-the-lbma–…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

END

Another must read from lawyer Avery Goodman. Here he describes a very easy way to calculate the correct value of gold  by taking the monetary base increase since 1944 and multiplying the gain by the old price of gold of 35.00 and he comes to a value of 5,000 plus. Of course he is assuming that the USA still has its gold:

(courtesy Avery Goodman/GATA)

Avery Goodman: It’s easy to calculate the fair-market value of gold

Section:

By Avery B. Goodman
Tuesday, July 5, 2016

There are many people who allege that, because gold does not pay interest or dividends, it cannot be accurately valued, like a stock or bond. That is not true. It is actually easier to calculate the fair market dollar value of gold than to value any other asset. We simply need to step back in time in order to find our answer, and then employ some math. …

Why, then, do I even bother to make this calculation? The reason is as simple as the calculation itself. The vast difference between the fair value of gold and the current prices caused a huge gap between supply and demand, which the “supplier of last resort” (that is, the U.S. Treasury) is filling every year. … What is important, however, is that the type of massive drain on U.S. gold reserves cannot be maintained without exhausting reserves. After that, it’s “game over.” …

… For the remainder of the commentary:

http://averybgoodman.com/myblog/2016/07/05/it-is-easy-to-calculate-the-f…

END

A must read..as the bankers are desperate.  They are short 25 million oz or approx 780 metric tonnes of gold/  This represents 25% of annual global production.  A 40 dollar move from 1350 to 1390 would cost 24 big banks almost 1 billion in losses.  This is why they are desperate.

(COURTESY CRAIG HEMKE)

Onward Toward Bullion Bank Collapse – UPDATED

Since writing this report on June 25, The Banks have surged total Comex gold open interest by another 22,000 contracts or 3.5%, all in a desperate attempt to contain the “price” of gold below the post-Brexit highs.

The purpose of this update is to once again highlight the tenuous and desperate situation of The Bullion Banks. These Banks are trapped short in Comex paper gold derivatives and they are clearly attempting to contain/restrain price below $1350 and the post-Brexit highs near $1360. How do we know this? Check the chart below:

The usual Shills and Apologists will claim that the benevolent, altruistic Banks are merely “acting in their role as market-makers” and “providing risk management services for their mining company clients”. To that end, you and I are supposed to believe that the 71,309 new Comex gold contracts created since June 23 were done so in order to “maintain an orderly market” and “allow producers to forward sell or hedge” 7,130,900 ounces of gold (about 222 metric tonnes or 7% of global production).

GIVE. ME. A. BREAK.

Instead, this Friday’s CFTC-generated Bank Participation Report will likely show a NET short position for the 24 largest, global Banks to be in excess of 250,000 contracts. This means two things:

  • On Comex alone and for their own, proprietary accounts, these 24 Banks are NET short 25,000,000 ounces of paper gold. That’s about 778 metric tonnes of “gold” or just a shade over 25% of annual, global mine supply.
  • On every $10 move UP in gold going forward, these Banks incur paper losses of $250,000,000. Thus, a move from $1350 to $1390 will “cost” these Banks about $1B in paper losses.

And this is why The Banks are so desperate to contain the paper price here. BUT THEY WILL LOSE! Brexit, NIRP, Eurozone bank collapse, global QE and all the rest WILL all combine to drive physical demand for gold past the point where the Bullion Banks will be able to deliver it. Once delivery failures begin, the collapse of the Paper Derivative Pricing Scheme will quickly follow. From there, where will prices head? We can’t know for sure but we can say with certainty that prices will NOT be $1350 an ounce for gold and $20 an ounce for silver.

Again, please take time to read the original post below, pausing to consider the desperate actions of The Banks in the days since. Then ask yourself if you own enough physical gold and silver. If the answer is “no”, then we suggest you get your hands on some while there’s still time. If you wait until after The Bullion Bank Paper Derivative Pricing Scheme collapses, it will be too late.

TF

<ORIGINAL POST WRITTEN SATURDAY, JUNE 25>

The events of Friday not only speed the eventual collapse of the Bullion Bank Paper Derivative Pricing Scheme, they also highlight the fraud of this current system and shine light upon the utter desperation of these Banks to maintain it.

We’ve written about this countless times over the past six years. Here are just two recent examples:

In short, as a measure of controlling the paper prices of gold and silver, The Bullion Banks that operate on The Comex act as de facto market makers of the paper derivative, Comex futures contract. This gives them the nearly unlimited ability to simply conjure up new contracts from thin air whenever demand for these contracts exceeds available supply and, almost without exception, these Banks issue new contracts by taking the short side of the trade versus a Spec long buyer. Never do these Banks put up actual collateral of physical metal when issuing these paper derivative contracts. Instead, they simply take the risk that their “deep pockets” will allow them to outlast the Spec longs and, without the risk of having to make physical delivery, The Banks almost always win. Eventually, an event like the runup to the Brexit vote or all of the Fed Goon jawboning of May will spook The Specs into selling and this Spec selling is used by The Banks to buy back (cover) their ill-gotten naked shorts and lower total open interest back down. (If you’re confused by this, please click the second link listed above for a more detailed explanation of this process.)

How this influences price is simple. If the supply of the paper derivative futures contract was held constant on a daily basis, then price would have to rise or fall based upon simple supply/demand dynamics. When the amount of buyers exceeded sellers, price would have to rise to a point at which existing owners would be willing to sell. But this is NOT how the Comex futures market operates! Because the market-making Banks have the ability to create new contracts from whole cloth, they can instead flood the “market” with new supply whenever it’s necessary. This mutes potential upside moves by imparting fresh new supply for the Spec buyers to devour. Price DOES NOT have to rise to a new, natural equilibrium. Instead, price equilibrium is found where demand meets this new supply.

As a case in point, simply study the “market” impact on gold “prices” in the hours that followed the Brexit decision in the UK. As turmoil shook the global markets, gold shot higher and, at one point, was up nearly $100. However, within hours it had given back nearly half of those gains and then spent the remainder of the day in am unusual and very tight trading range while virtually every other “market” was rocked with volatility throughout the trading day. See below:

The all-important question of the day is: How and why was this done? 

First, the “how”. At the end of each trading day, the CME Group issues an update that details total open interest changes for both gold and silver. Friday’s preliminary totals can be found here: http://www.cmegroup.com/trading/metals/precious/gold_quotes_volume_voi.html  What does the data show? On Friday, with global markets in turmoil and precious metals markets rallying significantly, The Bullion Banks on the Comex issued brand new supply of nearly 60,000 new paper gold contracts! At 100 paper gold ounces per contract, this represents a potential future obligation to deliver almost 6,000,000 ounces of gold, should the Spec long buyers ever stand for delivery (which they won’t). So, ask yourself these questions:

  • Did the world’s gold producers all suddenly decide to forward sell and hedge 186 metric tonnes of future production yesterday, just as the most significant economic event in eight years was beginning to unfold?

OR

  • Did the Bullion Banks suddenly put up a few million ounces of their own gold and then lever it up a few times and issue 60,000 new contracts based upon this collateral deposit?

Obviously, the answer to both questions is a big, bold NO! Instead, the market-making and price manipulating Banks simply played their usual game, writ large. In a desperate attempt to contain price, they simply issued these 60,000 new contracts and fed them to the Spec buyers. So next, ask yourself these vital questions:

  1. Without this added supply…which grew total open interest by over 10% in one day!…how much further would the paper price of gold have risen yesterday?
  2. If a natural equilibrium was forced to be found between buyers and sellers of existing contracts, would price have settled even higher?
  3. And how much higher? Gold was up nearly $60 yesterday. But without the paper derivative supply increase of 10%, would it have risen $100? $200??

So now let’s address the more important part of the question: “why”.

Simply put, these Banks are desperate and on the run. However, in their arrogance, they are still flailing away and attempting to postpone their demise. The minimal amount of physical gold that they do hold and utilize to backstop the paper derivative market is shrinking rapidly as investors and institutions around the globe seek gold as a safe haven against the financial devastation of negative interest rates.

But not only are The Banks attempting to reverse this trend that is rapidly deleveraging their system, they are also desperate to protect their established NET short positions from additional paper losses. Recall that the CFTC generates something that it calls The Bank Participation Report every month and we write about this report almost every month, too. Here’s the latest: http://www.tfmetalsreport.com/blog/7675/latest-bank-participation-report

So let’s cut to the chase…

With gold at $1060 back on December 1, 2015, the 24 Banks covered by this report were NET short just 30,757 Comex gold contracts. After running this NET short position all the way to 195,262 contracts on May 3, 2016, the report for June showed a NET short position of 133,396 contracts. However, data for this latest report was surveyed on June 7, with price at $1247 and total Comex open interest of 496,330 contracts. By this past Tuesday, in the days before the Brexit total were announced, price had risen to $1318 and then fallen back to $1270. However, total Comex open interest had risen to 571,517 contracts and, by analyzing the latest CFTC-generated Commitment of Traders Report, we can safely estimate that The Banks were likely NET short at least 180,000 Comex gold contracts.

Putting this all together, while price rose from $1060 to $1270, these 24 Banks added about 150,000 contracts of NET short liability to their Comex trading operations. So, with a NET position of 180,000 contracts short and with every contract representing 100 ounces of paper gold, the paper losses to these Banks for every $10 move in the gold price amounts to about $180,000,000. Multiplying that out…When gold was up nearly $100 early Friday, these Banks were on the losing side of a $1,800,000,000 move. Even for the likes of JPM et al, that’s a lot of fiat!

So, what did they do? Like any arrogant and addicted gambler, they doubled-down! They put “good money after bad” and, in doing so, likely increased their NET short position to nearly 250,000 contracts! All of this in order to suppress price and get it back under their control. This also allows them to somewhat control the message gold was sending. Can you even imagine the headlines if gold was up $200 yesterday? By holding the gains to just $50, The Banks hope to:

  • Manage the increased physical demand these higher prices are causing AND
  • Mitigate their paper losses. All of those new shorts lowered price by nearly $50 and nearly cut their one-day paper losses in half.

In the end, what’s the point of this post? First and foremost, it’s simply the latest installment of our efforts to shine the light of truth upon theincredible fraud and sham that is the current paper derivative pricing scheme. The Comex-derived price is not at all related to the price/value of true physical gold. Rather, the price discovered on Comex is simply the price of the derivative, itself, with the price of this derivative determined by changes of supply and demand of the derivative. Barely any physical metal ever exchanges hands on Comex so it is entirely inaccurate to say that the price discovered there has any connection at all to the underlying physical.

That said, though, we’ll leave you with one last link that you simply must read. Mark O’Byrne at Goldcore is closely-connected on the ground in London. In all of the hubbub of the Thursday and Friday, you may missed his daily report. If Mark and his sources are correct, we may be rapidly approaching the demise and destruction of these criminal Bullion Banks and their fraudulent pricing scheme. Demand for unencumbered, true physical gold is the key to ending this system and finding justice for gold holders, miners and producers around the globe…and this link may prompt you to think that we are closer to The End than at any other time in the past 40 years: http://www.goldcore.com/us/gold-blog/gold-lower-despite-panic-due-to-supply-issues-in-inter-bank-gold-market/

Friday’s Brexit vote truly was a game-changer and the single most important financial event since 2008. That it might accelerate the death throes of the Bullion Bank Paper Derivative Pricing Scheme is not something that is fully appreciated by the global gold “community”. Hopefully, this post has helped you to understand where we are at present, the reasons behind the price action of Friday and the significance of global physical supply/demand versus paper price going forward.

TF

www.tfmetalsreport.com/subscribe

END

China is desperately trying to manage its currency but in the wake of BREXIT we have seen a considerable devaluation:

(Mullen/CNN(

Forget Brexit — China’s currency is falling again

Section:

By Jethro Mullen
CNN, Atlanta
Tuesday, July 5, 2016

Turmoil triggered by Brexit may have masked a more troubling market move — China’s currency is falling again.

Since British voters’ shock decision to leave the European Union, the yuan has lost 1.3 percent against the dollar.

That’s small compared with the 12 percent plunge in the British pound since the EU referendum, but it contributed to the yuan’s biggest quarterly loss on record against the dollar — down nearly 3 percent in the three months to June 30.

The yuan was trading around 6.67 to the dollar on Tuesday, its lowest level since December 2010.

China still tries to manage its currency, and significant moves in the past year have roiled global markets. Investors are watching warily. …

… For the remainder of the report:

http://money.cnn.com/2016/07/05/investing/china-brexit-yuan-dollar-curre…

END

(courtesy Harvey)

For those of you who are following gold in the native currencies, it seems he has reached record levels or are very close to it:

CANADA:

When the USA hit its peak at $1886.80 the Canadian price of gold reached its zenith at 1786.80 as the USA dollar was .95 to the Cdn.  Today we reached $1786.00 and now trading at $1780.

British Pound;

When the USA price of gold hit its zenith, the British pound price of gold was 1094. Today it is 1062 pounds per oz or close to its record.

Swiss Francs:

When the USA price of gold was 1886.80, the Swiss Franc price was 1590.00 Today it is 1324.00 swiss francs per oz.

Euros:

When the USA price hit 1886.80, the Euro price of gold was 1380.00.  Today it is 1241 or  getting closer to its record.

In Yen:

The record price of gold in yen: 141,000 yen/oz.  Today 137,979.

In Aussie dollars;

The record price in Aussie:  1815.95.  Today’s price 1830.00 a record!

So it seems that all currencies are at or close to their record price in gold.!

Your early WEDNESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight

 
 

:

1 Chinese yuan vs USA dollar/yuan  DOWN to 6.6900 ( BIG DEVALUATION SOUTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN WIDENS TO 6.6999) / Shanghai bourse  UP 10.90 OR 0.36%   / HANG SANG CLOSED DOWN 255.43 OR 1.23% 

2 Nikkei closed DOWN 290.34 OR 1.85% /USA: YEN FALLS TO 100.32

3. Europe stocks opened ALL IN THE RED   /USA dollar index DOWN to 96.10/Euro UP to 1.1171

3b Japan 10 year bond yield: FALLS  TO -.265%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 100.32

3c Nikkei now WELL BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  45.99  and Brent: 47.30

3f Gold  UP  /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

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.

3h Oil DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to -.193%   German bunds BASICALLY negative yields from  10+ years out

 Greece  sees its 2 year rate FALL to 8.38%/: 

3j Greek 10 year bond yield FALL to  : 7.94%   (YIELD CURVE NOW COMPLETELY INVERTED)

3k Gold at $1372.30/silver $20.38(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 BROKEN 

3l USA vs Russian rouble; (Russian rouble DOWN 31/100 in  roubles/dollar) 64.72-

3m oil into the 45 dollar handle for WTI and 47 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a LARGE DEvaluation DOWNWARD from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 100.32 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9776 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0826 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now NEGATIVE territory with the 10 year FALLS to  -.193%

/German 10+ year rate  negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,AND NOW THE ECB WILL ACCEPT GREEK BONDS (WHAT A DISASTER)

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.335% early this morning. Thirty year rate  at 2.1111% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

“We’ve Never Had A Shock To The System Like This” – Global Selloff Accelerates On Brexit, Italy, “Unknown” Fears

END

ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed UP 10.90 POINTS OR 0.36% AND ONLY BOURSE IN THE GREEN THROUGHOUT THE GLOBE / /Hang Sang closed DOWN 255.43 OR 1.23%. The Nikkei closed DOWN 290.34 POINTS OR 1.85% Australia’s all ordinaires  CLOSED DOWN 0.53% Chinese yuan (ONSHORE) closed DOWN at 6.6900 /Oil FELL to 45.99dollars per barrel for WTI and 47.30 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades  6.69900 yuan to the dollar vs 6.6900 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AS MORE USA DOLLARS LEAVES CHINA’S SHORE 

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

Two reasons why Japan has lower inflation expectations:

i) huge deflation coming onto their shores from the devaluation of the Chinese yuan

ii) Japanese companies are not spending on infrastructure (capital expenditures) as they see no growth in their economy:

How Abenomics Fails: Japanese Firms Choose Salvaged Computer Parts Over Investment

The fact that Abenomics has been a miserable failure has been well established, and even the IMF felt the need to get involved and tell Japan what it should do next. One of the IMF’s recommendations to the BOJ was for the inflation target to be scrapped entirely.

To wit:

The Bank of Japan in February introduced a negative interest rate in part to support domestic demand. However, in the event that the IMF’s suggestions will not be implemented, Japan will lack growth and therefore would need a longer time to get its fiscal books in order. In that scenario, the IMF called on the bank to scrap its time frame for achieving its 2% inflation target, which the BOJ now sets at somewhere in fiscal 2017.

Inflation in Japan has now turned down again, and household inflation expectations have declined as well.

While we touched on one reason for Japan’s inflation headwind, namely that China has been and will continue to export deflation as the yuan is devalued, there is also another reason of course, which is that businesses aren’t spending.

As Goldman notes, FY’2016 business capex plans are the weakest in years.

FY2016 capex plans weakest in recent years:

The FY2016 capex plan (all companies, all industries) calls for +0.4% yoy, an upward revision from the March survey (-4.8%). The Tankan capex plan tends to be particularly conservative in the March survey after which it is usually raised gradually through to year-end. Even so, it is the weakest plan in the past

several years. We see a strong downside risk to capex, with the outlook for FY2016 recurring profits (all companies, all industries) calling for a drop of 7.2% and uncertainty growing with regards to domestic and external demand.

One of the most interesting examples of business sentiment on capital spending is that major Japanese manufacturers are buying salvaged computer parts from a small business owner instead of spending the money to upgrade. Those who picture Japanese manufacturing production lines as being on the cutting edge of the newest technology have the wrong impression.

Operating from a hilltop warehouse in the backwoods of Japan’s Izu peninsula, Tomoharu Iguchi makes a living by scavenging  parts from long obsolete computers and selling them to businesses. Not just a few businesses, as the Financial Times reports, Iguchi’s customer base is a nationwide, 1,000 strong list of Japanese companies that includes major railway operators, auto-parts giants, drugmakers, retailers, and hundreds of small manufacturers.

As the FT explains

Operating from a flimsy hilltop warehouse in the backwoods of Japan’s Izu peninsula, Tomoharu Iguchi is a highly successful technology cannibal. His existence is one of the country’s darker secrets: a necessary strut in a corporate edifice defined by decades of deflation.

For those who picture Japanese production lines at the bleeding-edge of modernity, Mr Iguchi’s business of disembowelling, scavenging and supplying parts from long obsolete computers, seems improbable. His stockroom — a precariously stacked jumble of grimy monitors, half-gutted ’90s-era PCs and spaghetti knots of yellowed keyboard and mouse cabling — should not logically be humming with activity in 2016.

But his customer base — a nationwide, 1,000-strong list of Japanese companies that includes major railway operators, auto-parts giants, drugmakers, retailers and hundreds of small manufacturers — reveals a rather more threadbare Japan. It cannot live without its creaking, underpowered, 20-year-old computers. Or Mr Iguchi.

Mr Iguchi is hardly to be blamed for the phenomenon, but the corporate mindset and decision-making that keeps him in business are one of the main reasons that Abenomics is having such a hard time gaining traction.

Larger Japanese manufacturers, as reflected in the Bank of Japan’s most recent Tankan survey of business sentiment, are narrowly planning to raise their IT spending. But the less visible industrial heartlands are dragging their heels. Those managers and business owners who opt for Mr Iguchi’s services have spent a large part of their careers in the shadow of deflation. For them, cost-cutting — to the point of not replacing computers — has become a cherished corporate skill and guarantee of promotion.

PC-98 series computers was so successful in the 1980s that for years businesses never found a good reason to upgrade, and NEC even continued to make replacement parts until 2010. Iguchi’s business has blossomed due to the fact that PC-98s are still embedded in production lines, and firms simply aren’t willing to spend the capital to upgrade the systems. This sentiment speaks volumes to the fact that Abenomics simply hasn’t been able to convince businesses to open up spigot and spend money, thus creating yet another headwind for the failed policy.

Computer cannibalisation highlights the blockage. Mr Iguchi is entirely focused on the PC-98 — a famously workhorse-like series of computers first produced by the Japanese technology group NEC in the 1980s. A Japanese-made computer, it was suited to Japanese use at a time when Japan was buying. A decade later, the arrival of the internet and flatscreen monitors created hot demand for new computers across corporate Japan. As offices upgraded their desktops, manufacturing and other sectors took the same opportunity to embed a new generation of machines in production lines, points of sale and back-office operations.

But the PC-98 was rather too successful: the machines were so user friendly and so deeply embedded, says Mr Iguchi, that for years nobody could see any good reason to replace them. Until 2010, NEC was still making replacement parts. Many took the 2010 cut-off as the prompt to finally ditch their old machines, but thousands decided that the cost was simply too high.

As a result, PC-98s are still embedded in production lines. They cannot simply be replaced with something newer, and replacing entire production lines instead seems recklessly expensive when people like Mr Iguchi are around to replace the crucial burnt-out microchip for a few thousand yen.

* * *

This particular story should be used as a business case in every university in order to show that central planning simply cannot consider all the elements of an economy, no matter how intelligent those that are doing the planning may believe they are. We’re kidding of course, we realize that academia is a staunch supporter of central planning and stories that clearly display the failures of central planning will be forever hidden from those debt-laden students who believe they are being properly educated and prepared for the real world.

b) REPORT ON CHINA

Gold trading, yuan devalues again,Japanese bond yields plummet across the board

last night:

Chinageddon – Gold Spikes As USDJPY, Yuan, Bond Yields Plunge

For the first time since March 2014, Gold is back above $1370, spiking higher as China opens. While silver has been celebrating way above Brexit spike highs, gold’s initial reaction was far bigger and that spike high has now been taken out.

Across Asia things are moving fast. Bond yields in Taiwan are breaking to record lows, JGBs are at fresh record lows with 20Y yields reaching zero for the first time...

Across Asia things are moving fast. Bond yields in Taiwan are breaking to record lows, JGBs are at fresh record lows with 20Y yields reaching zero for the first time…

  • *JAPAN’S 30-YEAR YIELD FALLS TO RECORD 0.015%
  • *JAPAN’S 10-YEAR YIELD FALLS TO RECORD MINUS 0.27%
  • *TAIWAN 10-YEAR GOVT BOND YIELD FALLS TO RECORD-LOW 0.695%

And USDJPY plunged to a 100 handle again

And then China devalued The Yuan fix significantly…to the weakest agaionst the USD since Nov 2010

Which is rippling through to US Equity futures… Dow -230 from earlier highs..

4. EUROPEAN AFFAIRS

Panic everywhere.  Two extremely important events: a)Deutsche bank and Credit Suisse two huge derivative players are crashing , and b) the yen is rising as investors bail out of assets bought, having shorted the yen.  Thus we witness London properties fall in value as investors exit.

The other key signal is the Euro-USA swaps which are rising exponentially. This is a signal of huge USA DOLLAR demand which also signals a huge downdraft in asset prices. Also the Great Britain pound libor/Ted spread is rising indicating huge stress in the British financial system as banks do not want to loan to one another!

please study this…

EU Banks Crash To Crisis Lows As Funding Panic Accelerates

The signs are everywhere – if you choose to look – Europe’s banking system is collapsing (no matter what Draghi has to offer). From record lows in Deutsche Bank and Credit Suisse to spiking default risk in Monte Paschi, the panic in Europe’s funding markets (basis swaps collapsing) is palpable.

Tumbling to a fresh post-Brexit low, Europe’s Stoxx 600 Bank Index is testing EU crisis lows…

With Credit Suisse smashing to record lows…

and Deustche Bank crashing towards the inevitable Lehman moment…

As it seems the most systemically dangerous bank in the world is liquidating aggressively (via Reuters)

Deutsche Bank is looking to sell at least $1 billion of shipping loans to lighten its exposure to the sector whose lenders face closer scrutiny from the European Central Bank, sources told Reuters.

While the oil tanker trade has picked up, the container and dry bulk shipping industries are struggling with their worst downturn due to a glut of ships, a faltering global economy and weaker consumer demand.

Banking and finance sources familiar with the matter said Germany’s biggest lender was initially looking to offload at least $1 billion.

“They are looking to lighten their portfolio and this includes toxic debt. It makes commercial sense to try and sell off some of their book,” one finance source said. “They are not looking to exit shipping.”

Deutsche Bank, which has around $5 billion to $6 billion worth of total exposure to the shipping sector, declined to comment.

Senior and Sub CDS are widening dramatically today with Italy’s short-sale ban on Monte Paschi shares sparking a 10% bounce in the stock but CDS are unchanged implying a 66% chance of default.

Which helps explain the crisis in Europe’s funding markets as USD demand smashes higher (-9bps to -49bps in EUR-USD basis swaps)…

With counterparty risk concerns growing in Sterling banks…

Charts: Bloomberg

end

 

No banker bonuses for our friends over in England:

(courtesy zero hedge)

In London, Banker Bonuses Are Set To Disappear

Not only will Brexit be used as an excuse for companies to lower earnings guidance and for central banks to provide more quantitative easing, but it may also be a scapegoat for banker bonuses in London being slashed – everyone can let out their collective gasp now.

As we have been covering, banker jobs have been getting cut for quite some time now, most recently with RBS announcing it will be cutting another 900 jobs. Times have been difficult for banks leading up to Brexit, but now, as Bloomberg reports, the message London’s investment banks are giving staff this year is that in the aftermath of Brexit, just be thankful to have a job, and forget a fat bonus at the end of the year.

It’s a great opportunity to blame Brexit, giving people the message ‘you’re lucky enough to have a job‘” said Stephane Rambosson, managing partner at DHR executive search firm in London,adding that bonuses could fall 30% or more in some areas.

Jason Kennedy, CEO of recruitment firm Kennedy Group in London said “Reality is going to kick in, today it’s about job preservation, rather than bonuses. Things are going to change, and some people shouldn’t expect any bonuses.

Jon Terry, a partner at PricewaterhouseCoopers in London, at least admits that things were falling apart even before Brexit: “If we hadn’t had the referendum results, this year was looking pretty tough anyway. We haven’t seen an end to various fines and compensation related to payment protection insurance and Libor. There are still billions of pounds being charged to the accounts. Ever since the financial crisis, there has been a need for reshaping the spend on compensation costs. Brexit is possibly one of the biggest catalysts for the next stage of reduction.”

As Bloomberg explains, banks have expressed concern that the slump will continue after the vote:

On the advisory side, Goldman Sachs Group Inc. has said it expects a slump to continue as uncertainty about what Brexit will look like chills investment. The vote has already led to multiple deals being scrapped or reassessed. Even before the vote, announced mergers worldwide were down 11 percent from a year earlier, while global equity issuance fell by more than half.

Morgan Stanley analysts said in a note on June 29 that revenue from equities for European banks may fall about 18 percent in 2016, while fixed income and investment banking may decline about 13 percent each in the same period.

* * *

Wherever the banks choose to place the blame is irrelevant however, as the impact is real. Banks will continue to fire employees if activity doesn’t pick up, and the truth of the matter is that for most in the industry, having a job at the end of the year will be a welcome sight, even if no bonuses get paid out.

END

Today,  France’s Societe Generale’s Chairman, Bini Smaghi stoked huge European banking panic by stating that people are starting to withdraw from the market.  He also commented on the huge problems in the Italian banking sector.  He also hints that what is needed is bail ins!

(courtesy former ECB banker, Smaghi, Bloomberg/zero hedge)

Ex-ECB Banker Stokes Europe’s Banking Panic: “People Are Starting To Withdraw From The Market”

The latest red flag about the solvency and viability of the European banking sector came this morning from none other than the chairman of Societe General and former ECB executive board member, Lorenzo Bini Smaghi who warned today that Italy’s banking crisis could spread to the rest of Europe.

“The whole banking market is under pressure,” the former European Central Bank executive board member said in an interview with Bloomberg Television on Wednesday. “We adopted rules on public money; these rules must be assessed in a market that has a potential crisis to decide whether some suspension needs to be applied.”

But what is most concerning is that one can make the argument that the former central banker was almost doing all he can to stoke panic: “There is no rationality in the market, it’s all very emotional. People are starting to withdraw from the market and to go to very liquid and safe assets.”

Why pour even more gasoline on the European banking fire? Simple: the financier is hoping for an overhaul of European bailout regulations saying that “rules limiting state aid to lenders should be reconsidered to prevent greater upheaval.” In other words, the countdown to the elimination of the brand new “bail in” process as a banking resolution mechanism appears to have started in order to avoid depositor panic that they may be next in line to “impairments”.

A summary of Bini Smaghi’s key points:

  • “There is no rationality in the market”
  • People are starting to withdraw from the market and to go to very liquid assets
  • “The bail-in wil scare the markets and small investors”
  • Europe needs a credible back-stop for its banking system, EU banking rules need to be assessed, policy makers need to be pragmatic
  • European solution is needed for Italy; “in this situation, you need policy to step in”
  • Opportunity to consolidate Italian banking industry
  • Germany has too many banks that are not profitable
  • Market concern on Brexit is that we’re in for “very long” negotiations
  • U.K. economy is sitting on major imbalances’’
  • U.K. cutting corporate taxes creates risk of tax competition across Europe, leading to bigger deficits and debts

His interview is below:

not available

The stress across Europe’s various institutions is palpable: as we have continuously reported, European banking stocks resumed their descent (especially now that even BlackRock has said it is selling the sector) as policy makers disagreed and sometimes issued contradictory statements about what may come next. Deutsche Bank AG, Germany’s largest lender, tumbled another 6.1% to its lowest level since at least 1989. Societe Generale, France’s second-biggest bank, which Bini Smaghi has chaired for just over a year, fell 1.8 percent as of 2 p.m. in Paris.

Nowhere was the confusion, greater, however, than in Italy where Finance Undersecretary Pier Paolo Baretta, responding to the unprecedented implosion of the country’s 3rd largest and most insolvent bank, Monte Paschi, said in an interview on RAI radio Wednesday morning that a “technical solution” on Monte Paschi could be hours away, before issuing a statement an hour later that said “no intervention is expected in the next few hours.”

German Finance Minister Wolfgang Schaeuble, speaking at a news conference in Berlin hours later, said his Italian counterpart Pier Carlo Padoan told him that Italy intends to stick to the banking-union rules.

The resulting confusion meant that while Monte Paschi has seen a brief rebound on hopes of some bailout, other Italian banks are now sinking fast: the largest Italian lender, UniCredit SpA, has slumped more than 60% this year and replaced its chief executive officer amid speculation the bank will need to tap its investors for more capital. Its shares fell 1.4% Wednesday.

Yet while the Italian fire rages, Europe refuses to concede to Matteo Renzi’s demands for a bail out instead of a bailin. “Despite the struggling market, it’s important to protect the regulations established for European banks since the financial crisis” said Klaus Regling, CEO of the EU Stabilization Fund in a separate television interview. Many solutions under the existing rules are still available to Italy, he said, the main of which of course is impairing depositors in one or more insolvent banks and thus launching an even greater bank run and even more bank failures.

“The Italian government is in a dialogue with the European Commission on how to apply the framework to these specific circumstances,” Regling said. “I am confident they will find a way.”

For now no way is obvious.

Meanwhile, the former ECBer did all he could to push up the panic level: Bini Smaghi said on Bloomberg TV that Europe’s banking market faces the risk of a systemic crisis unless governments accept the idea of taxpayer money as the ultimate recourse. Any intervention should be as swift as possible, he said.

In other words, going back to square one.

Both Italy and Germany have too many banks that are not profitable and more consolidation is needed, he said. Italy must do more to deal with non-performing loans, and Prime Minister Matteo Renzi will have to take politically unpopular steps, including encouraging mergers that will lead to job cuts, Bini Smaghi said.

“What’s needed is a European solution,” he said. “So far, we’ve had national solutions. We need a clear backstop.”

Translation: all that macroprodential bullshit we have heard so much about really means just one thing: more taxpayer bailouts are inevitable.

 

end

 

Your humour story of the day:

 

Italy bans short selling in Monte de Paschi for 3 months but forgets to ban credit default swaps on Monte Paschi (BMPS)

(courtesy zero hedge)

Italy Bans Short-Selling In Monte Paschi For Three Months, Forgets To Ban Buying Of CDS

Yesterday we got the first sure sign that Italy’s banking system is near collapse when in a flashback to the Greek financial crisis days of 2010-2011, Italy’s bank regulator banned short selling in Monte Paschi shares for the day. Today, we can conclude that the Italian bank crisis is set to get far worse, because moments ago, Italy’s banking regulator just announced that what was supposed to be just a temporary measure has been extended for the next three months and shorting in BMPS shares is now prohibited until October 5.

Consob bans for three months net short positions on Banca MPS shares – The prohibition shall apply from tomorrow 7 July 2016 until 5 October 2016 – It affects derivatives and market makers as well

Consob, with Resolution 19655 of 6 July 2016, decided to temporary prohibit net short positions on Banca Monte dei Paschi di Sienashares – BMPS (ISIN code IT0005092165).

The ban will be enforce for the next three months, from tomorrow 7 July 2016 (start of day) until 5 October 2016 (end of day).

The prohibition on net short positions strengthens and extends the ban to short selling adopted yesterday, as the new prohibition bans both short selling on BMPS shares and short positions taken though single stock derivatives on BMPS shares.

The ban applies to all transactions, irrespective of where they have been carried out (on an Italian or foreign trading venue or over-the-counter) and it affects market makers as well.

The ban does not apply to transactions in index-related instruments (e.g. FTSEMIB), taking into account the marginal weight of BMPS shares in financial indices.

The prohibition has been adopted pursuant to Article 20 of the EU Regulation on short selling, considering the negative price change recorded by the share in the last days and taking into account the positive opinion issued by ESMA on 6 July 2016.

Good luck with that:

While at it, Italy should probably also ban buying of CDS… just a thought.

And if that wasn’t enough, Italy’s prime minister, Matteo Renzi, took a page right out of the central banker playbook and in a desperate attempt to boost confidence, has gone the “opposite” route, by saying that Italian savers have no problems regarding banks:

  • ITALY’S RENZI: ITALIAN SAVERS HAVE NO PROBLEMS REGARDING BANKS

The implication being that contrary to bank insolvency rumors, no bank run is coming any time soon.

He could have stopped there, but instead decided to make it far worse by comparing Italy with other just as insolvent European nations:

  • ITALY PM RENZI SAYS PROBLEMS AT OTHER EUROPEAN BANKS MUCH MORE SERIOUS THAN ITALY’S NPLS 

With that statement he will hardly win any empathy points from his fellow Europeans and certainly not from Angela Merkel, whose very own Deutsche Bank remains in dire straits.

The good news is that at least for the time being, the headline chasing algos have assumed this means either a bailout is coming or that things are perhaps getting better, and sent USDJPY to the day’s highs, which as everyone knows by now, means the S&P 500 promptly follows.

end

 

Wow!! Renzi goes to war with the Germans.  He basically states that if they think Italy has a problem wait until you see what is behind the scene at Deutsche bank.

Renzi wants a bailout.  The Germans want a bail in where depositors gets hosed.

Let us see who will win!

(courtesy zero hedge)

 

A Furious Italian Prime Minister Slams Deutsche Bank As Europe’s Most Insolvent Bank

Several years ago, we were the first to point out the true “elephant in the room”, namely Deutsche Bank’s $75 trillion in derivatives which as we said at the time was about 20 times bigger than Germany’s GDP, and 5 times bigger than the entire economic output of the Eurozone.”

 

This was largely ignored by the “experts” because why bring attention to something which is fundamentally a devastating break in the narrative that “Europe is fine” and the financial crisis is now contained.

Fast forward to today when Europe is once again not fine, only this time one can’t blame Europe’s problems on Greece (instead the same “experts” are trying to blame everything in Brexit), when in a surprising admission of reality, none other than Italy’s prime minister Matteo Renzi, “went there” and slammed Deutsche Bank as the true “derivative problem” facing Europe.

To be sure, Renzi has his own problems, chief among which is how to pass a banking bail out of his insolvent banks without implementing the dreaded bail in mechanism unveiled in 2016 as the only permitted European bank resolution mechanism. Alas, in his push to bail out rather than bail in Italian banks, Renzi has faced stiff resistance from the Germans, namely Angela Merkel and Wolfgang Schauble who have both strongly opined against this kind of backtracking. Just today, Wolfgang Schaeuble, speaking at a news conference in Berlin (just hours after Italy hinted once again at an imminent bailout of Monte Paschi), said his Italian counterpart Pier Carlo Padoan told him that Italy intends to stick to the banking-union rules. Perhaps not.

So it is not surprising that when faced with stiff resistance from the Germans, Renzi decided to call a spade a spade when, as Reuters reports, he said that the difficulties facing Italian banks over their bad loans are miniscule by comparison with the problems some European banks face over their derivatives.

One look at the chart above and it becomes clear just who he was referring to.

As Reuters adds, speaking at a joint news conference with Swedish Prime Minister Stefan Lofven, Renzi said other European banks had much bigger problems than their Italian counterparts.

“If this non-performing loan problem is worth one, the question of derivatives at other banks, at big banks, is worth one hundred. This is the ratio: one to one hundred,” Renzi said

So just like that the Mutually Assured Destruction doctrine is activated, because now that Deutsche Bank’s dirty laundry has been exposed for all to see, Renzi’s gambit is clear: if Merkel does not relent on bailing out Italian banks, the collapse of Italian banks will assure the failure of Deutsche Bank in kind. And since in a fallout scenario of that magnitude DB’s derivative would not net out, there will be no chance to save the German banking giant, bail out, in, or sideways.

And now the ball is in Germany’s court: to be sure, traders everywhere will be curious to see just how this diplomatic escalation in which the fingerpointing at insolvent banks is only just beginning concludes, and most of all, they will follow every word out of Merkel’s mouth to see if the Chancellor will relent and give in to what is the first tacit case of financial – and factual – blackmail.

Ironically, even the best possible outcome, namely another bailout of every insolvent European bank, will merely accelerate the same populist anger that catalyzed the Brexit-driven schism in the first place, and lead to even more anger at what will, inevitably, be yet another banker bailout until ultimately the war of words between the classes becomes all too literal.

 

 

We now have a 4th domino as Henderson has suspended trading in its 5 billion UK property fund:

(courtesy zerohedge)

 end

The biggest loser in all of these dominoes falling in England is Royal Bank of Scotland, this once proud central bank and probably Europe’s first central bank. On unification with Gr Britain in 1711, it became an ordinary bank.  It sure looks like it will fail!

(courtesy zero hedge)

And The Biggest Loser From The UK’s “Falling Dominoes” Is…

Now that not just 3 (as of last night) but 5 UK property funds, with Henderson and Columbia Threadneedle became the latest two entrants to this exclusive club of clueless asset managers who have no idea how to factor in liquidity mismatch during market stress, have “frozen” their assets and gated investors from accessing assets, concerned traders are wondering how far the downstream effects of this domino chain will go. Luckily, overnight analysts at Morgan Stanley, JPM and SocGen did the math and found what they believe is (are) the most impacted bank(s) from UK’s commercial real estate troubles.

Here is the verdict, first from SocGen:

  • RBS exposure to CRE is GBP26b, most of U.K.’s major banks, and equivalent to 63% of tangible equity
  • Lloyds 2nd most exposed at 46% of tangible equity, Santander 3rd at 24%, Barclays 4th at 23% and HSBC 5th at 17%
  • U.K. banks debt financing of CRE is down 34% since 2008 to GBP168b, according to De Montfort University
  • Says watch out for other banks, challenger banks have relatively high proportion of more highly leveraged CREs on books
  • Lloyds is most preferred, will be able to absorb Brexit bumps; RBS is least preferred

Next, from JPM:

  • RBS, Lloyds and Bank of Ireland are more exposed to risks from U.K. commercial property prices than Barclays, HSBC and Standard Chartered
  • RBS, Lloyds TNAV sensitivity in stress scenario may be up to 5.5% with CT1 sensitivity at 90bps-100bps
  • Major U.K. banks’ exposure is GBP69b
  • Is “cautious” on U.K. domestic-exposed banks
  • U.K. lenders exposure is GBP86b down from GBP150b in 2011
  • Flags BOE remarks that U.K. challenger banks have high proportion of more highly leveraged commercial real estate loans
  • Says BOE research shows 10% drop in U.K. CRE prices leads to 1% drop in economy-wide investment

Finally, Morgan Stanley is outright negative on everything:

  • Morgan Stanley analysts see potential for further stress with GBP25b-40b of AUM in property funds, or 2-5% of total U.K. mutual fund assets, according to note.
  • Outflows are always high when REIT discounts are wide, whilst Henderson, Aberdeen and Schroders have some exposure among asset managers
  • Number of redemption requests normally correlated with discount to NAV for listed property stocks, currently close to historical wides
  • Fund suspensions designed as circuit-breakers, but sentiment generated can still drive negative feedback loop similar to that seen during last financial crisis
  • Liquidity mismatch the main concern:
  • Liquidity of investment funds is a significant concern for global regulators, particularly where illiquid underlying investments are being sold in daily dealing fund structures to retail investors

* * *

The conclusion: Italy has Monte Paschi, Germany has Deutsche Bank, and the UK is now saddled with RBS.

At this rate, all three will soon require taxpayer bailouts. Just remember: it’s all Brexit’s fault that 7 years after the financial crisis, not a single of Europe’s most systemically important banks were actually “fixed.”

end

This is huge:  Spain’s social security program will go bust in 2018 as revenues fall  far from payments.

(courtesy Mish Shedlock/Mishtalk.com)

Spain’s Social Security Program Will Go Bust In 2018

Submitted by Michael Shedlock via MishTalk.com,

Spain’s Social Security system is expected to go broke by 2018.

In the US, concerns over such matters are virtually nonexistent.

But Spain cannot print Euros, and is already deep in the hole on meeting budget deficit targets.

 

Spain SS Reserves

Via translation from El Confidencial, Spain’s Social Security Reserve Fund Exhausted by 2018.

The Social Security reserve fund will run out of money in 2018. The cause in bonus payments to pensioners, which consumes every six months (in December and July) over 8.5 billion euros. Revenue from social security contributions are not sufficient to meet the payment obligations.

Starting in 2018, only an extraordinary contribution by the State would make it possible for Social Security can meet its commitments.

The financial problems of Social Security are not a temporary problem. The government itself expects that this year the public pension system will register equivalent to 1.1 percent of GDP deficit (about 11 billion euros ), while in 2017 planned is an imbalance equivalent to 0.9% of GDP.

In 2016, revenues from social security contributions recorded an accumulated a deficit of 12.24% compared to expectations. The deviation is even higher than the already recorded in 2015.

Spain Budget Deficit Wildly Off Target

Spain has missed watered down budget deficit targets a half-dozen times. Spain is already under pressure from Brussels to cut spending or hike taxes, by 8 billion euros.

Something has to give.

end

GLOBAL ISSUES/GLOBAL MARKETS

Now Black Rock downgrades all the European banks to a sell and they now expect a huge global slowdown! No kidding!

(courtesy BlackRock/zero hedge)

World’s Biggest Asset Manager (BLACK ROCK) Downgrades European Banks To Sell, Expects Global Slowdown

Exactly one month ago we reported that BlackRock, the world’s largest asset manager, had downgraded global equities to Neutral, saying “U.S. valuations are elevated.” The chief catalyst for that call was BlackRock’s assumption that a summer Fed rate hike was imminent, something which now is assured won’t happen for years. So overnight BlackRock shifted its attention, and this time sees Brexit as the downside catalyst du jour, one which for Blackrock is enough to cause it to trim its global growth expectations, as it now expects “a modest slowdown over the next 12 months.”

More importantly, Blackrock also notes that since “there’s limited scope for monetary policy to reflate the global economy, however, and much-needed fiscal stimulus and structural reform progress looks unlikely over the coming months” it has in response “downgraded European stocks to underweight, with a negative view of the eurozone banking sector.

Offsetting this negativity is Blackrock’s “preference for income” and as a result it has “upgraded U.S. credit and EM debt to overweight. We like U.S. investment-grade credit, hard-currency EM debt, stocks in selected EMs and global quality and dividend-growth stocks.”

Here are the key points:

  • We have updated our asset views to reflect political uncertainty, weaker global growth and low-for-longer interest rates ahead.
  • Global stocks have regained some of what they lost in the two trading days post Brexit, but safe-haven assets remain resilient.
  • This week’s U.S. jobs report will show the extent to which May’s weak report was an anomaly.

The full note:

One thing that’s certain in a post-Brexit world: uncertainty. We see heightened political uncertainty, more modest global growth and low-for-longer interest rates ahead, and we have updated our asset views accordingly.

Economic Policy Uncertainty, 2000-2016

Political uncertainty has increased following the British vote to exit (Brexit) the European Union (EU), and we expect elevated uncertainty for some time. The UK prime minister position is open, a Scottish independence referendum is possible and Brexit negotiation will likely take at least two years. The imminent risk of other EU exits is low, we believe, but key political votes occur in Italy, France and Germany over the next 15 months, and in the U.S. in November.

We have trimmed our global growth expectations, and now expect a modest slowdown over the next 12 months. We see risk of a UK recession and European slowdown, as Brexit uncertainties weigh on sentiment. Our new BlackRock Macro GPS “nowcasting” indicator suggests Brexit-related uncertainty has already started to negatively impact UK and global economic growth. We see limited direct economic impact on the U.S., developed Asia and emerging markets (EM), but increased downside risks.

We expect lower rates ahead, with the Bank of England set to cut interest rates soon, U.S. rates on hold and potential for further quantitative easing in the UK, eurozone and Japan. We believe there’s limited scope for monetary policy to reflate the global economy, however, and much-needed fiscal stimulus and structural reform progress looks unlikely over the coming months.

In response, we have downgraded European stocks to underweight, with a negative view of the eurozone banking sector. We have a preference for income, and have upgraded U.S. credit and EM debt to overweight. We like U.S. investment-grade credit, hard-currency EM debt, stocks in selected EMs and global quality and dividend-growth stocks. Overall, in today’s uncertain, low-growth environment, we prefer credit to equity and believe exposure to gold and alternatives as diversifiers makes sense.

 

end

 

OIL ISSUES/OIL MARKETS/

Who is winning the oil export war:  Russia or the Saudis?

Looks like Russia is winning;

 

(courtesy Calcuttawala/OilPrice.com

 

Is Russia Winning The Oil Export War Against The Saudis?

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/WEDNESDAY morning 7:00 am

Euro/USA   1.11071 UP .0008 (STILL  REACTING TO BREXIT)

USA/JAPAN YEN 100.32  DOWN 0.837 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.2971 UP .0011 (MORE STIMULUS PLANNED)

USA/CAN 1.3018 UP .0006

Early THIS WEDNESDAY morning in Europe, the Euro ROSE by 8 basis points, trading now JUST above the important 1.08 level RISING to 1.1071; Europe is still reacting to BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED UP 10.90 POINTS OR 0.60%   / Hang Sang CLOSED DOWN 255.43 OR 1.23%/AUSTRALIA IS LOWER BY 0.53%/ EUROPEAN BOURSES ARE ALL DEEPLY IN THE RED   as they start their morning

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this WEDNESDAY morning: closed DOWN 290.34 POINTS OR 1.85% 

Trading from Europe and Asia:
1. Europe stocks ALL DEEPLY IN THE RED AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 255.43 OR 1.23% ,Shanghai CLOSED UP  10.90 POINTS OR .36%/ONLY BOURSE AROUND THE GLOBE IN THE GREEN  / Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED  IN THE RED/India’s Sensex IN THE RED  

Gold very early morning trading: $1372.80

silver:$20.32 

Early WEDNESDAY morning USA 10 year bond yield: 1.338% !!! DOWN 3 in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.1111 DOWN 3 in basis points from TUESDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early WEDNESDAY morning: 96.10 DOWN 6 CENTS from TUESDAY’s close.

This ends early morning numbers WEDNESDAY MORNING

END

And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield:  3.05% UP 3 in basis points from TUESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.265% DOWN 2  in   basis points from TUESDAY

SPANISH 10 YR BOND YIELD: 1.17%  DOWN 2 IN basis points from TUESDAY( this is totally nuts!!)

ITALIAN 10 YR BOND YIELD: 1.24 DOWN 2 IN basis points from TUESDAY (again totally nuts)

the Italian 10 yr bond yield is trading 7 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: -.176% UP  1 IN  BASIS POINTS ON THE DAY

END

IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

Closing currency crosses for WEDNESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

Euro/USA 1.11072 UP .0044 (Euro =UP 44 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 101.33 UP 0.172(Yen DOWN 172 basis points )

Great Britain/USA 1.2952 DOWN .0035 ( Pound DOWN 35 basis points/BREXIT DECISION AFFIRMATIVE/QE TO START AGAIN/UK DOWNGRADED

USA/Canada 1.2952-DOWN 0.0049 (Canadian dollar UP 49 basis points  AS OIL FELL  (WTI AT $46.68).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 44 basis points to trade at 1.1072

The Yen ROSE to 101.52 for a GAIN of 100 basis points as NIRP is STILL a big failure for the Japanese central bank/

The POUND was DOWN 35 basis points, trading at 1.2924

The Canadian dollar ROSE by 49 basis points to 1.2952, WITH WTI OIL AT:  $47.28

The USA/Yuan closed at 6.6900

the 10 yr Japanese bond yield closed at -.265% DOWN 2  IN BASIS  points in yield/

Your closing 10 yr USA bond yield:DOWN 8 IN basis points from TUESDAY at 1.365% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.139 DOWN 9 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 96.09 UP 57 CENTS  ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for WEDNESDAY

London:  CLOSED DOWN  81.78 OR 1.25%
German Dax :CLOSED DOWN 159.35 OR  1.07%
Paris Cac  CLOSED DOWN 78.12  OR 1.88%
Spain IBEX CLOSED DOWN 141.40 OR 1.75%
Italian MIB: CLOSED DOWN 356.37 OR 2.26%

The Dow was UP 78.00  points or 0.44%

NASDAQ UP 36.26 points or 0.75%
WTI Oil price; 47.28 at 4:30 pm;

Brent Oil: 48.59

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  64.28 (ROUBLE DOWN 18/100 ROUBLES PER DOLLAR FROM TUESDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD RISES TO -.1760%  FOR THE 10 YR BOND

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:47.41

BRENT: 49.11

USA 10 YR BOND YIELD: 1.3733% 

USA DOLLAR INDEX: 96.08 down 8 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.2921 down .0036 or 36 basis pts.

German 10 yr bond yield at 5 pm: -.176%

END

And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

US Stocks, Bonds, & Gold Jump As European Banking System Collapses

Another day, another short squeeze.

 

Today’s bounce bought to you by the fact that traders forgot that Europe will open again in a few hours…

 

It’s probably nothing…

 

Post FOMC Minutes, bonds and stocks were bid, crude and gold sold modestly…

 

VIX was monkeyhammered lower in a desperate bid to get the S&P 500 back to 2,100…BUT FAILED!

 

But Nasdaq outperformed (another major short squeeze) with Trannies underperforming (presumably on the disaster in trucking)…

 

Post-Brexit, Trannies and Small Caps remain laggards…

 

The long-end managed a small gain on the day as the short-end of the Treasury market sold off in unison starting at 8amET… 10Y yield hit a new record low at 1.3180% and 30Y at 2.0971%

 

Bonds and Stocks remain bid…

 

The USD Index leaked lower with GBP and JPY the most active once again…

 

Commodities were mixed despite the lagging USD. Copper lagged, PMs rallied holding gains post-FOMC, and crude jumped for no good reason at all…

 

Gold and Silver keep running…

 

Charts: Bloomberg

 

END

 

No comment necessary!

(courtesy zerohedge)

“It Feels Like 2008”

Government Bond Yields Signal: “Something Very Nasty Is Coming”

With global developed market bond yields crashing to record lows and almost $10 trillion of negative-yielding debtworldwide, it is no surprise that money managers are concerned that “it’s starting to feel like 2008.”

Global developed market bond yields crashed once again to new record lows overnight at just 40.0bps (having plunged from 63bps pre-Brexit)…

As negative yields become the new normal around the world. Japan and France are leading the way as demand for the safest assets boosts the amount of global bonds with negative yields to $9.8 trillion, according to Bloomberg World Sovereign Bond Indexes.

That’s up from $8.35 trillion before Britain voted to leave the European Union last month. The latest new entrants include Japan’s 20-year bonds, and French nine-year securities, which both saw yields drop below zero for the first time in the past 24 hours.

As John Anderson, a money manager at Smith & Williamson Investment Management in London concluded:

Government bond yields are telling you something very nasty is about to happen. These property fund suspensions are a worry. I am risk-off at the moment, erring on the side of believing the govvies,”

Certainly seems like ever since Bernanke went back to the money-printing game after QE2 that he broke the stock market’s ability to signal anything…

Because the days of ‘fundamentals’ are long gone…

“Rebound? What Rebound?” – Services Sector Business Confidence Hits Record Lows As ISM Surges To 7-Month Highs

Markit’s Chris Williamson sums up today’s Services sector data in three simple words – “Rebound? What Rebound?” With new business expanding at the fastest pace since January but business confidence plumbing record lows, there appears to be total confusion in the Services economy as today’s PMI print at 51.4 offers little hope for Q2 GDP. So having said all that, ISM data hit and soared to 56.5 – the highest since Nov 2015 – beating expectations by 5 standard deviations and well above the highest forecast. All subcomponents improved aside from Prices Paid as it seems “baffle ’em with bullshit” economics is back.

Seriously…

With ISM beating expectations by 5 standard deviations…

As if the world were not confused enough by record low bond yields and near record high US equity prices, here are two headlines from today’s Services PMI data that sum it all up…

“New business expands at fastest pace since January”

“Business confidence drops to a fresh survey-record low”

So everything is awesome… and the future is terrible? Or as per ISM – everything is awesome again…

ISM respondents are exuberant??

  • “Business is generally good and following historical seasonal patterns. Suppliers report being very busy compared to last year.” (Management of Companies & Support Services)
  • “Business is strong in the private sector; bidding a lot of commercial buildings.” (Construction)
  • “Slightly greater activity, specifically due to midyear reporting.” (Finance & Insurance)
  • “Oil prices seem to be stabilizing in the $48/bbl. range which has eased the panic in the industry over falling prices.” (Mining)
  • “Overall business appears to have flattened out. New business for the next six months looks good according to sales forecasts.” (Professional, Scientific & Technical Services)
  • “Steady movement with negligible fluctuations both up and down.” (Public Administration)
  • “Business was slow, but starting to pick up this month.” (Retail Trade)
  • “More new business.” (Utilities)
  • “Oil, gas, steel [and] coal mining continues to drag down revenues. Automotive, food, package handling and airports [are] strong.” (Wholesale Trade)
  • “Overall business conditions are good, even though growth is flat.” (Health Care & Social Assistance)

We leave it to Chris Williamson, Chief Economist at Markit, to sum up the mediocrity…

“Rebound, what rebound? The final PMI numbers confirm the earlier flash PMI signal that the pace of US economic growth remained subdued in the second quarter. While volatile official GDP numbers are widely expected to show a rebound from a lacklustre start to the year, the PMIs suggest the underlying malaise has not gone away. The surveys point to an annualized pace of economic growth of just 1% in the second quarter.

“Service sector confidence has slumped to the lowest since 2009 alongside ongoing woes in the energy and manufacturing sectors, as well as worries about the outlook amid presidential election uncertainty.

“Hiring has also slowed, though remains surprisingly upbeat. The surveys signal non-farm payroll growth of 150,000 in June, suggesting many companies expect the slowdown to be short-lived.”

Bonds Bid As Fed Minutes Spark Little Reaction Across Markets

 

end

 

Just one word;  UNCERTAIN!!!!!!

(courtesy zero hedge)

 

Just One Word Describes This Fed

A simple word count of the Fed’s minutes reveals that the prevailing mood at the Federal Reserve right now can be described with just one word. With exactly 13 instances in the latest, June, FOMC Minutes, it becomes clear that the Fed has never been more “uncertain”…

 

… which is ironic, because in these very minutes, one lament voiced by Fed governors was the following:

Several participants expressed concern that the Committee’s communications had not been fully effective in informing the public how incoming information affected the Committee’s view of the economic outlook, its degree of confidence in the outlook, or the implications for the trajectory of monetary policy.

In other words, the Fed has no clue what is going on, but is concerned that its communications are confusing the “public” about its “degree of confidence” in the economic outlook.

One really couldn’t make this up.

 

END

Commercial Mortgaged back Securities: CMBS

 

For the past 3 days, we have been hearing huge problems with Gr. Britain’s property funds and how these guys have stopped redemptions because of poor liquidity.  Believe it or not, but it is also heading to the USA as the Commercial Mortgaged Back Security Industry just announced a huge increase in delinquencies:

(courtesy zero hedge)

Time To Take The Fed’s Warning Seriously: CMBS Has “Greatest Ever Monthly Delinquency Increase”

David Stockman is following the tea leaves and states that we are following closely events that happened in 2007/2008

(courtesy David Stockman/ContraCorner)

Here We Go Again——August 2007 Redux

Nearly everywhere on the planet the giant financial bubbles created by the central banks during the last two decades are fracturing. The latest examples are the crashing bank stocks in Italy and elsewhere in Europe and the sudden trading suspensions by three UK commercial property funds.

If this is beginning to sound like August 2007 that’s because it is. And the denials from the casino operators are coming in just as thick and fast.

Back then, the perma-bulls were out in full force peddling what can be called the “one-off” bromide. That is, evidence of a brewing storm was spun as just a few isolated mistakes that had no bearing on the broad market trends because the “goldilocks” economy was purportedly rock solid.

Thus, the unexpected collapse of Countrywide Financial was blamed on the empire building excesses of the Orange Man (Angelo Mozillo)  and the collapse of the Bear Stearns mortgage funds was purportedly owing to a lapse in supervision.

So it boiled down to an injunction of “nothing to see here”.  Just move along and keep buying.

In fact, after reaching a peak of 1550 on July 18, 2007, the S&P 500 stumbled by about 9% during the August crisis, but the dip-buyers kept coming back in force on the one-off assurances of the sell-side “experts”. By October 9 the index was back up to the pre-crisis peak at 1565 and then drifted lower in sideways fashion until September 2008.

The bromides were false, of  course. Upon the Lehman event the fractures exploded, and the hammer dropped on the stock market in violent fashion.

During the next 160 days, the S&P 500 plunged by a further 50%. Altogether, more than $10 trillion of market cap was ionized.
^SPX Chart

^SPX data by YCharts

The supreme irony of the present moment is that the perma-bulls insist that there is no lesson to be learned from the Great Financial Crisis. That’s because the single greatest risk asset liquidation of modern times, it turns out, was also, purportedly, a one-off event.

It can’t happen again, we are assured. After all, the major causes have been rectified and 100-year floods don’t recur, anyway.

In that vein it is insisted that U.S. banks have all been fixed and now have “fortress” balance sheets. Likewise, the housing market has staged a healthy recovery, but remains lukewarm and stable without any signs of bubble excesses. And stock market PE multiples are purportedly within historic range and fully warranted by current ultra-low interest rates.

This is complete daytraders’ nonsense, of course. During the past year, for example, the core CPI has increased by 2.20% while the 10-year treasury this morning penetrated its all-time low of 1.38%.  The real yield is effectively negative 1%, and that’s ignoring taxes on interest payments.

The claim that you can capitalize the stock market at an unusually high PE multiple owing to ultra-low interest rates, therefore, implies that deep negative real rates are a permanent condition, and that governments will be able to destroy savers until the end of time.

The truth of the matter is that interest rates have nowhere to go in the longer-run except up, meaning that the current cap rates are just plain absurd. Indeed, after last’s week’s “bre-lief” rally the S&P 500 was trading at24.3X LTM reported earnings

Moreover, the $87 per share reported for the period ending in March was actually down by 18% from the $106 per share peak recorded in September 2014. So in the face of falling earnings and inexorably rising interest rates, the casino punters are being urged to close their eyes and buy the dip one more time.

And that’s not the half of it. This time is actually different, but not in a good way. Last time around the post-August 2007 dead-cat bounce was against $85 per share of S&P LTM earnings, meaning that on the eve of the 2008 crash the trailing multiple was only 18.4X.

That’s right. After the near-death experience of 2008-2009 and a recovery so halting and tepid as to literally scream-out the main street economy is impaired and broken, the casino gamblers have dramatically upped the valuation ante yet again.

There is a reason for such reckless obduracy, however, that goes well beyond the propensity of Wall Street punters and robo-traders to stay at the tables until they see blood on the floor. Namely, their failure to understand that the current central banking regime of Bubble Finance inherently and inexorably generates financial boom and bust cycles that must, and always do, end in spectacular crashes.

Bubble Finance is based on the systematic falsification of financial prices. That’s the essence of ZIRP and NIRP.

It’s also the inherent result of massive QE bond-buying with fiat credits from the central bank. And it’s the purpose of the wealth effects doctrine and stock market puts. The latter are designed to inflate stock prices and net worths, thereby encouraging households to borrow (against rising collateral values) and spend on the expectation of permanently higher real wealth.

The trouble is, financial prices cannot be falsified indefinitely. At length, they become the subject of a pure confidence game and the risk of shocks and black swans that even the central banks are unable to off-set. Then the day of reckoning arrives in traumatic and violent aspect.

And that brings us to the father of Bubble Finance, former Fed Chairman Alan Greenspan. In a word, he systematically misused the power of the Fed to short-circuit every single attempt at old-fashion financial market corrections and bubble liquidations during his entire 19-year tenure in the Eccles Building.

That includes his inaugural panic in October 1987 when he flooded the market with liquidity after Black Monday. Worse still, he also sent the monetary gendarmes of the New York Fed out to demand that Wall Street houses trade with parties they knew to be insolvent and to prop up stock prices and other financial valuations that were wholly unwarranted by the fundamentals.

Greenspan went on to make a career of countermanding market forces and destroying the process of honest price discovery in the capital and money markets. Certainty, that’s what he did when he slashed interest rates in 1989-1990, and when he crushed the justified revolt of the bond vigilantes in 1994 with a renewed burst of money printing.

Ditto, when he bailed out Long-Term capital and goosed the stock market in the fall of 1998—-a maneuver that generated the speculator dotcom bubble and subsequent collapse.

And then he applied the coup de grace to what remained of honest price discovery on Wall Street. During the 30 months after December 2000, he slashed interest rates from 6.25% to 1.0% in a relentless flood of liquidity. The latter, in turn, ignited the most insane housing market bubble the world had ever seen.

During the second quarter of 2003, for example, as rates were brought down to a previously unheard of 1.0%, the financial system generated mortgage financings at upwards of a $5 trillion annual rate. Even a few years earlier, a $1 trillion rate of mortgage financing had been on the high side.

Needless to say, housing prices and housing finance costs were systematically and radically distorted. The crash of 2008-2009 was but the inexorable outcome of Greenspan’s policy of financial asset price falsification—–a policy that his successor, Bubbles Ben, doubled down upon when the brown stuff hit the fan.

So as we sit on the cusp of the next Bubble Finance crash, now comes Alan Greenspan to explain once again that he knows nothing about financial bubbles at all.  According to the unrepentant ex-Maestro, its all due to the irrationalities of “human nature”.

Why, central banks have nothing to do with it at all!

“The 2000 bubble collapsed. We barely could see a change in economic activity. On October 19, 1987, the Dow Jones went down 23% in one day. You will not find the slightest indication of that collapse of that bubble in the GDP number – or in industrial production or anything else. So I think that you have to basically decide what is causing what. I think the major issue in the financial models has got to be to capture the bubble effect. Bubbles are essentially part of of the fact that human nature is not wholly rational. And you can see it in the data very clearly.”

No you can’t.  As Doug Noland observed in his most recent post:

At their core, Bubbles are about Credit excess and market distortions. Major Bubbles almost certainly have a major government component. They are indeed toxic, seductively so. Had the Greenspan Fed not backstopped the markets and flooded the system with liquidity post the ’87 Crash, Credit would have tightened and bursting Bubble effects would have been readily apparent throughout the data. Instead, late-eighties (“decade of greed”) excess ensured spectacular Bubbles in junk debt, M&A and coastal real estate. It’s been serial Bubbles ever since.

Noland is completely correct. During the early part of the Bubble Finance era, the main street economy was goosed time and again by cheap credit, which induced household and business spending from the proceeds of steadily higher leverage.

At length, the American economy essentially performed an LBO upon itself. The historic leverage ratio if 1.5X total credit market debt to national income soared to 3.5X on the eve of the financial crisis. That meant that the US economy was lugging around $52 trillion of debt in December 2007——or $30 trillion more than would have been outstanding under the historic golden mean of 1.5X.

Needless to say, the one-time leveraging of the US economy’s collective balance sheet did indeed generate incremental GDP, albeit debt fueled spending growth that was unsustainable and ultimately stolen from the future.

Greenspan’s claim, therefore, that earlier bubble collapses did not cause GDP to falter gives sophistry an altogether new definition. In fact, it just rolled one bubble into the next, making the eventual payback all the more traumatic and destructive.

Yet at the time, Greenspan even applauded the exploding and unstable leveraging of household balance sheets. He actually bragged about how he had induced higher consumption expenditures and GDP by encouraging American families to to refinance their castles and then spend the MEW (mortgage equity withdrawal) on a new car or trip to Disneyland.

Here is what happened to the household leverage ratio during Greenspan’s destructive MEW campaign. Does he really think that the nearly parabolic rise of the leverage ratio during his tenure to nearly double the stable historic average was do to the irrationalities of human nature?

Household Leverage Ratio

In fact, the limpid recovery of household consumption spending even by the Fed’s Keynesian measuring sticks is not about human nature at all. It is the consequence of central bank policies that first drove the household sector to a unsustainable balance sheet condition of Peak Debt, and has now left it high and dry under a crushing debt burden of $14.5 trillion.

In short, by its very nature Bubble Finance impregnates the system with FEDs (financial explosive devices). And worse still, what Greenspan started in the US has been exported to the rest of the world owing to the emulation by all of the world’s central banks, and the often defensive rationalizations for money printing that has been forced upon them by the massive flow of excess dollar liabilities into the global financial system.

(to  be completed.)

end

 

WELL THAT ABOUT DOES IT FOR TONIGHT

i WILL SEE YOU TOMORROW NIGHT

H

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