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Economic News

The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed

The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed

The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed

By Tyler Durden

The Real Reason Why Germany Halted Its Gold Repatriation From The NY FedFollowing the stunning announcement in January 2013 that the Bundesbank would repatriate 674 tons of gold from the NY Fed and the French Central Bank, a year later the Bundesbank followed up with a just as stunning revelation that of the 84 tons the bank was supposed to bring back home, it had managed to obtain just a paltry 37 tons, with only 5 tons originating from the NY Fed.

The reason given for this disappointing amount was as follows:

The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly.” Additionally, the Bundesbank had the “support” of the BIS “which has organized more gold shifts already for other central banks and has appropriate experience – only after months of preparation and safety could transports start with truck and plane.” That would be the same BIS that in 2011 lent out a record 632 tons of gold…

Going back to the main explanation, we wonder: how exactly is a gold transport “simpler” because it originates in Paris and not in New York? Or does the NY Fed gold travel by car along the bottom of the Atlantic, and is French gold transported by a Vespa scooter out of the country?

Supposedly, there was another reason: “The bullion stored in Paris already has the elongated shape with beveled edges of the “London Good Delivery” standard. The bars in the basement of the Fed on the other hand have a previously common form. They will need to be remelted [to LGD standard]. And the capacity of smelters are just limited.”

Or, simply said, generic pretexts for a failure to follow through with the Bundesbank’s original intention of redomiciling physical gold, especially after Zero Hedge posted in November 2012 proof of collusion between the 1968 Bank of England and the Fed seeking to defraud Deutsche Bank: ‘Bank Of England To The Fed: “No Indication Should, Of Course, Be Given To The Bundesbank…”

The charade ended with a thud in June of this year, when instead of continuing the farce, Germany simply gave up, providing an even more laughable reason why it can no longer even pretend to collect its physical gold located at New York’s 9 Liberty Street.

Germany has decided its gold is safe in American hands. “The Americans are taking good care of our gold,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic bloc in parliament, said in an interview. “Objectively, there’s absolutely no reason for mistrust.”

And that was it: not a single word more from Germany on the topic of its failed gold repatriation initiative. Until this week, when Deutsche Bank – the bank which is Germany’s equivalent to America’ Goldman Sachs in terms of policy decision-making – once again revealed just what the true reason behind the failure of Germany’s attempt to bring its gold back. From Robin Winkler’s special report:

… the gold community paid great attention to the decision of the German Bundesbank to “bring German gold home”. At the beginning of 2013, the Bundesbank announced it would repatriate 300 tonnes of gold stored in the US by 2020. It is well behind schedule, citing logistical difficulties. Yet diplomatic difficulties are more likely to be the chief cause of the delay, especially seeing as the Bundesbank has proven its capacity to organise large-scale gold transports. In the early 2000s, the Bundesbank incrementally repatriated 930 tonnes of German gold held by the Bank of England.

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Posted by Red Pill Reports in Economic News
Bank Deposits Will Soon No Longer be Considered Money But Paper Investments

Bank Deposits Will Soon No Longer be Considered Money But Paper Investments

Bank Deposits Will Soon No Longer be Considered Money But Paper Investments

By Kenneth Schortgen Jr

This weekend the G20 nations will convene in Brisbane, Australia to conclude a week of Asian festivities that began in Beijing for the developed countries and major economies. And on Sunday, the biggest deal of the week will be made as the G20 will formally announce new banking rules that are expected to send shock waves to anyone holding a checking, savings, or money market account in a financial institution.

Bank Deposits Will Soon No Longer be Considered Money But Paper Investments

Image credit: shtfplan.com

On Nov. 16, the G20 will implement a new policy that makes bank deposits on par with paper investments, subjecting account holders to declines that one might experience from holding a stock or other security when the next financial banking crisis occurs. Additionally, all member nations of the G20 will immediately submit and pass legislation that will fulfill this program, creating a new paradigm where banks no longer recognize your deposits as money, but as liabilities and securitized capital owned and controlled by the bank or institution.

In essence, the Cyprus template of 2011 will be fully implemented in every major economy, and place bank depositors as the primary instrument of the next bailouts when the next crisis occurs.

On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure. With deposits then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank deposit is no longer money in the way a banknote is. If a banknote cannot be subjected to a decline in nominal value, we need to ask whether banknotes can act as a superior store of value than bank deposits? If that is the case, will some investors prefer banknotes to bank deposits as a form of savings? Such a change in preference is known as a “bank run.”

Each country will introduce its own legislation to effect the ‘ bail-in’ agreed by the G20 this coming weekend.

Large deposits at banks are no longer money, as this legislation will formally push them down through the capital structure to a position of material capital risk in any “failing” institution. In our last financial crisis, deposits were de facto guaranteed by the state, but from November 16th holders of large-scale deposits will be, both de facto and de jure, just another creditor squabbling over their share of the assets of a failed bank. – Zerohedge

 

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Posted by Red Pill Reports in Economic News
This Will Make Watergate Look Like a Sunday School Picnic – “V” the Guerrilla Economist

This Will Make Watergate Look Like a Sunday School Picnic – “V” the Guerrilla Economist

This Will Make Watergate Look Like a Sunday School Picnic – “V” the Guerrilla Economist

By Red Pill Reports

(RedPillReports) In the words of “V” the Guerrilla Economist, “This will be monumental. This will make Watergate look like a Sunday school picnic and Iran Contra look like a choir boy circus”.

On Friday, November 7, 2014, “V” The Guerrilla Economist invited Greg Morse back to the show. V described the information that Greg is bringing out, being on the level of a “JRR Tolkien” of finance.

This Will Make Watergate Look Like a Sunday School Picnic - "V" Guerrilla EconomistThis was the prequel broadcast to the November 14th show, that lays the foundation to help you understand the progression of the information, as Greg Morse takes us deeper into the rabbit hole. It is recommended that you listen to this show first, so that you have the background needed to grasp the full disclosure in the Friday 11-14-2014 blockbuster.

Paraphrasing Greg Morse, the small town, farm boy, fighter pilot summarizes by saying, “The 6 years worth of research and legal process to bring everybody forward in equal knowledge regarding the mortgage crisis, beyond the Federal Reserve and show you where the preponderance of evidence shows where that money (that’s been stolen from you, the homeowner) has gone and what it’s been used for.”

Is this disclosure really bigger than Watergate?

Greg follows up on Red Pill Reports broadcast, Monday November 17th at 11:00am Central Time.

The Guerrilla Economist is on Freedom Slips Radio every Friday night. Freedom Slips
“V” The Guerrilla Economist Website: Rogue Money
Twitter: Rogue Money Twitter
Greg Morse Website::Save our Family and Home/

Here is the “V” the Guerrilla Economist show from 11-7.

Posted by Red Pill Reports in Economic News
Canada Just Abandoned US Dollar in Chinese Trade Agreement

Canada Just Abandoned US Dollar in Chinese Trade Agreement

Canada Just Abandoned US Dollar in Chinese Trade Agreement

By Investment Watch Blog

Canada and China have signed a reciprocal currency deal that’s expected to dramatically boost exports.

The hub will foster far easier trade between the Canadian dollar and the Chinese yuan, also known as the renminbi. It makes Canada the first country in the Americas to have a deal to trade in the renminbi.

The signing of the deal was announced in Beijing today by Premier Li Keqiang and Prime Minister Stephen Harper.

Canada Just Abandoned US Dollar in Chinese Trade Agreement

Parliament Hill in Canada’s capital city, Ottawa – Image credit: Maria Azzurra Mugnai [GFDL or CC-BY-SA-3.0]

“It’s a great boon for the Canadian business community, both importers and exporters, because they can now do business in China with the currency and not have to go through multiple financial exchange transactions,” Stewart Beck, president and CEO of the Asia Pacific Foundation of Canada, told CBC News.

“So the pundits are saying it could double maybe even triple the level of Canadian trade between Canada and China,” he said.

Authorized by China’s central bank, the deal will allow direct business between the Canadian dollar and the Chinese yuan, cutting out the middle man — in most cases, the U.S. dollar.

http://www.cbc.ca/news/politics/canada-china-sign-currency-deal-aimed-at-boosting-trade-1.2828707

Stephen Harper heads to China to ‘reanimate’ trade relations

Prime minister leaves today, hoping to boost business after recent setbacks

http://www.cbc.ca/news/politics/stephen-harper-heads-to-china-to-reanimate-trade-relations-1.2823836

Prime Minister Stephen Harper stumps for Canadian exporters on China trip

Canada opening 4 new trade offices in China

http://www.cbc.ca/news/prime-minister-stephen-harper-stumps-for-canadian-exporters-on-china-trip-1.2827194

Russia and China are building up huge gold reserves while abandoning the dollar

http://img.welt.de/img/geldanlage/origs131682619/6949725299-w900-h600/DWO-FI-Goldreserven-ag-Aufm1.jpg

Russia may ban circulation of US dollar

http://en.apa.az/xeber_russia_may_ban_circulation_of_us_dollar_218603.html

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Posted by Red Pill Reports in Economic News
Predictors of ’29 Crash See 65% Chance of 2015 Recession

Predictors of ’29 Crash See 65% Chance of 2015 Recession

Predictors of ’29 Crash See 65% Chance of 2015 Recession

By Simon Kennedy

In 1929, a businessman and economist by the name of Jerome Levy didn’t like what he saw in his analysis of corporate profits. He sold his stocks before the October crash.

Almost eight decades later, the consultancy company that bears his name declared “the next recession will be caused by the deflating housing bubble.” By February 2007, it predicted problems in the subprime-mortgage market would spread “to virtually all financial markets.” In October 2007, it saw imminent recession — the slump began two months later.

Predictors of ’29 Crash See 65% Chance of 2015 RecessionThe Jerome Levy Forecasting Center, based in Mount Kisco, New York, and run by Jerome’s grandson David, is again more worried than its peers. Its half-dozen analysts attach a 65 percent probability of a worldwide recession forcing a contraction in the U.S. by the end of next year.

That call runs counter to the forecasts of Morgan Stanley and Goldman Sachs Group Inc. The two banks posit an expansion that has plenty of room to run.

“Clearly the direction of most of the recent global economic news suggests movement toward a 2015 downturn,” chairman David Levy told clients in an Oct. 23 edition of a monthly forecasting report, which at over 60 years purports to be the oldest of its kind.

Why the gloom? Levy argues the U.S. and many advanced economies still have balance-sheet excesses exposing them to renewed financial crisis. There is limited room for policy makers to reverse any slump, and low inflation risks tipping into deflation in many parts of the world.

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Posted by Red Pill Reports in Economic News
San Francisco Voters Approve Minimum Wage Hike to $15

San Francisco Voters Approve Minimum Wage Hike to $15

San Francisco Voters Approve Minimum Wage Hike to $15

By

The more than 100,000 of San Francisco’s lowest paid workers are in store for a pay raise after voters supported raising the minimum wage Tuesday to $15 by 2018.

Already the highest in the nation, San Francisco’s minimum wage will continue to have that distinction with passage of Proposition J. Under the measure, the minimum wage increases on May 1, 2015, to $12.25 per hour, and rises gradually each year until it hits $15 on July 1, 2018. Subsequently the wage would be increased according to the consumer price index.

San Francisco Voters Approve Minimum Wage Hike to $15

Image credit: Bernard Gagnon (Own work) [GFDL or CC-BY-SA-3.0-2.5-2.0-1.0]

Mayor Ed Lee hailed the passage of the wage measure in a statement Tuesday.

“Tonight, San Francisco voters sent a message loudly and clearly to the nation that we can take on the growing gap between rich and poor, we can give a well-deserved raise to our lowest-wage workers, and we can do it in a way that protects jobs and small business,” Lee said.

While minimum wage increases are being discussed across the nation, San Francisco is also struggling with the challenges of growing rents, evictions and one of the worst income inequalities of any major city. Mayor Ed Lee supported the minimum wage hike as one effort to address the rise in costs.

“Our city has become more expensive. Working families, particularly those who earn minimum wage, are struggling,” Lee said at the time of announcing the ballot measure.

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Posted by Red Pill Reports in Economic News
The Economy Of The Largest Superpower On The Planet Is Collapsing

The Economy Of The Largest Superpower On The Planet Is Collapsing

The Economy Of The Largest Superpower On The Planet Is Collapsing

By Michael Snyder

How do you fix a superpower with exploding levels of debt, that has a rapidly aging population, that consumes far more wealth than it produces, and that has scores of zombie banks that could collapse at any moment.  You might think that I am talking about the United States, but I am actually talking about Europe.  You see, the truth is that the European Union has a larger population than the United States does, it has a larger economy than the United States does, and it has a much larger banking system than the United States does.  Most of the time I write about the horrible economic problems that the U.S. is facing, but without a doubt economic conditions in Europe are even worse at the moment.  In fact, there are many (including the Washington Post) that are calling what is happening in Europe a full-blown “depression”.  Sadly, this is probably only just the beginning.  In the months to come things in Europe are likely to get much worse.

The Economy Of The Largest Superpower On The Planet Is Collapsing

First of all, let’s take a look at unemployment.  If the U.S. was using honest numbers, the official unemployment rate would probably be somewhere close to 10 percent.  But in many nations in Europe, the official unemployment rate is already above the ten percent mark…

France: 10.2%

Poland: 11.5%

Italy: 12.6%

Portugal: 13.1%

Spain: 23.6%

Greece: 26.4%

The official unemployment rate for the eurozone as a whole is currently 11.5 percent.  The lack of good jobs is causing the middle class to shrink all over Europe, and more people than ever are becoming dependent on government assistance.  European nations are well known for their generous welfare programs, but all of this spending is causing  debt to GDP ratios to absolutely explode…

Spain: 92.1%

France: 92.2%

Belgium: 101.5%

Portugal: 129.0%

Italy: 132.6%

Greece: 174.9%

At the same time, the value of the euro has been steadily declining over the last six months.  This is significantly reducing the purchasing power that European families have…

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Posted by Red Pill Reports in Economic News
American Eagle Silver Coins Sold Out as Demand Jumps

American Eagle Silver Coins Sold Out as Demand Jumps

American Eagle Silver Coins Sold Out as Demand Jumps

By Debarati Roy

The U.S. Mint ran out of American Eagle silver coins after selling 1.26 million ounces since the start of the month as futures in New York slumped to the lowest in more than four years.

“Due to the tremendous demand we have experienced in the last several weeks, the U.S. Mint has temporarily sold out,” Michael White, a spokesman, said in an e-mail yesterday. The Royal Canadian Mint also said demand was up “significantly.”

American Eagle Silver Coins Sold Out as Demand Jumps

By United States Mint [Public domain], via Wikimedia Commons

In October, U.S. Mint sales jumped 40 percent to 5.79 million ounces from a month earlier to the highest since the record in January 2013. Futures dropped 1.2 percent to $15.26 an ounce on the Comex at 7:09 a.m. in New York. The contracts tumbled to $15.12 yesterday, the lowest since February 2010.

Assets in exchange-traded products backed by silver rose to a record last month, defying a slump in gold ETP holdings to the smallest since 2009.

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From Wikipedia:

Effect of recession on availability, 2008–2010

As a result of the global recession, the demand from investors for bullion coins as a hedge against inflation and economic downturn surged. This increased demand began to affect the availability of American Silver Eagle bullion coins in February 2008 when sales to authorized dealers were suspended temporarily. In March 2008, sales increased ninefold from the month before (from 200,000 to 1,855,000). In April 2008, the United States Mint began an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to “unprecedented demand.” At least one observer has questioned the legality of the allocation program, as the Treasurer of the United States is required by law (31 U.S.C. § 5112(e)) to mint and issue these coins “in quantities sufficient to meet public demand.” On June 6, 2008, the Mint announced that all incoming silver planchets were being used to produce only bullion issues of the Silver Eagle and not proof or uncirculated collectible issues. The 2008 Proof Silver Eagle became unavailable for purchase from the United States Mint in August 2008 and the 2008 Uncirculated Silver Eagle sold out in January 2009 (however, it was available as part of the “2008 Annual Uncirculated Dollar Coin Set” until it sold out on January 28, 2010).

On March 5, 2009, the United States Mint announced that the proof and uncirculated versions of the Silver Eagle coin for that year were temporarily suspended due to continuing high demand for the bullion version.[46] The allocation program that had been put in place in March 2008 was lifted on June 15, 2009, leading to speculation that proof and uncirculated versions might be produced before the end of the year. However, on October 6, 2009, the Mint announced that the collectible versions of the Silver Eagle coin would not be produced for 2009. The disappointment of collectors was expressed in a December 1 article by Representative Gary C. Peters (D-Michigan). Peters offered alternative scenarios to the cancellation of 2009 proof and uncirculated Silver Eagles and explained that he would be sending a letter to Mint Director Edmund C. Moy urging him to begin minting these products as soon as possible and continuing to do so until the end of the year. This effort was not successful and the collectible versions were not produced. The sale of 2009 Silver Eagle bullion coins was suspended from November 24 to December 6 and the allocation program was re-instituted on December 7; the product sold out on January 12, 2010.

Production of the 2010 Silver Eagle bullion coins began in January of that year (as opposed to beginning typically in December preceding the year of issue) and the coins were distributed to authorized dealers under an allocation program until September 3.

On July 20, 2010, Mint Director Edmund C. Moy provided testimony to the House Subcommittee on Domestic Monetary Policy and Technology on the matter of proof and uncirculated Silver Eagle coins, referencing the possibility of a legislative solution. Moy explained:

“Because we could not produce these popular coin products, those who had become accustomed to purchasing them on an annual basis were very disappointed. As Director of the United States Mint, I appreciate the disappointment of these collectors, but I am encouraged to know that the Subcommittee is exploring the possibility of an amendment to the law that would afford the Secretary the authority to approve the minting and issuance of American Eagle Silver Proof and Uncirculated Coins even when we are unable to meet the public’s demand for the bullion versions of these coins. American Eagle coin collectors and our many other customers who purchase these products as gifts would likely welcome such a change. Indeed, such a change would be one of the most positive customer satisfaction measures that could be taken to benefit your coin collecting constituents without having an effect on American’s [sic] ability to acquire investment-grade silver bullion. We have already provided you technical drafting assistance that your staff have requested to accomplish this change; however, such a change needs to be enacted soon. We can mint 200,000 per month, and if we can begin by September, we will be able to produce about 830,000 one-ounce silver American Eagle coins to meet collector demand for this product in the remaining months of 2010.”

— Edmund C. Moy, Testimony of Edmund C. Moy, Director United States Mint, Before the Subcommittee on Domestic Monetary Policy and Technology, United States House of Representatives, July 20, 2010

On September 22, 2010, Representative Melvin L. Watt (D-North Carolina) introduced the “Coin Modernization, Oversight, and Continuity Act of 2010” (H.R. 6162) to amend 31 U.S.C. § 5112 (e) and (i) by giving the Secretary of the Treasury authority to mint American Eagle silver and gold coins in “qualities [e.g. bullion, proof, or uncirculated] and quantities” sufficient to meet public demand. The bill was signed into law (Pub.L. 111–302) by President Barack Obama on December 14, 2010.

On October 4, 2010, the Mint announced that 2010-dated proof American Silver Eagle coins would be available for purchase beginning on November 19, 2010, at a price of $45.95 per coin and that 2010-dated uncirculated Silver Eagle coins would not be produced.

2013 allocation program

In January 2013, the Mint suspended sales of American Silver Eagle bullion coins after the first week due to high demand. The Mint resumed the allocation program that had been implemented from 2008 to 2010.

Mintages

Year Bullion Proof Uncirculated Total
1986 5,393,005 1,446,778 6,839,783
1987 11,442,335 904,732 12,347,067
1988 5,004,646 557,370 5,562,016
1989 5,203,327 617,694 5,821,021
1990 5,840,110 695,510 6,535,620
1991 7,191,066 511,925 7,702,991
1992 5,540,068 498,654 6,038,722
1993 6,763,762 405,913 7,169,675
1994 4,227,319 372,168 4,599,487
1995 4,672,051 438,511 5,110,562
1995-W 30,125 30,125
1996 3,603,386 500,000 4,103,386
1997 4,295,004 435,368 4,730,372
1998 4,847,549 450,000 5,297,549
1999 7,408,640 549,796 7,958,436
2000 9,239,132 600,000 9,839,132
2001 9,001,711 746,398 9,748,109
2002 10,539,026 647,342 11,186,368
2003 8,495,008 747,831 9,242,839
2004 8,882,754 801,602 9,684,356
2005 8,891,025 816,663 9,707,688
2006 10,676,522 1,092,477 466,573 12,235,572
2006-P Rev. Pr. 248,875 248,875
2007 9,028,036 821,759 621,333 10,471,128
2008 20,583,000 700,979 533,757 21,817,736
2009 30,459,000 Not offered Not offered 30,459,000
2010 34,764,500 849,861 Not offered 35,614,361
2011 40,020,000 947,355 409,809 41,377,164
2011-S 99,882 99,882
2011-P Rev. Pr. 99,882 99,882
2012 33,742,500 877,731 226,120 34,846,351
2012-S 281,792 281,792
2012-S Rev. Pr. 224,935 224,935
Total 315,754,482 18,920,026 2,357,474 337,031,982

Sources:

Posted by Red Pill Reports in Economic News
It’s Currency War! – And Japan Has Fired The First Shot

It’s Currency War! – And Japan Has Fired The First Shot

It’s Currency War! – And Japan Has Fired The First Shot

By Michael Snyder

It’s Currency War! – And Japan Has Fired The First Shot

Image credit: tracy_olson, Flickr

This is the big problem with fiat currency – eventually the temptation to print more of it when you are in a jam becomes too powerful to resist.  In a surprise move on Friday, the Bank of Japan dramatically increased the size of the quantitative easing program that it has been conducting.  This sent Japanese stocks soaring and the Japanese yen plunging.  The yen had already fallen by about 11 percent against the dollar over the last year before this announcement, and news of the BOJ’s surprise move caused the yen to collapse to a seven year low.  Essentially what the Bank of Japan has done is declare a currency war.  And as you will see below, in every currency war there are winners and there are losers.  Let’s just hope that global financial markets do not get shredded in the crossfire.

Without a doubt, the Japanese are desperate.  Their economic decline has lasted for decades, and their debt levels are off the charts.  In such a situation, printing more money seems like such an easy solution.  But as history has shown us, wild money printing always ends badly.  Just remember what happened in the Weimar Republic and in Zimbabwe.

At this point, the Bank of Japan is already behaving so recklessly that it is making the Federal Reserve look somewhat responsible in comparison.  The following is how David Stockman summarized what just happened…

This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters——Messrs. Morimoto, Ishida, Sato and Kiuchi—-are only semi-mad.

Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year—-a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet which had previously exploded to nearly 50% of Japan’s national income or more than double the already mind-boggling US ratio of 25%.

The Japanese are absolutely destroying the credibility of their currency in a last ditch effort to boost short-term economic growth.

So why would they want to devalue their currency?

Well, there are too main reasons why nations do this.

One reason is that it makes it easier to pay off debt.  The government debt to GDP ratio in Japan is approximately 250 percent at the moment, and the total debt to GDP ratio is approximately 600 percent.  When you have lots more money floating around, servicing crippling levels of debt becomes more feasible.

Secondly, nations like to devalue their currencies because it makes their products less expensive on the world stage.

In other words, it helps them sell more stuff to other people.

But in the process, this hurts other exporters.  For example, what the Bank of Japan just did is already having serious consequences for South Korean automakers

In Seoul, shares of auto makers Hyundai Motor and Kia Motors fell 5.9% and 5.6%, respectively, on Monday.

South Korean and Japanese companies often compete head-to-head in the same product groups in global markets, notably cars and electronics goods.

From the Bank of Japan’s standpoint, “you’re giving your industry a head start relative to someone else’s,” said Markus Rosgen, regional head of equity strategy at Citi in Hong Kong. “The perception in the equity market will be that they [South Korea] will have to take a hit from the lack of competitiveness versus the Japanese.”

This is why I said that there are winners and there are losers in every currency war.

If you boost your exports by devaluing your currency, you take away business from someone else.  And ultimately other nations start devaluing their currencies in an attempt to stay competitive.  That is why they call it a currency war.

For now, the Japanese are celebrating.  On Friday, Japanese stocks surged almost five percent for the day and reached a seven year high.  Investors tend to love quantitative easing, and they were very pleasantly surprised by what the Bank of Japan decided to do.

But of course rising stock prices are not always a good thing.  As Kyle Bass recently explained, wild money printing caused Zimbabwe’s stock market to skyrocket to unprecedented heights as well and that turned out very, very badly…

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Posted by Red Pill Reports in Economic News
How The Petrodollar Quietly Died, And Nobody Noticed

How The Petrodollar Quietly Died, And Nobody Noticed

How The Petrodollar Quietly Died, And Nobody Noticed

By Tyler Durden

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company – the end of the system that according to many has framed and facilitated the US Dollar’s reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.

The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, “developed world” status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements, leading to, among other thing, such discussions as, in today’s FT, why China’s Renminbi offshore market has gone from nothing to billions in a short space of time.

And yet, few would have believed that the Petrodollar did indeed quietly die, although ironically, without much input from either Russia or China, and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy, and to a lesser extent Saudi Arabia too, which by glutting the world with crude, first intended to crush Putin, and subsequently, to take out the US crude cost-curve, may have Plaxico’ed both itself, and its closest Petrodollar trading partner, the US of A.

As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their “petrodollars” out of world markets this year, citing a study by BNP Paribas (more details below). Basically, the Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.

A consequence of this year’s dramatic drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed.

This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.

But no more: “this year the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations.”

How The Petrodollar Quietly Died, And Nobody NoticedIn short, the Petrodollar may not have died per se, at least not yet since the USD is still holding on to the reserve currency title if only for just a little longer, but it has managed to price itself into irrelevance, which from a USD-recycling standpoint, is essentially the same thing.

According to BNP, Petrodollar recycling peaked at $511 billion in 2006, or just about the time crude prices were preparing to go to $200, per Goldman Sachs. It is also the time when capital markets hit all time highs, only without the artificial crutches of every single central bank propping up the S&P ponzi house of cards on a daily basis. What happened after is known to all…

At its peak, about $500 billion a year was being recycled back into financial markets. This will be the first year in a long time that energy exporters will be sucking capital out,” said David Spegel, global head of emerging market sovereign and corporate Research at BNP.

 

Spegel acknowledged that the net withdrawal was small. But he added: “What is interesting is they are draining rather than providing capital that is moving global liquidity. If oil prices fall further in coming years, energy producers will need more capital even if just to repay bonds.”

In other words, oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer.

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Posted by Red Pill Reports in Economic News
Sears Layoffs Swell To 7,000, Closing Distribution Center, More Stores

Sears Layoffs Swell To 7,000, Closing Distribution Center, More Stores

Sears Layoffs Swell To 7,000, Closing Distribution Center, More Stores

By

More stores have been added to the tally of Sears and Kmart locations shutting down. The locations include 63 Kmart stores; 34 Sears stores; 34 Sears Auto Centers, 32 of which are associated with closing Sears stores; 1 Kmart distribution center and 1 Sears product repair facility. More locations could be added to the list. The closures are scheduled between November and January, with many stores closing before Christmas.

Sears Layoffs Swell To 7,000, Closing Distribution Center, More Stores

Richard Sears

The closures have been compiled from liquidation, layoff and closure notices from Sears Holdings (NASDAQ: SHLD) received by multiple parties, including employees, property managers and local media. 7,048 layoffs have been announced, a number which could still grow.

Closures can cause hassles for customers, especially for pharmacy patients who will have their medical records automatically transferred to other stores, including stores not operated by Sears Holdings. Layaway accounts will also be transferred to other stores or to the website, or be refunded. Those holding gift cards or Kenmore or Craftsman warranties may find that the nearest Sears location is now farther away. Purchases at liquidating stores are final and cannot be returned to other Sears or Kmart locations.

Sears has not revealed the total number of locations being closed, saying it will do so in its next quarterly filing. Those filings do not identify individual locations. Last week, Sears cast doubt on a report regarding the closures of “at least” 46 Kmart stores, 30 Sears department stores and 31 Sears Auto Centers, saying the number of closures was not accurate. Nine additional Kmart stores were later added to the tally. In an email Sunday, Sears spokesman Chris Brathwaite did not dispute a claim that the number of closures is higher than was originally reported, but said that stores have been notified, and that their employees are advised of the situation.

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Posted by Red Pill Reports in Economic News
Attempts Being Made to Suppress Russia, BRICS in International Arena

Attempts Being Made to Suppress Russia, BRICS in International Arena

Attempts Being Made to Suppress Russia, BRICS in International Arena

By ITAR-TASS

Attempts Being Made to Suppress Russia, BRICS in International Arena

Image credit: ITAR-TASS/Mikhail Metzel

Attempts are being made to suppress in the international arena not only Russia but the entire BRICS developing-nation assembly of Brazil, Russia, India, China and South Africa, Russian experts said on Wednesday.

“The current situation shows that there are attempts to suppress not only Russia but also the BRICS given that the global role of this association has only intensified,” Vladimir Davydov, director of the Russian Academy of Sciences’ Institute of Latin America, said at a Moscow-Brasilia video conference.

“The forthcoming period will bring proof,” Davydov said, adding that an information war unleashed against Russia could also hit Brazil, India and China.

The expert noted that Western sanctions should not be considered purely negative. “The Russian man often needs extreme conditions to make a technological breakthrough,” he said. “I suppose that the coming years, which will be difficult for Russia, will offer us new solutions both in the economy and technology.”

“More and more communication takes place through BRICS channels today,” Georgy Toloraya, executive director of the Russian National Committee on BRICS Research, said Thursday.

“Unfortunately, the period of stability in international relations has come to an end, and the BRICS got into this geopolitical situation,” Toloraya said. “However, institutionalisation of this group is very important, and the BRICS will continue to develop further.”

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Posted by Red Pill Reports in Economic News
Michigan Granted $3 Billion in Special Tax Credits to Big 3 Automakers

Michigan Granted $3 Billion in Special Tax Credits to Big 3 Automakers

Michigan Granted $3 Billion in Special Tax Credits to Big 3 Automakers

By Tom Gantert

The state of Michigan granted more than $3 billion in combined tax breaks and cash subsidy deals to General Motors, Ford and Chrysler in the final years of former Gov. Jennifer Granholm’s tenure, which helped make this state among the biggest corporate welfare providers in the country, according to a recent study.

Special Tax Credits to Big 3 AutomakersChrysler ($1.30 billion), General Motors ($1.07 billion) and Ford ($909 million) were awarded the benefits in 2009 and 2010 under the Michigan Economic Growth Authority program. The deals required the firms to “create or retain” a specified number of jobs in order to actually collect the benefits.

Michigan has been the fourth most generous state in dispensing business subsidies, according to a report by Good Jobs First, a government accountability advocacy group. Only New York, Washington (home of Boeing) and Louisiana (home of large energy producers) offered more.

The report attempts to quantify subsidy deals going back to 1976. Veronique de Rugy, senior research fellow at the Mercatus Center, said tracking these is not easy because the information is scattered among many government reports and websites.

Michigan had 15,205 deals authorizing $10.4 billion in combined tax breaks and cash subsidies according to the analysis. New York led the country with 71,759 deals worth $21.7 billion.

De Rugy said the deals lowered the incentive for auto companies in Michigan to operate efficiently, because they offered the firms an advantage over competitors

James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, said taxpayers can’t even determine how much money the auto companies claimed from the billions they were approved to receive. That’s because the state of Michigan considers the tax deals to be private information, the equivalent of an individual tax return.

“This is a huge expenditure of taxpayer dollars,” Hohman said. “A company should expect confidentiality about the taxes they pay. But that confidentiality should cease when it’s taxpayers who are giving money away to businesses. More than $3 billion in state tax credits — which often result in cash payments — have been offered to these three companies and taxpayers deserve to know how much they are paying.”

In 2013, legislation was introduced that would remove current restrictions on revealing such information. Senate Bill 316 was sponsored by state Sen. Jack Brandenburg, R-Harrison Township. It would prohibit the Department of Treasury from using taxpayer confidentiality as a reason to deny requests by legislators or others for “statistical and economic information or data” if this does not directly identify a taxpayer.

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Posted by Red Pill Reports in Economic News
Disorderly Reset Coming – Dollar Goes to Zero

Disorderly Reset Coming – Dollar Goes to Zero

Disorderly Reset Coming – Dollar Goes to Zero

By Greg Hunter

Wealth preservation expert Egon von Greyerz is not bullish on the U.S. dollar. Greyerz explains, “More and more countries are trying to go away from the dollar, and I think the days of the dollar are counted. I think the dollar is going to start falling rapidly in coming months and years. Of course, it already has fallen dramatically in the last few decades, but that will now accelerate. It will go down to its intrinsic value which is zero, which most currencies do over their lifetime. Of course, we have the movements in Russia and China with alternative currencies for commodities like oil, etc. There will be a very disorderly reset with currencies falling.

Disorderly Reset Coming - Dollar Goes to ZeroThey can’t all fall at the same time, but they will fall dramatically, and gold will, of course, reflect that. The stock markets are in a bubble, and they will also fall. I think the secular bull market we have seen is finished. Now, we are going to see a very long bear market. Of course, the biggest bubble of them all, where governments do all they can to keep the bubble going, is the bond market. We have more debt than ever and interest rates at zero. That just doesn’t add up.” Greyerz goes on to say, “You can’t have governments borrow more than ever and have interest rates at zero. You can only do that temporarily because you have governments printing money and artificially holding interest rates down. That will not last either. So, the reset will be dramatic. It won’t happen overnight, but there will be events that trigger short term pitfalls, but this is a long term thing.”

Greyerz also predicts, “There will be one event after another, and instead of all the good news we have seen . . . now, we will see just bad news coming out. Sadly, we are just at the end of a major era.”

Greyerz is predicting the end of the U.S. dollar era, and you don’t need a total abandonment for the dollar to crash globally. Greyerz says, “In any market, you don’t need big sellers to change the price dramatically. It is always the marginal buying and selling that can make a dramatic difference. . . . If there are sellers and no buyers, that market will collapse

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After the Interview:

Egon von Greyerz is working for passage of the Swiss Gold referendum.  He says he is firmly in the ‘Yes” camp.  If you would like to donate to the “Yes” camp to help fund getting the word out for passage, you can do so by clicking the donation/information page at  GoldSwitzerland.com.

Posted by Red Pill Reports in Economic News
A Storm of Global Events Is Threatening to Push Gold and Silver to Record Highs

A Storm of Global Events Is Threatening to Push Gold and Silver to Record Highs

A Storm of Global Events Is Threatening to Push Gold and Silver to Record Highs

By Joshua Krause

Earlier this week, Mac Slavo reported on an interview conducted with the CEO of Future Majestic Silver Corp, Kieth Neumeyer. In it, Mr. Neumeyer proposed a brilliant way to put an end to the blatant manipulation of the gold and silver market. If all of the mining companies in the world agreed to halt production for a single 30 day period, it would “send ripples throughout the entire system”.

It would show the phony paper market who’s really in charge. With the price of 800 million ounces of physical silver being controlled by 1 billion ounces of paper stocks, a challenge like this could make stock prices tumble while the price of real silver goes through the roof. He suggested that they agree upon a month sometime in 2015. I’d be willing to bet that the anticipation of that event, would make silver prices go ballistic long before that month arrives.

Gold and Silver to Record HighsOf course, even if Mr. Neumeyer doesn’t have his way, there’s a long list of events on the horizon that could push gold and silver back into the spotlight. There’s so many factors that are converging at once, that if only a few them come to fruition, we can expect gold and silver to be making some serious gains by the end of this year.

Another challenge to metals market may be coming down the pike by the end of this month. In Switzerland, a referendum is being planned for November 30th, that could bring about the first gold backed currency in decades. Currently, polls show that support for the bill has a very narrow lead, so we’ll see what happens in the next few weeks. If it passes, Switzerland will hold 20 percent of it’s reserves in gold, demand the return of all its gold being held overseas, and will cease selling gold to the rest of the world.

If that doesn’t come to pass though, an even bigger event is brewing in China, and it threatens to destroy London’s monopoly on gold and silver pricing once and for all. For nearly 300 years, the London Fix has determined the global price of gold. Now China has opened a free trade zone in Shanghai, and an international gold exchange along with it. Essentially, there will now be two prices for gold. If China doesn’t agree with London’s price, they can set theirs higher or lower. I’m betting they’ll set the price higher, because China has a much greater interest in Gold that most Western nations.

Which brings me to the next major factor that will effect the price of gold. Countries like China and India continue to outmatch the demand of every other country on Earth. Asia is responsible for the majority of the global precious metals market, and that demand isn’t just coming from the government. Private citizens are getting in on that action as well, especially in India where gold has been a traditional store of wealth for centuries.

That doesn’t mean governments aren’t still hoarding massive amounts of gold. With sanctions putting pressure on Russia, Putin’s government has been doing everything it can to separate itself from the dollar. That includes increasing its gold reserves by 54 tons over a six month period. The new purchases have made Russia the sixth largest country in in gold reserves. They now have a total of 1094.7 tons of gold, which is more than China. While every national currency is racing towards the bottom to keep their wealth from being traded overseas, it seems like every government, (except for the U.S. and Britain) is trying to buy up as much gold as they can. You can imagine what this will do to gold prices in the near future.

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Posted by Red Pill Reports in Economic News