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Thread: Financial flows: moves, changes and significant events

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    Default Financial flows: moves, changes and significant events

    This is a novice (non-financial expert) attempt to follow some of the larger and more significant aspects of the global / international financial system.

    A caveat: I am neither an economist nor a financier.

    I hope by trying to spot and share here some of the larger financial events, news and changes that some broader patterns can be observed.

    Everyone is welcome to share here high level changes and trends in the international financial systems and structures such as:
    • Financial institutions such as IMF, central banks, etc.
    • The Bank of International Settlements (BIS)
    • Special Drawing Rights (SDR) basket of currencies
    • De-dollarisation and the petro-dollar
    • SWIFT and its developing alternatives
    • The growing online payments industry including players such as Ripple
    • Digital currencies and their development
    • Etc.

    This is more of a brainstorm of topics that I feel might fall into this thread. Others may also be relevant.

    The intention is keep this thread to significant, internationally relevant changes (rather than daily trade data for example).

    If you are interested in or more knowledgable in the financial systems and structure that operate at a large scale geopolitical level, please do step in! All insights that might help clear the noise from the signal would be appreciated
    *I have loved the stars too dearly to be fearful of the night*

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    Default Re: Financial flows: moves, changes and significant events

    This first post I hope to collect and list useful and helpful resources that track relevant information for this thread. If you know any, please do share and I’ll update this post to include them.

    New additions in orange.

    Independent commentators:

    David Harvey - Professor of Anthropology & Geography at the Graduate Center of the City University of New York (CUNY), the Director of Research, Center for Place, Culture and Politics, author of numerous books. He has been teaching Karl Marx's Capital for over 40 years
    http://davidharvey.org/
    Twitter: https://twitter.com/profdavidharvey
    Podcast: The Anti-Capitalist Chronicles on Apple Podcasts | Google Play | Stitcher | YouTube


    Nomi Prins - ex-director Goldman Sachs, author of:
    Collusion: How Central Bankers Rigged the World,
    All the President's Bankers,
    It Takes a Pillage: An Epic Tale of Power, Deceit, and Untold Trillions
    https://www.nomiprins.com/
    Twitter: https://twitter.com/nomiprins


    The Solari Report, Catherine Austin Fitts - a subscription podcast and quarterly report.
    https://home.solari.com/
    Twitter: https://mobile.twitter.com/thesolarireport
    Avalon Threads here:
    http://projectavalon.net/forum4/show...l-things-Fitts
    http://projectavalon.net/forum4/show...With-The-Saker[/COLOR]

    The Sirius Report - a subscription podcast on global geopolitics and financial events.
    https://www.thesiriusreport.com/
    Twitter: https://mobile.twitter.com/thesiriusreport
    Last edited by Cara; 26th October 2019 at 07:40.
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    Default Re: Financial flows: moves, changes and significant events

    Development of the yuan-bond market as a facility for international trade:

    Quote Russia, China eye first bonds in yuan amid US trade war


    China and Russia are set to issue their first yuan-denominated bond at the end this year or early next year.

    Russia plans to issue its first yuan-denominated bond as the country is working with China to cut reliance on the US greenback, Russian broadcaster RT reports.

    China and Russia are drawing increasingly close amid a changing global landscape marked by President Donald Trump’s “America First” policy and his trade war which involves multiple battles with US allies and others alike.

    Beijing and Moscow have been planning yuan bonds since 2016, but the plan has been postponed several times. According to RT, Russia now expects to issues its first sovereign debt in the Chinese currency, officially called renminbi, by the end of the year or early next year.

    Both countries are concerned about “the dollar hegemony” and see the launch as a stepping stone in their bid to break the dominion up, the network said.

    “It’s a step towards de-dollarization,” investment strategist with Premier BCS Anton Bakhtin told RT. “Secondly, it’s an additional bridge between us and the Chinese investors.”

    As tensions escalate with the US, world countries are becoming increasingly worried about Washington using global reliance on the dollar as a weapon.

    Nigeria sold yuan at its first auction of the Chinese currency last month while Russia and China said Tuesday they backed using national currencies in bilateral trade.
    However, it will take much more time to fully shift away from the greenback and countries are looking for additional financial instruments as protection.

    Both China and Russia have been stockpiling gold. Since December, the People’s Bank of China has reportedly added about 100 tonnes of gold to its reserves. Russia has bought 106 tonnes of the precious metal this year.

    Over the past decade, Russia has more than quadrupled its gold reserves to more than 2,200 tonnes and now owns the fifth-largest stockpile by country. China’s reserves reportedly stand at more than 1,950 tonnes.

    Russian President Vladimir Putin has taken a special interest in breaking up America’s “exorbitant privilege” in the words of former French President Charles de Gaulle through the dollar hegemony.

    In June, Putin urged five major emerging economic powers - Brazil, Russia, India, China and South Africa, known as BRICS - to accelerate developing a system that could replace the dollar.

    China, on the other hand, is on a campaign to make the renminbi a global reserve currency and its rising gold reserves could add to world confidence in the currency.

    China’s launch of yuan-denominated Shanghai futures in March generated a lot of enthusiasm around the world.

    Experts say the new futures contract traded on the Shanghai International Energy Exchange is now on course to become an alternative international oil benchmark not priced in dollars.
    From: https://www.presstv.com/Detail/2019/...r-bonds-dollar
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    Default Re: Financial flows: moves, changes and significant events

    Russia and Iran are seeking a SWIFT alternative.

    SWIFT = “The Society for Worldwide Interbank Financial Telecommunication provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.”
    https://www.swift.com/

    Quote Kremlin aide says Iran, Russia looking for alternative to SWIFT

    IRNA – The aide for Russian president for international affairs said Iran and Russia are looking for an alternative network to replace the Society for Worldwide Interbank Financial Telecommunication (SWIFT) whose key is unlawfully held by the secretary of US Department of Treasury.

    Iran and Russia will take measures for expansion of direct financial transactions and use of national currencies, Uri Ushakov told reporters on Friday.

    Ushakov said that Tehran and Moscow are trying to make Iranian SEPAM and Russian System for Transfer of Financial Messages (SPFS) cooperate to put SWIFT aside.

    He added that the prominent joint project of Russia and Iran is building a nuclear power plant in Iran, the second phase of which is in progress and the concreting process will soon start.

    The Kremlin aide also said that in the upcoming meeting of Iran’s President Hassan Rouhani and Russia’s President Vladimir Putin, the issue of Syria will be discussed, alongside the mutual issues and the topic of the Joint Comprehensive Plan of Action (JCPOA).

    He said that in the aftermath of the US withdrawal from the deal, the goal is now to preserve the JCPOA. Russia is in touch with all the remaining signatories of the deal, including Iran, adding that Russia has had active talks with France and is loyal to the international deal.

    Saying that Rouhani and Putin are to meet for the third time this year, Ushakov added that strengthening the economic and trade relations between Iran and Russia is among the most important issues.

    He said that in 2018, the trade grew by 2% reaching $1.7b and in the first half of 2019 it has grown by 17% to reach $1.1b and that the big oil companies of Russia, such as Gazprom, Rosneft‎, Lukoil, Zarubezhneft, and Tatneft are discussing exploitation of Iran’s big fields.

    ...
    From: https://theiranproject.com/blog/2019...tive-to-swift/
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    Default Re: Financial flows: moves, changes and significant events

    This seems a fairly significant financial event. The US Federal Reserve has three days in a row now injected funds into the market. The explanation is that this is to keep interest rates low.

    I am not sure I understand why this is necessary now - i.e. what changed that makes this needed? Which financial players are no longer injecting funds into the market that the US Fed now has had to do this?

    Any insights welcome!

    Quote The Fed pumps another $75 billion into markets — its 3rd straight daily injection

    The Federal Reserve jumped into financial markets for a third straight day on Thursday in another attempt to keep interest rates from moving higher.
    • The central bank has injected a total of $203 billion into markets this week — $75 billion on both Wednesday and Thursday, and $53 billion on Tuesday.
    • This week marked the first time the central bank has taken such steps since the global financial crisis 10 years ago.
    • The Federal Reserve jumped into financial markets for a third straight day on Thursday in another attempt to keep interest rates from moving higher.

    The New York Federal Reserve said late Wednesday that it would inject another $75 billion into the market on Thursday to keep the federal funds rate within its target range. Short-term rates had earlier this week shot up as high as 10%, threatening to disrupt the bond market and the overall lending system.

    The latest overnight repurchase agreement, or repo, came a day after the policy-setting Federal Open Market Committee cut its benchmark interest rate to a target range of 1.75% to 2%.

    In two separate market operations on Tuesday and Wednesday, the central bank offered a total of $128 billion through repos. This week marked the first time the central bank has taken such steps since the global financial crisis 10 years ago.

    There remained debate about the exact reason the amount of cash that banks have on hand for short-term funding needs dried up early this week. But the shortage came after businesses had to pay quarterly tax bills at the same time that the Treasury issued billions in new bonds.

    Fed Chairman Jay Powell said on Wednesday that the repo operations were temporary and that rates were expected to return to the target range.

    "Funding pressures in money markets were elevated this week, and the effective federal funds rate rose above the top of its target range," he told reporters at a press conference following the interest-rate announcement. "While these issues are important for market functioning and market participants, they have no implications for the economy or the stance of monetary policy."

    Read more: The Fed cuts rates for 2nd time since financial crisis — but defies Trump's calls for 'big' stimulus
    From: https://markets.businessinsider.com/...9-9-1028537926

    ~~~

    This was released over the newswires on the evening of the 17th September and published in the Wall Street Journal. The article identifies the need as being a shortage of cash.

    Quote For first time since 2008 the central bank injects funds into money markets after a sudden shortage of cash
    For the first time in over a decade, the Federal Reserve Bank of New York took steps Tuesday to relieve pressures that were pushing short-term interest rates higher than the central bank wanted Monday.

    Strains developed Monday in short-term financing markets that suggested the central bank could lose control of its federal-funds rate, a benchmark that influences borrowing costs throughout the financial system.

    Bids in the fed-funds market on Tuesday morning reached as high as 5%, according to traders, well beyond the central bank’s target range, which is 2% to 2.25%.

    The Fed moved Tuesday morning to put $53 billion of funds back into the banking system through transactions known as repurchase agreements. After the moves, the New York Fed said the effective fed-funds rate, or the midpoint of transactions in that overnight market, stood at 2.25%, up from 2.14% on Friday.

    The pressures that had sent the fed-funds rate higher were related to shortages of funds for banks, stemming from rising government deficits and the central bank’s decision to shrink its securities holdings in recent years. Its reduced holdings have soaked up funds in the financial system, crimping liquidity.

    The Fed is likely to continue to provide funding to ensure the smooth operation of the repo market for some time to come, although it isn’t clear how long that might be, said Gennadiy Goldberg, a fixed-income strategist at TD Securities.

    “I think they’re going to be playing this one by ear,” he said. “This is in every way, shape and form an emergency measure.”

    The Federal Reserve’s rate-setting committee began a two-day policy meeting on Tuesday at which officials are likely to lower the fed-funds range by a quarter-percentage point to cushion the economy from a broader global slowdown, a decision unrelated to recent funding-market strains.

    The New York Fed hasn’t had to conduct such a transaction since 2008 because during and after the financial crisis, the Fed flooded the banking system with reserves when it purchased hundreds of billions of dollars of Treasurys and mortgage-backed securities in an effort to spur growth after cutting interest rates to near zero.

    It has been draining reserves from the banking system since 2014, when it stopped increasing its securities holdings. The declines accelerated after the Fed began shrinking its holdings in 2017. Reserves have declined from $2.8 trillion to less than $1.5 trillion last week.

    The Fed stopped shrinking its asset holdings last month, but because other Fed liabilities such as currency in circulation and the Treasury’s general financing account are rising, reserves are likely to grind lower in the weeks and months ahead.

    The Fed hasn’t announced when it will begin allowing its balance sheet to increase, which would stop reducing reserves.

    The strains in funding markets this week have been driven by several factors.

    First, reserves have been declining. Second, brokers who buy and sell Treasurys have more securities on their balance sheets due to increased government bond sales to finance rising government deficits.

    Then on Monday, these strains were aggravated by a series of technical factors. Corporate tax payments were due to the U.S. Treasury and Treasury debt auctions settled, leading to large transfers of cash from the banking system.

    Meantime, postcrisis financial regulations have made short-term money markets less nimble than they used to be. This didn’t matter as much when the banking sector was awash in reserves and could absorb the kind of seasonal swings witnessed this week.

    “The issue here is not that the level of reserves is structurally too low. We’ve reached the level where the market doesn’t respond to temporary deposit flows as efficiently or fluidly,” said Lou Crandall, chief economist at financial-research firm Wrightson ICAP.

    Monday’s tax payments and debt settlements “drained money from the system, and there was no cash sitting on the side waiting to come in,” said Mr. Crandall.

    Banks are holding on to reserves because they don’t think they can part with them and still continue to conduct the normal operations of a bank, such as cashing checks, approving mortgages and allowing companies to draw on letters of credit, Mr. Goldberg said. “Even small confluences of events will start to have outsized effects,” he said.

    What happens in this narrow sector of the financial market can be important because funding spikes create the risk of sudden and disorderly efforts by market participants to reduce debts given the lack of cheap and predictable short-term financing.

    “This sort of thing can lead to substantial pullbacks, and that can create very unpredictable dynamics in markets,” said Mr. Crandall.

    Scott Skyrm, a repo trader at Curvature Securities LLC, said he had seen cash trade in the fed-funds rate as high as 9.25% Tuesday.

    “It’s just crazy that rates could go so high so easily,” he said.

    On his trading screens, Mr. Skyrm said he could see traders with collateral securities that they were trying to exchange for cash. The rates they were offering would start to rise until an investor with cash available to trade would start to accept their bids, gradually driving repo rates down until investors had exhausted their cash, he said. Then rates would resume their climb.

    While there are technical factors to explain why cash would be in high demand this week, including corporate tax payments, the settlement of recently issued Treasury securities and the approach of quarter-end, they didn’t seem to explain the “crazy market volatility,” Mr. Skyrm said.

    It seems like there’s something underlying out there that we don’t know about,” Mr. Skyrm said.

    Write to Nick Timiraos at nick.timiraos@wsj.com and Daniel Kruger at Daniel.Kruger@wsj.com

    Dow Jones Newswire
    September 17, 2019 12:51 ET (16:51 GMT)
    From: http://www.ethicalmarkets.com/fed-in...rrowing-costs/
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    Default Re: Financial flows: moves, changes and significant events

    The challenges of negative and zero interest rate policy and the bond markets.

    Quote Chart of the week: Bond returns soar this year, but income falls further



    Less than three quarters into 2019, the Bloomberg Barclays U.S. Aggregate Bond Index, a proxy for traditional core fixed income investments, has already generated an equity-like return. Its 9% plus total return through August 30 is nearly triple its annual average from 2010–2018 and well above those of the prior two decades.1

    Total returns for bonds are generated from two sources: income from regular interest payments and changes in price. As the chart highlights, the vast majority of 2019’s return came from price appreciation (price return) as the 10-year U.S. Treasury yield declined sharply this year, reaching lows not seen since 2016. (As a reminder, a bond’s price rises as interest rates decline.)

    Rising prices bode well for investors seeking total return, yet many investors turn to their fixed income portfolios as a source of income. As interest rates plummeted this year, the income generated by a traditional fixed income portfolio has steadily declined. The income return on the Barclays Agg is below 2.0% through August 30 compared to nearly 7% in the 1990s.2 The Index’s yield has fallen from 3.7% in November 2018 to approximately 2.1% today.2

    Today’s historically low interest rates will continue to make it difficult for investors to find competitive levels of income. Additionally, with the 10-year Treasury hovering near 1.5%, investors may not be able to rely on falling interest rates to boost their bonds’ total returns.

    1 Bloomberg Finance L.P., as of August 30, 2019.
    2 Based on yield-to-worst as of September 5, 2019.
    From: https://fsinvestments.com/perspectiv...6-barclays-agg

    ~~~

    Problems with developed markets and the debt economy as seen by Donald Amstad from Aberdeen Standard Investments. He specifically cites the USD 124 trillion unfunded liabilities. He sees a “looming catastrophe” in the West and thinks that the markets are “just beginning to wake up”.

    It’s a rather gloomy outlook and does not take into account some of the topics discussed by Catherine Austin Fitts such as black budgets, the missing trillions, etc.



    Quote Published on Aug 27, 2019
    Donald Amstad from Aberdeen Standard Investments delivers a sobering assessment on the state of developed market economies.

    Livewire Markets is an Australian based investment website providing access to the investment insights and opinions of fund managers and investment professionals. Registration is free and gives you access to our daily newsletter featuring the most popular articles and videos.

    Visit the Livewire website for more information: https://www.livewiremarkets.com

    Developed economies are at a crisis point, the powers of unconventional monetary policy are exhausted, and markets are just beginning to wake up to this. That’s the sobering assessment on the current state of the global economy delivered by Donald Amstad from Aberdeen Standard Investments

    His view is that when developed markets finally crack, there will be serious implications for every asset class and economy. However, those economies where monetary policy remains relatively ‘normal’ will be those best placed to respond. In his view, the emerging markets have more levers to pull when compared to developed markets, where the money printing taps have been turned on and interest rate settings are near zero.

    The irony is that during the Asian crisis it was the IMF and central bankers from developed markets that convinced the emerging market governments not to print money and ‘take their medicine.’ Amstad says that this was a cathartic process for these economies, and they are now looking on in bewilderment as the West has resorts to money printing of an unprecedented scale.

    “In the emerging world, economic and monetary policy is broadly orthodox. It is the West that is running unorthodox economic and monetary policy and it is the West, ironically, that is now on the cliff edge.”

    Implications for investors

    Amstad says that unconventional monetary policy has been pushed to the limit and that negative yielding bonds are playing havoc with pension funds and with the profitability of banks and other financial institutions. He highlights that while the United States is awash with debt, it is the $125 trillion of unfunded government liabilities that is most concerning.

    Furthermore, he says that investors are faced with a scenario where the key defensive or ‘risk-free’ asset in their portfolios appears to be in a bubble. Historically, it has been riskier asset classes that have been the source of financial malaise. For example, it was credit markets in 2007, tech stocks in 2000 and equities in 1987. However, during these periods' bonds have acted as a buffer for balanced portfolios, Amstad questions if this will be the case today.

    “What we have never had to cope with before is if there is a bubble in the risk-free asset class. What happens when that goes pop. What is the new risk free?”

    Social implications

    Central banks have been playing a game of ‘whack-a-mole', using monetary policy tools to quash any flare up in volatility. Under this regime it has been the wealthiest 0.1 per cent of the world population that has benefited from asset price inflation. Amstad argues that we are already seeing financial and economic troubles becoming political and social flare ups.

    He expects that these social tensions will only continue to escalate if developed world policy makers are unwilling to take their medicine.

    “If they do come out with another bout of QE then banks are going to go bust, pension funds are going to go bust, insurance companies are going to go bust. And if it pushes the stock market back up again, then the 99.9% are probably not going to tolerate more handouts. That leads to social and political instability.”

    Watch the full video below for a sobering assessment on the state of developed market economies and the implications for investors.

    "I am very worried about the West. I think it is verging on catastrophe and what is interesting of course is the markets are just beginning to wake up to this."

    For all the latest insights from Australia's leading Fund Manager's sign up to Livewire for free at http://www.livewiremarkets.com
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    Default Re: Catherine Austin Fitts: all things Fitts

    This interview is also posted here: http://projectavalon.net/forum4/show...=1#post1315074

    Most interesting in terms of the topic of this thread is the discussion of how the off record / secret financial structures enable unipolarism and the roll-out of the global capital structures in the late 1980s and early 1990s.

    Also interesting to hear is how the opacity of financial movements enabled by FASAB 56 legislation means that Kompromat and illegal intelligence agency operations, which are very expensive and difficult to run, can be reduced. Essentially, this legislation is a disintermediation of some of the off the books mechanism and black budget structures that previously were needed to run a unipolar global empire.

    ~~~

    Here is a new interview with James Corbett on the recently enacted US legislation FASAB 56 and the overall context of what Catherine Austin Fitts calls The Financial Coup D’Etat.

    Also discussed is how this fits with the 9/11 events and the strategy of globalisation.

    Overall this is an excellent interview and discussion. I highly recommend it.


    Quote Published on Sep 17, 2019
    SHOW NOTES AND MP3: https://www.corbettreport.com/?p=33017

    Catherine Austin Fitts has been following the story of the black budget, the missing trillions, and the back door in the US Treasury for decades. Now, her tireless work on this subject has been published in a comprehensive report from Solari.com, "The Real Game of Missing Money" Volumes 1 and 2. Today James Corbett talks to Fitts about FASAB 56, the missing trillions and the financial coup d'état which has liquidated the wealth of the United States and shipped it out the back door.
    From: https://www.corbettreport.com/interv...al-coup-detat/
    Last edited by Cara; 21st September 2019 at 10:11.
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    Default Re: Financial flows: moves, changes and significant events

    Russia refuses to comply with IMF's demands to put surplus money into other countries' financial systems

    Koba The Stalker Zone
    Sat, 21 Sep 2019 00:00 UTC



    Russia's policy has become a concern for Western countries, as the position and decisions of Moscow started to often go against the opinion and notion of the West about world politics.

    This happened in the situation with the IMF, when Russia decided to use "surplus" money from the National Wealth Fund of Russia in order to maintain and develop the economy, but the International Monetary Fund forbids to use this money inside the country. According to the IMF, these funds should be invested in securities and assets of foreign states.

    The National Wealth Fund of Russia is a reserve fund of the state that is formed at the expense of the oil and gas sector, the additional income of the federal budget, etc. It is something like a "safety cushion" for the Russian economy in the event of a crisis.

    As of September 1st 2019 the fortune of the fund is estimated to be at $122.88 billion, which is approximately 7.2% of GDP.

    But despite the position of the IMF, Moscow nevertheless decided to invest the so-called "monetary surplus" (this is all the money that exceeds 7% of GDP) in the development of Russia.

    According to the Minister of Finance Anton Siluanov, the received money will be used for the construction and modernisation of infrastructure facilities in regions of the country.

    ======================================

    O, the effrontery!
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    Default Re: Financial flows: moves, changes and significant events

    Charity begins at home....
    The love you withhold is the pain that you carry
    and er..
    "Chariots of the Globs" (apols to Fat Freddy's Cat)

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    Default Re: Financial flows: moves, changes and significant events

    New head of the IMF to replace Christine LaGarde (who is taking over as head of the EU central bank).

    Things to note:
    • She is 66. France exerted pressure to waive the age limit rules.
    • Studied political economy and sociology at the Karl Marx Higher Institute of Economics in Sofia, Bulgaria.
    • Studied at London School of Economics as a British Council scholar.
    • Has worked at the World Bank and the European Commission (was commissioner in charge of the EU budget)

    Quote IMF names Kristalina Georgieva as new head


    AFP
    Kristalina Georgieva (left) succeeds Christine Lagarde (right) as IMF head


    Bulgarian economist Kristalina Georgieva has been selected as the new managing director of the International Monetary Fund.

    Ms Georgieva, who was previously chief executive of the World Bank, becomes the first person from an emerging economy to lead the IMF.

    She will succeed Christine Lagarde, who is leaving to become head of the European Central Bank (ECB).

    Ms Georgieva was the only nominee for the job.

    Who is Kristalina Georgieva?

    The 66-year-old economist, the daughter of a civil engineer, studied political economy and sociology at the Karl Marx Higher Institute of Economics in Sofia while Bulgaria was still under communist rule.

    After graduating in 1976, she got her first taste of capitalism in the UK, as a British Council scholar at the London School of Economics.

    Since then, she has built up a strong background in the World Bank and the European Commission, having held various senior roles in both institutions.

    She was commissioner in charge of the EU budget before she left to join the World Bank in January 2017.

    The head of the IMF has traditionally been a European since the IMF was created in 1945.

    Normally, she would have been considered too old for the job. But following pressure from France, the IMF waived its 65-year-old age limit for applicants.

    What can we expect from her tenure at the IMF?

    Ms Georgieva has been appointed for a five-year term, starting on 1 October.

    Speaking after her selection by the IMF's executive board, she described herself as "a firm believer in its mandate to help ensure the stability of the global economic and financial system through international co-operation".


    Reuters

    She added: "It is a huge responsibility to be at the helm of the IMF at a time when global economic growth continues to disappoint, trade tensions persist, and debt is at historically high levels."

    She said the IMF's long-term aim was to support sound monetary, fiscal and structural policies to build stronger economies and improve people's lives.

    "This means also dealing with issues like inequalities, climate risks and rapid technological change," she said.

    "My goal is to further strengthen the Fund by making it even more forward-looking and attentive to the needs of our members."
    From: https://www.bbc.com/news/business-49833220
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    Default Re: Watching Eurasia and the New Silk Road / One Belt One Road (OBOR)

    Also posted here: http://projectavalon.net/forum4/show...37#post1315737

    A tweet from Catherine Austin Fitts yesterday (25 September 2019):

    Quote CatherineAustinFitts
    @TheSolariReport
    Big Money Game = WTO designation of China as developing or developed

    Quote EDUARDO VINANTE, CPN
    @evinante
    Pay attention to this: the world is increasing demanding #China to be treated as a #developed #country as it flexes its muscles.

    The geopolitical push will make it harder for China to expand markets as was the past.
    ~~~

    There is some media narrative about getting China’s status at the WTO changed or about challenging the WTO itself. I have read elsewhere that there are ongoing US moves against the WTO. It could be an attempt to address both.

    Quote Australia PM joins Trump calling for China to drop 'developing economy' status

    (Reuters) - Global trade rules are "no longer fit for purpose" and must be changed to accommodate China's new status as a developed economy, Australian Prime Minister Scott Morrison said in a major foreign policy speech in the United States.

    The global community had engaged with China to help it grow but now must demand the world's second-largest economy bring more transparency to its trade relationships and take a greater share of the responsibility for addressing climate change, Morrison said.

    "The world's global institutions must adjust their settings for China, in recognition of this new status," said Morrison in a speech to the Chicago Council on Global Affairs, referring to China as a "newly developed economy".

    "That means more will be expected of course, as has always been the case for nations like the United States who've always had this standing," Morrison said in the speech, according to transcript provided to Reuters.

    Global trade rules were "no longer fit for purpose" and in some cases were "designed for a completely different economy in another era, one that simply doesn't exist any more", he added.

    Referring to China as a newly developed economy marks a change from Beijing's self-declared status as a developing economy, which affords it concessions such as longer times to implement agreed commitments, according to the World Trade Organization (WTO).

    It also puts Australia into line with a campaign led by U.S. President Donald Trump to remove China's developing nation status. In an April 7, 2018 tweet, Trump wrote that China was a "great economic power" but received "tremendous perks and advantages, especially over the U.S."

    Morrison has previously urged China to reform its economy and end a trade war with the United States but has until now stopped short of taking a public position on its WTO status.
    ...
    More and from: https://mobile-reuters-com.cdn.amppr.../idUSKBN1W9010

    This may all be media noise because here is what is said on the WTO website. I guess it depends on how costly the agreements are to implement and what is the value of having extra time to implement agreements.

    Quote Definition of a “developing country” in the WTO

    How is the selection made?
    There are no WTO definitions of “developed” and “developing” countries. Members announce for themselves whether they are “developed” or “developing” countries. However, other members can challenge the decision of a member to make use of provisions available to developing countries.

    What are the advantages of “developing country” status?
    Developing country status in the WTO brings certain rights. There are for example provisions in some WTO Agreements which provide developing countries with longer transition periods before they are required to fully implement the agreement and developing countries can receive technical assistance.

    That a WTO member announces itself as a developing country does not automatically mean that it will benefit from the unilateral preference schemes of some of the developed country members such as the Generalized System of Preferences (GSP). In practice, it is the preference giving country which decides the list of developing countries that will benefit from the preferences. For more information about the GSP, see the United Nations Conference on Trade and Development (UNCTAD)’s website, (opens in a new window).
    From: https://www.wto.org/english/tratop_e..._e/d1who_e.htm
    Last edited by Cara; 26th September 2019 at 07:35.
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    Default Re: Financial flows: moves, changes and significant events

    Same here: I am neither an economist nor a financier.

    Quote Posted by Cara (here)
    This seems a fairly significant financial event. The US Federal Reserve has three days in a row now injected funds into the market. The explanation is that this is to keep interest rates low.

    I am not sure I understand why this is necessary now - i.e. what changed that makes this needed? Which financial players are no longer injecting funds into the market that the US Fed now has had to do this?
    The cause seems to be a liquidity squeeze. Take a look at the repo market. First of all, an explanation of that obscure word:

    Quote repo

    A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day.
    https://www.investopedia.com/terms/r...eagreement.asp

    Here is a general explanation, the second link -- published one week ago -- contained an amazing prediction regarding the repo market this week.

    Quote zerohedge
    Tue, 09/17/2019

    Bottom line: even if the Fed does nothing tomorrow, convinced that today's repo was sufficient to put out the funding fire, things will be relatively normal... until next Tuesday when the blowout in repo rates is likely to repeat.
    The article below explains what's wrong with the whole financial system! Emphasis is mine.

    Quote The Real Story Of The Repo Market Meltdown, And What It Means For Bitcoin

    Last week the financial system ran out of cash. It was a modern version of a bank run, and it’s not over yet. Stepping back, it reveals two big things about financial markets: first, US Treasuries are not truly “risk-free” assets, as most consider them to be, and second, big banks are significantly undercapitalized. The event doesn’t mean another financial meltdown is necessarily imminent—just that the risk of one is heightened—since the brush fire can be doused either by the Fed, or by the banks raising more equity capital. However, it provides a “teachable moment” regarding systemic fragility and anti-fragility.

    What’s Happening, In Plain English?

    Somebody—probably a big bank—needs cash so badly that it has been willing to pay a shockingly high cost to obtain it. That’s the layman’s explanation of what’s happening. Interest rates have betrayed common sense—interest rates in the repo market should be lower than rates in unsecured markets, for example, because repos are secured by assets and thus supposedly lower-risk. But repo rates spiked way above unsecured lending rates last week, even for “risk-free” collateral such as US Treasuries.

    Today In: Money

    But US Treasuries are not risk-free. Far from it. (By this, I’m not referring to the US potentially defaulting on its debt obligations. Rather, I’m referring to the practice in the repo market that allows more people to believe they own US Treasuries than actually do. It’s called “rehypothecation.”)

    Why was someone willing to borrow cash at a 10% interest rate last Tuesday, in exchange for pledging US Treasury collateral that yields only 2% or less? That trade lost someone a whopping 8% (annualized) overnight, but presumably the trade allowed the bank to stay in business for another day. As risk premiums go, 8% is shockingly high—for a supposedly risk-free asset!

    -- snip --

    The Elephant In The Room

    For every US Treasury security outstanding, roughly three parties believe they own it. That’s right. Multiple parties report that they own the very same asset, when only one of them truly does. To wit, the IMF has estimated that the same collateral was reused 2.2 times in 2018, which means both the original owner plus 2.2 subsequent re-users believe they own the same collateral (often a US Treasury security).

    -- snip --

    This is the real reason why the repo market periodically seizes up. It’s akin to musical chairs—no one knows how many players will be without a chair until the music stops. Every player knows there aren’t enough chairs. Everyone knows someone will eventually lose.

    -- snip --
    https://www.forbes.com/sites/caitlin.../#6733067a7caa



    Quote What Happens Next In Repo? The World's Biggest Interdealer Broker Explains

    Tue, 09/17/2019

    When it comes to the shady events in the shadow banking world of collateral assets and repurchase agreements, nobody does it better than interdealer broker, ICAP, which is not only intimately familiar with just how the Fed's plumbing vision takes place in the real world, but also happens to be the go to firm for pricing on such suddenly critical market stress indicators as repurchase rates.

    And sure enough, it was none other than ICAP which first - correctly - said this morning when overnight G/C repo hit 10%...



    -- snip --

    Bottom line: even if the Fed does nothing tomorrow, convinced that today's repo was sufficient to put out the funding fire, things will be relatively normal... until next Tuesday when the blowout in repo rates is likely to repeat.
    https://www.zerohedge.com/markets/64...pens-next-repo
    Last edited by silvanelf; 26th September 2019 at 18:55. Reason: important section (in red) added

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    Default Re: Financial flows: moves, changes and significant events

    Thanks Silvanelf, those articles and quotations were very helpful.

    This one in particular was very interesting (your emphasis removed and further snips from me):

    Quote Posted by silvanelf (here)
    ...
    The article below explains what's wrong with the whole financial system! Emphasis is mine.

    Quote The Real Story Of The Repo Market Meltdown, And What It Means For Bitcoin

    Last week the financial system ran out of cash. It was a modern version of a bank run, and it’s not over yet. Stepping back, it reveals two big things about financial markets: first, US Treasuries are not truly “risk-free” assets, as most consider them to be, and second, big banks are significantly undercapitalized. ...

    What’s Happening, In Plain English?

    Somebody—probably a big bank—needs cash so badly that it has been willing to pay a shockingly high cost to obtain it. ... But repo rates spiked way above unsecured lending rates last week, even for “risk-free” collateral such as US Treasuries.

    Today In: Money

    But US Treasuries are not risk-free. Far from it. (... I’m referring to the practice in the repo market that allows more people to believe they own US Treasuries than actually do. It’s called “rehypothecation.”)

    Why was someone willing to borrow cash at a 10% interest rate last Tuesday, in exchange for pledging US Treasury collateral that yields only 2% or less? That trade lost someone a whopping 8% (annualized) overnight, but presumably the trade allowed the bank to stay in business for another day. As risk premiums go, 8% is shockingly high—for a supposedly risk-free asset!

    -- snip --

    The Elephant In The Room

    For every US Treasury security outstanding, roughly three parties believe they own it. ...

    -- snip --

    This is the real reason why the repo market periodically seizes up. It’s akin to musical chairs—no one knows how many players will be without a chair until the music stops. Every player knows there aren’t enough chairs. Everyone knows someone will eventually lose.

    -- snip --
    https://www.forbes.com/sites/caitlin.../#6733067a7caa

    ...
    In addition to the musical chairs phenomenon described above, I wondered whether some financial player (or players) might have been attacking the US markets?

    It does seem to be the case that market trading can be used as a kind of economic warfare (for instance there are examples of national currencies in emerging economies being sold short etc. as a means to induce some kind of “compliance”). I don’t know if this would be possible with the US Repo though and those players would have had to have very deep pockets to afford the 8% mentioned above.

    ~~~

    More on the repo rate liquidity funding is in the following article. Morgan Stanley says the US Federal Reserve might have to continue this type of activity:

    Quote The Fed will need to grow its balance sheet 'permanently,' Morgan Stanley says
    Jeff Cox | @JeffCoxCNBCcom Published 14 Hours Ago Updated 10 Hours Ago CNBC.com

    The Federal Reserve will have to maintain permanent operations in its efforts to stabilize short-term lending markets and keep its target borrowing rate in check, Morgan Stanley says.The result is projected to be a $315 billion balance sheet expansion over the next six months.Morgan Stanley sees the Fed buying a combination of short-term Treasury bills and notes across the duration spectrum.

    The Federal Reserve's asset purchases likely will total $315 billion over the next six months as it seeks to stabilize overnight funding markets and contain the movements of its target interest rate, according to projections from Morgan Stanley.

    Those permanent moves will be necessary because the current temporary purchases likely won't be enough to stabilize the market for overnight purchase agreements, or repos, the bank said. The Fed just a month ago halted a process that saw a more than $600 billion reduction of the balance sheet, which consists mostly of Treasurys and mortgage-backed securities that it had acquired in its efforts to pull the U.S. economy out of the financial crisis.

    "We maintain that these temporary repo operations will not prove to be a sufficient long-term solution to the recent funding pressure," Morgan Stanley strategist Kelcie Gerson said in a note. "Ultimately, the Fed will need to increase the size of its balance sheet permanently."

    ...

    The Morgan Stanley forecast is a bit smaller than one recently from Bank of America Merrill Lynch, which estimated balance sheet expansion at $400 billion this year.

    The balance sheet currently stands about $3.9 trillion, pushed by three rounds of asset purchases in a process known as quantitative easing. Starting in October 2017, the Fed started allowing some proceeds from its maturing bonds to roll off each month, with a corresponding decrease of bank reserves that has taken the total down to about $1.5 trillion, the lowest in more than eight years.

    Turmoil in overnight lending markets last week has led the Fed to rethink its balance sheet policy, and Wall Street now is increasingly of the belief that the asset purchases that stopped two years ago will restart again soon. Over the past week the Fed has been running a temporary purchase program that many market participants now expect to become permanent.

    The exact composition of how the Fed will conduct the balance sheet expansion remains to be seen. Fed Chairman Jerome Powell said last week that he expects the issue to be discussed at the Oct. 30-31 meeting.

    Gerson said the Fed has a number of options for how it conducts the operations, with a standing repo, or repurchase, operation one possibility. However, Gerson said there are some issues with that option that could push the central bank away from it.

    The Fed is now temporarily providing cash in exchange for safe assets like Treasurys and agency debt to keep its benchmark interest rate within a target range of 1.75% to 2%. During the repo market troubles last week, the fed funds rate broke its former barrier of 2% to 2.25%.

    In its more permanent effort to rebuild reserves, the Fed is likely to purchase $35 billion to $40 billion a month in short-term Treasury bills, plus about $15 billion a month in various maturities "over the next 6 months and beyond," Gerson wrote.

    "This will ensure a rebuild of reserves to the longer-run level consistent with efficient and effective policy implementation," she added.
    From: https://www.cnbc.com/amp/2019/09/26/...mpression=true

    So according to this article, the US Federal Reserve were apparently trying to reduce the balance sheet until this intervention (according to paragraph 7 above):
    Quote ... Starting in October 2017, the Fed started allowing some proceeds from its maturing bonds to roll off each month, with a corresponding decrease of bank reserves that has taken the total down to about $1.5 trillion, the lowest in more than eight years.
    To no avail it seems.

    ~~~

    And we have this analysis which states that the effect is to lower the value of the US dollar:

    Quote Lisa Abramowicz
    @lisaabramowicz1
    The New York Fed is effectively increasing the supply of dollars in the economy with its repo operations, and will likely continue to do so. This may eventually drag on the value of the greenback: Morgan Stanley's Hans Redeker https://ft.com/content/6f6f54e2-db7d...b-77216ebe1f17
    Click image for larger version

Name:	97A10856-BE9F-44C6-945B-8E7B563CC5A2.png
Views:	9
Size:	88.9 KB
ID:	41587
    ~~~

    Some questions:
    • does the comment by the banks (Morgan Stanley and Merrill Lynch) constitute a request / suggestion for more permanent “balance sheet expansion”?
    • or is it rather a nicely orchestrated media narrative arranged between the US Fed and these banks?
    • was/is the US Federal Reserve repo intervention a response to some kind of economic attack?
    • not mentioned in the above but a speculation from me: was/is this Federal Reserve repo action a response to President Trump’s (and his backers, whoever they may be) apparent requests to weaken the US currency to benefit exporters?
    Last edited by Cara; 27th September 2019 at 06:55.
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    Default Re: Financial flows: moves, changes and significant events

    This interview from February 2019 is a discussion with investment and market commentator Jeff Gundlach. I had not heard of him before this interview.

    It’s interesting in both its forward and backward looking review of market sentiment and perceptions, in particular in its comparison of different “bear” markets and downturns historically.

    It is mostly focussed on domestic US market issues and makes some interesting political speculations. It briefly touches on the wider international sphere, mostly in consideration of emerging markets.

    Here is the audio on SoundCloud:
    https://soundcloud.com/user-26385473...the-powell-put

    This is a teaser and the description of the interview shared on YouTube:

    Quote Published on Mar 8, 2019
    In this wide-ranging interview with Grant Williams, Jeff Gundlach, the founder and CEO of DoubleLine Capital, provides his valuable insights on the dollar, the explosion of the corporate bond market, and the rise of ETFs and passive strategies. He also touches on politics, weighing in on what “wealth tax” proposals will mean for the 2020 election. Filmed on February 20, 2019 in Los Angeles.

    About The Interview:
    The Powell Put & the Bear Market Rally (w/ Jeff Gundlach) | Interview | Real Vision™
    https://www.youtube.com/c/RealVisionT...

    Transcript:

    Hi. I'm in Los Angeles, California to sit down and have a chat with Jeff Gundlach of DoubleLine. Jeff needs no introduction. He's always got something to say. And he's one of the most cerebral money managers out there today. I'm going to talk to him about politics, the dollar, the bond market, the equity market. There's so much ground I want to cover and we've got a limited amount of his time, so let's dive straight into it.
    Sure. Thanks very much. Great to see you again.
    Thanks for doing this. I know you've not been well. Neither of us have been, so we'll--
    It's the time of year.
    It's that time of year. And a very cold Los Angeles. There's so much I want to talk to you about, but I want to start with the stock market. And there's something that has been on my mind, and that is December. Did something change in December? Or was it just a glitch as it's been nailed?
    Well, I think that the attitude about Jay Powell really changed a lot during December. Well, it kind of changed twice. First it changed in a way that accelerated the stock market lower. And I think that also has something to do with year end. I think there was-- people adjust things at year end. There may be some selling and the like.
    But Powell was thought to be different than the other Fed chairs.
    I fell for it too.
    Yeah. He was supposed to be non-academic. He doesn't have PhD in economics. And I think the word was pragmatic for Jay Powell. And then he showed up after the rate hike, at the press conference, and he sounded very different than being pragmatic. He's basically said, we're on autopilot with quantitative tightening, which is the last thing that a falling stock market needs to hear, because quantitative easing seems to be correlated with higher prices to quantitative tightening.
    It is interesting that the global stock market really accelerated to the downside in October, which is when QT was ramped up to a maximum of 50 billion per month. So Powell says we're on autopilot, which the market was shocked to hear, because they thought it was pragmatic and wouldn't be rigid in his thinking. And then he also used the word models a lot-- inputs to the models. And all of a sudden he sounded as wonky as any Fed chair ever gets. And kind of detached from being pragmatic. The market didn't like that at all.
    So when it accelerated-- I think about-- dropped 800 points from when he opened his mouth to the end of the press conference. And that scared him. And we had a complete 180 from the pragmatic Powell to the Powell put, which wasn't supposed to exist at all. And I don't think I can remember a rhetorical shift so rapid and so major from a Fed chair, because just a few days later, with the stock market in freefall, it's all about patience. And I didn't really ever say really that we were close minded on quantitative tightening.
    The full interview (no transcript or video, only audio) at the SoundCloud link above.
    Last edited by Cara; 30th September 2019 at 05:52.
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    Default Re: Financial flows: moves, changes and significant events

    Here’s another interview from the same YouTube channel as the post above - RealVision.

    This one is with Michael Howell. His approach is to view the global economy from a liquidity perspective. He talks about a “quick recession” and predicts that there will be more quantitative easing from central banks. More in the transcript below.



    Quote Published on Sep 14, 2019
    Michael Howell, founder and managing director of Crossborder Capital, joins Real Vision to talk about his views on global liquidity and capital flows. He says that the global economy is sputtering, and that central banks will have to reengage in quantitative easing in order to inject liquidity into markets. Howell argues that this will ultimately lead to rallies in equities, gold, bonds and bitcoin. Filmed on August 7, 2019 in London.

    ...

    Will Central Banks Use QE to Prevent a Liquidity Crisis? (w/ Michael Howell)
    https://www.youtube.com/c/RealVisionT...

    For the transcript visit: https://rvtv.io/2ISs6L6
    Transcript:
    Quote 00:05
    MICHAEL HOWELL: The world's financial system is no longer a new money raising system. It's effectively a refinancing mechanism. And if it's a refinancing mechanism, what you need is balance sheet, in other words, size. You're not too worried about the level of interest rates.
    00:22
    There'll be a lot of pressure being put on the Federal Reserve now to try and cap any dollar appreciation by printing money.
    00:29
    So effectively, we're in a currency war, but the gold price comes out of this magnificently. And cryptocurrencies, which are pure liquidity play, should do extremely well.

    01:04
    I'm Mike Howell. I'm Managing Director of Crossborder Capital. We're a fund management and research company based in London. My background prior to that was that I was at Salomon Brothers involved in research. And what we focus on almost entirely is global liquidity and capital flows worldwide.

    01:23
    What's your macro thesis?
    01:26
    We think that the world economy is clearly stuttering. It needs a boost. Central banks have been behind the curve. They've basically been tightening too much collectively over the last few months. And what they're going to have to do is to embark on a major easing program. In other words, another QE. That is very bullish for gold. And it's pretty bullish for cryptocurrencies, too.

    01:47
    Can you explain the context of China's slowdown?
    01:50
    Yeah, I think one has to go back actually quite a long time or one's going to look at what happened to China starting in 2001, when China was allowed into the world trade organization. As a result of that China built up a huge trade surplus over time. It developed Chinese economy. China became very, very export-driven. And the US accommodated China, accommodated Germany too. But effectively, China was being accommodated by the US trade deficit.
    02:18
    America is now saying enough is enough. They're no longer prepared to accommodate these big deficit diet China surplus. And this is the background to the tariff dispute. China was reacting to that. America imposed 10% tariffs, I believe, on the 17th of September, within five days, China went and started to tighten monetary policy. Through October, China hit the monetary base very, very hard and curtailed liquidity injections into Chinese money markets. We've seen the biggest slump in liquidity in these Chinese money markets that we've seen for five years probably, and effectively, that is slowing the economy hard.
    03:00
    Now, if you look at the backdrop, not only is Chinese manufacturing slowing down significantly in the Chinese economy, but China dominates global value chains, in other words, supply chains globally. And as China has slowed down, world exports have also shrunk. And that has hit manufacturing companies worldwide, but particularly in those locations that are involved in these supply chains. In other words, Japan, Taiwan, Korea, and Germany. And those markets have been among the hardest hit through the slowdown. America and service industry generally have come out of this relatively unscathed.

    03:41
    What are market crevasses?
    03:43
    We've described the market outlook, in other words, the stock market outlook as a market which is generally rising, but there is risk of very sharp selloff, so what we call crevasses. To protect against that, what you need in portfolios is effectively more bond convexity. Now, what's the reason that you're getting these major selloffs? The major reason really goes back to the restructuring of the global financial system, really in the wake of the GFC, the Global Financial Crisis in 2008.
    04:11
    We know there's a big buildup of debt, but debt needs to be refinanced. And the way to think about this is that the world financial system is no longer a new money raising system. It's effectively a refinancing mechanism. And if it's a refinancing mechanism, what you need is balance sheet. In other words, size. You're not too worried about the level of interest rates. So, the focus that the markets have and the media has on interest rate cuts, we think are broadly meaningless. What you need to understand is the volume of liquidity markets. In other words, balance sheet size, and in particular, if the private sector is not coming up with balance sheet with central bank balance sheet.
    04:52
    Now, the key issue with the private sector, which is what makes the whole system a lot more fragile, and contributes to these crevasses is essentially that there was a shortage of safe assets in the system. Now, what do we mean by this? Safe assets are basically high quality bonds, particularly Treasuries, particularly US Treasuries, but to some extent, corporate securities have crept into that collateral mix. And the reason they crept in is there are insufficient Treasuries in the system to provide collateral.
    05:23
    Most lending now is collateral-based. And the reason for that is that what you have is some very, very big new players in the markets, which we call corporate institutional cash pools that basically come out of foreign exchange reserve managers in Asia, or they come out of US corporates that are running major Treasury piles of cash. And what they need are safe short-term assets to invest in in the money markets. And effectively, what's happening is that the bonds are being repoed and sold back to the CICPs, and that is the mechanism of refinancing.
    05:57
    That works very well until you started collateral problems. And collateral problems can occur if you get an economic slowdown, for example, and the value of the corporate slice of that collateral tranche comes under pressure. And then the whole liquidity mechanism collapses. That's what we've seen a number of times. We saw it clearly in 2008 with mortgage backed securities. We saw it again briefly in 2018 in December when markets sold off.
    06:26
    And what's happened every time is the central banks have come in, particularly the Federal Reserve. And that's what happened through December and January. And this is the basis for changing central bank policy now. They're beginning to realize that behind the curve, liquidity has been way, way too tight. And now, what you're seeing is central banks beginning to ease but the leader is the People's Bank of China.

    06:49
    How tight are the central banks?
    06:52
    One of the ways that you can gauge the tightness of the US system is to compare Fed Funds Rate, which everybody knows, with the term premia, which is a slightly wonkish concept, but it's the premium that investors prepared to pay for long-term debt, long-term Treasury debt in the US, compare that to the Fed Funds Rate. Normally, the two move extremely closely together. But effectively in the last two years, term premia have collapsed relative to Fed Funds. The collapse in term premier is equivalent to a significant or it implies a significant monetary tightening. And that monetary tightening could be equivalent, on our estimates, to a Fed Funds Rate which looks at around about 5% points. So way, way above reported levels.

    07:41
    Has China changed its policy to re-ignite stimulus?
    07:45
    We think China has changed policy. And we think that the decisive move was around mid-May. Now, the geopolitical background of that time was right across the Chinese media, there are reports from Xi Jinping of three red lines that the Chinese put down that say they would no longer negotiate on these three aspects of the trade dispute with America. And those red lines meant that America effectively had to now yield, China wouldn't yield. And they're not going to go back on this because it would be a huge loss of face. In other words, this seems to be a very significant watershed in the whole trade tariff dispute.
    08:23
    What China did at the same time was to start to inject liquidity back into their money markets. Effectively, what they're saying is, we are ignoring trade. We are starting to stimulate the domestic economy. And we don't really care if the yuan now devalues. The reality is here with us now because the yuan has broken 7 against the US dollar. The magic 7 number.
    08:46
    China reside to plow money back through the money markets, liquidity injections by the People's Bank that has persisted through May, June, July and into August, and then they're backing that up with other measures of fiscal stimulus infrastructure programs and a lot more is likely in the pipeline.

    09:04
    How targeted is China's stimulus?
    09:07
    It is more targeted. It's looking much more at infrastructure programs as far as one can tell at the moment. It's been given certainly to the state-owned banks, and they'll be generally at more into state-owned enterprise. Now, I want to stress here that this is not a first best solution. This is the second best solution. China cannot continue to keep getting growth through debt. We know that. But in the short term, this is the reality that is happening.
    09:33
    The Chinese economy needs to get between 6% and 6.5% growth a year. China has estimated that the trade dispute could cost it 1.5% points in GDP every year that this persists. It pushed the growth rate significantly below their targeted rate. And therefore, they need to rebalance to get the growth rate up. And hence the stimulus.
    09:58
    Other central banks will follow the Chinese lead simply because of China's importance in the world economy and the importance of the yuan in terms of a currency within these global value chains. Essentially, what you're seeing at the moment is as China has devalued and started to push in more liquidity, you've seen devaluations generally of companion currencies or peer currencies against the US dollar. Other countries that are experiencing fallout from the slowdown in China will want to try and boost their economies.
    10:30
    And so we're starting to see an increasing debate in Asia and in Europe about easy monetary policy, already a lot of countries, for example, Australia, are already doing that. The Federal Reserve is starting to cut interest rates. But the most important thing that the Federal Reserve can do is to expand liquidity. And that's what it's doing.
    10:49
    Now the $64,000 question, which comes back to the dollar is will America allow the US currency to appreciate? In other words, to put it another way, other units to devalue again the US unit? And that with the answer that we think is no. In other words, there'll be a lot of pressure being put on the Federal Reserve now to try and cap any dollar appreciation by printing money. So effectively, we're in a currency war, and every currency, every economy is trying to leapfrog every other economy in terms of monetary ease.
    11:21
    Who wins out of that? Financial assets should generally do pretty well. But the gold price comes out of this magnificently. And cryptocurrencies, which are pure liquidity play should do extremely well.

    11:33
    Will we see another coordinated currency accord?
    11:36
    We call this Shanghai 2.0, which parallels the Shanghai Accord that occurred in early 2016 following the G20 meetings. After those meetings, the G20 countries agreed to stimulate their economies. And that broadly came through in terms of central bank balance sheet expansion, or what we call QE. That launched an equity rally. Equity markets rallied strongly through the back end of 2016, through 2017 and until they hit the hiatus in 2018.
    12:08
    This is happening again. It is not coordinated this time around, but it's coinciding. It's coinciding, because every country is now trying to react to the slowdown, which we say is China-induced by basically trying to stimulate their economies. And as each one tries to beggar thy neighbor, so to speak, you get a general lift in liquidity worldwide.

    12:32
    What will the Fed have to do?
    12:35
    There'll be a lot of pressure now for the US currency's rise, particularly if other countries are beginning to leapfrog the US in terms of monetary easing. Therefore, the US has to keep up. And we think the pressures will start to build on the Federal Reserve and the Treasury to try and maintain dollar parity at current levels. And that will mean more monetary stimulus coming through. So there'd be a lot of pressure on the Federal Reserve to do even more QE.
    12:58
    The point is against this ground, where generally central banks are easing, this is the environment where equity markets tend to do pretty well. The best time for investors in equities are when central banks are trying to stimulate economies that are very sluggish, such as now. There's a lot of competition now to see who needs the most. And unless the US matches other major economies, you're going to start to see the US dollar rise. And that's something that the administration clearly doesn't want, so they're putting a lot more pressure on the Federal Reserve to expand the QE programs.
    13:32
    In terms of what this will actually mean, we think there'll be a significant easing of policy. To try and put it into perspective, probably you're going to see the equivalent of 100 basis points of US rates that will be bullish certainly for the front end of the yield curve. It will mean that the yield curve likely steepens and there is a chance that long yields could come down as well. But generally in this environment, when central banks are trying to stimulate economies that are very sluggish, equity markets are the big winners.

    14:04
    Will monetary easing increase growth or just asset prices?
    14:08
    Can we grow away out of a slump with credit or debt alone? And the answer is probably not. But it does help to alleviate some of the symptoms. What you're likely to get is much stronger financial asset prices. In other words, if you look at equity markets, we can't expect very much from the E, but the P can expand probably quite significantly. And generally speaking, as far as we can see, well, the equity markets, while not being cheap, are comparatively inexpensive.
    14:36
    What the big danger for markets is, is if you get a major cracking liquidity as we saw previously in 2008. Now, we don't think that's on the cards, because basically central banks are now beginning to act. That's clearly something one has to watch very carefully.
    14:50
    Equity markets generally should do pretty well in this environment. And if we're correct, then what we're looking at is what we've termed a quick recession. In other words, investors prepare to look through the outside. What you could easily get is a rally in value with cyclical stocks which have clearly been under great pressure in the last 12 to 18 months. If you look worldwide, we think there is scope for Asia to rebound based on this China reflation trade. And there is scope for Europe to rebound based on what the ECB is likely to do. And in particular, when Christine Lagarde gets into the helm of the ECB, it is likely that there will be some significant easy moves there too.
    15:30
    I don't think there's any good price inflation in the system. We're in a secular disinflationary environment, which is being compounded by the fact that you've got long-term demographic problems. There simply is excess supply in the world economy. Therefore, if liquidity goes into the system, what you will get is further asset price inflation. And that's the name of the game.
    15:52
    There's a good chance that bond yields could go down. Now, this is a very dangerous trade. And I think that one has to say wholeheartedly that buying bonds on negative and very low yields, on what could only be a 2, 3 or 5-year view, is a crazy investment. But more and more investors are being browbeaten into doing it. And the reason being is that there is a shortage, a structural shortage of duration in the world economy, and particularly in the US system.
    16:20
    And what that means is that the duration of US pension liabilities is, for example, around 20 years, whereas the duration of the assets is around 10 years. Now, a lot of pension plans have been holding off, closing that duration gap, because they feel, they believe that bond yields already are too low. But there's a pain trade. And the lower the bond yields get, the more that those plan sponsors will begin to capitulate, and start to buy more bonds. And that's when you cook in a downside flip.
    16:51
    So there's a very clear asymmetry in the system, because investors will be browbeaten into buying bonds as the yields drop. So it's what he's called in the pound's negative convexity. And that could be a problem. In other words, even though this environment would seem to be unfavorable for bonds, because normally when central banks ease, yield curve steepen. We could be in an environment where actually the curve steepens, but across all maturities, the entire term structure drops.
    17:21
    Commodities in our view should go up. And I think there's a very interesting parallel here with maybe what went on in the 1930s. Now, it's always very dangerous to go back and look at history. But one of the things that seems to be underway is that the Trump administration is trying to divide the world in two. In other words, there's a China-based system, and there's an American-based system. And in other words, there's a lot more that comes after this trade dispute. In other words, there's attempts to try and divide the world economy. And that was more or less what was happening in the 1930s.
    17:52
    In that environment, in the 1930s, there was a scramble for resources. And that may be what's on the cards now. A lot of variant TV commentators, I admit, take a very different view. And they say, what's going on is that you will see commodity prices collapse if China is decoupled from the US system. It's possible. There's a logical case for that. But I think the opposite could happen. And with a lot of central bank liquidity being plowed back into the system, I think it's much more likely the commodity prices will rise. The bellwether of that is the gold price. Gold normally leads other commodity prices by around 9 to 12 months. And I don't see any reason why that shouldn't happen now. any reason why they shouldn't happen now.

    18:34
    What about the US dollar?
    18:37
    There's a real risk here of the US dollar going up, and the dollar could easily overshoot. And that's one of the dangers one's got to be alert to. Because a stronger dollar is unambiguously negative for global liquidity, because it represents a big monetary tightening. We think the Federal Reserve will try and stop that. It's not in the administration's interest to allow the dollar to appreciate. And we think the pressure on the Federal Reserve will build.
    19:03
    Now one of the things one got to think about in the background here, both for China and for the US, and for their political leaderships, they face elections, both of them in the next 12 to 18 months, even Xi Jinping as it happens. Although he's been installed as paramount leader for arguably two decades, the reality is that he has to face the politburo for very important debates in 2021. And China is trying to attain what is called middle income status on World Bank numbers.
    19:36
    And that has been a goal for the Chinese administration. Xi Jinping needs to get that. He needs growth. Trump needs to be reelected. He wants growth. So there'll be a lot of pressure on the policymakers to try and deliver growth for both those two economies.

    19:51
    When does the US-China trade dispute get resolved?
    19:55
    Trade is unquestionably the paramount issue. And markets are understandably skittish about the worsening in the trade environment. One looks at the media, the odds continually go up. Everyone's trying to make this trade situation look worse and worse and worse. But it's been very much in China and the US' interest to resolve the trade issue relatively quickly because both leaders need strong economies going into 2020.
    20:22
    What we think the outcome will likely be is that probably by the end of this month, the end of August, come early September, the cost will be set in terms of Federal Reserve ease. What you're already seeing in terms of the Federal Reserve balance sheet is a significant step having liquidity injections. China, as we noted, is already doing that, we just got to wait for the ECB and Bank of Japan to come in.
    20:45
    In other words, liquidity is starting to flow into the system now and it normally tends to lead financial markets by around about 3 to 6 months. And therefore, certainly by Q4, markets, we think should be beginning to move strongly upwards again. I think we ought to be under no particular illusions that more liquidity doesn't create growth. It will stabilize economies, it can flatten out the cycle, but it doesn't increase productivity in any way. And it doesn't add to long term economic growth.
    21:15
    In other words, what it does is it affects in equity markets, the P multiple, it doesn't necessarily affect the E in terms of long term trend in E very much. The problem the world economy has got is it's saddled by debt, and it's saddled by ageing populations. And the West is facing pronounced competition from emerging markets and China. And that broadly is why we've got a secular low growth rate. Liquidity is not going to change that, but it may make us feel better.

    21:43
    Which assets should one consider buying?
    21:47
    What we're looking at is effectively a correction of the selloffs. And if we are correct and we've called this the quick recession, China is now easing and trying to stabilize its economy. What you will see is a lot of those markets who have sold off very heavily in the wake of this China slowdown are the ones that could bounce back pretty significantly. But Australia's already had a very big bounce through this year so far, but you're likely to see Europe rebounding strongly, Korea rebounding, and Japan.

    22:16
    So what's your macro thesis then?
    22:19
    Punch line unquestionably is watch liquidity. Liquidity is the most important thing in the global economy and global financial markets right now. What do you buy? You buy gold. If you look at global liquidity, it's clearly a very difficult thing to measure and to monitor. We do that systematically and professionally. So we cover 80 countries worldwide. But clearly, everybody can't do that.
    22:41
    What are the signs that liquidity is moving into markets? Broadly, what we would say is to look at probably three things. One is to look at the price of gold. Gold is a very sensitive asset class. Equally, I've mentioned cryptocurrency, but let's stick with gold. Gold, if gold goes up, it's a sign that liquidity is moving into markets.
    23:01
    The second thing is to look at the slope of the yield curve. Yield curves always steepen 6 months after liquidity conditions start to improve. And that is a rule, which has worked for 3, 4 decades. It's a very clear rule. Steepening yield curves mean more liquidity, flattening yield curves mean tightening liquidity. Yield curves at the longer end of markets, so looking at the 5 to 10-year spreads or 35 spreads already beginning to steepen. And that's a sign that liquidity is bottoming out and picking up.
    23:36
    And the third thing to look at, which is sign, if you like, if tension or stress is the corporate credit spread in the US. And the reason for looking at that is if that spread begins to widen out, there is a risk of a crevasse vast in markets, as we warned, because the whole collateral system is fragile and it rests a lot on the integrity of US corporate debt, which is held as marginal collateral. So if credit spreads widen, then you could see a pushback and liquidity could drop. So what I would like to see is rising gold, steepening yield curves, and flat to narrowing US corporate spreads.
    From: https://www.realvision.com/tv/shows/...quidity-crunch

    ~~~

    This to me is a very significant statement:
    Quote the Trump administration is trying to divide the world in two. In other words, there's a China-based system, and there's an American-based system. And in other words, there's a lot more that comes after this trade dispute. In other words, there's attempts to try and divide the world economy. And that was more or less what was happening in the 1930s.
    *I have loved the stars too dearly to be fearful of the night*

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    Default Re: Financial flows: moves, changes and significant events

    Quote Posted by Cara (here)
    This to me is a very significant statement:
    Quote the Trump administration is trying to divide the world in two. In other words, there's a China-based system, and there's an American-based system. And in other words, there's a lot more that comes after this trade dispute. In other words, there's attempts to try and divide the world economy. And that was more or less what was happening in the 1930s.
    What if ... the trade war is in reality an already ongoing process of economic decoupling between US and China?

    Delisting Chinese firms from US stock markets appears as a major escalation of the trade war. Take a look at the news:

    Quote Trump considers delisting Chinese firms from U.S. markets: sources

    WASHINGTON (Reuters) - President Donald Trump’s administration is considering delisting Chinese companies from U.S. stock exchanges, three sources briefed on the matter said on Friday, in what would be a radical escalation of U.S.-China trade tensions.

    -- snip --

    China says it cannot allow its companies to submit to oversight by PCOAB because of rules prohibiting the storage, processing or transfer of any material considered to be state secrets or national security matters.

    U.S. hedge fund manager Kyle Bass, a prominent critic of China, said on Friday that Chinese companies should have to play by U.S. rules if they want to sell to U.S. investors.
    https://www.reuters.com/article/us-u...-idUSKBN1WC1VP


    An article which represents the Chinese view -- emphasis is mine:

    Quote An economic decoupling from the United States is looking more likely and China should get ready, scholars in Beijing warned on Saturday, a year after US President Donald Trump fired the first shot in the trade war.

    The break-up of the world’s two biggest economies was gradually becoming a real possibility as Beijing and Washington clashed over issues beyond trade and the White House sought to push China out of global value chains, according to Li Xiangyang, director of the National Institute of International Strategy, a think tank under the Chinese Academy of Social Sciences.

    “This economic decoupling is completely possible, in theory,” Li told a symposium on the trade war at Renmin University of China on Saturday.

    [...]

    “The ultimate target [of the United States] is to contain China’s rise … this is a life-or-death game [for them],” Li said, adding that decoupling could be seen as “strategic blackmail” for Washington to try to prevent China from growing stronger.

    He made the remarks as debate heats up in both the US and China about a potential economic decoupling.

    Chinese President Xi Jinping told an economic forum in St Petersburg last month that he did not want a decoupling from Washington, and he doubted Trump did either.
    https://www.scmp.com/news/china/arti...-decoupling-us

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    Default Re: Financial flows: moves, changes and significant events

    Quote Posted by silvanelf (here)
    ...What if ... the trade war is in reality an already ongoing process of economic decoupling between US and China?...
    Thanks Silvanelf, that's an important wider context.

    And your question and articles you shared remind me of a piece written by Alastair Crooke published 18 December 2018:

    Quote America’s Technology and Sanctions War Will End, by Bifurcating the Global Economy
    Alastair Crooke, Strategic Culture Foundation, 18 Dec 2018

    “The true reason behind the US-China ‘trade’ war has little to do with actual trade … What is really at the basis of the ongoing civilizational conflict between the US and China … are China’s ambitions to be a leader in next-generation technology, such as artificial intelligence (AI), which rest on whether or not it can design and manufacture cutting-edge chips, and is why Xi has pledged at least $150 billion to build up the sector”, Zerohedge writes.

    Nothing new here: yet behind that ambition, lies another, further ambition and a little mentioned ‘elephant in the room’: that the ‘trade war’ is also the first stage to a new arms race between the US & China – albeit of a different genre of arms race. This ‘new generation’ arms-race is all about reaching national superiority in technology over the longer-term, via Quantum Computing, Big Data, Artificial Intelligence (AI), Hypersonic Warplanes, Electronic Vehicles, Robotics, and Cyber-Security.

    The blueprint for it, in China, is in the public domain. It is ‘Made in China 2025’ (now downplayed, but far from forgotten). And the Chinese expenditure commitment ($ 150 billion) to take the tech lead - will be met ‘head on’ (as Zerohedge puts it), “by a [counterpart] ‘America First’ strategy: Hence the ‘arms race’ in tech spending … is intimately linked with defence spending. Note: military spending by the US and China is forecast by the IMF to rise substantially in coming decades, but the stunner is: that by 2050, China is set to overtake the US, spending $4tn on its military, while the US is $1 trillion less, or $3tn … This means that sometime around 2038, roughly two decades from now, China will surpass the US in military spending.”

    This close intimacy between tech and defence in US future defence thinking is plain: It is all about data, big data and AI: A Defense One article makes this very clear,

    Quote “The battle domains of space and cyber are divorced, largely, from the raw physical reality of war. To Hyten [Gen. John E. Hyten, who leads US Air Force Space Command], these two uninhabited spaces mirror one another in another way: They are fields of data and information and that’s what modern war runs on. “What are the missions we do in space today? Provide information; provide pathways for information; in conflict, we deny adversaries access to that information,” he told an audience on Wednesday at the Air Force Association’s annual conference outside Washington, D.C.. The same is true of cyber.

    The U.S. wages war with tools that require a lot of information … Inevitably, more adversaries will eventually employ data-connected drones and gunships of their own. The heavy information component of modern-day weapons, particularly that those wielded by air forces, also creates vulnerabilities. Air Force leaders this week discussed how they are looking to reduce the vulnerability for the United States while increasing it for adversaries”.
    So, the ‘front line’ to this trade/tech/defence war, effectively pivots about who can design - and manufacture - cutting-edge, semi-conductors (since China already has the lead in Big Data, Quantum computing, and AI). And, in this context, General Hyten’s comment about reducing US vulnerability, whilst increasing it for adversaries takes on major significance: For Washington, the plan is to ramp up export controls (i.e. ban the export) of so-called ‘foundational technologies’ — those that can enable development in a broad range of sectors.

    And the equipment for manufacturing chips, or semi-conductors – not surprisingly - is one of the key ‘target areas’ under discussion.

    Export controls though, are just one part of this ‘war’ strategy of ‘data denial’ to adversaries. But semi-conductors is one field in which China is indeed vulnerable: since the global semiconductor industry rests on the shoulders of just six equipment companies, of which three are based in the US. Together, these six companies make nearly all of the crucial hardware and software tools needed to manufacture chips. This implies that an American export ban would choke off China’s access to the basic tools needed to manufacture their latest chip designs (though China can retaliate by choking-off the supply of Raw Earth, upon which sophisticated tech, is reliant).

    "You cannot build a semiconductor facility without using the big major equipment companies, none of which are Chinese,” said Brett Simpson, the founder of Arete Research, an equity research group. And, as the FT, notes, the real difficulty is not [so much] designing the chips, but in the making of very cutting-edge chips."

    So here is the point: the US is attempting to clasp to itself both the ‘pure’ technology-knowledge, plus additionally, the practical tech supply-chain experience and knowhow, in order to repulse China out from the western tech sphere.

    At the same time, another strand to the US strategy – as we have witnessed with Huawei, a global leader in 5G infrastructure technology (in which the U.S. is falling behind) – is to scare everyone off incorporating Chinese 5G in to their national infrastructures - through such devices as the arrest of Meng Wanzhou (for breach of US sanctions).

    Even before her ‘arrest’, America has been systematically cutting Huawei out of the global 5G rollout, by quoting the magical words: ‘security concerns’ (Just as it is attempting to cut Russia out of weapons sales in the Middle East, on similar, tech-protective, grounds: i.e. that states should not buy Russian air defence, since this would give Russia a ‘window’ into NATO tech capabilities).

    And, as General Hyten made clear, this not just about increasing tech and area denial, and promoting vulnerability for adversaries in terms of chips - but the US also plans to extend tech and area info-denial to space, cyber, avionics and military equipment.

    It’s another Cold War - but this time it is about technology and ‘data denial’.

    Well, China, with its centralized economy, will throw money and brainpower, into creating its own, ‘non-dollar sphere’, supply lines: for semi-conductors; for components – both for civil and military use. It will take time, but the solution will come.

    Clearly, one consequence of this new arms race between the US - and China and Russia - is that specialized, and thinly-populated supply lines will have to be disentangled, and made anew, each in its own separate sphere: that is, on one hand, within the NATO-dollar sphere, and on the other, in the non-dollar sphere, led by China and Russia.

    And not only will there be this physical supply-line disentanglement and separation, but should the US persist with its Huawei leverage tactic of ‘War on Terror’-style ‘rendition’ of foreign businessmen, or business women, alleged to have breached any US broad spectrum tech sanctions, there will have to be a disentangling of mixed boardrooms to avoid exposing company officials to individual arrest and prosecution. Limitations on company officers’ travel, where their business spans spheres, is already happening (as a result of the attempted rendition of Meng Wahzhou - and in order to avoid being caught up in tit-for-tat, retribution).

    The bifurcation of the global economy was already in process. This stemmed firstly from America’s geo-political financial sanctions regime (i.e. Treasury Wars) – and the consequent attempts by targeted states to de-couple from the dollar sphere. The ‘war hawks’ surrounding the President are now inventing a whole new swathe of ‘tech crimes’ for sanctioning – ostensibly to give Trump oven more of his much-desired negotiating ‘leverage’. Clearly the hawks are using the ‘leverage’ pretext, to up-the-ante against China, Russia and its allies – for far wider ambitions than just giving the President more ‘cards in his hand’: Perhaps rather, to re-set the entire power-balance between America versus China and Russia.

    The obvious and inevitable consequence has been an accelerating financial separation from the dollar sphere; and the development of a non-dollar architecture. De-dollarisation in a word.

    Effectively, the US seems prepared to burn-down its reserve-currency status, to ‘save’ itself - to ‘Make America Rich Again’ (MARA), and to hobble China’s rise. And while burning down dollar-hegemony, the Administration is burning its own ‘global order’ too: attenuating it from the ‘global’ - down to a reduced sphere of US tech and security allies, facing China and the non-West. The domestic consequences for America will be felt in the new (for Americans) frustration of finding it harder to finance itself, in the manner in which it has grown accustomed, over the last 70 years, or so.

    Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, says that:

    Quote “The dollar – [the US] having the reserve currency, [is placing that] status … in jeopardy. And I don’t think the world likes giving America this kind of power that we can impose our own rules and demand that the entire world live by it. So, I think this has a much bigger and broader ramifications other than what’s going on in the stock market today. I think long-term, this is going to undermine the dollar, and its role as a reserve currency. And when that goes, so does the American standard of living: because it’s going to collapse.”

    “People think we have the upper hand because we have this huge trade deficit with China. But I think it’s the other way. I think the fact that they supply us with all this merchandise that our economy needs, and the fact that they hold a lot of our bonds [debt], and continue to lend us a lot of money so we can live beyond our means - they’re the ones, I think, that call the tunes, and we have to dance to it.”
    This tech and data new Cold War will polarise the global economy into spheres, and already it is polarising it politically, into a new ‘with us, or against us’ American paradigm. Politico notes:

    Quote “The Trump administration's global campaign against telecom giant Huawei is pitting Europe against itself - over China. In the midst of a ballooning U.S.-China trade conflict, Washington has spent the past few months pressing its EU allies via its ambassadors to take a stronger stance against Chinese telecom vendors such as Huawei and ZTE.

    The American push…is exposing fault-lines between U.S. allies in Europe as well as [between] the so-called "Five Eyes" intelligence community — which have largely followed the U.S. lead — and others that resist the American pressure, by stopping short of calling out Chinese tech.

    On the other side there is Germany, which wants proof from the United States that Huawei poses a security risk, as well as France, Portugal and a slew of central and eastern EU nations.

    The increasingly divergent attitudes show how Donald Trump is forcing allies to take sides in a global dispute and measure their economic interests — often deeply embedded with the Chinese vendors — against the value of a security alliance with Washington.”
    The potential for accelerated de-dollarisation is one aspect, but there is another potential flaw inherent to the wholesale repatriation of supply-lines. US corporate earnings have ballooned over the last two decades. Part of this earnings hike stemmed from ‘easy’ liquidity, and ‘easy’ credit; but a major element owed to cost-cutting -- that is to say, off-shoring elements of higher-cost US production (because of wage levels, regulatory costs and employee entitlements) to lower wage, less regulated states. The coming bifurcation of the global economy has therefore, as its inevitable consequence, the repatriation of lower-cost production (in China and elsewhere) to a now higher-cost, and more highly regulated, US and European environment.

    Perhaps this is a good thing -- but for sure it means costs and prices will rise in the US and America, and it means that corporate business models will be impaired as they de- off-shore. Americans’ standards of living will decline further (as Peter Schiff foretells).

    The alienation and disgruntlement of America’s ‘deplorables’ and Europe’s ‘Yellow Vests’ is evidently a profound problem – and one that will not be solved by a new Cold War. The roots to our present discontents lie precisely with the ‘easy’ liquidity, and the ‘easy’ credit paradigm, which centrifuged-out societies into the asset owning 10% and into the non-asset holding 90% of society, and which degraded so the sense of societal well-being and security.

    Of course this discontent can really only be resolved by addressing the question of our hyper-financialised economic paradigm – which is not something the élites will, or want, to ‘touch’.
    From: http://www.conflictsforum.org/2018/a...lobal-economy/
    *I have loved the stars too dearly to be fearful of the night*

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    Default Re: Financial flows: moves, changes and significant events

    In an interview I heard recently they said JP Morgan bank has 830 million ounces of silver and 25 million ounces of gold. How does that integrate with all of this going on especially the daily borrowings happening? Has this type of money being pumped put ever happened before?

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    Default Re: Financial flows: moves, changes and significant events

    Quote Posted by pyrangello (here)
    In an interview I heard recently they said JP Morgan bank has 830 million ounces of silver and 25 million ounces of gold. How does that integrate with all of this going on especially the daily borrowings happening? Has this type of money being pumped put ever happened before?
    Good question. I don't know how this relates.

    My guess is that they are holding these reserves because they are using them as a hedge against uncertainty in the US dollar (or other markets). However, I would need to see their history of gold and silver holdings and a comparison of these to other players in the market and the central banks themselves. I would also want to see what price they paid for these and at what premium (if any) over the market rates at the time.

    Having said that, I have come across (seemingly knowledgeable) commentators who take it as given that the gold market is manipulated on a global scale - so any and all analysis of it is uncertain without knowing at least some details of this manipulation.

    But perhaps someone else who knows more about the gold and silver market will be able to shed more light on this.

    ~~~

    Update:
    I have just been listening to a Sirius Report podcast (subscription only sadly) that says that a change in JPMorgan’s balance sheet is what triggered the recent trouble in the US repo.
    Last edited by Cara; 3rd October 2019 at 12:37.
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    Default Re: The Changing / Emerging Global Landscape

    This posted previously here: http://projectavalon.net/forum4/show...obal-Landscape

    ~~~

    State issued cryptocurrencies are on the way.

    China:
    Quote China’s Digital Currency Coming Soon, Says Central Bank
    By Kalyan Kumar On 8/12/19 at 10:37 AM EDT

    At a time, the currency war between the U.S and China is raging in the name of deliberate weakening of yuan, here comes news that the central bank of China is all set to issue its sovereign digital currency.

    Disclosing this, Mu Changchun, deputy director of the People’s Bank of China’s payments department, said the PBOC’s cryptocurrency is “almost ready” for release.

    Earlier China was maintaining the stand that cryptocurrency creates disorder as speculators sell off the regular currency and would buy up virtual currency.

    In the new system, China might be hoping to create stability with the off-blockchain model.

    According to reports, the central bank’s researchers have been working on the currency for five years.

    The news comes amidst central bankers worldwide taking a skeptical view of Facebook’s plan to create a cryptocurrency named Libra in association with a consortium of companies including Visa and Uber.

    No fixation on Blockchain

    The cryptocurrency news from China’s central bank said its digital token will have a two-tier system in which the PBOC and commercial banks will be the authorized issuers at tier 1 and tier two.

    The significant part is that PBOC is not fussy about making blockchain the exclusive platform. Rather, it will be technology-neutral.

    Blockchain is the main decentralized ledger technology platform guiding most cryptocurrencies including bitcoin.

    China's digital currency plan gained traction after Facebook announced details of its Libra cryptocurrency in June.

    Wang Xin, head of the research bureau at the PBOC, said in June that the central bank is paying “high attention,” to Libra and would ramp up the development of its digital currency.

    China wants more control

    However, shunning the decentralized blockchain-based offerings reveals Beijing’s intent to exercise more control over its financial system.

    According to reports, the PBOC has already filed 52 patents relating to its digital currency in the name of the Digital Currency Research Lab of the PBoC.

    The patents registered by the central bank suggest consumers and businesses have to download a mobile wallet and swap their yuan for the digital money, that could be used to make and receive payments.

    The PBOC will track every time money changes hands.

    Changchun also said the “blockchain platform just couldn't deliver the throughput needed for retail.”

    He said the PBOC’s digital currency will serve as a substitute for M0 –coins and notes in circulation, but not M2, including bank deposits.

    Mu said the digital currency would boost the circulation of the yuan internationally.
    ...
    From: https://www.ibtimes.com/chinas-digit...mpression=true

    Iran:
    Quote Iran Announces Gold Backed National Cryptocurrency
    July 20, 2019

    The Tehran News agency has reported that Iran intends to launch a gold-backed cryptocurrency. This comes less than a week after President Trump slammed virtual currencies on Twitter amid tensions between the historic foes. The New agency reported the development on its English website.

    Accordingly, the Central Bank of Iran (CBI) has approved the issuance of new cryptocurrencies. This is according to the CEO of Iranian Information and Communication Technology (ICT) FANAP, Shahab Javanmardi.

    Shahab described the measure as follows:
    “Iran’s cryptocurrency will be supported by gold, but its function is similar to other cryptocurrencies. The crypto asset is designed to maximize the use of Iranian frozen bank assets.”
    As a matter of fact, banks like Parsian Bank, Bank Pasargad, Bank Melli Iran and Bank Mellat were working with blockchain startup Kuknos Company on this as early as January. The Financial Tribune reported that the gold-backed cryptocurrency project will be called Paymon.

    The Legal Status of Cryptocurrency in Iran

    The Iranian government had earlier this year signaled some opposition to Bitcoin and mining in general. This is because the government decried the use of power which is a feature of cryptocurrency mining. Notably, power is subsidized in Iran and many miners took advantage of this opportunity to have large mining farms.

    Mehr news reported that CBI was looking to ban private cryptocurrency and encryption services like in China. That said, the status of Bitcoin in the legal system is still quite unclear. Different government agencies have given conflicting positions in the recent past. In this regard, the conundrum of crypto regulation is as unclear in Iran as it is in most countries globally.

    ...

    Ironically, the American government has accused the Iranian government of actually using Bitcoin to circumvent sanctions. This is because Bitcoin is immutable and not subject to centralized control. Therefore, the Iranian government seems to have a “do as I say and not as I do” stance on Bitcoin.

    The Role of Politics

    ...

    Iran is similarly in the middle of currency turmoil after more sanctions from the USA. The fact that cryptocurrency is a way to escape the monopoly of SWIFT transfer in finance is lucrative. As such the country is simply taking a logical measure to cope.

    Iran is not alone in exploring cryptocurrency. In fact, more than 70 percent of the world’s central banks are looking at the impact of such a coin. The announcement by the Central bank of Iran will certainly up the ante.
    From: https://www.asiacryptotoday.com/iran...cryptocurrency

    Russia:
    Quote Russian Engineering Union Proposes Stablecoins “Backed by Material Valuables”
    cryptoregradar July 27, 2019

    The Russian Engineering Union (‘SoyuzMash’) has requested that the Central Bank of consider exploring blockchain technology as a potential means of exchange for arms deals with foreign customers.

    Vladimir Gutenev, the vice-president of SoyuzMash, has indicated that he made the recommendation directly to Elvira Nabiullina, the head of the Central Bank of , alongside “a whole range of measures” also endorsed by the union.

    Specifically, Mr. Gutenev recommended the consideration of stablecoins to conduct Russian arms sales, emphasizing the advantages such offered in facilitating the bypassing of economic sanctions. He stated:

    The so-called ‘stablecoins’ are cryptocurrency backed by material valuables, especially gold. That is to say, anonymous payments are one of the possible ways to resolve the existing problems.

    Mr. Gutenev’s comments also indicated his preference that arms only be exported after receiving full payment upfront, stating:

    Quote It’s hard to name any new conditions with respect to competition, because of course, this is not a competitive environment, it is powerful sanction pressure. Whereas previously there were a few reference points according to which one could say that a contract had been fulfilled, we are now encountering cases where for months the delivered equipment and adopted equipment is not paid for, the transactions are very difficult to carry out.
    The recommendation was made by the Russian Engineering Union in partnership with an “expert council on military and technological cooperation” of the State Duma’s commission on legal support for the development of defense industry organizations, which was established during 2019.

    Russian Cryptocurrency Legislation Expected by the End of 2019

    Last month, local media outlet Interfax reported that the Russian deputy finance minister, Alexei Moiseyev, had announced that the country’s lawmakers were discussing allowing the purchase and sale of cryptocurrencies while preparing Russia’s upcoming virtual currency regulation. However, Mr. Moiseyev indicated that cryptocurrency payments will not be legitimated under the bill.

    “Like with foreign currency, it would be possible to buy and sell [cryptocurrencies], but impossible to use them for payments,” he stated.

    The report also cited the head of the Duma Financial Market Committee, Anatoly Aksakov, as having indicated that Russia must develop and implement a regulatory apparatus for cryptocurrencies before 2020 to comply with the recommendations of the international financial watchdog, the Financial Action Task Force (FATF).
    From: https://reginnovate.com/2019/07/27/r...in-arms-sales/

    Other countries have also made announcements:
    Quote So far, the countries that launched their own Cryptocurrency

    To date, countries that have issued their own cryptocurrencies include Ecuador, China, Senegal, Singapore, Tunisia, though these countries will not be standing alone for long with Estonia, Japan, Palestine, Russia and Sweden looking to launch their own national cryptocurrencies. Some of these countries are likely to take it a step further and replace paper tender altogether with China being one nation that is looking to take one step beyond a virtual and paper version.

    Of the countries looking to introduce their own cryptocurrencies, the world’s largest economies could force the hands of smaller nations and we would expect momentum to build in the years ahead. Central banks now looking closely at the successes and constraints faced by those who have already stepped into the light, though only in early September, ECB President Draghi stated in a press conference that no member state of the Eurozone can introduce its own digital currency, with the currency of the Eurozone being the euro.
    From: https://www.fxempire.com/education/a...urrency-443966
    (I think the article is somewhat out of date as it does not mention Venezuela’s announcement to launch a petro backed cryptocurrency.)
    Last edited by Cara; 4th October 2019 at 05:10.
    *I have loved the stars too dearly to be fearful of the night*

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