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Posts Tagged ‘Central Banks’

Ο ΚΟΣΜΟΣ ΣΤΟ ΧΕΙΛΟΣ ΤΟΥ ΠΟΛΕΜΟΥ? – A World On The Verge Of War?

Posted by satyrikon στο 16 Σεπτεμβρίου, 2012

Revolutionary Guards

Revolutionary Guards (Photo credit: Wikipedia)

Here is a summary of where the world stands:

From Reuters:

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After Creating Dollar Exclusion Zones In Asia And South America, China Set To Corner Africa Next | ZeroHedge

Posted by satyrikon στο 15 Ιουλίου, 2012

National emblem of the People's Republic of China
National emblem of the People’s Republic of China (Photo credit: Wikipedia)

By now it really, really should be obvious. While the insolvent «developed world» is furiously fighting over who gets to pay the bill for 30 years of unsustainable debt accumulation and how to pretend that the modern ‘crony capitalist for some and communist for others’ system isn’t one flap of a butterfly’s wings away from full on collapse mode, China is slowly taking over the world’s real assets. As a reminder: here is a smattering of our headlines on the topic from the last year: «»World’s Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade», «China, Russia Drop Dollar In Bilateral Trade», «China And Iran To Bypass Dollar, Plan Oil Barter System», «India and Japan sign new $15bn currency swap agreement», «Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says», «India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees», ‘The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap», and finally, «Chile Is Latest Country To Launch Renminbi Swaps And Settlement», we now get the inevitable: «Central bank pledges financial push in Africa.» To summarize: first Asia, next Latin America, and now Africa.

Yep: the Yuan may not be the reserve currency by default, but at this
rate China will have bilateral, read USD-bypassing relations, with all
countries in Asia, South America and shortly Africa (where none other
than Goldman Sachs has been pushing harder than anyone). Once the entire
world is trading in CNY, it will be merely a matter of flipping the
switch and all those fancy three-letter economic theories that explain
why the uber-welfare state works just becayse the US can print an infinity+1 in debt, will all suddenly find themselves completely and totally bidless.

From China Daily:

China is to promote the yuan’s use in settling trade and
investment with Africa, and encourage the more active development of
Chinese financial institutions across the continent, a senior central
bank official said on Friday.

 

Li Dongrong, assistant governor of the People’s Bank of China, said
Africa has the capability of becoming a new hub of international capital
flow, and the yuan’s use there should be further improved in accordance
with rising demand for the currency there.

 

«We will continue to encourage domestic financial institutions to
increase their presence and business across the continent,» Li told
delegates at the Forum on China-Africa Financial Cooperation in Beijing,
adding that the cooperation potential between the two sides is huge, as
Africa’s economy continues to take off.

 

According to Li, yuan-denominated settlement between China and some
African countries has already started, with 4.3 billion yuan ($156.5
million) worth of settlement made with South Africa and 2.3 trillion
yuan with Mauritius, for example.

 

The popularity of using the yuan has been increasing in Africa, and
more central banks are considering including the currency in their
reserve portfolios, reported various governors of African central banks
at the forum.

For China, Ghana is not Spain. It is far, far more valuable.

Millison Narh, second deputy governor of the Bank of
Ghana, said the bank’s board of directors has decided to use the yuan as
part of its settlement and reserve currencies in January, but has yet
to finalise details with the People’s Bank of China

 

«We have looked at the currency rate risk management of the reserve
portfolio. I think the yuan has performed very well, supported by the
huge international reserves of China. It makes sense to use the yuan as
both the settlement currency and the reserve currency.»

 

More African central banks will make similar decisions, and in five
years about 20 percent of African central banks’ foreign reserve
portfolio would be yuan assets, he said.

So is Zambia:

Michael Gondwe, governor of the Bank of Zambia, added
that his country is yet to decide on including the yuan in its foreign
reserve assets, but it is expecting increased usage of it to settle
trade between China and Zambia.

 

Franklin Kennedy, a non-executive director of the African
Export-Import Bank, said he believed using the yuan on the continent was
«a natural evolvement – it has to happen», and expects more African
central banks to include the currency in their foreign reserve
portfolios.

Of course the French, who are not used to being snubbed in what is
rapidly becoming a second Congress of Berlin, only this time one without
any European participation, are not very happy:

One trade finance manager at Societe Generale (China)
Ltd, who declined to be named, said he has seen little demand among
traders to settle deals in yuan, because there is no sound channel to
make investment or purchases in yuan after holding the currency.

As for the truth:

Babacar Ndiaye, the former president of the African
Development Bank, said he saw «no reason» why traders would refuse to
settle transactions in yuan «when the trade flow increases» between
China and Africa.

 

«It is logical that very soon more and more central banks of Africa will follow Nigeria to include the yuan into their reserves,» he said

 

He added at present it is just the beginning, and central banks would
also prefer to buy treasury bonds from China in the future if possible.

But… but… if the whole world suddenly realizes that the CNY is the defacto reserve currency and «would also prefer to buy treasury bonds from China in the future if possible«… who does that leave as natural buyers for US paper? Aside from the Fed of course…

μέσω After Creating Dollar Exclusion Zones In Asia And South America, China Set To Corner Africa Next | ZeroHedge.

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Will Tsipras Blow Up Europe? | ZeroHedge

Posted by satyrikon στο 17 Ιουνίου, 2012

Submitted by John Aziz of Azizonomics

Will Tsipras Blow Up Europe?

The world’s eyes are on the Greek election, and whether or not Greeks will elect New Democracy’s Samaras (widely-assumed to be pro-bailout, pro-status quo), or SYRIZA’s Tsipras (widely-assumed to be anti-bailout, anti-status quo).

The Eurocrats have very sternly warned Greece against voting against austerity. Merkel said:

It is extremely important for Greeks to elect lawmakers who would respect the terms of the bailout.

In recent days, opinion has swung back toward the status quo, with Intrade rating New Democracy’s chances of winning the largest number of seats at 65%, and SYRIZA at just 33%.

While I cannot rule out New Democracy winning, I think that I’d flip those odds. Greece widely reviles German-imposed austerity, but fears the consequences of leaving the Euro — 85% of Greeks want to stay in. A vote for New Democracy would reflect fear of Drachmatization. Meanwhile, a vote for SYRIZA would seem to reflect the idea that through brinkmanship and the threat of Euro collapse, Greece can negotiate their way to a much more favourable bailout position.

So why do I think SYRIZA are the likelier winner? The election is on a knife-edge, so I think the difference might be football.

Greece — against all odds — managed to bumble through the Euro 2012 group stage, beating Russia 1-0 and likely setting up a poetic quarter final against Germany. I think that that victory against Russia will fire enough Greeks to try their luck and assert themselves against austerity.

For Greece, this is an important election. Inside the euro, their heavily state-dependent economy will continue to suffer scathing austerity. Outside the euro, they can freely debase, and — as Nigel Farage has noted — enjoy the benefits of a cheaper currency like renewed tourism and more competitive industry. If Greeks want growth sooner rather than much later, they should choose life outside the euro (and by voting for Tsipras and trying tough negotiating tactics, they will be asking to be thrown out).

But for the rest of the world, and the rest of Europe, this is all meaningless. As Ron Paul has noted, when the banking institutions need the money, central banks — whether it’s the ECB, or the Fed, or the BoE, or a new global central superbank — will print and print and print. Whether Greece is in or out, when the time comes to save the financial system the central bankers will print. That is the nature of fiat money, as much as the chickenhawks at the ECB might pretend to have hard-money credentials.

Tsipras, though — as a young hard-leftist — would be a good scapegoat for throwing Greece out of the Eurozone (something that — in truth — the core seems to want).

The real consequence throughout Europe as austerity continues to bite into state-dependent, high-unemployment economies will be more political fragmentation and support for political extremes, as the increasingly outlandish and unpopular political and financial solutions pushed by Eurocrats — specifically more and deeper integration, and banker bailouts — continue to help special interests and ignore the wider populations.

 

Guest Post: Will Tsipras Blow Up Europe? | ZeroHedge.

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Greece — What Matters And What Does Not | ZeroHedge

Posted by satyrikon στο 16 Ιουνίου, 2012

From Mark Grant, author of Out of the Box

Greece—What matters and What does Not

The bond market is heading East while the equity markets heads West because they have two totally different focuses at present. I have seen this often enough in my almost four decades on Wall Street and I am always amused when this differentiation takes place. It is really just a reaction to what either market is staring at that causes this phenomenon to take place and, eventually, one market proves to be correct while the other gallops along to catch up. The stock markets seem buoyed by the possibility of the more EU friendly government to win this Sunday’s election and they are taking comfort in the hope for support of the world’s major central banks and the possibility of more easing; a new or redefined QE3. The fixed income people are concentrating on the possibility of a systemic financial shock, the recession in Europe that will affect the United States and the plight of the European banks. In my experience the bond markets generally get it right and get there first and I expect nothing different this time.

Let us calmly consider the facts as we can ferret them out and change our focus to reality and not what we are spoon fed by the Europeans. Greece has a total debt of about $1.3 trillion. This is composed of their sovereign debt, which Europe counts, and then their $90 billion in derivatives, their Federally guaranteed regional debt, their sovereign guaranteed bank and corporate debt, their obligations to the EU and finally their loans at the other central banks. It is just simple addition and not my opinion; I am just counting all of the liabilities while Europe does not. Then if you take their GDP and divide it by their total debt you get a debt to GDP ratio of around 453%. You may claim, and somewhat correctly, there is value in some of their assets which would be an off-set in case of actual default but the problem here is that they are a sovereign nation so how one would lay claim to any Greeks assets would be quite problematical.

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Here Comes The Mother Of All Rumors: G-20 Sources Say Central Banks Preparing For Coordinated Action | ZeroHedge

Posted by satyrikon στο 14 Ιουνίου, 2012

Update 1: and here comes the revision:

  • G20 SOURCES SAY CENTRAL BANKS PREPARING FOR COORDINATED ACTION AFTER THE GREEK ELECTIONS IF NEEDED

So… if Syriza wins, and Greece leave the Eurozone, there will be a response? Unpossible.

Update 2:

  • EUROZONE MINISTERS TO HOLD CONFERENCE ON SUNDAY TO DISCUSS OUTCOME OF GREEK ELECTIONS

LOL

* * *

And the mother of all rumors strikes:

  • G20 SOURCES SAY CENTRAL BANKS PREPARING FOR COORDINATED ACTION AFTER THE GREEK ELECTIONS

One small problem. Central banks NEVER indicate in advance what they will do. This is merely a desperation attempt to ramp markets into the close, and sucker even more retail into stocks ahead of Sunday. Now we wait for the denial because otherwise some pathetic G-20 leak just made central banks everywhere irrelevant and obsolete: remember what happened to Jamie Dimon when in March he front-ran the Fed…

 

Here Comes The Mother Of All Rumors: G-20 Sources Say Central Banks Preparing For Coordinated Action | ZeroHedge.

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Just What Is Mario Draghi Hiding? ECB Declines To Respond To Bloomberg FOIA Request On Greek-Goldman Swaps | ZeroHedge

Posted by satyrikon στο 14 Ιουνίου, 2012

Back in February 2010, in the aftermath of the discovery that none other than Goldman Sachs had facilitated for nearly a decade the masking of the true magnitude of non-Maastricht conforming Greek debt, Zero Hedge first identified the prospectus for a Goldman underwritten swap agreement securitization titled Titlos PLC. We titled the analysis «Is Titlos PLC The Downgrade Catalyst Trigger Which Will Destroy Greece?» because for all intents and purposes it was: at that time a rating agency downgrade of the country would lead to a chain of events which would make billions in assets ineligible for ECB collateral, forcing a massive margin call on the National Bank of Greece, which likely would have precipitated a Greek default there and then.

In retrospect, considering the two years of pain that Greece has already suffered, this may have been the better option as the country would have taken its bitter medicine, and become a second Iceland case study by now, growing at a brisk pace, unencumbered by debt, free from the clutches of the Euro, instead of having its economy collapse by nearly 10% every year without any resolution in sight.

But that is irrelevant for the time being: what is relevant is Titlos itself, and what Bloomberg did after we posted the analysis. It turns out that following in the footsteps of Mark Pittman, Bloomberg sued the ECB under Freedom of Information rules requesting «access to two internal papers drafted for the central bank’s six-member Executive Board. They show how Greece used swaps to hide its borrowings, according to a March 3, 2010, note attached to the papers and obtained by Bloomberg News. The first document is entitled “The impact on government deficit and debt from off-market swaps: the Greek case.” The second reviews Titlos Plc, a securitization that allowed National Bank of Greece SA, the country’s biggest lender, to exchange swaps on Greek government debt for funding from the ECB, the Executive Board said in the cover note. The ECB’s response: «The European Central Bank said it can’t release files showing how Greece may have used derivatives to hide its borrowings because disclosure could still inflame the crisis threatening the future of the single currency.»

Maybe.

But what is far more likely is that the reason why the ECB, headed by none other than former Goldmanite Mario Draghi, is desperate to keep these documents secret is for another reason. A very simple reason:

 
 

Mario Draghi – 2002-2005:  Vice Chairman and Managing Director at Goldman Sachs International

In other words, Draghi was a key executive at Goldman at precisely the time when none other than Goldman Sachs was hired to create and facilitate the active hiding of the true extent of the Greek debt problem.

In yet other words: could it be that none other than the head of the European Central Bank is refusing to cooperate with a Bloomberg FOIA, something even the US Federal Reserve ultimately succumbed to which led the revelation that the Fed had handed out trillions in secret loans to banks all around the world  – and that includes tens of billions in under the table loans to JPM, contrary to Dimon’s defense that he did not need the TARP money in Senate yesterday: he did, and much more, but since when is perjury a crime before a kangaroo court of bought politicians:

But this is not about JPM for once. Let’s go back to that infernal mollusc which everyone loved to hate in all of 2009 and 2010 until JP Morgan became the world’s Fed-backstopped, prop trading pinata, and the response that the ECB did provide to Bloomberg as a reason for not handing out the required information:

 
 

Disclosing the files when Bloomberg News first sought them in 2010 would have “fueled negative perceptions about Greece’s ability to honor its debt,” ECB lawyer Marta Lopez Torres said at a hearing of the European Union’s General Court in Luxembourg today. “It’s the same now with Spain” which “isn’t able to borrow money,” she said. “Markets are reacting in very volatile ways. It’s affecting the euro economy.”

In other words from Mutual Assured Destruction as a means to push through policy propaganda, M.A.D. is now the only option for heads of central banks from being exposed to the world as the very same people who enabled the current financial collapse in the first place?

Now we see…

More from Bloomberg, which explains the reasoning for demanding access to the two abovementioned docs:

 
 

These documents “played a role” in shaping policy and “highlighted there were issues” when the ECB undertook a review of its eligibility criteria for collateral in its funding operations, the ECB lawyer told the court.

 

The cornerstone of the ECB’s response to the crisis is to give banks as much money as they needed in return for collateral. In October 2010, the ECB changed the rules on the asset-backed securities it accepted and gave itself more discretionary power to reject collateral if necessary.

 

The public has a right to know how EU authorities may have allowed Greece to hide its deficit, which helped trigger Europe’s sovereign debt crisis,” said Matthew Winkler, editor- in-chief of Bloomberg News. “Greater transparency results in more accountability, and we seek this information to understand how this debt debacle unfolded in an effort to avoid repeating it.”

 

The Greek government didn’t originally disclose the swaps, designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001. The swaps allowed the country to increase borrowings by 5.3 billion euros, Eurostat, the EU’s statistics agency, said in November 2010.

 

In April 2009 — seven months before the Greek crisis erupted — ECB officials spotted “a swap operation in unusual terms,” according to the March 2010 document.

And back to Goldman, who in the 2001 onward period was the sole bank provider of shady currency swap transactions:

 
 

In the largest derivative transaction disclosed so far, Greece borrowed 2.8 billion euros from Goldman Sachs Group Inc. in 2001 through a derivative that swapped dollar- and yen- denominated debt issued by the nation for euros using a historical exchange rate, a move that generated an implied reduction in total borrowings.

 

“The Greek authorities had never informed Eurostat about this complex issue, and no opinion on the accounting treatment had been requested,” Eurostat, the Luxembourg-based statistics agency, said in a statement. The watchdog had only “general” discussions with financial institutions over its debt and deficit guidelines when the swap was executed in 2001.

 

“It is possible that Goldman Sachs (GS) asked us for general clarifications,” Eurostat said, declining to elaborate further.

 

Spokesmen for Goldman Sachs in London couldn’t immediately comment after the hearing.

How about asking that other Goldman Sachs spokesman, Mario Dragi? Perhaps at the next ECB press conference journalists can finally grow a pair and start asking the really important questions instead of listening to the violins as the European titanic is steadily sinking?

 

Just What Is Mario Draghi Hiding? ECB Declines To Respond To Bloomberg FOIA Request On Greek-Goldman Swaps | ZeroHedge.

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Fitch Follows S&P, Slashes Spain By 3 Notches To BBB, Only Moody Is Left – Step 3 Collateral Downgrade Imminent | ZeroHedge

Posted by satyrikon στο 7 Ιουνίου, 2012

 

Fitch Follows S&P, Slashes Spain By 3 Notches To BBB, Only Moody Is Left – Step 3 Collateral Downgrade Imminent

First it Egan-Jones (of course). Then S&P. Now Fitch (which sees the Spanish bank recap burden between €60 and a massive €100 billion!)joins the downgrade party of rating agencies that have Spain at a sub-A rating. Only Moody’s is left. What happens when Moody’s also cuts Spain to BBB or less? Bad things: as we explained on April 30, when everyone has Spain at BBB or less…

If all agencies downgrade Spain to BBB+ or below, the ECB could increase haircuts by 5% on SPGBs

The key aspect in terms of the Spanish downgrade(s) is the ECB’s LTRO. If all three rating agencies move Spain to BBB+ or below then under the ECB’s current framework it moves into the Step 3 collateral bucket which requires an additional 5% haircut across the maturities. In classifying its risk management buckets, the ECB uses the highest of the ratings to determine an asset’s position (unlike the sovereign benchmark indices which use the lowest rating, in general). Fitch and Moodys currently rate Spain at A and A3 respectively, with both having a negative outlook in place leaving only a small downgrade margin before Spain migrates to the lower ECB bucket.

Italy’s position is marginally more precarious in that it shares Spain’s A3 rating from Moody’s but is rated lower at A- by Fitch, and is similarly outlook negative from both agencies. One would hope ECB pragmatism would prevail and move to be more accommodative on its collateral haircut rules on sovereign debt.

The weakness of the eurozone’s growth outlook is undermining the efforts of many sovereigns to rein in budget deficits, thereby highlighting the self-defeating nature of the fiscal compact as currently defined. Including the political impact, this has potential to lead to further downgrades

via Fitch Follows S&P, Slashes Spain By 3 Notches To BBB, Only Moody Is Left – Step 3 Collateral Downgrade Imminent | ZeroHedge.

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