A Global House Of Cards

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

As most Americans, if not the financial media, are aware, Quantitative Easing (a euphemism for printing money) has failed to bring back the US economy.

So why has Japan adopted the policy? Since the heavy duty money printing began in 2013, the Japanese yen has fallen 35% against the US dollar, a big cost for a country dependent on energy imports. Moreover, the Japanese economy has shown no growth in response to the QE stimulus to justify the rising price of imports.

Despite the economy’s lack of response to the stimulus, last month the Bank of Japan announced a 60% increase in quantitative easing–from 50 to 80 trillion yen annually. Albert Edwards, a strategist at Societe Generale, predicts that the Japanese printing press will drive the yen down from 115 yen to the dollar to 145.

This is a prediction, but why risk the reality? What does Japan have to gain from currency depreciation? What is the thinking behind the policy?

An easy explanation is that Japan is being ordered to destroy its currency in order to protect the over-printed US dollar. As a vassal state, Japan suffers under US political and financial hegemony and is powerless to resist Washington’s pressure. Continue reading

‘Gold Wars’ – Swiss Gold Shenanigans Intensify Prior To November 30 Vote

Submitted by Mark O’Byrne  – Founding Partner of  GoldCore2014-08-12_1821

‘Gold wars’ are intensifying with just 16 days left to polling day in the Swiss Gold Initiative.


‘The Gold Wars’ by Ferdinand Lips

The Swiss National Bank (SNB) and establishment parties went “all in” during the week and intensified their campaign. They suggested that passing the Gold Initiative would be a ‘fatal’ for Switzerland and would be positive only for speculators.

The ‘yes’ side countered by saying the SNB’s assertions were alarmist and over the top. They say that it is not an invitation to speculators as there would be a five year transition to gold being 20% of Swiss reserves. They warned that there is a real risk of another debt crisis and a global currency crisis and that gold reserves would protect the Swiss franc and the Swiss economy.

If the Swiss vote to revert to having 20% of currency reserves in gold, the Swiss National Bank will be forced to make huge purchases of gold bullion. Switzerland  and its ‘Gold Initiative’ would contribute to driving the price of gold higher – likely in the short term and contributing to higher prices in the long term.

Understanding the important recent past and what has led to the forthcoming Swiss Gold Initiative is important and why we look at it today. This context is all important and is essential reading for all who wish to understand the key issues in the debate, for all who invest in and own gold internationally and for all Swiss people.

‘Gold Wars’ – The All Important Context and Gold Wars Today

By Ronan Manly,

Introduction
Golden Constant: Unchanging Swiss Reserves from 1971 to 2000
IMF Threat To Swiss Constitutional Gold
SNB Working Group  – Begins Gold Lending
Solidarity Fund Confusion
SNB ‘Expert Group’ Pre Planned Sale Of “Excess” Gold Reserves?
Low Turnout Gold Referendum and New Constitution
Swiss Gold Expert Ferdinand Lips Speaks Up
Jean-Pierre Roth’s Important 20% Diversification ‘Rule of Thumb’

Introduction
Much of the background to the sale of Swiss gold reserves in the early 2000s relates back to a number of distinct episodes in Swiss monetary history in the 1990s.

A lot of this period was characterised by what in hindsight looks like coordinated planning on the part of the Swiss National Bank (SNB) to push through a specific figure of 1,300+ tonnes of Swiss gold sales, but which back then looked like an unconnected but bungled series of unrelated changes to Switzerland’s gold and monetary landscape.

Furthermore, it is only by reviewing this series of events that it’s possible to appreciate the genesis  of the current Swiss Gold Initiative and the motivation of the proponents to call a halt to and try to reverse some of what they see as the unwise sale of Swiss gold due to decisions made in the 1990s. Continue reading

Bank gearing in the Eurozone

Submitted by Alasdair Macleod – FinanceAndEconomics.org

According to the ECB’s Bank Lending Survey for October banks eased their credit standards in the last quarter, while their risk perceptions increased.

This apparent contradiction suggests that the 137 banks surveyed were at the margin competing for lower-quality business, hardly the sign of a healthy lending market. Furthermore, the detail showed enterprises were cutting borrowing for fixed investment sharply and required more working capital instead to finance inventories and perhaps to cover trading losses.

This survey follows bank lending statistics since the banking crisis to mid-2014, which are shown in the chart below (Source: ECB).

Euro bank lending 14112014

It is likely that some of the contraction in bank lending has been replaced with bond finance by the larger credit-worthy corporations, and Eurozone banks have also preferred buying sovereign bonds. Meanwhile, the Eurozone economy obviously faces a deepening crisis. Continue reading