Category Archives: Banking

The World Acquires More Gold While China Is Dumping Treasuries

We are told China’s economy is hurting, the “trade wars” are working and bringing China to it’s knees. From where I sit nothing could be further from the truth.

Currently China holds well north of $1 TRILLION in U.S. Treasuries – debt – that you and I, the tax payers of this country, send interest payments to month after month for them to continue holding our debt. It’s like the mortgage on your house, student loan or car note you have but instead of you getting anything for the debt payment you get to know the warmongers are going to purchase more bombs, weapons of all kinds and create more destruction. China, on the other hand, takes the payment and is building out the Belt and Road Initiative around the world. So, while we are working like slaves to pay our taxes, China is using our labor (taxes) paid to them to build a better global economic and financial system that does not include you and I. Pretty cool, aye?

While this is happening on one side of China’s national ledger sheet, on the other side something completely different is happening.

China reentered the gold market seven months ago, in December 2018 and has added a little less than 74 tons to their official gold holdings of approximately 1,935+ tons of gold. Please keep in mind this does not count the known 80-100 tons per annum that is flowing in from Russia. While this is not a large volume of gold in the grand scheme, this has been going on since 2016 so we are now talking about upwards of 240 – 300 additional tons. This changes their “official” gold holdings from approximately 1,935 tons to somewhere north of 2,175+. It could be as high as 2,235 or more tons of gold.

With more and more central banks continuing to add to their gold hoards did China see the pipeline tightening? China made their exit from the market in October 2016, the same month the yuan / renminbi was added to the IMF basket of currencies accounting for the SDR global trade note. Then fourteen months later decided to jump back in and have been adding to their horde ever since.

Last year, central banks bought 651.5 tons, 74% up on the previous year, the World Gold Council said in January. Official sector purchases could reach 700 tons this year, assuming the China trend continues and Russia at least matches 2018 volumes of about 275 tons, Citigroup Inc. said in April. Buying from central banks in the first five months of this year is 73% higher than a year earlier, with Turkey and Kazakhstan joining China and Russia as the four biggest buyers, according to data released on Monday by the WGC. Source

If 2018 saw national / central banks acquiring more than they have since 1968 and this they are outpacing last year by 73% will this be the biggest year for gold national / central bank acquisitions in history? If not history it would have to be much earlier than 1968 since that record has already been breached.

With the global economic changes that are occurring we have been calling for some type of gold trade settlement for a number of years. We believe that Russia and China are on the cusp on making this change. We have no proof this going to happen this year or next, but all the signs are pointing in that direction. We believe, especially if China continues acquiring more “official” gold on the open market, there will be a gold trade settlement note announced before 2025. Possibly much sooner if the warmongers in Washington DC continue with the war drums over Iran. If President Trump listens to the war-pigs in the Pentagon this will not fare well for the U.S. economy and gold will be much in demand at all levels – from retail to government and everything in between.

Source: Authored by Rory Hall via The Daily Coin, | ZeroHedge

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Money Laundering Scandals Bring Court Charges and Record Job Cuts to Euro Banks

The international financial establishment is known to express concern about the risks of money laundering when the crypto space is mentioned. A string of scandals indicates, however, that traditional banks are not only susceptible to the phenomenon but sometimes complicit, whether knowingly or inadvertently. New chapters have been added to the saga over the last few months that are hurting banks, bankers and their clients.

Deutsche Bank Prepares to Lay Off 20,000 Employees

Deutsche Bank, one of the biggest names associated with money laundering accusations, has been dogged by many problems during the past year. The leading German financial institution is now preparing for a major reorganization that may include the sacking of up to 20,000 employees, if the plan is approved at the end of this week.

The changes come after a failed merger with Germany’s Commerzbank a couple of months ago, which was eventually deemed too risky by the teams of both banks. It did not materialize, despite the support of the federal government in Berlin.

Many of the layoffs are expected to affect Deutsche Bank’s investment banking offices in London and New York. According to a BBC report, the German bank has 8,000 employees in the British capital. And the 20,000 jobs that are likely to be cut represent a fifth of the institution’s global staff.

Besides persistent problems with its investment business and unsatisfactory financial results, the banking giant has been suffering from its involvement in money laundering scandals. In November, 2018 its headquarters and other offices in Frankfurt were raided by law enforcement officers and representatives of the German tax authority.

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How To Decode Investment Adviser Speak

(by Luke Delorme) As an investment adviser, I can’t help but sometimes fall into the trap of industry lingo. Mea culpa.

This is my short list of things I hear way too often in the investment industry, and my honest translation into English.

What advisers say: “Your returns were good last year because we maintained exposure to equities.”

What it means: “The stock market went up and we didn’t do anything stupid.”

What advisers say: “Your portfolio has downside protection in the event that the market falls.”

What it means: “Your portfolio includes both stocks and bonds (and probably some other stuff). Usually, when stocks fall, bonds will go up to offset the losses.”

What advisers say: “We’re cautiously optimistic about the market.”

What it means: “We have no idea what’s going to happen, but things generally go up if you wait long enough.”

What advisers say: “Economic fundamentals are strong.”

What it means: “Unemployment is low. Other economic factors seem to be moving in the right direction. The economy is growing instead of contracting. We have no idea what that means in the short term for the stock market, but a growing economy should help companies that issue stocks and bonds, which is good for investors over long periods of time.”

What advisers say: “The equity premium is still positive.”

What it means: “Stocks have historically gone up more than bonds. We expect that to happen in the future, although nothing is guaranteed over the short-term.”

What advisers say: “The 5-year return of this hypothetical portfolio was 7% per year.”

What it means: “The 5-year return of this hypothetical portfolio was 7% per year, which means practically nothing without context. The return over the next five years could be almost anything.”

What advisers say: “We see an opportunity in … emerging markets equities, small cap value, high yield bonds, gold, and so on.”

What it means: “Since no one knows what will do well next, it’s probably smart to hold a little bit of everything. That way, when something goes up, we can point to it and everyone will be happy.

What advisers say: “We believe it is important to maintain broad diversification.”

What it means: “Again, since no one knows what will happen next, we want to be positioned to capture returns wherever they happen to show up. Also, holding a broad array of assets reduces exposure to any single asset that might tank.

What advisers say: “Portfolio A has higher expected returns than Portfolio B.”

What it means: “Portfolio A is riskier than Portfolio B, and probably more concentrated in stocks. This may or may not be a good idea based on your financial needs, expectations, and circumstances.”  

What advisers say: “These funds are actively managed.”

What it means: “Someone is getting paid really well to guess what companies to buy in that fund. There is no evidence that they can consistently succeed, but they get paid either way.”

What advisers say: “We are forecasting that X, Y, and Z will happen and the result will be A, B, and C.”

What it means: “There are an infinite number of possible outcomes in the world. Good luck guessing what will happen next. Even if you can guess it, financial markets will react unpredictably. We’re going to tell you that we’re forecasting something because it sounds good to tell a confident story instead of being honest.”

What advisers say: “We charge a very reasonable 1.5 percent wrapper on assets under management.”

What it means: “Thanks for putting my kids through college.”

Deutsche Bank Enters Controlled Collapse Two Weeks After Passing Fed Stress Test

“The Deutsche Bank As You Knew It Is No More”: DB Exits Equities In $8.4 Billion Overhaul, To Fire Thousands

Europe’s 2nd largest banking behemoth that only a decade ago dominated equity, fixed income, sales, trading, and investment banking across the globe is no more.

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How The Fed Wrecks The Economy Over And Over Again

When people talk about the economy, they generally focus on government policies such as taxation and regulation. For instance, Republicans credit President Trump’s tax cuts for the seemingly booming economy and surging stock markets. Meanwhile, Democrats blame “deregulation” for the 2008 financial crisis. While government policies do have an impact on the direction of the economy, this analysis completely ignores the biggest player on the stage – the Federal Reserve.

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America’s Adversaries Are Buying Gold Hand Over Fist


Having tested $1300 numerous times over the past few years, gold has broken dramatically higher in the last month, hitting 6-year highs as President Trump rhetoric around the world raises tensions, increasing the odds of open WWIII conflict.

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The surge in the precious metal has accompanied a collapse in bond yields around the world and a record level of negative-yielding debt…

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And while Gold volatility is soaring…

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Demand remains abundant, as Goldman details in its latest note, raising its outlook for gold, countries with “geopolitical tensions with the US” are buying everything:

https://www.zerohedge.com/s3/files/inline-images/2019-06-25_8-31-56.jpg?itok=gGGl0dTX

Central bank demand is gaining momentum and we now expect 2019 purchases to reach 750 tonnes vs 650 tonnes last year. Visible gold purchases YTD are running at 211 tonnes until April vs 117 tonnes over the same period last year (see Exhibit 11).

Importantly, China just raised its gold purchasing pace from 10 tonnes per month to 15 tonnes for April and May as it aims to diversify its reserve holdings. 

With the Fed and ECB now both likely easing monetary policy, more CBs may decide to add gold to their portfolios as they did between 2008 and 2012 (see Exhibit 12).

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Also, just recently, trade tensions between India and the US have begun to escalate as India retaliated with tariffs on US goods in response to US steel tariffs. Rising tensions with the US often create upside potential to a country’s gold purchases

Additionally, in case you thought the move was exhausted, Goldman notes that there is about to a pick up in demand as Russia purchases tend to be strongest in Q3…

https://www.zerohedge.com/s3/files/inline-images/2019-06-25_8-40-22.jpg?itok=XUkbj0p-

And finally, Goldman notes that good economic news and bad economic news could both be positive for the precious metal at this point in the cycle.

If DM growth fails to pick up in the second half, gold has substantial upside potential

If DM growth continues to underperform, there is room for a much more substantial build in ETF positions. Last time we were in a similar environment was in 2016. DM growth back then was as weak as it is now and both the Fed and the ECB turned more dovish.

https://www.zerohedge.com/s3/files/inline-images/2019-06-25_8-46-27.jpg?itok=c9RpItJW

But back then the push into ETFs was significantly higher than it is currently… we think that current low growth makes owning gold appealing from a diversification perspective.

And Goldman notes that an improvement in global economic growth is not necessarily bearish for gold.

Our economists expect the bulk of the acceleration in GDP growth to come from ex-US and EM countries in particular. This should support gold through the “wealth” channel. Importantly, a reduced US growth outperformance points to a weakening of the dollar, which should boost the dollar purchasing power of the world ex-US (see Exhibit 7). In addition to this, gold is starting to build momentum in the local currencies of its two biggest consumers, India and China.

And the momentum gold prices built in the first half of 2019 can lead to an increase in EM (emerging markets) retail gold demand in the second half.

Goldman concludes, we believe that gold continues to offer significant diversification value with substantial upside if DM (developed markets) growth continues to underperform… or, as we noted above, global tensions continue to rise.

As we noted previously, combined Russia and China Treasury holdings are at their lowest since June 2010 as China and Russia’s gold holdings have soared…

https://www.zerohedge.com/s3/files/inline-images/bfm348C.jpg?itok=8s85CyGy

De-dollarization?

Source: ZeroHedge

As China’s Banking System Freezes, SHIBOR Tumbles To Lowest In A Decade

One trading day after we reported that China was “Hit By “Significant Banking Stress” as SHIBOR (Shanghi Interbank Offered Rate) tumbled to recession levels, and less than a week after we warned that China’s interbank market was freezing up in the aftermath of the Baoshang Bank collapse and subsequent seizure, which led to a surge in interbank repo rates and a spike in Negotiable Certificates of Deposit (NCD) rates…

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… China’s banking stress has taken a turn for the worse, and on Monday, China’s overnight repurchase rate dropped to its lowest level in nearly 10 years, after the central bank’s repeated liquidity injections to ease credit concerns in small-to-medium banks: The rate fell as much as 11 basis points to 0.9861% on Monday, before being fixed at exactly 1.000%.

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Seeking to ease funding strains after the Baoshang collapse and to unfreeze the financial channels in the banking sector, the PBOC has been injecting cash into the financial system to soothe credit risk concerns in smaller banks following the seizure of Baoshang Bank, which sent shockwaves through China’s markets.

Also helping drive the rate lower is China’s move to allow brokerages to issue more debt, said ANZ Bank’s Zhaopeng Xing, quoted by Bloomberg. As a result, at least five brokerages had their short-term debt quotas increased by the People’s Bank of China in recent days, according to filings.

The improved access to shorter-term debt will cut costs for brokerages compared with alternative funding sources such as bond issuance. The flipside, of course, is that the lower overnight funding rates drop, the greater the investor skepticism that China’s massive, $40 trillion financial system is doing ok, especially since the last time overnight funding rates were this low, the near-collapse of the global financial system was still fresh and the S&P was trading in the triple-digits.

Commenting on the ongoing collapse in SHIBOR, Commodore Research wrote overnight that “low SHIBOR lending rates are supposed to be supportive and accommodative in nature — but rates are now at the lowest level seen this decade and  are very likely an indication that China is facing significant banking stress at the moment. It is extremely rare for the overnight SHIBOR lending rate to be set as low as 1.00%. This previously had not all been seen this decade, and the last time it occurred was during the financial crisis in 2008 – 2009.”

Meanwhile, as the world’s biggest financial time bomb ticks ever louder, traders and analysts are blissfully oblivious, focusing instead on central banks admitting that the recession is imminent and trying to spin how a world war with Iran would be bullish for stocks.

Source: ZeroHedge