Daily Digest

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Daily Digest 2/8 - Hyperinflation In Venezuela, Rip-Off By The Federal Reserve

Monday, February 8, 2016, 12:01 PM

Economy

Living Out of a Van Is the New American Dream (Aaron M.)

"We basically felt we were wasting our youth," Murray explained. "Travel, learning about new cultures and meeting new people, having meaningful experiences—that's what is important to us." So they saved up money, quit their jobs, and took the plunge. After traveling for a year in Latin America, they bought a red Kia Sedona minivan and converted it into a camper. Now, they both work remotely—Murray in the communications field as a freelancer, Trenschel operating and promoting e-commerce websites—while they travel around North America and focus on the things that make them happiest.

Venezuela Orders Bank Notes by Planeloads (richcabot)

While use of credit cards and bank transfers is up, Venezuelans have to carry stacks of cash as many vendors try to avoid transaction fees. Dinner at a nice restaurant can cost a brick-size stack of bills. A cheese-stuffed corn cake—called an arepa—sells for nearly 1,000 bolivars, requiring 10 bills of the highest-denomination 100-bolivar bill, each worth less than 10 U.S. cents.

Rip-Off By The Federal Reserve (Jim C.)

If the Fed retained all of the securities (assets), the inflationary pressure created by theextended line-of-credit for Congress would be too obvious. Also, Congress complainedseveral years ago the interest collected was too much profit. The Fed has been forced toreturn excess profit to the government. The Fed therefore wants to sell a major portion of the securities so it has arranged with the Treasury department to act as auctioneer for selling to the Primary Dealers. This immediately sells the assets of the Fed.

Paul Craig Roberts: There Is No Freedom Without Truth (richcabot)

Neoconservatives such as William Kristol would be demanding to know why President Eisenhower was issuing warnings about our own military-industrial complex instead of warning about the threat presented by the Soviet military.

The presstitute media would be implying that Ike was going a bit senile in his old age, a tactic the presstitutes used against President Reagan as he struggled to end stagflation and the Cold War.

French police 'abuse' Muslims under emergency laws (jdargis)

ISIL's claim triggered a backlash - not just in France, but across Europe and elsewhere - as Muslim communities were collectively "punished".

There are between 5.5 million and 6.2 million Muslims in France, or roughly 7.6 percent of the total population - making the group the largest Muslim minority in Europe.

Above The Fold (jdargis)

Like any paper, the Journal did lots of toss-away journalism, but lots of great work, too. It succeeded in rolling back a 60 percent wage hike that city council voted for itself in a secret meeting in 1979. It raised serious concerns about the judicial system’s reliance on psychiatric testimony. It won a four-year battle to overturn the province’s draconian ban on information regarding the deaths of children in care. It is the only paper in Canada to have ever won a Pulitzer Prize.

Exclusive: Iran wants euro payment for new and outstanding oil sales - source (PBD)

"Many European companies are rushing to Iran for business opportunities, so it makes sense to have revenue in euros," said Robin Mills, chief executive of Dubai-based Qamar Energy.

Iran has pushed for years to have the euro replace the dollar as the currency for international oil trade. In 2007, Tehran failed to persuade OPEC members to switch away from the dollar, which its then President Mahmoud Ahmadinejad called a "worthless piece of paper".

Will climate change move agriculture indoors? And will that be a good thing? (richcabot)

The result: He was the newly minted CEO of BrightFarms, an urban farming and education nonprofit that had morphed into a for-profit greenhouse consultant. Lightfoot had a vision: He wanted to build his own greenhouses, instead of just consulting on other people’s. He also wanted to build a lot of them. That would take a lot of money. But Lightfoot had a plan to copy a financing technique that was common to the solar industry, but rare elsewhere: the Power Purchase Agreements (PPA).

Gold & Silver

Click to read the PM Daily Market Commentary: 2/5/16

Provided daily by the Peak Prosperity Gold & Silver Group

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11 Comments

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1227
More ban the cash propaganda

Guess what, if you ever use a £50 or $100 bill you are a terrorist, drug lord or tax evader, maybe all three! The bankers are now at the forefront of 'stopping crime'. Isn't that rich? What entity has been fined for more criminal activity in the last decade than the banking industry? Is there any group even within two orders of magnitude? The big banks are the biggest criminal organization on the planet! I like the quote "Banning the notes would not stop crime, but it would make hiding transactions more costly and more difficult, Mr Sands said.". Translation, you have to pay the banksters their cut of your operation be you drug lord or soccer mom. If you are rich enough, they will even hide your money (for a fee). The only "legitimate" economy runs through the banks 100% of the time, don't you know? What this tells me is that there is a lot of cash leaving the system to mattresses of the well-to-do, not just a few preppers salting away the reserves that even FEMA says that you should maintain! The banks are getting scared that they do not completely control everyone. If we are not 100% dependent on them then next time we have another 2008 (maybe this year) people will be less desperate to bail out the banks at any cost yet again. The smell of fear may be one of the things driving down the financials, even if no one knows exactly what is causing the banks to squirm...

 

Ban £50 notes to tackle crime, ex-bank chief says

Central banks should stop issuing £50, $100 and €500 notes to tackle crime, according to a former bank boss.

The high-denomination notes are favoured by terrorists, drug lords and tax evaders, argues Peter Sands, former chief executive of Standard Chartered bank, in a new report.

Illegal money flows exceed $2 trillion (£1.4 trillion) a year, Mr Sands said.

Rather than focus on the criminals, his report argued G20 countries should now target the cash itself.

---

High-value notes issued by rich countries are the "currency of corrupt elites, of crime of all sorts and of tax evasion", Mr Sands said.

"They play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy," he added. "The irony is that they are provided to criminals by the state."

Banning the notes would not stop crime, but it would make hiding transactions more costly and more difficult, Mr Sands said.

 

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Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
The Mathematics of pre-crime.

My people in full flight. And you want to eliminate us? 

 

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1924
Dave Kranzler says Deutsch Bank is a Goner

 

Will Deutsche Bank Be Saved From Collapse?

Basically, No.

Typically the credit markets sniff out a very real problem before the equity market “catches up.”   Deutsche Bank has emerged as one of the most recklessly managed “Too Big To Fail” banks.  Under Anshu Jain’s “leadership,”  DB became a financial nuclear weapon bloated on derivatives, exceedingly risky assets and highly corrupt upper management.  It’s a literal cesspool of financial fraud and Ponzi scheme banking activity.  The graph of the spread on DB 5-yr credit default swaps shows how quickly the market has determined that DB’s financial risk of insolvency is quickly accelerating.

Currently DB has roughly $2 trillion assets supported by $68 billion of book value.  The problem is that many of its assets are highly overstated in value and have yet to be written down.  The financial world shuddered at the $7 billion of admitted write-offs DB took in 2015.  The problem is that over 85% of the charges taken by DB were attributed to legal costs.  We know its “on-balance-sheet” assets are being reported at a significantly overvalued stated level.  DB has big loans to the energy sector, Glencore, Volkswagon/Audi and other sundry highly risky businesses.   It would only take a 3.5% write-down of its asset base to wipe out its book value.  

THEN there’s the derivatives.  DB has $58 trillion of notional amount in OTC derivatives hidden off its balance sheet.  The bank will claims most of that is hedged out and the “netted” amount is a sliver of the notional amount.  But ask AIG and Goldman Sachs how hedging / netting works out in the long run.   “Netting” is only relevant when counterparties are prevented by Central Banks from defaulting.  Once the defaults start, “net” becomes “notional” in a hurry.

And for the grand finale

The current era’s first big bank casualty will likely be Deutsche Bank, unless the German Government and the EU and U.S. Central Banks determine that a DB collapse would collapse the west, which it likely would.  To put this in perspective, DB’s stated assets are $2 trillion. Germany’s GDP is just under $4 trillion.   Then there’s the derivatives…

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5458
banning cash + DB =

If you are a banker, how do you stop a bank run?  You pre-emptively make cash illegal.  Taking out cash makes you a drug lord, or a corrupt official.  Bankers do not like that cash stuff.  After all, that cash can be withdrawn same day.  That's a bad thing.  And lines at the bank are terrible for the optics.  News crews come, everyone gets to see for themselves how worried the customers are, etc.  If money has to flee (more slowly) by ACH, news crews can't film that, can they?  And once customers realize the bank has almost no cash on hand, what then?

I agree with the analysis of DB.  It is in trouble.  And I just want to point out, Armstrong mentioned this about eight months back.

My guess: those CDS are products that are bought by other traders, some of whom used to actually work at DB, and so they know where the bodies are buried.  Things don't matter until they suddenly matter, and at that point, they matter a whole lot.

Let's assume for the moment that DB will eventually have a "problem" that is big enough that it can't be solved by a straight-line bailout (i.e. where the German state dumps a bunch of money into the company to shore up the balance sheet).  That sort of bailout is supposed to be a no-no in the EU these days too, although we know that Germany gets to break the rules if they really want to.

We also assume that an uncontrolled BK won't happen either - DB turning into Lehman would (and this is a guarantee) lock up the worldwide banking system because of the counterparty issue for all those derivatives they are short.  So if you are Frau Merkel, what do you do?

Bail-in seems to be the only answer.  Equity gets wiped out for sure.  Germany can't (realistically) afford to pay the deposit insurance, so the depositors are (probably) safe.  532 billion in deposits; 300 billion demand deposits, 235 billion in time deposits.

DB has 146 billion in long term debt, and 100 billion in short term debt.  Some chunk of that would get "converted to equity" in a bail-in.  (woohoo)

Do we imagine this would be enough to recapitalize DB?  Maybe.  Depends on how big those losses are.

The bond prices aren't currently pricing in a default.  Only the equity looks iffy right now.

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2839
Bail-In
davefairtex wrote:

Bail-in seems to be the only answer.  Equity gets wiped out for sure.  Germany can't (realistically) afford to pay the deposit insurance, so the depositors are (probably) safe.  532 billion in deposits; 300 billion demand deposits, 235 billion in time deposits.

It'll be interesting if so. I wonder what the public at large will do when they see the first large scale "bail-in". Probably nothing (DWTS is on tonight)...or maybe enough to finally spook the herd?

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Blankfein says you must all tighten your belts.

You have got to love him. 

Sanders took offense when Blankfein, in a 2012 segment on “60 Minutes,”said, “You’re going to have to undoubtedly do something to lower people’s expectations” that they will get their full Social Security and Medicare benefits because “we can’t afford it.” Blankfein advocated an increase in the eligibility age for both programs as well as other cuts because “entitlements have to be slowed down and contained.”

 

https://theintercept.com/2016/02/08/why-goldman-ceo-lloyd-blankfein-call...

Edwardelinski's picture
Edwardelinski
Status: Gold Member (Offline)
Joined: Dec 23 2012
Posts: 323
It is 'Death by a Thousand Cuts'

Some are saying they are not to big to fail,but rather,to big to save...You could not make this up.

Tall's picture
Tall
Status: Platinum Member (Offline)
Joined: Feb 18 2010
Posts: 564
DB is toast

Deutsche Bank AG is “absolutely rock-solid,” Co-Chief Executive Officer John Cryan wrote in a letter to employees, seeking to reassure markets after a plunge in the shares

http://www.bloomberg.com/news/articles/2016-02-09/deutsche-bank-is-absolutely-rock-solid-cryan-tells-employees

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1628
The DB goose is certainly cooked: the govt's official denial

Stick a fork in it.  The kiss of death for DB: 

German Finance Minister Wolfgang Schaeuble says he isn’t worried about Deutsche Bank. 

 
 

“No, I have no concerns about Deutsche Bank,” Schaeuble says

So, it's "contained," right?

 

http://www.zerohedge.com/news/2016-02-09/german-finance-minister-joins-db-ceo-says-not-worried-about-deutsche-bank

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1924
Why save money in a bank account?

I must be slow.  But I just don't get it.  Why keep money in a bank account?

1.  to earn interest (which doesn't happen anymore)

2.  to keep it safe from theft.

So if bank accounts are confiscated, doesn't that mean there there is no longer any reason to keep money in a bank?

Won't everyone realize this and rush to extract their savings?

Why would banks participate in their own undoing in this way?

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Away with the Fairies.

Do the banks need depositors' money? I was under the impression that the Central Banks had stuffed their vaults full of digits.

They don't need customers. Customers are so last century.

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