Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Sunday, April 7, 2013
Bitcoin - a reflection of de facto rejection of fiat currencies , a reflection of de facto absence of trust in governments / specific banks in Europe and banking in general , a reflection of a view that what is yours is " "theirs " to be stolen at whim if " yours " is based in euros / dollars / sterling or any currency that can be stolen - but does Bitcoin represent a safe and effective escape from TBTF control frauds and virtual enslavement ? For that , time will tell .....
Think the great BitCoin drama is over? After plunging by over 60% intraday, touching $100 from an all time high of $265 earlier, BitCoin was just getting started, posting a just as epic rebound to $200 in mere hours... before tumbling once more to $125... before rebounding again to $180... before sliding to $140... and so on. As the vomit-inducing sequence above hints, merely following every twist and turn of the real time tragicomedy that is the minute chart of BTC is a full-time job. And with the bulk of assorted BTC price charts DDoSed into oblivion, or merely down due to record traffic, the only remaining real-time chart may be the following from Clark Moody: we suggest using 1 Minute resolution. Perhaps what is most fascinating, is that unlike regular stock, FX or commodity charts which are largely dominated by robots, algos and other electronic traders, the trading in BTC is purely carbon-form based. So for those who enjoy some seriously hypnotic after hours undulations, this chart's for you.
Bitcoin returns to earth - with a lot of help ! From a high of 265 to a low of 105 - in one day ! Not a currency and they need to figure out how to stop DDOS attacks pronto !
On Wednesday afternoon, the Bitcoin bubble appears to have burst. As of this writing, its current value is around $160—down from a high of $260. (It fell as low as $130 today.) There is no obvious explanation for why the digital currency has fallen so far and so fast, although the market correcting after such a huge rise might be a good explanation. (Update 4:05pm CT: Bitcoin seems to have somewhat recovered and appears to be hovering around $200.)
Some redditors have taken solace in a comment thread entitled "Hold Spartans."
"This is just the market venting some pressure after these huge gains," wrote anotherblog. "To be honest I'm glad it's happening now. If it recovers, it will demonstrate resilience in the market and give confidence to future buyers and current holders that they don't need to panic sell, reduce the chances of a crash in the future."
Coincidentally, the plunge came several hours after a reddit user by the name of “Bitcoinbillionaire” suddenly, spontaneously decided to give away around $12,000 (more than 63 BTC) worth of the digital currency. Bitcoinbillionaire rewarded 13 seemingly random redditors, then stopped the whirlwind spree after about eight hours. At the moment, no evidence links the currency's plunge with this random reddit charity.
Bitcoinbillionaire took advantage of reddit’s Bitcointip mechanism, which allows users to send each other small amounts of cash (usually less than $5). The mysterious benefactor appears to have given away 20 BTC (now worth slightly less than $4,000) as his or her first gift to one Karelb. This gift happened under a comment titled: “I wish for the price to crash.” That comment now seems prophetic.
A look at the account transferring all this money shows that two hours before the giveaways began, Bitcoinbillionaire received 50 BTC (about $9,500) from another account without an IP address.
Business Insiderreported that Bitcoinbillionaire has left hints that he or she was an "early adopter,"and had forgotten he or she even had any bitcoins. Not much is known beyond that, as Bitcoinbillionaire vanished as suddenly as he or she appeared.
After enjoying a week or so of increasing value, Bitcoin took a huge dive today, which explains why the "virtual currency" is not a currency at all, but more of a stock people have invested in to get rich. The coins started out at a high of $266 today, and have fallen to around $150, as this dramatic chart from Business Insider shows:
Currencies are allowed to lose value over time. That happens. But Bitcoin is designed specifically such that it will have these kinds of rises and falls all the time. And for that reason, the majority of people are using it more like an investment than a way to buy things.
The system encourages hoarding, which is not a great thing for an economy. This is happening for a couple of reasons. First, there will one day be a finite number of coins. The system will cap out around 21 million, currently there are something like 11 million in circulation. When there is only a certain number of a valuable commodity, people don't want to spend it. This hoarding causes instability, as Pascal-Emmanuel Gobry explained over at Forbes. He compares it to a babysitting co-op Paul Krugman once wrote a column about in The New York Times:
A problem arose when people tried to hoard coupons to build a reserve and then run it down. The more people tried to hoard coupons, the less people were willing to go out and get their babies sat. And since there were less coupons in circulation, there were less babies sat. The baby co-op, in other words, had entered a recession.
It's kind of how, back in 2009, people in Argentina held onto their pocket change out of fear for their credit system. As coins became scarce, Buenos Aires bus riders didn't want to spend their coins because they were saving it up for their own trips, which only exacerbated the shortage as coins were hoarded by people fearful of a coin shortage. That same thing will happen to bitcoins, especially since there are only so many out there and, if the price goes up, it will make them too valuable to exchange for mere goods and services. (This is also kind of like the great Argentina coin shortage because people were possibly keeping the coins believing that inflation had made the metal in them more valuable than their face value.) But it doesn't stay that way forever. People hoarding bitcoins because they think they are too valuable to spend will lead to crazy instability, as Matt Yglesias explains at Slate. "The problem is that if the price of a bitcoin is on a steady upward trajectory, then nobody's actually going to want to spend a bitcoin on anything. And if everyone's hoarding their bitcoins, then the network is actually useless. Then since it turns out to be useless, you get a crash," he writes.
All the hoarding and the inevitable ups and downs suggest people aren't using it to buy things, but instead selling and trading it like a stock. Stability is one of the reasons currency works, as Vanity Fair's Kurt Eichenwald explains: "The essence of a currency is a rational expectation of relatively stable valuation. Yes, values can collapse or soar, but those circumstances relate to unusual events and, for the most part, are widely predictable ahead of time. Outside of those circumstances, the values of valid currencies tend to fluctuate within a reasonable range." Bitcoins are more like a share of stock, Eichenwald suggests, "I could certainly purchase items with shares of Google Inc.—I would just have to find a seller willing to accept them—but no one would rationally say that makes stock into a currency rather than an investment."
To be fair, there are some people who aren't using it like a stock, such as Bitcoin aficionado Erik Voorhees, who believes that a tiny fraction of the hype over the last few weeks will result in real infrastructure developments for the money, he explained in an interview with BuzzFeed.
But not even he really knows if the value will hold over time, he explained in a Reddit post. "Either Bitcoin is worth zero, or is worth thousands of dollars each. It will take years for the market to figure out which it is," he wrote. And even within those years nothing sounds too certain: "As stated many times, Bitcoins are incredibly risky and volatile. The whole thing is one grand experiment. Don't ever hold more money in Bitcoin than you can afford to lose, and in general you should assume the whole thing will go to zero." Would you ever assume the cash in your wallet is worth nothing?
Treasury yields finally got back up to pre-Payrolls levels today but there was no stopping stocks as the S&P 500 finally broke its all-time highs (and yay verily there was much rejoicing).USDJPY pushed on lower (despite a decent spike on early comments from Kuroda that 'the market misunderstood') edging ever closer to the magic 100 level. This JPY-cross weakness provided the ammo (along with a 5-6bps decompression in bond yields) to take stocks on to new highs (from Friday's close, JPY is down 2.28% vs the USD and AUD up 1.5%) Gold and Silver had a tough day, giving back yesterday's gains. The only stock index to lose today was the S&P Small Caps but Materials and Homebuilders lagged the market. Equities topped around the European close and from then channeled sideways (with a little 330pm ramp effort) but credit markets and VIX were not buying into this move at all. As the Nasdaq had it best day of the year, so Bitcoin, umm, didn't - losing over 50% of its highs intraday. Trannies are the best off the post-NFP gap-down-open, up an impressively ridiculous 4.7%.
From the NFP gap open in cash markets...
And Treasuries retraced back to pre-NFP levels...
But VIX wasn't fully engaged... as it seems protection was sought...
and credit markets (while they did play catch up into the close) were not buying into the exuberance...
Everything is one market now...
Gold and Silver rolled over today but noth remain above pre-NFP levels...
and while shareholders the world over were celebrating their unrealized fiat 'wealth', it appears BitCoin holders were realizing losses...
Time to rename it BitCrash... or will it stage an amazing recovery? Alas, for this particular bubble, there are no NYSE circuit breakers nor is there a Federal Reserve-mandated "plunge protection team." And why should there be? The central banks hate all currency alternatives. Firehats: on, especially since the volume is still relatively lite.
Bitcoin is undergoing a classic correction after quintupling in price over the past 30 days. The currency, which was trading as high as $265 earlier today on Mt. Gox, plummeted and is now trading at around $150.
This also happened last week when Mt. Gox when Bitcoin reached $142 and hackers attacked the exchange. At that point, Mt. Gox said it had suffered ”its worst trading lag ever.”
The Tokyo-based exchange said last week that hackers are engaging in a strategy to manipulate the price of the currency: “Attackers wait until the price of Bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their Bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can. Repeat this two or three times like we saw over the past few days and they profit.”
It looks like this may be happening again. Aside from that, any kind of 400% increase over 30 days is probably unsustainable from a technical point of view. A correction at this point would be healthy and natural.
The news surrounding Bitcoin is now coming in so hard and fast it is virtually (pun intended) impossible to keep track of it all. It was just this past weekend that I highlighted a website that shows some of the various retail locations around the world where you can spend your BTC. Just today, I discovered that New York property management company, Alvic Property Management, is accepting Bitcoin for rent and maintenance payments at all of its properties. From PRWeb:
Alvic Property Management, a property management company specializing in the management of condominiums, cooperatives and multifamily rentals in the New York metro area, has become the first property management company to accept rent and maintenance payments in Bitcoin.Properties on the Alvic Property Management platform are now be able to accept payments with the speed and ease of credit card or eCheck payments without the risk of chargebacks or bounced eChecks.
All properties managed by Alvic Property Management are currently accepting bitcoins. Residents initially need to reach out to their property manager to have their account enabled to accept bitcoin, they will then be able to then make payments to a Bitcoin address exclusive to their account. All bitcoin payments will post to the property bank account in US dollars at the quoted bid price on the Mt.Gox Bitcoin exchange at the time of receipt.
“It has become clear to us that Bitcoin has traction in New York City and the requests to pay by Bitcoin has been increasing. When landlords provide more options, they open themselves up to larger pools of potential tenants, which ultimately increases property values.” said Michael Lacsa, head of client relations for Alvic Property Management. “We are always looking for ways to increase income while cutting expenses for our properties and accepting Bitcoin provides this opportunity.”
Could a patent lawsuit take down Bitcoin exchanges?
Max Keiser, the host of RT's ‘Keiser Report,’ is a former stockbroker, the inventor of virtual specialist technology and co-founder of the Hollywood Stock Exchange.
In a free market capitalist system ‘price signals’ are everything. Prices are determined by buyers and sellers, and these prices are broadcast from exchanges and then on to all corners of the economy - where they are used to transact business.
In a centrally-planned economy, prices are set by fiat and implemented in a ‘top down’ approach organized by a committee; rather than by bottoms-up, animal-spirits-driven, self-interested individuals.
Where free market capitalism has failed over the past few decades is in maintaining fair and equitable ‘price discovery’ on various exchanges to complement those animal spirits.
Instead of buyers and sellers coming together and letting the ‘invisible hand’ of self-interest determine prices, more and more we see the dead hand of a Wall St. monopolist market-rigging determine prices.
Evidence of how badly the situation has become can clearly be seen in how the price of the petro-dollar, the post-Bretton Woods, post-Nixon’s closing of the ‘gold window’ in 1971 price of oil has not been allowed to trade - NOT according to free market principles - but rather the dead-market interference of Wall St. and Washington insiders who profit mightily from this rent-seeking corruption.
Iraq, Iran and Libya all wanted to trade oil outside of the Saudi-American petro-dollar fixed pricing scheme and all paid dearly for it.
On a more personal note, in the 1990s I developed a technology and market for creating price-discovery for future box office results for movies. The entrenched monopoly in Hollywood made sure that never succeeded; breaking up the company and selling the technology to Wall St. where it is warehoused out of reach of any good it might have done establishing freer markets benefiting the public's interest.
The industry’s lobbyist, the MPAA, is known for aggressive tactics. At Aaron Swarz's funeral (the copyright freedom activist) his father pointed to Chris Dodd, the MPAA head, as the killer of his son - who hanged himself rather than face 30 years in prison (the term the MPAA was looking for) to ‘send a message.'
Note that when box-office futures were attempted again a few years back it was Chris Dodd, while in Congress (remember he now heads up the MPAA) who shot this initiative down in the Dodd-Frank bill.
InTrade in Ireland was looking to do something similar for politics with their 'prediction market’. It sent out ‘price signals’ about which candidates were actually winning and losing market share ahead of elections and this infuriated Washington’s corrupt insiders. When InTrade and other 'quants' sunk Mitt Romney’s chances to win the last presidential election, the powers that be had had enough. InTrade has been taken off line without much by way of explanation.
This brings me to Bitcoin and the exchanges that broadcast current prices for Bitcoin such as MtGox.
Success of Bitcoin would mean the demise of central banks, Wall St. and the Washington insiders who trade on inside information and market manipulation. So will we see these insiders try to do to the Bitcoin exchanges (the price discovery mechanism) what they did to similar challenges to the oil price fixing, Hollywood propaganda, and political market making? One would tend to think so.
My thought is that as Bitcoin and the exchanges become more prevalent we’ll see Wall St. and the central banks challenge the exchanges on intellectual property grounds. They will argue the technology for trading in virtual securities with a virtual currency is a patented technology owned by Wall St. and that virtual market making is violating this patent (US pat. no. 5950176).
So far the collateral damage has been high for anyone trying to combat the enemies of free markets in oil, entertainment and politics, but perhaps the sheer size of Bitcoin's global distributed network will prevail.
Let’s hope so. Let's hope Bitcoin does not become an intellectual property farce the way Monsanto claims to hold the patent rights on seeds or the way the drug industry claims to have the patent rights on various DNA.
and......
http://www.businessinsider.com/bitcoin-190-2013-4
Bitcoin Goes On Another Big Tear, And Surges Past $190
The digital currency Bitcoin is having a bit of a moment, which is drawing the attention of cybercriminals. They don’t want to steal your money (though there is some of that too). Instead they want to hijack the processing power of your computer to create more bitcoins out of thin air.
There is no company, central bank, or government behind Bitcoin—there is only math. The currency, created by a pseudonymous researcher and governed by computer code, is slowly adding more coins to circulation. New bitcoins are distributed to users with access to hugely powerful computers, which compete to process fiendishly complicated math problems. The system gives new coins to the winner as a reward; the process is known as “mining.”
The newest Bitcoin scam was discovered last week by security firm Kaspersky Lab, which found a type of computer malware that hijacks computers and uses them to mine new bitcoins.
The computers are infected through links within Skype—users click on an link that installs software on their machine, and they become unwitting slaves in the bitcoin mines. Kaspersky’s Dmitry Bestuzhev found infected computers in Italy, Russia, Poland, Costa Rica, Spain, Germany and Ukraine that have been brought to a crawl as nearly all of their processing power is stolen.
This isn’t the first Bitcoin botnet, as massive networks of hacked computers that are controlled by cybercriminals are known. A botnet called ZeroAccess was estimated to be earning $2.7 million a year by using infected computers to mine new coins, even offering bounties for new infected computers. And as the media hype and Bitcoin’s valuation rises, there will undoubtedly be further exploits. As Felix Salmon explained in his deep-dive last week, botnets are the logical outcome of the Bitcoin system:
The way that the money supply grows, in the bitcoin system, is by people harnessing the power of hundreds or thousands of computers to solve very complicated mathematical tasks, earning bitcoins for doing so along the way. And the easiest and cheapest way of doing that is to do so illegally, by stealth: set up a “botnet” of hacked computers to do your bidding for you. The incentives, here, are very bad indeed.
An FBI report last year detailed several incidents in which cybercriminals bought and sold botnets, with bitcoin as the medium of exchange. So Bitcoin may have inadvertently given birth to an insidious new business model: Pay bounties to build a botnet, use the botnet to mint bitcoins, sell botnet for more bitcoins, and repeat.
And........
The are a few reasons to explain why interest in Bitcoin has exploded of late , below are a few reasons......
Rethinking Money With Bitcoin Quadrupling Since Cyprus
Submitted by Tyler Durden on 04/07/2013 15:22 -0400
Since the beginning of the Cyprus debacle(followed by Russia's call for repatriation of all offshore capital and then Japan's willful debasement of their currency), which appears to have awoken many to the fact that banks and politicians can't be trusted , the 'price' of the virtual currency Bitcoin has quadrupled - touching an incredible $162 this morning. While most people believe the only way to 'spend' this currency is on drugs or blogging sites, Liberty Blitzkrieg's Mike Krieger points out there are in fact hundreds of places(growing daily) where this as-yet unregulated store of wealth can be spent. However, what is really driving this surge in demand for a different kind of 'money' is the wholesale loss of faith in the status quo - nowhere is this clearer than in the words and actions of the people of Cyprus and this devastating clip capturing the thoughts and feelings of ordinary Cypriots after their bank accounts were frozen."Nothing has started yet... everything is going to fall down like dominoes because people don't trust the banks."
And the following insightful brief documentary is how real people - not the mouthpieces projected on TV - feel in the streets of Cyprus about the confiscation of their savings...
And Brandon Smith's rather more direct take on the Bitcoin phenomena specifically - "Ignore It..."
Assets aren't safe - whether bank accounts where arbitrary levels are decided to be " safe " from confiscation or gold and silver you may own ( but may have stolen while attempting to safeguard them or take them to safer destinations.... )
After the theft of up to 40% of deposit accounts in Cyprus, a move that was approved and applauded by EU finance ministers, many Europeans who understand that the government will soon be coming for their savings as well are rapidly moving to extricate themselves from the global banking cartel. To do so, they are shifting paper assets and digital deposit accounts into tangible goods. One such tangible asset of last resort is gold, believed by many to be the only ‘currency’ that will survive the world-wide debasement of fiat paper currencies like the US Dollar, Japanese Yen and Euro.
But just because you own gold doesn’t mean you’re safe from the prying eyes and thieving hands of the government.
When one obviously panicked family looking to get out of harms way before contagion spreads and financial Armageddon takes hold attempted to cross into Switzerland, customs agents on the border found much more than they expected.
After questioning the family and inspecting their vehicle police reportedly found one ton of gold hidden in the floor boards.
The nearly $50 million in gold was promptly seized by authorities.
But because taking one’s life savings is never enough for government goons whose job is to consideranyone with a pulse a criminal suspect or terrorist, the former owner of the gold is now being investigated by police for money laundering.
Police officers got the surprise of their lives when they found a treasure trove of gold bars hidden in a car at a border crossing with Switzerland. They haul weighed a ton…
The car belonged to an Italian family that lived in Switzerland.
*Note: The Bloomberg report above claims that one ton of gold valued at approximately $6 million was confiscated by Italian police. However, one ton of gold is equivalent to 32,000 ounces of gold. With the current price of gold around $1580, the total value of said gold exceeds $50 million US dollars. An earlier Bloomberg report calculated the value of this one ton of gold at $7.5 million.
If they know you own something of value, they will come for it.
Take note of the digital and paper trail left by your purchasing and storage habits. They are watching, no matter how benign you think your activities are. If you own physical assets, get creative with how you hide them. And if you are ever forced to transport your personal assets, be they gold, guns, ammo, food or the like, spend the time to take multiple trips if at all possible instead of putting all your eggs in one basket.
This week three banks, ING, Rabo and SNS, simultaneously suffered major computer malfunctions, leading to a temporary closure of their on-line facilities. Their problems were ‘unrelated’. It is completely unprecedented. The chances of a coincidence are close to zero. For years some in the blogosphere have speculated that ‘computer problems’ might be a good excuse for the Money Power to call a bank holiday and ‘reorganize’ their system. This looks like a drill.
By Anthony Migchels Real Currencies
ING’s problems were the worst, it’s off-line again today. ING is one of the biggest banks in Europe with a trillion plus balance and one of the living dead. It’s a zombie bank, propped up with massive credit lines from the ECB and handouts and guarantees from the Dutch taxpayer. It has 40 billion of Spanish debt on its books and it needs to write off untold billions, maybe as much as hundreds of billions, from its commercial real estate portfolio. Obviously this would vaporize the Dutch economy over night, should it have to bail out ING.
The Dutch economy is one of the worst in the world in terms of debt. All the nonsense about ‘lazy Greeks’ and ‘thrifty and frugal Dutch’ is just that: complete baloney. We have a usurious debt based monetary system. However hard one works, eternally growing debt and interest charges are inevitable, it has nothing to do with character.
Meanwhile, the economy is being destroyed with ridiculous austerity, 45 billion was taken out of the budget over the last two years. The Government loses 80 cents in income due to falling aggregate demand in the economy for every euro it takes out of the economy through taxation or austerity. Same thing that destroyed Southern Europe. It’s incredible that this kind of insanity can happen in the modern age.
Considering the situation in Cyprus and depositors now knowing they are fair game, it seems clear that the Money Power is organizing a bank run to further the depression it wants so badly.
However unpleasant it is to be on the same side as these vultures in this case, the advice remains the same: get your money out of the bank now. The advice is now not just correct because of moral imperative, it is becoming a matter of personal financial survival. True, it is becoming harder and harder to find safe havens, but the bank is absolutely not one of those, that’s for sure.
Why is the Money Power busting its own banks? They don’t really care: all the major banks own each other. 100% market share remains guaranteed, even if some of them drop. Also, the smaller banks go first and they are gobbled up by the big boys, often with ECB/Fed/taxpayer financial support. So this crunch is also a major consolidation effort by the Money Power. Busting the banks is a good way to plausibly sell the many that the good days are over.
So what does this computer malfunction mean? It’s an exercise. And probably not for Holland itself. The Dutch economy is midsized and a good place for a drill for something bigger. Like the US, which is the real target here. Two weeks ago, Chase Manhattan had some problems too: accounts were suddenly drained and set to zero. Interestingly, this was also going on with ING.
The US has been coasting relatively unscathed through the crunch up to now. Because the Fed printed like crazy, all in all some 16 trillion were lent out to its buddy insider banks worldwide to prop up their balances. This money never enters the real economy, because it used as capital to replace losses to the Mortgage Backed Securities scam that popped in 2008. Hence no inflation.
But this is coming to an end and in the next round of the crunch something major is going to go down.
Conclusion We have the funniest stockmarket boom ever, bankers resigning all over the place, Cyprus, and now this.
Something’s on. And it’s big.
Japan having a glitch in their JGB Matrix.....
Japanese Finance Ministry Warns Surge In JGB Volatility May Lead To A Sharp Bond Selloff
Submitted by Tyler Durden on 04/07/2013 18:19 -0400
If Friday's session is any indication of what to expect in a few minutes when JGB trading resumes, we are about to have a doozy of a session on our hands (especially with Interactive Brokers already announcing all intraday marginson all Japanese products for Monday trading have been lifted). As a reminder, the 10Y JGB suffered only its second most volatile trading day ever this past Friday when the yield plunged by half (!) to 0.30%, then doubled in a matter of minutes to 0.60% - a 13 sigma move- and the bond trading session was interrupted by two trading halts when it seemed for a minute that the BOJ may lose all control of the bond market. Well, judging by the absolutely ridiculous moves in the USDJPY as of this moment, with the pair soaring 70 pips in a matter of seconds, we are about to have precisely the kind of insanely volatile session that the Japanese Finance Ministry itself warned may lead to a wholesale selloff in JGBs, offsetting even theNew Normal Mrs Watanabe kneejerk which is to merely frontrun the BOJ in buying JGBs. Why? Because with implied vol exploding, VaR-driven models will tell banks to just dump bonds as they have become too volatile to hold on their books. The problem is that with trillions and trillions of JGBs held by banks, insurance companies and pension firms, there just not may be anyone out there to buy them.
Another thing to be noted here is the fact that as a risk management method, many domestic financial institutions adopt the VaR approach, which is designed to calculate the amount at risk on the basis of volatility. Under the present circumstances, we can determine the amount at risk to be small because of not great volatility. But if the volatility moves up or down in the order of 0.5% to 1.5%, it will increase the amount at risk, forcing domestic financial institutions to reduce their JGB holdings.
0.5% or 1.5%? Try ten times that. The chart below shows the implied vol of the 10Y JGB in recent days. If any financial institution still adhering to a VaR approach hasn't puked its bond holdings, it will shortly.
Perhaps it is not, then surprising, that the one rhetorical question the MOF had was the following:
Here, we have one question. What will happen to interest rates payable on 15-Year Floating-Rate Bonds or Nonmarketable JGBs for Retail Investors in case the 10-Year Bond auctions are suspended?
Yes, what will happen if the BOJ has managed to literally break the bond market?
Away from the dramatic shifts in JGBs, the last 3 days have seen the 2nd largest weakening in JPY in 25 years...
...and most notably the relationship between JPY (as a funding currency for every and any risk trade around the world) has experienced a rather interesting transition change in the last month...
Green Oval = Normal: JPY weakness funds FX carry to buy stocks and thus bond yields rise.
Orange Oval = Transition: unwinding of those trades led to JPY strength...
Red = New correlation: the BoJ drops the shock-and-awe hand grenade and confirms JPY investors' concerns that their wealth is being destroyed - the Treasury buying begins and stocks get sold.
...or perhaps the 'strength' in JPY relative to EUR in recent weeks (the ultimate JPY carry trade) is now being squeezed back to reconnect with the US equity market
Charts: Bloomberg
First the Cyprus deposit theft - despite knowing such theft was in violation of the Cypriot Constitution - now the European Commission threatens Portugal to check their Supreme Court. If you a a citizen within the 17 countries of the Eurozone the message is clear - your sovereignty is a facade ...... http://www.zerohedge.com/news/2013-04-07/european-commission-threatens-portugal-get-your-constitutional-court-line
European Commission 'Threatens' Portugal - Get Your Constitutional Court In Line
Submitted by Tyler Durden on 04/07/2013 19:48 -0400
It seems, despite the constant "it's all fixed" banter, that Portugal's Constitutional Court decision that the Troika-imposed austerity is unconstitutional (as we discussed in detail here and here) has a few of the 'elites' nervous. And so, late on a Sunday night European time, they launch a press release that is about as passively aggressive as they come, "any departure from the program's objectives, or their re-negotiation, would in fact neutralize the efforts already made and achieved by the Portuguese citizens, namely the growing investor confidence in Portugal, and prolong the difficulties from the adjustment... it is a precondition for a decision on the lengthening of the maturities of the financial assistance to Portugal." In other words, get your constitutional court in line or the OMT 'promise' get's it! Perhaps that explains why, unlike Spain and Italy who rallied in the last few days, Portugal's bond spreads are at the widest of 2013 (70bps off the tights of the year).
Statement by the European Commission on Portugal
The European Commission welcomes that, following the decision of the Portuguese Constitutional Court on the 2013 state budget, the Portuguese Government has confirmed its commitment to the adjustment programme, including its fiscal targets and timeline. Any departure from the programme's objectives, or their re-negotiation, would in fact neutralise the efforts already made and achieved by the Portuguese citizens, namely the growing investor confidence in Portugal, and prolong the difficulties from the adjustment.
The Commission therefore trusts that the Portuguese Government will swiftly identify the measures necessary to adapt the 2013 budget in a way that respects the revised fiscal target as requested by the Portuguese Government and supported by the Troika in the 7th review of the programme.
Continued and determined implementation of the programme offers the best way to restore sustainable economic growth and to improve employment opportunities in Portugal. At the same time, it is a precondition for a decision on the lengthening of the maturities of the financial assistance to Portugal, which would facilitate Portugal's return to the financial markets and the attainment of the programme's objectives. The Commission supports that such a decision be taken soon.
The Commission will continue to work constructively with the Portuguese authorities within the parameters agreed to alleviate the social consequences of the crisis.
The Commission reiterates that a strong consensus around the programme will contribute to its successful implementation. In this respect, it is essential that Portugal's key political institutions are united in their support.
Spain requiring citizens to declare overseas assets - property , investments and savings - for amounts in excess of 50,000 euros ! Of course once you know where the assets are and what the sums are , stealing assets becomes much easier.....
The strangely secret itinerary of USS Carter Hall.An amphibious assault landing troop carrier dropped anchor in the harbour off Corfu town last week. The 11,500 ton big guy from the US Sixth fleet was quite happy to publish the fact that it had been in the East Atlantic, and then on a tour of duty throughout the Med, including several Italian ports.
What the published accounts leave out is that the Carter Hall docked at Corfu twice in eight days, putting several hundred marines ashore. This account from a local eye-witness is interesting:
“Standing in line behind a small group of guys [in McDonalds] and being from Los Angeles, I asked this sailor where he was from. He goes on to tell me that he is from Kentucky and some of the others on their boat are mostly from Missouri, but that no one knows where the Marines they have as passengers came from… he says that this is the last day they are in port, that they were here last week, and that they were told to get out and get a lay of the land and to get to know the culture… I asked where they were heading… he said no one knew as they never tell them that stuff anyway….. this is the first time I have ever seen a US military presence here…”
That’s true. Usually, the Corfu military visitors are Russian.
A potted history of the vessel is equally intriguing: it has been used in the past on Somalian operations. Further, in North Carolina on 25th January , 400 Marines from the 26th Marine Expeditionary Unit integrated with more than 300 sailors on board USS Carter Hall to participate in amphibious squadron/marine expeditionary unit integration and Composite Training Unit Exercises.
On 5th March 2010, Berlin made serious noises about trying to buy Corfu to ameliorate the Greek debt mountain. But now, of course, Berlin’s prize is Cyprus. Does this perhaps mean that, after Schäuble’s land-grab, Corfu is now an American sphere of influence?
This entire thing is about energy: there is rarely smoke without fire.
German spies manning Greco-German travel hubs?Four days ago, influential website keeptalkinggreece posted a piece headed ‘German policemen at Greek airports to check travellers bound to Germany’. As such a role for German police officers defies the Lisbon Treaty’s rule that only local Sovereign police officers should fulfil such a role, the site wondered why the decision to place an officer from the German police at the airport of Heralkio, Crete, went ahead on April 3rd. German police officers will be occupied also at Athens and Thessaloniki airports. All of them will be in plain clothes, and fluent Greek speakers. Their job is to inspect travel documents and passports whenever they think fit.
The Heraklio police tried to oppose the appointments, but were rebuffed.
What struck me at the time was how few regular German police officers would be likely speak fluent Greek…or have the expertise to usefully inspect travel documents. So I’ve been doing some digging….and a German source with whom I am fairly familiar offers an interesting allegation as f0llows:
My source in turn quotes sources in the BMI. The allegation does make sense: in the recent past, Friedrich has questioned the principle of European integration by “responding to migration with isolation”, and the German interior ministerrecently announced that Berlin is ready to block extending immigration privileges to Romania and Bulgaria. Hans-Peter Friedrich had asked municipalities to tighten controls with view of possible high number of Bulgarian and Romanians migrating to the country after 2014.
But H-PF, like his older colleague Wolfgang Schäuble, is a spook. Aware of the widespread unpopularity of B-am-B policy, his job is to extend German control over things.
Global Looting, episode 2,319: Spain joins the larceny club. A Spanish Slogger writes:
“By the 30th April this year – and in subsequent years by the 30th March – everyone [in Spain] has to make a declaration about their assets overseas worth over 50,000 euros. There are three categories – property, investments and savings. If you have nothing over 50,000 euros in any category, you still have to sign a declaration to that effect. Failure to declare that you have nothing to declare will be a CRIMINAL offence! If there is found to be any omission or understating of your assets, there is a minimum automatic fine of 10,000 euros for each of the three categories.”
Hmm. Looks like the rip-off exemption just came down from €100k to €50k.
And yes - in case the last piece wasn't clear - even though deposit insurance may be 100 , 000 euros - that doesn't mean that sums under 100 , 000 are secure . Ask the Bundesbank.....
the first time, that bank deposits under € 100,000
in the worst case are not sure. Weidmann's plan
provides only that these assets are "not as
touched." An absolute guarantee sounds different.
Bang in Frankfurt: Bundesbank President Jens Weidmann, explains the future be saved as banks in Europe. Weidmann leaves no doubt: all must bleed.
There is "work at European level on a settlement regime," Weidmann said in an interview with the DLF . These are part of the planned Union Bank. The aim was to bankrupt banks not "always have to save the taxpayers money." Banks should "be handled pays basis" without presenting a threat to the financial system.
Weidmann literally
Cyprus is certainly not a blueprint , because the banking sector is exceptionally large in Cyprus and the financial structure of the banking sector in Cyprus is different from other countries. Nevertheless, it is of course truethat in the stabilization of the banking system, the polluter pays principle is also applied that means those in responsibility to be taken, which have also taken the decisions that led to the problems - ie that initially the owners of the banks to be taken in the liability, then the lenders, but only at the very end of the chain of liability to depositors, and possible not the taxpayer, either. the national or the European
Weidmann admits for the first time then that include deposits under € 100,000 are not completely secured, as alleged by the policy in the past few days several times.
The crucial passage in the interview Worlaut:
Angel: That would mean you would think, stick that those who have some form of money into the banks, and then this. And would this bank that is in trouble, in an emergency can also go bust?
Weidmann: Well, that is first time that there is a difference in the adhesion sequence that carry so those corporate responsibility - these are the ones who provide the equity capital - that the liability order at the beginning. And that until the very end, the depositors are, for example, and the deposits covered under € 100,000 - that are by guarantee under EU rules also protected - as level as possible t not touched be. This is the correct order of liability. And the goal is that one banks that are in difficulty, just not necessarily have to save. With taxpayers' money and thus to a more risk behavior causes and possible future crises less likely makes
This again is only half the story: The deposit insurance must naturally from households and thus the taxpayers. In banking circles, simply keep the deposit insurance even be null and void ( here ).
What is interesting about the interview is that Weidmann on the question of whether the German savers now have to worry about explicitly evasive answers - and said: The alternative to the cupping of savers is the fleecing of the taxpayers.
Literally
Engels: The German savers thinks but then when banks can be handled and he may deposit more than 100,000 euros, is not sure his money. What do you say to him?
Weidmann: So first time it is a fact that the savers and taxpayers. And the alternative to this approach is that the taxpayers in the country and perhaps in Europe as a whole are just for mistakes that others have made.And that's a situation we want to avoid as a lesson from the crisis. And that's why it's now a reasonable settlement regime.
Bank deposits are outlawed
The master plan of the Weidmann speaks at a "settlement regime" targets, definitely on the deposits of all European German taxpayers. Weidmann now confirmed for Germany, which was Europe announced previously - Dijsselbloem, Rehn and Knot have left no doubt on the march. (More here ).
A common deposit insurance in the EU Weidmann looks but not initially. This is still not adequate, "because such control, confronting this liability does not exist." "I can not be held liable for something for which I have no control."
This statement is purely tactical: a European Union bank is only useful if it runs at the end of a full, common security deposit. Come that this is, after the massive, completely unambiguous statements of EU, ECB and the Bundesbank now considered as settled.
With Weidmann so the next high-level Euro player has made it clear where we are going.
Before him have said that the dream of safe bank deposits has burst:
The only one who can, given the clarity of these statements see the banks as a safe repository for financial assets, therefore Finance Minister Wolfgang Schäuble, who would monitor the situation with pleasure is ( here his plan ).
Greece at loggerheads with Troika - we now see reality biting as the tough issues can't be papered over with fluff , using fictitious monies to fill real holes , pretending the public job cuts demanded and that haven't been made will be made ......
Samaras concludes talks with troika, consults Stournaras
Troika representatives left the Prime Minister's office in Athens in early afternoon on Sunday after about two hours of talks with Antonis Samaras, who is continuing his consultation with Finance Minister Yannis Stournaras at the Maximos Mansion regarding government policy, according to sources.
Reports suggest the negotiations with the troika focused particularly on the issues on the reduction of civil servant numbers, the property tax and the planned merger of National Bank of Greece with Eurobank Ergasias.
Samaras met with officials from the International Monetary Fund, the European Central bank and the European Commission after the visiting inspectors cancelled a meeting with Finance Minister Yannis Stournaras at the last minute on Saturday afternoon.
Greece’s talks with the troika are at a delicate stage as the two sides appear unable to agree on several key issues, such as civil servant sackings and the banks' merger.
Skai had earlier reported that Samaras would not close on Sunday the deal with the troika, which would pave the way for 8.8 billion euros in bailout loans to be released, but that a new meeting between the IMF, ECB and EC officials and Stournaras would take place.
Samaras and Stournaras met late on Saturday to discuss the government’s positions ahead of the Sunday morning talks with the troika.
Sources suggested that the government might try to wrap up as quickly as possible the part of the negotiations that relates to the delayed March bailout tranche of 2.8 billion euros and allow more time to reach an agreement on remaining issues on which the 6-billion-euro tranche depends. This instalment is likely to be discussed at the Eurogroup on May 13.
The coalition’s aim is to ensure that all the money has been disbursed by May 20, when bonds worth 5.6 billion euros mature.
One of the key stumbling blocks in the negotiations with the troika is that Greece’s lenders are insisting that civil servant numbers be reduced by 25,000 people over the next few months.
This has caused friction in the government as Administrative Reform Minister Antonis Manitakis believes that his plan for a mobility scheme will reduce the size of the civil service sufficiently without the need for any bureaucrats beyond those who have breached the code of conduct to be fired.
It is believed that Manitakis threatened to walk away from the cabinet, prompting Samaras to try to smooth things over with Fotis Kouvelis, the leader of junior coalition partner, Democratic Left, which nominated Manitakis for minister.
The troika is also concerned about the size of the new lender that will be created when National Bank and Eurobank merge and are sceptical about the deal. The Greek side is adamant that the merger should go ahead.
The troika also wants to see what plans Greece has for Hellenic Postbank and Proton Bank, which were recently split into “good” and “bad” banks.
China losing it over currency devaluation by Japan ......
The Chinese Central Bank has so far stoically endured the monthly injection of $85 billion in boiling hot money for the past seven months, lovingly delivered by the inhabitants of the Marriner Eccles building, even if it meant a proportionate hawkish response which has pushed the Shanghai Composite red for the year, and having to deal with a property market that is on the verge of another inflationary blow off top. But while the PBOC will grudgingly take this kind of monetary abuse from Bernanke, now that it has to deal with another de novocreated $70+ billion in monthly central bank liquidity (poetically called Carry-O-QE by Deutsche's Jim Reid), this time coming from that loathed neighbor and one time invader across the East China Sea, China won't take it any more. As the SCMP reports, "Many of China's top economists are livid at what they view as an effective currency devaluation by Japan and are calling on the People's Bank of China to retaliate by weakening the yuan to defend itself in what they see as a new currency war."
Of course, calling on the PBOC to "do something about it" is one thing, and certainly China whose GDP is still extremely reliant on net exports for economic growth would like nothing more than to crush the CNY, boost its exports and hurt Japan in the process. However, if it does that, it will merely accelerate already rampant home price inflation, which in the aftermath of the recent chicken culling birdflu outbreak and what is already a scracity of pork meat after last year's corn drought, will then spread to food prices and lead to mass social instability (something Japan, and its docile, irradiated population apparently has little to worry about).
These economists, including Tsinghua University professor Li Daokui and ANZ Bank's Liu Ligang, see Japan's plan to double its monetary base within two years as "blackmail" and have criticised the Japanese central bank's decision to open the liquidity floodgates to bump up the economy.
Liu said Japan's unprecedented easing programme, aimed at ending more than two decades of deflation, was "a monetary blackmail" targeted at other export-driven Asian countries such as China and that the central bank should sell more yuan and buy the US dollar to push down the yuan.
He also called on authorities to guard against a fresh wave of hot money into China's fragile financial markets, warning that Japan's move would reignite the so-called carry trade, under which investors borrow in low-interest yen and invest in high- interest markets.
"The massive monetary stimulus by the Japanese central bank could spell doom for other nations in the region," said Tsinghua's Li, a former adviser to the People's Bank of China.
All spot on, and all well-known in advance, but apparently all the brilliant minds in the world forget that trade is a zero-sum game, and that Japan's current account and trade surplus gain (if any, recall both hit record lows recently) facilitated by a plunging yen, will come at the expense of other very angry exporting nations. This also ignores what happens to Japaneseimport energy and food prices, already exploding as has been documented here previously. The BOJ's hope: companies will promptly hike wages to make up for rising staples costs. We hope the central banker often confused with a Yankees pitcher is not holding his breath on that one...
As for countries hating Japan's guts right now, China may have to wait in line: if there is one country that has to be truly livid at Japan it is South Korea, whose net exports account for nearly 60% of its GDP. So yes: the next currency war salvo will come most likely not from China, which is already caught between a rock and a hard place, but from Seoul, where the perfect storm of a totally nutjob neighbor to the north has emerged just in time for Japan to do everything in its power to crush its economy.
In conclusion, if there is one thing Japan has done, is to make sure all the overnight angst so carefully focused on Europe in 2011 and 2012 (and where it is pretty much game over now following news that "success-story" Portugal will pay public workers in bonds not in cash, all it takes is someone to put down the time of death) shift forward, with the attention now focused not on the 3 am European open, but on what promises to be a daily 8 pm Eastern JGB volatity explosion each and every day.
and from Portugal , it won't be too long before they get put on time out by the Troika.......
As reported late on Friday, just as the market closed, the Portuguese constitutional court decided that several provisions of the country's 2013 budget were not constitutional. According to the high court, cuts in wages and pensions of public employees were unfair (there's that word again) because they targeted only the public sector. The court rejected plans to cut one of the 14 paychecks that public workers usually get each year and to slash 6.4% from pensions for retirees. This coincided with the government warning that the court's decision would put into question the country's ability to fulfill its €78 billion international bailout program, which in turn would send bondholders of Portuguese sovereign debt scrambling for the exits as suddenly the country may find itself in the ECB's "dunce" corner, with Draghi preparing to pull a "Berlusconi" on a government which can't even whip its judicial branch in line. However, of more immediate concern is how will the government now plug a hole of up to €1.3 billion in its €5.3 billion 2013 budget. A solution has, luckily, presented itself: bypass the unconstitutional provisions by paying government workers not in cash, but in government bills!
The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts, a person familiar with the situation said Sunday.
"This is one of the ideas being considered," the person said.
By paying one month of salary in T-bills to public workers and pensioners, the government would save an estimated €1.1 billion in expenses, narrowing the budget gap significantly.
Incidentally, this plan makes perfect sense: with every central bank openly monetizing its debt, it has effectively made debt and cash equivalent.
Now if only Portuguese public workers had access to the same shadow transformation pathways and government bond repo collateralization opportunities afforded to the big banks, then every bill thus obtained would be able to serve as a source of nearly infinite rehypothecation potential, and thus, a DIY fractional reserve banking system provided to every individual.
Coming next: the full convertibility of Spanish Spiderman towels backed by the full faith and credit of the Rajoy kickback scandal, and fully convertible into chorizo.
All joking aside, the fact that this absurd option is even being contemplated shows just how deep into the rabbit hole event horizon the modern completely insolvent financial system has traversed.
President Nicos Anastasiades with Archbishop Chrysostomos II at a conference for Makarios
OFFICIALS at the Central Bank will work through the weekend to come-up with a final percentage for the levy on uninsured deposits of over €100,000 at Bank of Cyprus, it was reported yesterday.
An announcement is expected tomorrow. The decision is dependant on calculations regarding the offset of loans against deposits according to head of internal audit at the Central Bank, Yiangos Demetriou. He expressed the belief that once measures were put in place it would breathe life back into the market and to trading.
Most reports suggest depositors with over €100,000 with the bank will take a hit of 60 per cent.
Meanwhile reported rumours of a ‘haircut’ on deposits in cooperative institutions were labelled the work of irresponsible parties by President Nicos Anastasiades yesterday.
“During these critical hours, responsibility is demanded from everyone and what happened on Friday is the work of irresponsible people,” he said at one-day conference celebrating Archbishop Makarios as the political leader of the EOKA struggle.
Massive lines of people formed outside cooperative banks across the country on Friday with customers seeking ways to either get their money out or divide their fixed deposit accounts into smaller ones of under €100,000. This was following the circulation of text messages claiming the government was about to impose a haircut on cooperative bank deposits.
Head of the Cooperative Central Bank Erotocritos Chlorakiotis reassured the public again yesterday that deposits at the cooperative credit institutions were safe, insisting that the rumours of a haircut were completely “unfounded”.
House President Yiannakis Omirou yesterday sought to ensure that the Memorandum of Understanding (MoU) deal reached with the troika earlier in the week would be presented to Parliament for ratification.
He said the MoU would be submitted to the parliaments of six eurozone countries. They include, Germany, France, Holland, Finland, Slovakia and Belgium. Getting around having to present it to the Cyprus parliament would be unthinkable, he said.
Omirou said it could be argued that in paragraph one of Article 169 of the constitution it states that international agreements of a financial and trading nature with international organisations could be approved by the cabinet alone but he said he did not believe the MoU was an ordinary financial or trading agreement. “No government and no President is authorised to make foundational commitments of such importance without consulting the House,” he added.
millions of euros remain locked in the banks under capital control regulations
PUBLIC SHOCK about the tough terms of the international bailout is turning into anger as millions of euros remain locked in the banks under capital control regulations.
Anxiety is being deepened by confusion over how the hastily-imposed rules should operate.
Hundreds of bank workers protested outside parliament on Thursday, worried that they could lose much of their pension savings under the terms of the bailout deal which stipulates that some depositors will part of the rescue's cost if their accounts hold more than 100,000 euros.
"I am disappointed and angry," said Iacovos Louca, 53, who works at Popular Bank, which is being wound down under the 10 billion euro deal with the EU and International Monetary Fund. "The politicians are out of touch with our problems and the big guys, who had the information, managed to take their money abroad."
One company in Nicosia which has several offices abroad has been caught in limbo as the central bank now has to approve transfers out of Cyprus over 25,000 euros. As part of the company's payroll is managed from the island, payments to employees abroad are being delayed because of the vetting process and currency controls to avoid a bank run.
"We have held clients' money for certain pre-paid jobs, and we have a cash flow issue now," the owner of the services company said, on condition of anonymity. "We have to make payments of more than 1 million euros on behalf of our clients, and now we can only use 100,000."
Lack of clear answers on where their money may end up is fuelling public frustration.
Andrew Georgiou, a 55-year-old British consultant who moved to Cyprus a year ago with the earnings from the sale of his home in London, says all four accounts he holds with Popular - even a sterling account containing just 22 pence - are blocked.
These totalled 97,000 euros and under the bailout deal, deposits under 100,000 are fully insured. Nevertheless, Georgiou is now unable to access any funds.
Georgiou, who is of Cypriot descent, said Popular Bank had justified its action on the grounds that he was also considered a beneficiary to an account held by his 78-year-old father. It also covered money held in a trust for medical expenses.
"I wrote to the central bank and they came back saying that it was not their competence, so whose competence is it?" said Georgiou. "Nobody is explaining where anyone should go with a problem."
As a result, Georgiou has been told he and his father could eventually be entitled only to a combined 40,000 euros despite the 100,000 euro guarantee, a fraction of their savings in Popular. "Absolutely nothing adds up," he said. "They told us it was 140,000 last week."
Georgiou and others like him are in for a long wait to figure out what went wrong. Three judges appointed to look into the island's financial collapse started work on Thursday.
With an extensive remit ranging from the business sense of Cypriot banks hoarding a mass of Greek government bonds while others were selling them and the prudence of government fiscal policies, the judges will need a small army of consultants.
Many, in the meantime, resigned to years of hardship. Iraklis Paraskeva, 53, has three children to support, now studying in Greece. "I am going to find myself in the street with no future, only debts. But we will fight to the end. We have nothing left to lose."
Submitted by Tyler Durden on 04/10/2013 19:54 -0400
The digital currency Bitcoin
The strangely secret itinerary of USS Carter Hall. An amphibious assault landing troop carrier dropped anchor in the harbour off Corfu town last week. The 11,500 ton big guy from the US Sixth fleet was quite happy to publish the fact that it had been in the East Atlantic, and then on a tour of duty throughout the Med, including several Italian ports.
The strangely secret itinerary of USS Carter Hall. An amphibious assault landing troop carrier dropped anchor in the harbour off Corfu town last week. The 11,500 ton big guy from the US Sixth fleet was quite happy to publish the fact that it had been in the East Atlantic, and then on a tour of duty throughout the Med, including several Italian ports.
