Wednesday, May 28, 2014

Market mayhem looming ? May 28 , 014 --Death of money coming says James Rickards......... Bonds and stocks disconnecting once again ( let's examine how that played out in 2011 ) .... Gold has been under pressure for several weeks - going back to May 5th - just pressure for the looming Jun delivery contract at Comex or is something else brewing ? With Abenomic having wiped out Japan's trade accounts , what is the next Act if any for re-lifting Japan's economy ?

'Death of money': Author Rickards predicts collapse of global monetary system

Published time: May 28, 2014 19:43
Edited time: May 28, 2014 22:36

AFP Photo / Juan Barreto
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The collapse of the monetary system awaits the world in the near future, says financial expert James Rickards. Russia and China's desire to rid the US dollar of its global reserve currency status is an early sign of the “increasingly inevitable” crisis.
“China has three trillion dollars, but they are buying gold as fast as they can. China worries that the US is going to devalue the dollar through inflation so they want to have a hedge if the dollar goes down, so the gold will go up,” Rickards told RT.
As one of the key events in support of his forecast, Rickards points to the words uttered by Russian President Vladimir Putin at the 18th International Economic Forum in St. Petersburg that took place earlier this month.

“Putin said he envisions a Eurasian economic zone involving Eastern Europe, Central Asia, and Russia. The Russian ruble is nowhere near ready to be a global reserve currency, but it could be a regional reserve currency,” he said, as quoted by ETF Daily News.

Rickards’ book about the demise of the dollar was released in April under quite an apocalyptic name – 'The Death of Money.' However, the author is surprised that the events are unfolding much faster than he predicted.

“If anything, the tempo of events is faster than expected. Therefore, some of these catastrophic outcomes may come sooner than I wrote about.”

Last Wednesday, China and Russia signed a historic US$400 billion gas deal which will provide the world's fastest growing economy with the natural gas it needs to keep pace for the next 30 years. Experts say this could be the catalyst that dethrones the greenback as the world's reserve currency.

The best-selling author writes that the “linchpin” of the collapse is the approaching failure of the dollar since it is at the foundation of the system. Powerful countries such as Russia, China, Iran, and India do not rely on the US in their national security and would benefit from the US economy being weaker, thus desiring to break free from the dollar standard.

He elaborates that the dual collapse “looks increasingly inevitable.”

“The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche,” he said, as quoted by ETF.

There are three big international factors that are pressuring the dollar right now – Russia, China, and Saudi Arabia.

“Since the 1970s, Saudi Arabia [has been] the leader in what’s called the petrodollar. It basically means that Saudi Arabia and, by extension, OPEC, price oil in dollars, so the world market is in dollars.

“Russia is a major natural resource exporter; they price their exports in dollars as well. But Russia now is engaged in a financial war with the US around the issues in Crimea and Ukraine.”
The threats to the dollar are “ubiquitous,” the author states in his book. The only way the US can pay off its $17 trillion debt is with inflation, which would drive other countries away from the dollar while the accumulation of gold by Russia and China presages the shift to a new reserve asset.

“The next time we will have a liquidity crisis in the world it’s going to be bigger than the ability of central banks to deal with it. The IMF will basically have to bail out the world by printing the SDRs (an international reserve asset created by the IMF in 1969 to supplement its member countries' official reserves). By that time, you will see the SDR emerge as the new global world currency,”Rickards told RT.

Good Q&A......

Waiting on snow flakes....

IMF to be forced to bail out insolvent Fed ( and ECB as well ? ) 

What Happened The Last Time Bonds & Stocks Were So Disconnected?

Tyler Durden's picture

Presented with little comment aside to note that bond shorts have not covered (in fact they added last week) and the last time we got this disconnected (with negative breadth in stocks and super low volatility) - things went south very quickly...

It's different this time though...
As an FYI - Treasury shorts lag the moves in rates - as rates rise, momentum gains and the world piles in short for the end of the multi-decade bond bull market... then each time they get over their skis and bond yields collapse... especially in 2011 when this last happened...

Market Breaks Out - Is This The Mania Phase?

Tyler Durden's picture

Submitted by Lance Roberts of STA Wealth Management,

28 MAY 2014

Gold Daily and Silver Weekly Charts - Silver Stonewalls the Metals Bears At $19

“Never take counsel of your fears.”

Stonewall Jackson

Tomorrow the June gold and silver contracts take center state.

Overall the markets will be watching the first revision of 1Q GDP tomorrow morning. Even if it is negative I am going to be surprised if it has a negative affect on stocks.

I do think we are in for a major correction in equities this year, but probably not yet barring some exogenous event.  I am watching for the characteristic signature of a major market top. I'll let you know if one shows up.

Let's see how June goes. There was nothing on the delivery side, and the Comex warehouses are scrambling to put some gold on the books ahead of another delivery month.

Silver held 19$ like a champ.   Gold is a sleeping giant.

Have a pleasant evening.

Good thing fundamentals don't matter anymore......

Japan’s Great Keynesian Rebuke: Abenomics Has Wiped Out ItsTrade Accounts—-Exactly Opposite The Theory

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The running narrative all over the developed world is temporary factors. In the US it is weather-related, while Europe is seized by not enough euphoria (more on that later), and Japan by the tax increase attempt at fiscal responsibility. In the Japanese case, as it relates to the ever-important trade balance, the record debilitation in the first quarter under an incomprehensible surge in imports was explained as a demand factor. As Japanese consumers and businesses splurged ahead of the tax change, it was assumed that “demand” brought forward importation.
If that was the case, and it is far more palatable to the optimistic view, than we should have seen a dramatic decline in importation in April to net out such a temporary skew. Like the netted weather difference in US factors, that simply has not happened. Importation growth did taper in April, but the net merchandise deficit was about even with April 2013. If the short-term burst narrative was valid, the trade imbalance in April 2014 should have been far, far more favorable.
ABOOK May 2014 Japan Trade Deficit
The fact that it was not reinforces the counter notion that it is not temporary tax change behavior that destroyed the Japanese trade advantage (after the tsunami in 2011 severely damaged it). Rather, it is becoming increasingly clear that Abenomics has heralded a structural change in the exact opposite manner as estimated, planned and advertised.
ABOOK May 2014 Japan Trade Deficit Cumulative YTD
The idea of currency devaluation as a “stimulus” is as old as currency, but the modern financialized affair is distinctly different than even when floating currencies were championed by Milton Friedman’s excitement over central bank control and assumed precision. Again, the assumption of a closed system is the primary fatal flaw. In the case of Japan, we see this most clearly in its trade data with Asia, a geography Japan Inc. dominated not so long ago.
ABOOK May 2014 Japan Trade Asia ttm
Clearly the tsunami left a major imprint on exports, but it is the period after the devaluation began that is most striking. And it is coming largely through China.
ABOOK May 2014 Japan Trade China ttm2
Exports have been given a nominal boost but that only changes the perceptions of revenue via diminished currency translations, not actual trade volume. However, it is the import side that is conclusively damning. Imports from China had actually slowed and even flattened out in 2012. Orthodox theory holds as unshakable that devaluation will reduce imports, but here we have the exact opposite in pristine fashion. Given the change from early 2012 (flat) into 2013 (rising quickly) it doesn’t leave many other options to explain the sudden and exactly coincident transformation.
So where Japanese exports have been given a nominal boost in only raw currency, imports have actually surged. And while energy is an important factor in the need for importation, it cannot explain but a small proportion of this change (especially from China). The introduction of currency instability, intentionally, has unleashed the outsourcing effect. Given that the only replacement is finance (as it has been in the US for decades) it leaves Japan in a far worse condition.
It is not only China, either. Trade with the Middle Kingdom is the best evidence of this effect, but you can see it elsewhere.
ABOOK May 2014 Japan Trade W Europe ttm
Imports from Europe (the Japanese use the classification “Western Europe”) have also been rising faster than exports to Europe. While energy is likely a higher proportion here, it is still exceedingly far from a comprehensive explanation for these “unexpected” results.
On the export side, which was supposed to provide the greatest economic boost inside Japan, businesses found only nominal changes in revenue rather than actual increases in trade volume. Now those nominal growth rates are winding down back to nothing as the yen destabilization itself becomes past tense. That is the primary reason for the increased calls for even more currency debasement.
ABOOK May 2014 Japan Trade US
There is a world of difference in how an economy produces growth, as economic activity is so far from homogenous in its downstream impacts. The Bank of Japan wanted a boost to generic aggregate demand, and may have gotten what it wanted, but that is not the same as producing a healthy economic rebound. You can certainly and even easily create activity by tearing your system apart from the inside, but what is left after that wave of artificiality and inorganic intrusion is done?

Japanese Retail Sales Collapse By Most On Record

Tyler Durden's picture

Given the pre-tax-hike surge, the oh-so-smart economists around the world were expecting some give-back from dragged-forward demand but the 13.7% MoM decline missed expectations by 2 percentage points. This was the largest MoM decline on record. Talking heads are already blaming the tax hike (but they knew all about it?) and year-over-year was just as dismal (and less immediately prone to events) as it fell by the most since the 2011 Tsunami. Bad news (the worst) is good news though right? Well no - USDJPY is down as is Nikkei as remember, Japanese inflation pressures are building and Kuroda has pushed off any actions from the BoJ for now.

Japan Retail Sales MoM - worst on record...

and YoY this is the biggest drop since the Tsunami...

Well played wonder you are begging rich people to sya for vacation and spend...
Japanese govt considers extending duration of stay for affluent foreign tourists to maximum 1 year from current 90 days, Nikkei newspaper reports, without attribution.

Govt plans to set income, asset and age requirements by summer and implement new measures as early as this year: Nikkei

Measures aim at boosting consumption and property investment: Nikkei

Govt aims to double no. of foreign visitors to 20m by 2020, when Tokyo hosts the Summer Olympics: Nikkei
Please stay and spend money... cuz the Japanese people sure can't now everything they need is going up.