Perspectives on the global economic changes

[Austin]

The Diabetic Economy - Paul Krugman

http://www.nytimes.com/2016/05/02/opini ... _r=1[quote]

LISBON — Things are terrible here in Portugal, but not quite as terrible as they were a couple of years ago. The same thing can be said about the European economy as a whole. That is, I guess, the good news.

The bad news is that eight years after what was supposed to be a temporary financial crisis, economic weakness just goes on and on, with no end in sight. And that’s something that should worry everyone, in Europe and beyond.

First, the positives: the euro area — the group of 19 countries that have adopted a common currency — posted decent growth in the first quarter. In fact, for once it was better than growth in the U.S. Europe’s economy is, finally, slightly bigger than it was before the financial crisis, and unemployment has come down from more than 12 percent in 2013 to a bit over 10 percent.

But it’s telling that this is what passes for good news. We complain, rightly, about the slow pace of U.S. recovery — but our economy is already 10 percent bigger than it was pre-crisis, while our unemployment rate is back under 5 percent.

And there is, as I said, no end in sight to Europe’s chronic underperformance. Look at what financial markets are saying.

When long-term interest rates on safe assets are very low, that’s an indication that investors don’t see a strong recovery on the horizon. Well, German five-year bonds currently yield minus 0.3 percent; in fact, yields are negative out to eight years.

How should we think about these incredibly low interest rates? Recently Narayana Kocherlakota, the former president of the Minneapolis Fed, offered a brilliant analogy. Responding to critics of easy money who denounce low rates as “artificial” — because economies shouldn’t need to keep rates this low — he suggested that we compare low interest rates to the insulin injections that diabetics must take.

Such injections aren’t part of a normal lifestyle, and may have bad side effects, but they’re necessary to manage the symptoms of a chronic disease.

In the case of Europe, the chronic disease is persistent weakness in spending, which gives the continent’s economy a persistent deflationary bias even when, like now, it’s having a relatively good few months. The insulin of cheap money helps fight that weakness, even if it doesn’t provide a cure.

But while monetary injections have helped to contain Europe’s woes — one shudders to think of how badly things might have gone without the leadership of Mario Draghi, president of the European Central Bank — they haven’t produced anything that looks like a cure. In particular, despite the bank’s efforts, underlying inflation in Europe seems stuck far below the official target of 2 percent.

Meanwhile, unemployment in much of Europe, very much including my current location, is still at levels that are inflicting huge human, social and political damage.

It’s notable that in Spain, which these days is being touted as a success story, youth unemployment is still an incredible 45 percent.

And there’s nothing in reserve to deal with a fresh shock. Suppose that Greece blows up again, or the British public votes to leave the European Union, or China’s economy goes off a cliff, or whatever. What could or would European policy makers do to offset the blow? Nobody seems to have any idea.

The thing is, it’s not hard to see what Europe should be doing to help cure its chronic disease. The case for more public spending, especially in Germany — but also in France, which is in much better fiscal shape than its own leaders seem to realize — is overwhelming.

There are large unmet needs for infrastructure and investors are essentially begging governments to take their money. Did I mention that the real 10-year interest rate, the rate on bonds that are protected from inflation, is minus 0.8 percent?

And there’s good reason to believe that spending more in Europe’s core would have big benefits for peripheral nations, too.

But doing the right thing seems to be politically out of the question. Far from showing any willingness to change course, German politicians are sniping constantly at the central bank, the only major European institution that seems to have a clue about what is going on.

Put it this way: Visiting Europe can make an American feel good about his own country.

Yes, one of our two major parties is poised to nominate a dangerous blowhard for president — but it has been obvious for a while that the G.O.P. was in the process of going mad, and the odds are that he won’t actually end up in the White House.

Meanwhile, the overall economic and political situation in America gives ample grounds for hope, which is in very short supply over here.

I’d love to see Europe emerge from its funk. The world needs more vibrant democracies! But at the moment it’s hard to see any positive signs.[/quote]

[Austin]

This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets.

[vera_k]

^^
The video's using out of date information to pump silver. Is there something to learn from it?

[panduranghari]

We all work within the given system. Even Freegolders are doing so by buying physical gold right now. Fortunes are made through genius, hard work and deliberate underconsumption. But truly immense fortunes are made mostly through making the most of the present system and a large helping of luck. Of course you've got to be capable and intelligent to do so, but first-generation billion dollar fortunes come from a lot of luck combined with working with (not against) the present system.

When I say luck, I'm talking about the "tournament effect". It applies to the Rothschilds and the "robber barons" of the 19th century as well as to Bill Gates and Steve Jobs. There are plenty of really smart, hard-working people out there, but the tournament effect rewards just a few of them in REALLY big ways. The "tournament effect" is an analogy of life to things like the WSOP, or American Idol, or beauty pageants. Pro sports are a good example. The teams are relatively evenly matched in talent, so you only have to be a hair's breadth better than the second best (or have a little luck) to win the whole thing. Life is a tournament too, and that luck-based prize is not a bad thing, it is the carrot that brings so many into the big game!

But envy views the tournament effect as a bad thing. It correctly observes that the big winners are not necessarily better than itself, at least not in proportion to their oversized winnings. So it tries to take those oversized winnings away and do away with the (quite natural) tournament effect, not realizing the unintended consequence of removing the carrot that brings so many into the game in the first place.

While we're thinking about oversized fortunes, it should be observed that they are all won while working within the system at that time. Sometimes that system included slavery. Sometimes it included child labor. Sometimes it included war and brutality like in the French Revolution and WWII. And lately it includes high frequency trading, complex mathematical algorithms and derivatives, and the "magic" of Wall Street in general, which is a result of all of the savings of the largest population the world has ever seen (7bn people, it was half that in 1970) sloshing around, ripe for the skimming, in one centralized mega financial industry.

If you feel a twinge of envy toward those rich bankers, I suppose the silver lining is that most of their "wealth" will vanish in a flash. And then someone else will be quite envious of you, since you bought gold before the big revaluation. Just remember that and let it help you keep your mouth shut about your gold when the time comes!

Sincerely,
FOFOA

http://fofoa.blogspot.co.uk/

Kyle Bass believes we are today as it was in April of 2007. What happened in October 2007, hmm let me think?

[panduranghari]

Austin,
While I agree that dollar collapse is likely, however IMO it will be the last fiat currency to collapse. I expect the DXY will rise well above 150 before it collapses. Now collapse is basically loss of confidence i.e. hyperinflation. And for those in the US, you want to know what hyperinflation will be like- look at Venezuela today. Its a trailer. The one in US will be much more violent as the gun ownership is much higher.

[TSJones]

the video is 5 years old but hey, any day now......

[Singha]

more than all this, the US middle class is being hollowed out - people either forced down or moving up, the middle-middle core of the any republic has been affected by many of the things like manufacturing, well paying unionized jobs being sent to china. these were skilled jobs with benefits, not service sector.

its based on a pew center study

http://abcnews.go.com/Business/wireStor ... s-39049118

the main root cause is probably departure of manufacturing.

[panduranghari]

^

[Neshant]

If you remove jobs like banking, real estate, finance and many govt jobs.. etc that don't actually produce anything, you'll find that productive society is rapidly shrinking.

[panduranghari]

"Making The Chicken Run" To Escape The Looming Greater Depression

1.“Making the chicken run” is what Rhodesians used to say about neighbors who packed up and got out during the ’60s and ’70s, before the place became Zimbabwe. It was considered “unpatriotic” to leave Rhodesia. But it was genuinely idiotic not to.

2.I’m directing these comments toward the U.S. mainly because that’s where the problem is most acute, but they’re applicable to most countries.

3.It strikes most people as outrageous because the long-running post-WWII boom has been punctuated only by brief recessions. After 70 years, why should it ever end? The thought of a nasty end certainly runs counter to the experience of almost everyone now alive—including myself—and our personal experience is what we tend to trust most. But it seems to me we're very close to a tipping point. Ice stays ice even while it’s being warmed—until the temperature goes over 32° F, where it changes very quickly into something very different.

4.That point—economic bankruptcy accompanied by financial chaos—is quickly approaching for the U.S. government

5.The pain will spread. Insurance companies are invested mostly in bonds and real estate; many will go bankrupt. The same is true of most pension funds. If the stock market doesn’t collapse, it will only be because money is looking for a place to hide from inflation. The payout for Social Security will drop significantly in real terms, if not in dollars. The standard of living of most Americans will fall.

6.This rough sequence of events has happened in many countries in recent decades, and they’ve survived the tough times. But it has the potential, at least in relative terms, to be more serious in the U.S. than it was in Argentina, Brazil, Serbia, Russia, Mozambique, or Zimbabwe for two main reasons.

a. First, many people in those countries knew they couldn’t trust their government and acted accordingly, even in contravention of the law, by accumulating assets elsewhere. So, there was a significant pool of capital available for rebuilding. Americans, on the other hand, tend to be much more insular, law-abiding, and trusting in their government. When they lose their U.S. assets, they'll have lost everything.

b. Second, those societies were significantly more rural than the U.S. is today.
One thing you can absolutely count on is that everyone will look to the government to “do something.”

7. But that’s just over the short run. The long run is much more serious because the next chapter of the Greater Depression has every chance of radically, and at least semi-permanently, overturning the basic character of American life. Ice turned to water—suddenly and unexpectedly—in Russia in 1918, Germany in 1933, China in 1949, Vietnam in 1954, Cambodia in 1975, and Rwanda in 1995. Those are just the first examples that come to mind. There are scores more.

The economic events I’ve outlined are going to mean serious hardship and unpleasantness for many people. But that doesn't concern me nearly as much as the social and political reaction.

Everybody gets hurt in a serious depression, but if you understand what’s going on and prepare for it, you can do well enough. Of course, political and social change always follow economic and financial upheaval, but I think it’s going to be much more drastic this time because the U.S. has been on the road to becoming a police state for quite a while. The trend was supercharged by the so-called War on Terror, starting in 2001. And it’s likely to go into hyperdrive in the months to come as the economy emerges from the eye of the storm. I know it seems asynchronous to think of a police state in a suburban country dotted with shopping malls. But not really.

8. So, here’s another prediction. Riding the economic and social disorder, these new Praetorians, oriented as they are toward professional paranoia and the “national security” state, are going to become truly virulent. They’re going to use the continuing economic crisis to increase their power, like it or not. The American people will demand it, since they are so degraded that they really do prefer the appearance of security to the prospect of having to take personal responsibility.

If I’m right (and I feel as sure about this as I ever have about anything), then it’s not going to go well for libertarians, classical liberals, old-line conservatives, individualists, freethinkers, non-conformists, people who subscribe to letters like this or cruise suspicious websites, or gamma rats, generally. It was a dangerous environment for these types (not to mention those of Japanese or German descent and members of various religious groups) during America’s past crises. When the chimpanzees are hooting and panting, you’d better join them, or they’ll start wondering why not.

I expect what we’re looking at is going to be much more serious than any past crisis, partly because America has already evaporated, like the morning haze on a hot summer's day.

Doug Casey lays it out bare. But then so have Bill Bonner, Lew Rockwell and many others before him done the same. In other words, leave America (even west?) now while you can, taking assets with you, before they give us the treatment.

[Arjun]

How to Spot an Anarcho-Capitalist

Stansberry is not the only ultra-libertarian to promote such ideas. One of his most prominent fellow travelers is Doug Casey, an antigovernment “investment guru” who on Nov. 29 told subscribers to his newsletter that being a taxpayer in America today is analogous to “being a Jew in Germany in the mid-1930’s.”

On the surface, Casey (who often cross-promotes Stansberry’s articles on his various websites and newsletters and who is described by Stansberry as a friend and mentor) seems a cheerful misanthrope, whose breezy manner and self-deprecating wit (he often says Uncle Scrooge McDuck is his hero) is a refreshing change from the pompous grandiosity of his close cousins in the far-right “Patriot” movement.

But scratch that surface and it’s clear that this self-described “anarcho-capitalist,” who in 2009 outlined a plan to privatize a small country and take it public on the New York Stock Exchange, is courting the same audience of government-fearing radicals. Though he puts a fresh face on tired conspiracies and a new spin on old animosities, Casey’s message is the same: The government is your enemy, and if you don’t prepare, it will destroy you.

If you stripped the Patriot movement of its pseudo-legal rhetoric, conspiracist malarkey and allusions to supposed Christian virtue, you’d end up with an ideology much like the one espoused by Stansberry, Casey and their compatriots. Often described as “anarcho-capitalists” or “voluntaryists,” their belief in essence is that government — any government — is by its very nature tyrannical and unnatural. They propose instead an essentially stateless society in which all relationships, economic and otherwise, are voluntary and untaxed. Services like roads and mail delivery would be built and maintained by private entities that would charge market-based fees for those who desired to use them. Government in any recognizable form simply would not exist.

In some respects, Casey and Stansberry’s rhetoric sounds like laissez-faire capitalism taken to its logical extreme. But Casey, Stansberry, and similar ideologues espouse beliefs that are even further out than that.

Mainstream conservatives often allege that the balance between states’ rights and federal power has tipped too far towards the latter, with the federal government exercising powers the framers of the Constitution never dreamed of. But Casey actually believes that the Constitution itself “was essentially a coup.”

Explaining this assertion in the same Nov. 29 newsletter in which he compared being an American taxpayer to being a Jew in Nazi Germany, Casey said: “[T]he delegates to what we now call the Constitutional Convention were not empowered to replace the existing government — only to improve upon the Articles of Confederation between the then-independent states. The framers of the Constitution drafted it with the notion of a national government already in place.”

They “calmed fears of loss of state sovereignty by calling the new government the ‘United States of America’ – a verbal sleight of hand that worked for over half a century. Then the southern states decided to exercise what these words imply, their right to leave the union … and the wrong side won.”

In other words, as Casey sees things, the Constitution and its built-in plan for a national government caused the Civil War.

“I’ve always suspected that U.S. and world history would be different – and better – if those delegates had done as they were told and just smoothed over the rough spots in the Articles rather than replaced them with the Constitution,” Casey explained in an April 2012 article. “Greater independence among the states could have led to more innovation, and I doubt there would have been the unpleasantness of 1861-’65. People with differing ethical values and economic interests would not have been forced to obey the same laws.”

Translation: Confederate partisans — people whose “ethical values and economic interests” included buying, selling, beating, raping and killing other human beings whose skin color happened to be different from their own — were unjustly stopped by overweening federal power that was built into the Constitution from Day One as part of a long-acting stealth coup to steal power from the states.

This is one place where Casey and portions of the Patriot crowd very definitely part ways.

At 2012’s “FreedomFest,” for instance, Casey was listed as a keynote speaker together with a plethora of Patriot bigwigs, including Judge Andrew Napolitano, a Fox News personality and 9-11 “truther” who thinks the government was behind the terror attacks of Sept. 11, 2001, and G. Edward Griffin, co-author of a popular Fed-bashing tome called The Creature from Jekyll Island. FreedomFest was organized by Mark Skousen, a friend of Patriot ringmaster Glenn Beck and nephew of the late W. Cleon Skousen, a hugely influential figure in Patriot conspiracist circles.

And at “Libertopia 2012,” Casey was a listed speaker along with Larken Rose, a blogger who made news in 2011 with an post titled, “When Should You Shoot a Cop?” which proposed that it is acceptable to kill law enforcement officers if you perceive them to be violating your constitutional rights. Also featured at Libertopia was Ryan William Nohea Garcia, an “ambassador” for the ultra-libertarian SeaSteading Institute, which envisions building custom floating countries in international waters.

Stansberry also has shared platforms with Patriot nabobs. For years, he was a financial columnist for WorldNetDaily, a Patriot-leaning online publication with a theocratic bent that specializes in antigovernment conspiracy theories, end-times prophecy and revisionist histories of the Civil War. And this November, he appeared on the “Alex Jones Show” to promote his prediction about Obama’s supposed secret plan to run for a third term. The same episode featured commentary from Edwin Vieira, a Patriot grandee and militia supporter who in 2005 called for the impeachment of Supreme Court Justice Anthony M. Kennedy, saying that the conservative jurist’s opinion striking down an anti-sodomy statute “upholds Marxist, Leninist, satanic principles drawn from foreign law.” Also appearing was Lew Rockwell, a libertarian commentator and blogger with a long history of promoting neo-secessionism and other extreme-right ideologies.

The Patriot movement is noteworthy for its followers’ forceful assertion of the right to bear arms, and form private militias willing to face down tyrannical government forces when the time comes. In contrast, Casey, Stansberry, and their sympathizers make a lot of noise about opposing violence, stressing the need to bring about their desired revolution through education and activism.

But in a 2011 essay titled “The Corruption of America,” Stansberry began to sing a very different tune. “The nation will soon face a choice between heading down the path toward fascism … or turning back the power of government and restoring the limited Republic that was our birthright,” he wrote. “What gives me confidence for the future? Gun sales, for one thing. U.S. citizens legally own around 270 million firearms – around 88 guns per 100 citizens (including children) today. That’s a hard population to police without its consent.”

Sounding very much like his Patriot cousins-in-arms — and very little like a proponent of nonviolent resistance — he continued: “f the government attempts to take our guns … my opinion would change immediately. … But that’s one right the Supreme Court has been strengthening recently.”

“It gives me hope,” Stansberry said, “that most people in America still understand that the right to bear arms has little to do with protecting ourselves from crime and everything to do with protecting ourselves from government.”

Interesting breed - these "anarcho-capitalists"....

[Austin]

Austin,
While I agree that dollar collapse is likely, however IMO it will be the last fiat currency to collapse. I expect the DXY will rise well above 150 before it collapses. Now collapse is basically loss of confidence i.e. hyperinflation. And for those in the US, you want to know what hyperinflation will be like- look at Venezuela today. Its a trailer. The one in US will be much more violent as the gun ownership is much higher.

Well US already has high gun violence without the need for hyper inflation.

How can India protect itself in such a situation , Even our Rupee like other currency are pegged against USD , Our GOI dont have enough gold , the people might but you can force people to sell their gold to GoI.

The other option and people like Jim Rickard has suggested is to elevate the SDR in to some form of Global Reserve Currency

[Austin]

Why are Russia and China Buying Gold, Tons of it?

[panduranghari]

Well US already has high gun violence without the need for hyper inflation.

How can India protect itself in such a situation , Even our Rupee like other currency are pegged against USD , Our GOI dont have enough gold , the people might but you can force people to sell their gold to GoI.

The other option and people like Jim Rickard has suggested is to elevate the SDR in to some form of Global Reserve Currency

The simple answer is I do not know. Gold- buy as much as you can understand it. When gold price rises, many weak hands will sell - especially those of a trader type mindset. But with negative rate of interest, even the cost of carry is not there as they used to say about gold. Why are you hoping GOI will come to the rescue of the common man? They wont and they should not. Bad businesses will need to fail. If a business or an individual is geared heavily, they will suffer. But then why should you care about these people- they were the ones who were buying huge houses, expensive cars etc. - all on credit. The good times can roll on for only so long. And to believe the laws of maths or physics can be defied forever, is idiotic in extremis.

Rupee is pegged to USD out of coercion, not out of choice. SDR is basically a unit of account. Its neither a medium of exchange nor a store of value. And no sovereign nation needs another unit of account as their existing fiat currency serves that function very well. Rickards clearly knows this but he is not willing to say it out aloud. Perhaps he does not want to be counted amongst 'doomsters'. But then why worry- there is already a currency in the wings which has severed its link to gold - thus demonetising it and also to the nation state - thus resolving Triffin's dilemma.

In a free market - gold will be sought by all and sundry. Buy as much you understand it. India is not China or Russia. They have their own problems, let them deal with them. And they are much worse than what they are in India. TIFWIW.

[Austin]

^^ Thank You for your reply panduranghari

[A_Gupta]

Real Estate in the US:
http://www.nytimes.com/2016/05/13/opini ... phole.html

Real estate guys can take advantage of the best loopholes left in the tax code, thanks in part to some aggressive nudging of lawmakers. For starters, real estate investors can take deductions for the ostensible depreciation of the value of their buildings, even though the point of owning buildings is that they generally appreciate.

For another, they often borrow against those properties, and because they hold these investments in partnerships or limited liability companies, the interest payments are tax-deductible.

“If you get close to paying taxes, you just buy another building,” a real estate friend told me.

If Mr. Trump were to sell a property, the profits would be taxed as capital gains at far lower rates (23.8 percent) than those imposed on ordinary income (39.6 percent). But real estate owners often don’t even pay capital gains taxes. They can take advantage of a provision known as Section 1031 to swap a piece of real estate that they are ready to part with for one that they would like to add to their portfolio — all tax free. There is no limit on how many swaps they can make, deferring capital gains taxes indefinitely.

Section 1031 is among the real estate operators’ favorite provisions — and it’s a break not readily available to other kinds of investors. No wonder that attempts to rein in or eliminate Section 1031, including a recent one by the Obama administration, have been met with fierce resistance from the industry.

The tax benefits don’t stop, even at death. If an investor dies holding appreciated properties, the heirs get a step up in basis, which means that they can sell the real estate and pay no taxes on the gain in value.

[A_Gupta]

The cost of gold today is roughly $41 per gram, or $41K per kg or $41million per ton. China's $3 trillion in foreign reserves, expressed as gold, would be equivalent to (3 * 10^12/ 41 * 10^6) ~= 73200 tons of gold. China actually has around 1700 tons of gold reserve.

The modern world cannot run on gold. There just isn't enough of it.

[chanakyaa]

One more regime change in the South America about to happen. So sad that even with arguably world's largest oil reserves, more than that of KSA, leadership in the country is totally helpless to capitalize on it.

Venezuela opposition slams 'desperate' Maduro state of emergency

From Wikipedia,

History of Venezuela's claimed reserves (red) in comparison to those of Saudi Arabia (blue). The proven oil reserves in Venezuela are recognized as the largest in the world, totaling 297 billion barrels (4.72×1010 m3) as of 1 January 2014. In early 2011, then-president Hugo Chávez and the Venezuelan government announced that the nation's oil reserves had surpassed that of the previous long-term world leader, Saudi Arabia. OPEC said that Saudi Arabia's reserves stood at 265 billion barrels (4.21×1010 m3) in 2009.

An Estimate of Recoverable Heavy Oil Resources of the Orinoco Oil Belt, Venezuela

[Austin]

Today's Guest: Bo Polny

[Neshant]

Bo Polny has been dead wrong a number of times.

So Caveat Emptor (Let the buyer beware) when it comes to listening to that dude.

[Neshant]

One more regime change in the South America about to happen. So sad that even with arguably world's largest oil reserves, more than that of KSA, leadership in the country is totally helpless to capitalize on it.

Supposedly Venezuela knows its about to be invaded by NATO & Company and ordered military drills despite is dire economic situation. This shows how likely they consider foreign invasion/sabotage the likes of which was used by NATO to grab Libya and its resources (gold, oil and money).

Now watch for "rebels" magically appearing on Venezuela's shores with heavy armament to do some freedom fighting aka govt overthrowing. The good old boys should be showing up any day now.

[panduranghari]

The cost of gold today is roughly $41 per gram, or $41K per kg or $41million per ton. China's $3 trillion in foreign reserves, expressed as gold, would be equivalent to (3 * 10^12/ 41 * 10^6) ~= 73200 tons of gold. China actually has around 1700 tons of gold reserve.

The modern world cannot run on gold. There just isn't enough of it.

At 50,000 USD the situation changes. At 50,000USD/ oz of Au, the world will be very different than what it is today. For 1, the exorbitant privilege of the US will be gone and that will usher in the extreme poverty like we see in sub saharan africa. Dont believe me, well lets wait and see.

An Estimate of Recoverable Heavy Oil Resources of the Orinoco Oil Belt, Venezuela

The pdf says median 45% is recoverable. Isn't Heavy oil is also more expensive to process?

[Falijee]

Revealed: Saudi Arabia owns $117 billion of U.S. debt

One of the biggest mysteries in global finance was just revealed: How much U.S. debt Saudi Arabia owns.
Saudi Arabia stockpiled $116.8 billion of U.S. Treasuries as of March, the Treasury Department announced on Monday, ending four decades of keeping the figure secret.
That makes Saudi Arabia the 13th largest foreign holder of U.S. debt, though well behind the $1 trillion-plus owned by China and Japan each. The Saudi figure was first reported by Bloomberg News based on a Freedom of Information Act request.

Unlike with most other major owners of U.S. debt, the Treasury Department kept Saudi Arabia's precise holdings secret since the 1970s. Saudi's holdings were lumped together with that of other oil exporting nations, including Venezuela and Iraq.
But that policy ended on Monday as the Treasury Department disclosed precise holdings by specific countries that were previously grouped together. A Treasury official told CNNMoney the move was made following a review aimed at trying to provide more "comprehensive and transparent" data.

The new Treasury report also revealed that the Cayman Islands, a country of less than 60,000 people, owned $265 billion of U.S. Treasuries as of March. That's the third-highest sum in the world and a reflection of the nation's status as a major tax haven. The Cayman Islands does not have a corporate tax, encouraging multinational companies to store vast sums of money there to avoid taxes.
Likewise, Bermuda, another popular tax haven, is sitting on $63 billion of U.S. debt. Previously both the Cayman Islands and Bermuda were lumped together in a group of Caribbean banking center nations.

The new Treasury report also revealed that the Cayman Islands, a country of less than 60,000 people, owned $265 billion of U.S. Treasuries as of March. That's the third-highest sum in the world and a reflection of the nation's status as a major tax haven. The Cayman Islands does not have a corporate tax, encouraging multinational companies to store vast sums of money there to avoid taxes.
Likewise, Bermuda, another popular tax haven, is sitting on $63 billion of U.S. debt. Previously both the Cayman Islands and Bermuda were lumped together in a group of Caribbean banking center nations.

The Saudi mystery had taken on greater significance in recent months. Since the end of 2014 the Saudis have burned through more than $130 billion of foreign-exchange reserves -- most likely including U.S. debt -- to help cope with the crash in oil prices. The Treasury Department said Saudi Arabia's U.S. debt holdings of $116.8 billion are down from $123.6 billion in January.
Additionally, rising tensions between the U.S. and Saudi Arabia led the kingdom to make a recent shocking threat. Sources told CNN in April that Saudi Arabia threatened to sell off American assets if Congress passed a bill that would allow 9/11 victims to sue foreign governments. A Saudi source at the time told CNNMoney that the kingdom was "serious" about this threat.

Dumping a vast sum of U.S. Treasuries at once could cause the securities to tank, potentially destabilizing global financial markets. It could also severely hurt Saudi Arabia's own finances, leading many experts to conclude the threat was empty.

[chanakyaa]

The pdf says median 45% is recoverable. Isn't Heavy oil is also more expensive to process?

Yes, you are right. It is considered Heavy to Extra Heavy. So, at today's prices it may not be very economical to make the best out of this natural resource. But for a country with a population of 30million, it is lot of oil. And, when the prices were high flying, not much was made out of it.

Revealed: Saudi Arabia owns $117 billion of U.S. debt

I've been following this and related news for some time now. Very likely the "mystery" of Saudi debt holdings as reported and their threat of dumping the treasuries, may be all flare or decoy. The grand plan of bankrupting KSA, and then acquiring their oil/gas assets by the movers and shakers, who have nothing but public good in their heart, may be at play here. Bankrupt individuals or states often make silly decisions by letting go of their most prized assets at fire sale values. It happened to some extent with Brasil/Petrobras, with national oil asset sales.
Petrobras says to speed up asset sales; bailout 'last resort'

Remember this news item?
In Saudi Aramco IPO Talk, Some See Age of Oil Coming to End

Saudi Aramco IPO set for $2tn valuation

[Austin]

I believe the recoverable part of oil is a moving target today it could be 45 % but going ahead it would be higher.

Surprised to see Saudi just holding $117 USD in US Debt , Likely a good part of their forex are in US Stocks and Housing market the latter part in which even the Chinese are invested it.

I think the threat is to divest from Stock and Derivative market where likely Saudi investment is far higher then spoken about , Likely Saudis know what to expect in months ahead and would like to get out of Stocks and political threat is just a alibi for the real reason why they want to get out of Stocks !

[Austin]

Former Reagan OMB Director David Stockman talks Trump and the economy, with CNBC's Jackie DeAngelis and the Futures Now Traders.

[chanakyaa]

Time to withdraw Rs 500 and Rs 1,000 currency notes

European Central Bank to withdraw €500 note

Why $100 Bills and €500 Notes May Soon Be Killed Off

[Austin]

Bo Polny has been dead wrong a number of times.

So Caveat Emptor (Let the buyer beware) when it comes to listening to that dude.

Ok , Never heard Bo Polny before

[Austin]

Dr. Jim Willie ZIRP / QE Destruction , Neshant Pandu check this interview

[Austin]

for those in the US, you want to know what hyperinflation will be like- look at Venezuela today. Its a trailer. The one in US will be much more violent as the gun ownership is much higher.

As if you predicted Peter Schiff next show topic

[panduranghari]

But Schiff says there will not be hyperinflation, if they dont print. I disagree. HI is happening irrespective.

[panduranghari]

For Krishna_K



http://www.usagold.com/goldtrail/archives/another1.html

When the once highly secretive London Bullion Market Association (LBMA) -- its venerable membership comprising the world's largest gold dealers -- published its daily clearing volume for the first time in January 1997, it rocked the tight-knit world of international gold traders and analysts.

According to this first of many subsequent LBMA press releases, thirteen hundred tonnes of gold (representing more than 50% of the world's annual mine production) changed hands daily in this fog-shrouded center of the global gold market. This figure represented over $10 billion per day and $4 trillion per year in bullion banking activity!

The gold market had always stood in austere, quiet contrast to the highly charged, mega-volume world of stocks and bonds. Now this first LBMA report forced analysts, investors, and brokers to reassess their understandings of the gold market. While some revelled in the glow of the large LBMA numbers, others began to raise some very important and rather unsettling questions. First, Why was this much gold on the move? Second, Where was all this gold going? And third, Where was all this gold coming from?

Then, in October of 1997 at the internet's only gold discussion forum of the day (hosted by Kitco), a series of remarkable postings began appearing under the pseudonym "ANOTHER", offering plausible answers to those questions. What followed in a seemingly incongruous stream of thought over many months was, in the fullness of time, seen to blend into a logical whole by many astute readers following the complete text. If you are not similarly moved to at least reassess your own view of the international financial scene after reading what's revealed below, then you are either firmly entrenched in your world view, or you've been numbed by too many hours of Wall Street's cheerleader (CNBC) and too many Friday nights with Louis Ruykeyser.

What matters most to us here at USAGOLD is ANOTHER's educational value to all who would take the time to read and think through his (at times) arcane and cryptic commentary of international economic dealings behind-the-scenes. ANOTHER demonstrates a feel for and understanding of the gold and oil markets that indicates connections at the highest echelons of international finance, yet for reasons having to do with his "position," as he has indicated, he wishes to remain anonymous. If his "THOUGHTS!" are theory; they are good theory. If they are speculation; they are reasonable speculation. If they are supposition; they are well-grounded supposition.

In the final analysis, ANOTHER offers one of the more plausible hypotheses for why the financial markets have acted as they have in the past few years, and therein lies his immense value to the reader, no matter who he is. Again, knowledge as is conveyed in his series of "THOUGHTS!" is rarely to be found outside the highest levels of international finance, and is seldom to be seen bandied about on the front pages of The Wall Street Journal or your favorite financial newsletter.

As explained by ANOTHER, an opportunistic arrangement for massive physical gold acquisition among important petroleum producing and exporting nations could be comfortably facilitated within these astronomical trading volumes now being publicly revealed via the LBMA. For the oil states this meant receiving real money (as opposed to government-sponsored paper) in payment for their depleting oil reserves. For the industrialized countries, this meant a continuing supply of cheap oil to fuel the economic boom already in progress. These transactions were to be cleared through the bustling London gold market. Up until late 1996, the volumes were a tightly kept secret so "the deal" proceeded without the knowledge of the general public.

When the LBMA went public with its figures, it raised the shroud off "the deal." But by then, according to ANOTHER, it no longer mattered. The oil states had already (almost inadvertently) cornered the gold market. As implied by ANOTHER's own words, his motivation for these postings was the discovery by "big traders" in the Far East of this opportune facility to buy gold at ever lower prices. Their subsequent heavy purchases of physical gold upset the delicate balance. Now there was no longer a reason to keep it secret, and hence, the revelation of this extraordinary tale.

His choice to use an Internet forum to tell his story is surely a "story" in itself. Many who have read ANOTHER's "THOUGHTS!" speculate why he would choose this particular venue for his revelations. Why not a magazine article? Or a book? Rather than turning this Foreword into a treatise on the merits of the Internet, let it suffice to say that if ANOTHER and his motives are as implied, then there is probably no better venue than the Internet; allowing his "THOUGHTS!" to be disseminated rapidly, anonymously, and without editing by intermediaries. In addition, they could be efficiently targeted to go directly to the core market audience -- the gold analysts, brokers and investors who frequent such Internet sites as this, devoted strictly to the yellow metal. And after all, as a utility, isn't this capacity for specialization and instant communication what the Internet is all about?

We encourage you to find time to read and consider these remarkable postings of ANOTHER with an open mind. In the field of gold and international economics, these posts are sure to remain as fascinating and worthy of careful study as anything you will find on the web today.

[Austin]

Stockman: U.S. has been living beyond its means for 30 years

[Muppalla]

This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets.

I don't see the collapse. Today is 5/28/2016

[panduranghari]

^ did you anticipate 2008 event? While I agree that Lehmann Mk2 won't happen, because the central banks will paper over the potential losses, it's quite disengeous to claim just because you can't see a crash, it won't happen. Crash happening is not a black swan event. Crash NOT happening and Full Economic Recovery with Dollar still as a global trading currency is A Black Swan event.

While you may disagree on the finer points, IMO crash is underway at the moment. It's not a Lehmann style blockbuster event, just look in the west. I work amongst people, purely because that's the job I am in. Talk to farmers, businesspeople, bankers, politicians, unemployed drones etc. And you will see how bad it's getting. Within the Elysian Fields of arrogant debauchery as symbolised by a 9 to 5 job, mortgaged house, exotic vacationing, it may not be apparent how the poor in the west are living. And they are getting restive, I can't tell you.

Look at the 100billion dollar debt of commodity giant Glencore or the ever hopeful gamblers in the SHINCOMP or damped pomposity at Sohn conference or the feral exposition of man in Venezuela and multitude other events prove without any doubt we are living in truly epochal times. This period will be looked back by our descendants with a certain mix of incredulity and humour.

Don't bank on the beliefs that have carried you (not you specifically) through your time in the west.

Don't believe in the narrative of the omnipotence of central bankers. They mean well unlike what the zero hedge crowd feels. However, they - Yellen et al - had no control of the Long end of the yield curve. And it seems they are even loosing the control of the shorter end of the yield curve.

A final graphic which might look trite but it tells the whole story.

[KrishnaK]

For Krishna_K

For me ? Why ?

[KrishnaK]

^ did you anticipate 2008 event? While I agree that Lehmann Mk2 won't happen, because the central banks will paper over the potential losses, it's quite disengeous to claim just because you can't see a crash, it won't happen. Crash happening is not a black swan event. Crash NOT happening and Full Economic Recovery with Dollar still as a global trading currency is A Black Swan event.

don't you want to take a rest from being the canary in the mine for all us ?

[svinayak]

$50-70T derivative exposure at DB or JPM

Well, this is where the real worry should be: Deutsche Bank is unlikely to suddenly collapse under the weight of its huge derivatives portfolio. Instead, it may well, gently but steadily, slide into oblivion, crushed by underperformance and an inability to grow its earnings.

But then, this sounds like the fate of many European banks in this low, or even negative, interest rate environment. It just so happens that Deutsche is the most visible right now.

Is It Time To Panic About Deutsche Bank?

And then there is the huge black hole that is China, and exposure to it... although others are starting to pay attention, and as New Europe wrote two weeks ago, "Major European banks... are significantly exposed to China and if there is significant deleveraging the impact will no doubt be global."

Banks such as HSBC, such as Deutsche Bank.

[TSJones]

when encountering cultural and political economic ideologies that are held in spite of failed predictions, it is best to leave well enough alone and indulge in the entertainment value there of......

[Neshant]