WLKINGSTICK » June 18th, 2015, 2:21 pm Opinion
The Danger of Fiat Currency
By Steve Kanaval +Follow June 17, 2015 2:26PM
Fiat currency means that it is backed by the good faith of the government. The US Dollar, The Euro and the Zimbabwean Dollar – all currencies are fiat currency, and all currency can be recalled and revalued, which an inherent danger is valuing assets any place on the globe.
That’s why, at some point in the future, a digital currency will replace fiat currency. The collective crowd will determine the value of the digital currency, not the government, and what happened in Zimbabwe will no longer occur. Economic collapse led to the devaluation of the Zimbabwe Dollar to the point where the currency had so many zeros on the bill that the ink became more valuable than the note itself.
The government then stopped printing the currency and took it out of circulation, where it was replaced by the US Dollar and South African rand. It’s been out of circulation since 2009.
Local Zimbabweans stashed them in closets and safe places, waiting until the government benchmarked the country's currency (this is where the good faith part comes in), and this week declared you would get 35 cents (using the US Dollar as a conversion comparison) for 100 million Zimbabwe Dollars.
Let me also explain that the currency value went from 0.13 per Z-Dollar to 0.00002 per Z-Dollar in one year. 2008 was the fateful year when the good faith of the government was no longer good, but had a distinctly Bernie Madoff-like quality to it. All currency (except crypto currency) depends on the government, because they can toggle the value of the currency by printing money.
It is done every day via Treasury Auctions. As we finance our economy by firing up the printing presses, everyone does it, so it must be OK until it's not OK…much like Zimbabwe.
Donald Trump said in his Presidential speech (that sounds weird to say and is strange to write) that China and Japan have been buying our currency for decades and they own more of our country than we know. In the case of China, they have been pegging the Chinese Yuan to the US Dollar, so they do not give the illusion of a fiat currency, all they have to do is wait for ours to collapse and start their own.
The Internet of Things will Give Way to the Digital Wallet The age will come when the digital wallet and digital currency will supplant fiat currency, as the Internet of things becomes more relevant and the collective eliminates disasters like Zimbabwe.
The world is becoming a global trading economy before our eyes, and will no longer depend on governments that manipulate the currency to the detriment of the people.
It will benchmark itself to a digital currency with low transaction costs and easy to use where you can pay with your cell phone or a chip in your wallet. The Internet is changing many things, but the change it will make to the way we pay for goods and services worldwide will be the most impactful change. -
Thunderhawk » June 18th, 2015, 1:53 pm
Gold Rallies to 3-Week High on Dovish Yellen Remarks, Greece Concerns
Gold futures prices are solidly higher and hit a nearly three-week high of $1,200.00 in early U.S. trading Thursday. The yellow metal is boosted on short covering and fresh speculator buying--and even some safe-haven demand. Bullish remarks from the Federal Reserve chair and Greece debt worries are working in favor of the precious metals bulls on this day. August Comex gold was last up $20.50 at $1,197.20 an ounce. July Comex silver was last up $0.298 at $16.245 an ounce.
Some markets, including gold, saw a somewhat delayed reaction to the conclusion of the Federal Reserve’s Open Market Committee (FOMC) meeting Wednesday afternoon and the following press conference from Fed Chair Janet Yellen. While the Fed did not raise U.S. interest rates at this meeting and said the U.S. economy continues to improve, Yellen did signal in her press briefing that the Fed will remain “highly accommodative” even when it does raise interest rates—likely later this year. The market place took her remarks to fall squarely in the monetary policy doves’ camp. U.S. stock indexes rallied, U.S. Treasury prices got a lift, the U.S. dollar index sold off and gold prices were boosted.
European stock markets were pressured again Thursday amid increasing worries about Greece defaulting on its debt obligations to the European Union and International Monetary Fund. Greece-EU debt negotiations broke down last Sunday. Greece’s central bank on Wednesday warned of an “uncontrollable crisis” if the debt talks ultimately fail. Greek government officials will meet directly with EU officials Thursday to try to hammer out a last-minute deal. German Chancellor Merkel said Thursday a deal is still possible. However, most market watchers think otherwise at this late stage of the game. This situation is prompting increased demand for safe-haven gold.
Asian stock markets sold off Thursday on heightened worries of a stock market bubble in China. Those notions also led to some buying of gold.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the consumer price index, real earnings and the Philadelphia Fed business survey. The CPI report will be closely watched. May CPI is forecast at up 0.5%, year-on-year. There is a growing group of market watchers who are worried about inflation becoming problematic in the months ahead.
(Note: Follow me on Twitter--@jimwyckoff--for breaking market news.)
Wyckoff’s Daily Risk Rating: 6.0 (Trader and investor market risk aversion is just a bit elevated this week, due to the Greek debt talks collapsing.)
(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.
The London A.M. gold fix is $1,198.00 versus the previous P.M. fix of $1,178.00.
Technically, August gold futures bears still have the overall near-term technical advantage. However, a four-week-old downtrend on the daily bar chart was negated today and prices have seen a bullish upside “breakout” from the recent sideways and choppy trading range. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the June high of $1,204.70. Bears' next near-term downside price breakout objective is closing prices below solid technical support at the June low of $1,162.10. First resistance is seen at the overnight high of $1,200.00 and then at $1,204.70. First support is seen at $1,191.80 and then at the overnight low of $1,183.10. Wyckoff’s Market Rating: 3.5
July silver futures bears have the near-term technical advantage. Prices did hit a two-week high overnight. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $16.80 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the April low of $15.595. First resistance is seen at the overnight high of $16.35 and then at $16.50. Next support is seen at $16.00 and then at last week’s low of $15.77. Wyckoff's Market Rating: 3.0.
Thunderhawk » June 18th, 2015, 2:12 pm
Bank withdrawals surge, revenue slumps as Greece defies creditors
LUXEMBOURG/ATHENS (Reuters) – Bank withdrawals accelerated and government revenue slumped as Greece defied its international creditors on Thursday, escalating a debt crisis that may reach a climax at a European Union summit next week.
Savers pulled out some 2 billion euros between Monday and Wednesday, senior banking sources told Reuters, double the amount that the European Central Bank granted Greek banks in extra emergency liquidity assistance (ELA) for the whole week.
The IMF meanwhile dashed any hope that Greece could avert default if it fails to repay a 1.6 billion euro ($1.8 billion) loan by the end of June, piling pressure on Prime Minister Alexis Tsipras, who showed no sign of yielding to the lenders.
If deposit flight continues to outpace ELA, it could force Greece to impose capital controls, as Cyprus did in 2013, to ration cash withdrawals and stop money fleeing the country.
The 2 billion euros taken out in just three days represents about 1.5 percent of total household and corporate deposits of 133.6 billion euros held by Greek banks as of end-April.
Before this week, withdrawals had been running at 200-300 million euros a day.
A finance ministry spokesman declined comment on the latest capital outflows. A government spokesman said on television late on Wednesday there was no plan to introduce controls.
Euro zone finance ministers met in Luxembourg for a session once billed as the final chance to reach a cash-for-reform deal. Any expectation of a breakthrough vanished before the meeting with Athens ruling it out as a forum to offer new proposals.
Tsipras, elected on a promise to end austerity, is demanding a “political level” bargain in which European creditors promise Greece debt relief before he will make any more concessions.
Irish Finance Minister Michael Noonan said any chance of a last-ditch deal to avert a Greek default hinged on a European Union leaders’ summit late next week.
EU officials said they would decide in the next day or two whether to hold an emergency summit of the euro zone on the sidelines of the regular EU summit on Thursday and Friday.
Athens reported a steep 24.6 percent fall in its revenues in May, including a 50 percent fall in tax returns, even though the central government posted a primary surplus before debt service in the first five months of this year.
Finance ministry officials said it was mainly due to a slump in tax payments by companies, hard hit by a return to recession.
ESCAPE HATCH CLOSED
IMF boss Christine Lagarde closed one of Greece’s last potential escape hatches, declaring that the global lender would consider Athens in default if it misses the June payment, despite reports there might be some leeway.
“It will be in default, it will be in arrears vis-a-vis the IMF on July 1, but I hope it is not the case, I really do,” Lagarde told reporters in Luxembourg. “There is no grace period or two-month delay, as I have seen here and there,” she said.
Greece confirmed on Wednesday that the government does not have the money to repay the IMF loan, which is the first in a series of debt repayments over the summer.
German Chancellor Angela Merkel said a deal was still possible to provide Greece with additional funds, if Athens showed the necessary will. French Finance Minister Michel Sapin also spoke optimistically at the Luxembourg talks.
But Tsipras – pointedly visiting Russia at a time of sour relations between Moscow and the EU – insisted creditor demands for pension cuts would worsen the economic crisis.
In a guest column for Der Tagesspiegel newspaper in Berlin, he sought to dispel what he called a “myth” that German taxpayers were paying Greek pensions and wages.
“The blind insistence of cuts (in pensions) in a country with a 25 percent unemployment rate and where half of all the young people are unemployed will only cause a further worsening of the already dramatic social situation,” he said.
A combination of a default and capital controls could set Greece on a path out of the euro zone and even the EU itself, the Greek central bank warned this week. It would be the first country to leave the currency area or the Union.
For its part, Russia quashed speculation that President Vladimir Putin – at loggerheads with the West over Ukraine – would ride to Greece’s rescue. A deputy finance minister told Reuters there had been no request for money from Greece, and Russia had no resources for such a bailout.
NO GIGANTIC DIFFERENCES?
Ahead of the Luxembourg meeting, France’s Sapin told reporters there was “real scope for convergence”.
“I want to dispel this idea that there are gigantic differences between the sides … The differences can be overcome,” he said.
But the head of the Eurogroup of finance ministers of the currency area made clear he saw little prospect of a fast deal.
“I don’t have a lot of hope,” Jeroen Dijsselbloem said, when asked if a deal could be reached at the meeting. “I have only one job to do today and it is to see whether we can bring that deal with Greece closer,” he said.
“It requires further steps from the Greek side because we need a solid deal. It needs to hold up, also in the coming years, and it needs to be credible for Greece and the euro zone. I am not sure whether we will make any progress.”
With European leaders and Greece’s central bank warning a possible “Grexit” was on the horizon, European shares fell and Greek shares .ATG hit a new three-year-low.
In a sign of growing nervousness among many Greeks about their country’s fate, pro-euro demonstrators planned a rally in central Athens, calling for an end to the deadlock. The previous day, anti-austerity protesters rallied in support of the government and against policies set by lenders.
“I’m still convinced: where there’s a will, there’s a way,” Merkel told German lawmakers. “If those in charge in Greece can muster the will, an agreement … is still possible.”
Merkel faces growing resistance in her ruling conservatives to granting Greece any more bailout money. A narrow majority of Germans now favor of Greece leaving the euro zone.
Thunderhawk » June 18th, 2015, 2:55 pm •
VIDEO: ECB warns EU officials it is not sure if Greek banks could open Monday: Reuters
The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.
The officials said that during the closed-door meeting of the ministers on Greece, the chairman of the meeting Jeroen Dijsselbloem asked European Central Bank Executive Board member Benoit Coeure if Greek banks would be able to open tomorrow.
Greek Finance Minister Yanis Varoufakis at an euro zone meeting in Luxembourg, June 18, 2015.
Banking sources said on Thursday that between Monday and Wednesday, Greeks have withdrawn around 2 billion euros from their bank accounts.
Euro zone leaders will hold an emergency summit on Monday to try to avert a Greek default after bank withdrawals accelerated and government revenue slumped as Athens and its international creditors remain deadlocked over a debt deal.
Read More Greek savers bail on banks: 2B euros in 3 days
Finance ministers of the 19-nation currency bloc failed to make any breakthrough on a cash-for-reforms agreement at talks in Luxembourg on Thursday, just 12 days before Greece must make a crucial debt repayment to the International Monetary Fund.
Walkingstick » June 18th, 2015, 2:26 pm
The Glitter Of Gold In An Age Of Soaring Debt
Ever wonder how much gold has ever been exhumed in the history of the world? The GFMS Gold Survey estimates that the total amount is approximately 183,600 tonnes, or 5.9 billion ounces. If we take that figure and multiply it by the closing price on June 16, $1,181 per ounce, we find that the value of all gold comes within a nugget’s throw of $7 trillion.
This is an unfathomably large amount, to be sure, yet it pales in comparison to total global debt.
According to management consulting firm McKinsey & Company, the world now sits beneath a mountain of debt worth an astonishing $200 trillion. That’s greater than twice the global GDP, which is currently $75 trillion. If we were to distribute this amount equally to every man, woman and child on the face of the earth, we would each owe around $28,000.
More surprising is that if gold backed total global debt 100 percent, it would be valued at $33,900 per ounce. Try convincing your gold dealer of this next time you want to sell a coin.
Besides imagining being able to buy a new BMW with a single American Gold Eagle coin, why is it important to think of the yellow metal in this way?
The Case of the Runaway Debt
To answer that, let’s back up a bit. For thousands of years, in countless cultures around the world, gold has been recognized as an exceptional store of value and, as such, accepted in all forms of transactions. A new archeological discovery, in fact, shows that the metal was being traded in the British Isles as far back as 2500 B.C., an entire millennium before the world’s first gold coins were minted in what is now present-day Turkey.
Up until the twentieth century, most nations were still using the gold standard. Just as most music is composed in a particular key signature to control tonality, the gold standard has historically provided long-term stability and inflationary controls. Even so, several financiers and central bankers throughout history tried experimenting with a fiat currency system, a decision which often led to major imbalances between monetary and fiscal policies, and eventually economic depressions. Last week I shared two such examples, including Scottish gambler John Law’s four-year experiment with paper money in the early eighteenth century, which ruined France’s economy and laid the groundwork for the French Revolution.
More to the point, the gold standard limits the amount of debt that can be issued. Forty-four years ago, when the U.S. made the switch to a fiat currency system, the federal government owed $399 billion. Since then, outstanding debt has ballooned 4,411 percent to $18 trillion—more than twice the amount of all the gold in the world. Such massive debt levels can be reached only in a fiat currency system, where money is easy, virtually limitless and unsecured by anything tangible.
Below, you can see how dramatically all debt in the U.S., both public and private, has been allowed to soar past economic growth since the end of the gold standard.
The $200 Trillion Question
So how would any of this debt ever be settled were it called in tomorrow? The U.S. currently holds “only” 8,133.5 tonnes of gold in its reserves, a significant decline from the all-time high of over 20,000 tonnes in the 1950s. This amount calculates to about $340 billion—nothing to sneeze at, but a far cry from the current U.S. debt level.
Countries with the largest gold holdings
This is the case in other nations as well. As you can see, Japan is one of the top holders of gold, but at 400 percent, its debt-to-GDP ratio is higher than any other country’s in the world.
Lately we’ve seen several central banks repatriate more of their gold reserves from foreign vaults, most notably Germany, Austria, France, Switzerland and others. Texas is even in the early stages of creating its own gold depository, the first to be run by a state. The fact that central banks still hold the metal has less to do with “tradition”—as former Federal Reserve Chair Ben Bernanke put it during a Congressional hearing in 2011—and more to do with confidence in gold’s enduring power.
It’s unlikely that gold will ever reach $33,900 per ounce—or even $12,000, as investing expert James Turk calculates—but the fact that supply has not kept up with debt levels suggests that prices might very well rise.
Gold’s Late Summer Rebound Trend
A new report by Bank of America Merrill Lynch shows that since 2001, bullion has reached a bottom between mid-June and mid-July and rebounded thereafter. In all but two of the last 27 years, or 93 percent of the time, gold and gold equities enjoyed a late summer rally, thanks in large part to the approaching Indian festival and wedding seasons.
This helps confirm what I often write and speak about, that gold prices have historically followed seasonality trends for the five-, 15- and 30-year periods. You can see how gold troughed between June and July and then rose in anticipation of Diwali and the wedding season.
Freedom: Integrity announces the recovery of more than five billion dinars to the state treasury
Thursday June 18, 2015 11:51
Alsumaria News / Baghdad
Integrity Commission announced, on Thursday, for the recovery of more than five billion to the state treasury, as pointed out implementation of the catch out of 373 is more than 1,700.
The head of the Hassan al-Yasiri in a press conference held in the capital Baghdadand attended by Alsumaria News , "The money they were sentenced to judicial their response to the state treasury, amounting to five billion and 889 million and 455 thousand and 853 Iraqi dinars".
Yasiri He added that "the Commission has issued arrest warrants against the accused more than 1,700 orders", adding that "373 is executed them."
The financial and administrative corruption is spreading in Iraq dramatically, as Transparency International's Iraq ranked as the third most corrupt country in the world after Somalia and Sudan, but that the Iraqi government is often critical of the organization reports on corruption and considers inaccurate and based on the information reached by by local and foreign companies It failed to implement service projects in Iraq. LINK