Starchild: "It's Gone" - Why Foreign Demand For US Treasuries Has Disappeared
Last week's TIC data confirmed something the Fed's Treasury custody account has indicated for the past several months: foreign demand for US government bonds has not only tumbled, but there has been aggressive selling
So much so, in fact, that in the past 12 months foreign central banks have sold a gargantuan $335 billion in US Treasuries (and $242 billion when looking at all foreign transactions including private).
Thunderhawk: AND THE YELLOW BRICK IS GOLDEN - NEWS FROM THE LAND OF OZ
Gold and gems pile up in Singapore vault as investors seek refuge
SINGAPORE — The stash of gold, silver and gems stored in the vaults and safe deposit boxes of Malca-Amit in Singapore has jumped almost 90 per cent in the past year as wealthy investors seek a refuge in a world of negative interest rates, stagnating economies and political uncertainty.
The company’s facilities in the city-state are about 70 per cent full and more than 90 per cent of the hoard comprises precious metals, according to Mr Ariel Kohelet, managing director of Malca-Amit Singapore, a logistics and storage provider, without giving specific figures. Revenue has grown at least 45 per cent in 2016 from a year earlier, he said in an interview last week.
Gold has rallied 26 per cent this year and silver’s up 37 per cent as negative interest rates, the UK vote to leave the European Union and the US presidential race spur investors to protect their wealth. Billionaire bond-fund manager Bill Gross has said there’s little choice but gold and real estate given current bond yields, while hedge fund manager Eric Mindich almost tripled his options bet on a bullion-backed exchange-traded fund in the second quarter.
“We’re seeing a trend where high net-worth individuals are looking to diversify their portfolio into tangible assets like precious metals, precious stones,” said Mr Kohelet, who’s been with the company for 12 years. “This is mostly to preserve and protect their wealth. They’re looking into places like Hong Kong and Singapore as places they deem to be safe.”
A raft of investors have underscored the attraction of gold in a world where central banks are trying to revive growth by buying bonds and keeping their economies flush with cash. While billionaire George Soros cut his holding in Barrick Gold Corp in the second quarter, he bought shares in the SPDR Gold Trust. Mr Paul Singer, Mr David Einhorn and Mr Stan Druckenmiller have all expounded reasons this year for owning gold.
In Asia, where more than half the world’s bullion is consumed, people have always invested in gold, according to Mr Kohelet. “If you take China and India, it’s part of the culture and tradition to put some aside,” he said.
Malca-Amit has 1,000 square feet of space at the Singapore FreePort, a free trade zone, capable of storing 700 metric tonnes, while another warehouse at Changi airport’s airfreight centre has a capacity of 200 tonnes, Mr Kohelet said. In May, the company started a safe depository service called UltraVault and opened new facilities in the central business district, he said. BLOOMBERG
Samson: China a booster, not a burden, for world economy
China and its role in avoiding the "new mediocre" that threatens the global economy are again in the spotlight as the country prepares to hold the 11th G20 summit in Hangzhou.
Recent news about China's economy has not all been good. Economic growth has slowed, and expansion in retail sales, industrial output and investment have decelerated.
For those who cannot see the forest for the trees, pessimism and worries may persist about the state and future of the Chinese economy. Some have even pointed to China as a potential burden on the global economic recovery.
The anxiety is understandable, given the huge role China plays in the world economy. The slowing Chinese economy contributed over a quarter of global economic growth and added an equivalent of the Swedish economy in 2015. Any faltering of the second-largest economy would ripple throughout the world.
However, if one looks a bit deeper, it is clear the transforming Chinese economy will only improve the lackluster global situation.
Sure, the slowdown may linger, at least for the near future, as it will take time to digest the legacy of a long economic boom. And China, the largest developing and most populous country, has to strike a balance between remaking the economy and securing growth to create jobs.
From slashing industrial overcapacity to shutting down polluting factories, the short-term effects of China's efforts to nurture consumer-driven growth and reduce reliance on investment, low-end exports and energy consumption will be felt acutely.
In addition, new problems, such as high debt levels, industrial overcapacity, environmental degradation and sluggish global demand, mean the economy must be directed along a more sustainable path.
However, global investors are poised to reap gains from a more robust market.
As David Dollar, a senior research fellow at the Brookings Institution, put it, China's continued strong growth in recent years, despite slowed investment, was achieved thanks to increasing consumption.
China's economic growth is entering a positive cycle, as domestic consumption grows due to rising wages, leading to the expansion of services, which generate more jobs and higher spending power, said the former official of the World Bank.
For China's massive economy, the transition to a service and consumption-driven economy, accompanied by an improved social security system, will unleash huge demand and business opportunities.
From Uzbek cotton to Chilean wines, from Brazilian soybeans to Ecuadorian seafood, from Japanese robots to American movies, more and more countries are discovering the growing market for their exports as China's 1.3 billion people become more prosperous and start to consume more.
As China transitions from being the world's workshop to an influential global consumer of goods and services, its economy will boost developing and developed countries alike.
The transition is already under way, with the service sector expanding 7.5 percent in the first half of 2016, accounting for 54.1 percent of the overall economy, up 1.8 percentage points from a year earlier.
In 2015, consumption accounted for over 66 percent of China's gross domestic product, up 15.4 percentage points from 2014.
As heavy industry and traditional manufacturing wrestle with slowing demand overseas and overcapacity at home, new engines are humming: social media, cinemas, travel and R&D are driving consumption, services and the high-tech sector.
Growing demand from Chinese consumers is set to continue, bringing more services, imports and new investment opportunities for the world economy.
China's economic transition will continue and will be positive overall for the global economy, the International Monetary Fund (IMF) said in a report earlier in August.
"Many countries could only dream of achieving growth rates that China has and is likely to achieve, which also reflects positively on the reforms that Chinese policymakers have undertaken," said James Daniel, the IMF mission chief for China.
GreatlyBlessed: Why France Is The Most Likely To Be The Next To Quit The EU
AUGUST 23, 2016 EURO NEWS
Exclusive: France is the most likely country to follow Britain in voting to quit the European Union amid a ‘bankruptcy of ideas’ about how to tackle its well-placed Eurosceptics, experts say, two months on from Brexit.
Economic woes, terrorist attacks and the re-emergence of Nicolas Sarkozy could all play into the hands of Marine Le Pen at next year’s presidential elections, according to Euroscepticism specialist Simon Usherwood, providing the conditions that could open the door to a referendum similar to that held across the channel in June.
Experts have also ranked The Netherlands, Denmark, Italy and Austria as being the most probable countries behind France to push for, or get, a new relationship with Brussels.
But they caution Britain’s particular circumstances are not easily repeatable elsewhere and multiple elements would have to fall into place for a referendum to happen.
Some believe we are more likely to see countries openly ignore EU policy but remain inside the bloc, than pushing for polls on whether to leave.
Le Pen: pushing for EU vote in France.
EU: Je t’aime, moi non plus?
Le Pen, leader of the far-right Front National (FN) party, was one of several Eurosceptic leaders to call for similar referendums in the immediate wake of Brexit.
And with reason, it would seem: a TNS Sofres survey released just days after the UK vote revealed 45 percent of those polled wanted a similar EU referendum in France, with 44 percent against.
Le Pen is now hoping to make that a reality by triumphing in the French presidential elections, set for April and May 2017.
“The country where we are going to see the biggest push is France,” Usherwood told Euronews. “We’ve got Marine Le Pen who is looking very well-placed for the presidential elections.
“If you look at the two main parties in France, none of them look in great condition. Hollande has been a very big disappointment for the left, he’s not been able to build on his reputation in the wake of the various terrorist attacks. When the most credible opponent to Le Pen is Sarkozy coming back to re-energise the centre-right, that doesn’t look like new politics.”
History may also boost Le Pen: the French only narrowly approved the Maastricht Treaty in a 1992 referendum (51 percent – 49 percent), while voters rejected establishing a European constitution in 2005.
But the past may also continue to haunt her: FN has been on the verge of political breakthroughs before, only to be kept out in the second round of voting.
“While polls suggest she would be defeated in the second-round run-off by a more modest conservative challenger, centre-left voters who are fed-up with austerity, the political establishment and German dominance may yet rally behind her,” said Philippe Legrain, former economic advisor to the president of the European Commission.
The narrative that the FN is likely to be defeated in the final round of polling is repeated by other experts, but Usherwood, a senior lecturer at the University of Surrey, thinks that would not be the end of the story.
“Even if we don’t have an EU referendum coming out of the presidential elections next year, you have to imagine that over the next five to ten years there will be a lot more pressure on countries to go down this path, particularly if the UK looks likes it doing okay [outside the EU],” he said.
Longer shots for leaving?
Denmark leads the pack of other countries behind France – which includes Italy, The Netherlands and Austria – where Euroscepticism could leave its mark, according to Usherwood.
He says Denmark’s position on the fringes of the EU project; its economic ties to the UK economy; and the strength of Eurosceptics -, the Danish People’s Party (DPP) – in the parliament, are factors to support this.
The Danes have also voted against the EU in three referendums in 1992, 2000 and 2015.
But while DPP holds the balance of power in Denmark’s coalition government, it’s unclear, if they push for a referendum, whether it will be for leaving the EU or just re-negotiating membership terms.
“You have seen a certain turning in of Danish politics in recent years, it’s not as open and friendly as it has been.” said Usherwood “There are the preconditions for a much more negative turn as we go along. It’s going to depend how much the Danish coalitions can hang together as they go along.”
Has Renzi opened the door to Italy’s Eurosceptics?
Italy, famous for the instability of its governments, could also see Eurosceptics come to power and push for a referendum on the country’s eurozone membership.
Prime minister Matteo Renzi has admitted he made a mistake by saying he would quit if he lost a referendum on Italy’s constitution, set to take place between October and December. If Renzi loses, and resigns, that could see the country’s Eurosceptic Five Star Movement (FSM), which won a landslide victory in recent local elections, capitalise in any subsequent national vote.
“If you look at levels of political discontent and frustration and you look at levels of anti-immigrant, anti-Muslim sentiment, you look at levels of hostility to the EU, they are incredibly high in Italy,” said Dr Seán Hanley, a senior lecturer in comparative central and east European politics at University College London.
Yet despite growing support for a Eurosceptic party in Italy, Usherwood has poured cold water on it pushing for an EU referendum, even if it does get into power.
“If you have a collapse of the Renzi government that puts a lot of pressure back on the banking sector,” he said. “I think the economic dangers look so significant that it’s going to put a big brake on that [the appetite for leaving the EU].”
Like Italy, the autumn could be a defining season in Austria, where the far-right candidate Norbert Hofer is leading polls ahead of a re-run of the country’s presidential elections.
Hofer’s Freedom Party is clearly tapping into voters’ Euroscepticism. A Eurobarometer survey this spring on views of the EU revealed 37 percent of Austrians surveyed had a negative outlook on Brussels, the third highest level in the bloc.
Usherwood says even if Hofer wins, he would not have the power as president to call for a referendum, but it may spark more talk of one ahead of parliamentary elections.
He added: “I think what you’re going to see is Austria is still going to carry on being a difficult partner in the EU, they might calculate it’s best to keep campaigning for less free movement and reducing their exposure in the eurozone, and that it’s better to do that on the inside rather than on the outside.”
The Netherlands is another of the EU’s founding fathers with a strong Eurosceptic party and a looming national vote.
The Dutch are set for a general election in March 2017; Geert Wilders’ far-right Freedom Party (FP) was leading opinion polls in June.
But Hanley says the system of proportional representation voting that helps give a voice to outsider parties like FP, could also be the mechanism that stops it. The setup means the Netherlands relies on coalition governments and it is doubtful whether other mainstream parties, especially in the light of Brexit, are prepared to indulge Wilders.
“It doesn’t seem the same dynamic as France where there seems to be a bankruptcy of ideas about what to do,” said Usherwood. “In the Dutch case the other parties do seem a bit more able to come up with other strategies and draw on a stronger liberal, cosmopolitan tradition.”
Leave the EU or imitate Orban
A direct imitation of Brexit is arguably the most obvious and desirable direction for most Eurosceptic leaders.
But it might not be realistic or possible, argues Hanley, who says talk of the ‘Brexit contagion’ has been overstated.
Instead, he says, Eurosceptics may follow the model of Hungary’s prime minister Viktor Orbán, who has picked a fight with the EU over aspects of its policy, such as the resettling of migrants.
Hanley added: “Rather than a rush to the door and a sudden break-up [of the EU], I would see a scenario more of unravelling, a kind of inertia, some countries selectively not implementing EU policy, like in Poland and Hungary.
“They’re not planning to leave, but they are planning to selectively ignore aspects of policy and see if the EU does anything and they haven’t so far.
“I think if I was Le Pen or another national populist politician I would be looking at what they [Hungary, Poland] are doing and thinking ‘well maybe we can do this’. And western European governments have already done it, to some extent, not in areas of governance and human rights, they’ve done it slightly more on the sly in relation to budget deficits (eg France).”
What’s next? Key dates on whether the Brexit contagion will spread
Italy constitutional referendum: October to December 2016
French presidential elections: April/May 2017
Dutch general election: March 2017
Austrian presidential election re-run: October 2, 2017
The evolution of Euroscepticism in selected EU states
This shows the percentage of respondents who had a negative view of the European Union. Source: Eurobarometer