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Turkish Central Bank Backs Gold

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Last week we had Helicopter Ben attack the gold standard and now we have the Turkish Central Bank announce  that it is doubling the amount of gold that lenders can hold in reserves. Its looking bullish for gold long-term to see both moves recently.

The Turkish central bank has doubled the amount of gold that lenders can hold in reserves (as opposed to paper money – Lira) as part of their reserve requirement changes. As the WSJ reports, this shift from 10% to 20% means that Turkish banks can use their shiny yellow metal as fungible money reserves against foreign currency deposits. This move follows closely on the heels of our comments on last week’s ‘gold transfer’ efforts in Turkey to unleash some of the country’s vast personal holdings of Gold. This effort to draw down on the nation’s individual gold reserves – the traditional form of savings in Turkey – is part of Ankara’s efforts to reduce a finance gap that is currently around 10% of GDP but more importantly it should serve as a lesson reality-check for Bernanke that gold is money and in the words of a 70-year-old housewife “In an emergency, I can convert [gold] to cash and I don’t have to wait for the bank to say the asset has matured.” It would seem a better store of value than the Lira over the past decade or two and we suspect incentives will have to rise considerably to ‘help’ the people part with their savings-gold.

Source: ZeroHedge

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Germanys Debt/GDP Now At 140%

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Quite a staggering amount, but ZeroHedge have calculated Germany’s debt/GDP at 139.8% when you factor in all its commitments. Eurostat deliberately leaves out certain information to help paint a brighter picture but the following breadown was uncovered by ZeroHedges digging.

 

Germany

German Gross Domestic Product (GDP):                                   $3.2 trillion

Official German Sovereign Debt:                                               $2.618 trillion

Percentage of Liabilities at the European Union:                                27%

Percentage of Liabilities at the ECB                                                       18.94%

Germany’s Percentage of the ECB Debt ($4 trillion)                          $757.6 billion

German annual cost for the EU budget                                                 $46.36 billion

German Guarantees for the Stabilization Funds                                $280.6 billion

German Guarantees for the Macro Financial Assistance Fund      $211.14 billion

German Target-2 Liabilities                                                                   $656 billion

German Guarantee for the EIB Debt                                                    $157.29 billion

Sovereign Guarantee for KFW                                                               $588 billion

Total German Sovereign Debt & Guarantees                                     $5.315 trillion

Official debt to GDP Ratio                                                             81.8%

Actual German Debt to GDP Ratio                                            139.8%

 

An Irishman’s Legal Bid To Stop Government Paying Out Billions For Non Existant Bank

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When Anglo Irish Bank went to the wall the previous Irish government put promissory notes into the bank to the tune of €31 billion and insisted the irish taxpayers paid its debts even though it did no buisiness with Joe Soap, just developers. Now the bank has been wound up and the new government insists the irish taxpayers continue to pay yearly these promissory notes, in a callious move to support the bank against the wishes of it own people.

Now a hero has stood up in David Hal, who is taking a legal challenge against paying back this €31 billion just as the Irish government is about to make a payment  at the end of this month. In the meantime the Irish governement is trying to get a solution with the ECB on these promissory notes to lock the Irish people into paying these as bonds at which it would be impossible to get out of. Its good to see somebody stand up to the banks after its government sold them out. 🙂

While the story was run on Newstalk radio today, a quick look at the Irish MSM shows no coverage. The original story was broken on reuters.

Activist seeks declaration that promissory notes illegal

* Says 31 billion promissory note not approved by parliament

(Reuters) – An Irish activist on Monday launched a legal challenge against a 31 billion euro ($41 billion) promissory note issued by the government to bail out two collapsed banks, saying the scheme was not approved by parliament.

The move comes amid talks between the Irish government and the European Central Bank on a possible refinancing of the notes, used to bail out now-defunct Anglo Irish Bank and Irish Nationwide Building Society.

A 3.1 billion euro repayment on the notes is due by the end of the week, and the government is exploring ways to delay the payment after a groundswell of opposition. The first repayment was made last year.

David Hall, the founder of an organisation that gives legal advice to struggling mortgage holders, on Monday applied for a judicial review of the scheme in the Irish High Court, according to documents presented in court.

Hall argued that the government’s decision to issue the 31 billion euros of promissory notes violated the constitution as it failed to secure parliamentary approval.

The papers ask the court for a declaration that the promissory notes “are of no effect and void.”

Senior Counsel John Rogers, a former attorney general of Ireland, is representing Hall. The High Court will allow the government to respond to the application on Wednesday.

SWIFT Move By US Could Damage The Dollar

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In an interview given by Jim Sinclair on KingWorldNews, he makes a good point, that a recent move by the US against Iran using the SWIFT system could seriously backfire on the US dollar. Although the SWIFT system is based in Brussels, it is mainly a tool owned by the US. Jim makes the point that it simply is like a telephone exchange for financial transactions with strong security. As a result it wouldn’t be too difficult for countries to set up their own system and to settle financial transactions in non US Dollar currencies. In fact Iran is now looking to trade in other currencies as well as using gold. It already has set up an oil bourse which trades in anything other than US dollars. Jim says your bond market and currency are a nuclear target and obviously you don’t want anything to attack this so why stop other countries access to the SWIFT system when they can setup their own and trade using gold etc an ultimately harm you.

Long term, Jim Sinclair sees this misuse of SWIFT (which is a financial weapon of sorts) as having opened the door to the US weakness. It’s a weapon that will massively backfire and ultimately hurt the dollar. He said “it will go down in history as possibly the most dumbest thing we could have done”.

To listen to full interview click here.

Netherlands No Longer Core Euro Nation Says Citigroup

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Rather staggering to hear it, but Citigroup no longer thinks the Netherlands is a core european nation or AAA rated. The ability of the dutch to bring its deficit to less than 3% has been seriously dented. It’s not a good sign to see such a strong country struggling but its clear that they have been affected by the woes of the euro. Below is a piece from Citi’s report on the Netherlands as reported by ZeroHedge.

The Netherlands has left the Core of the euro area in our view. We characterize core countries as those with i) a relatively strong fiscal position in both the public and private sector, ii) advocating strict fiscal and structural reform conditionality in return for support measures for weaker EA sovereigns and iii) relatively little reliance of the domestic banking system on Eurosystem liquidity. Consequently core countries get a relatively benign treatment by financial markets even during times of turmoil, and have recently shown above euro area average growth. Furthermore, core countries have in common the skepticism towards extraordinary ECB support for troubled euro area sovereigns and banks. While Dutch general government debt remains much below the euro area average (66% of GDP in 2011 compared to 88% for the euro area as a whole) and the centre-right minority government of PM Mark Rutte and Finance Minister Jan Kees de Jager has long been an advocate of strict fiscal rules in the euro area, the Netherlands no longer seems to satisfy all of our other requirements for Core membership.

The poor performance of the Dutch economy will make it very difficult for the country to reduce its general government deficit below 3% of GDP in 2012, as had been targeted, in our view. As a consequence of the euro area sovereign debt and banking crisis, financing conditions in the Netherlands have tightened, creating pressure on the country’s highly leveraged households, which is likely to lead to further contractions in house prices and domestic demand. As the Netherlands Bureau for Economic Policy Analysis1 (CPB) highlighted in March, large fiscal tightening is required in order to meet the fiscal targets in 2012/13. But the minority centre-right government, which even with support from the extreme-right wing Freedom Party no longer has a majority in Parliament, is unlikely to implement the necessary measures in our opinion. Moreover, in order to secure the Netherlands’ ratification of the fiscal compact treaty, PM Rutte needs the support of the left-wing opposition parties, which are against additional austerity measures in the current environment.

As a result, we expect the general government deficit in the Netherlands to reach 4.5% of GDP in 2012 and 3.4% in 2013, above the EA averages of 3.4% of GDP and 2.6%, respectively. The reliance of Dutch banks on Eurosystem liquidity has also multiplied since mid-2011, along with that of Italian, French and Spanish banks. While we do not expect the Netherlands to lose its AAA rating in the near-term we expect that at least S&P will put the rating on negative outlook and that spreads to Bunds will widen.

Saudi Arabia and China To Jointly Build Major Oil Refinery

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Saudi Arabia and China have decided to jointly build a major oil refinery in the Red Sea port of Yanbu by 2014. The largest oil producer in the world and second largest oil consumer collaborate and the MSM ignores the story as China is now a larger customer than the US.

This mammoth new refinery is scheduled to be fully operational in the Red Sea port city of Yanbu by 2014.  Over the past several years, China has sought to aggressively expand trade with Saudi Arabia, and China now actually imports more oil from Saudi Arabia than the United States does.  In February, China imported 1.39 million barrels of oil per day from Saudi Arabia.  That was 39 percent higher than last February.  So why is this important?  Well, back in 1973 the United States and Saudi Arabia agreed that all oil sold by Saudi Arabia would be denominated in U.S. dollars.  This petrodollar system was adopted by almost the entire world and it has had great benefits for the U.S. economy.  But if China becomes Saudi Arabia’s most important trading partner, then why should Saudi Arabia continue to only sell oil in U.S. dollars?  And if the petrodollar system collapses, what is that going to mean for the U.S. economy?

At a time when the U.S. is actually losing refining capacity, this is a stunning development.

Yet the U.S. press has been largely silent about this.

Very curious.

But China is not just doing deals with Saudi Arabia.  China has also been striking deals with several other important oil producing nations.  The following comes from a recent article by Gregg Laskoski….

China’s investment in oil infrastructure and refining capacity is unparalleled. And more importantly, it executes a consistent strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon subordinate U.S. relations with the same countries.

Egypt is building its largest refinery ever with investment from China.

Shortly after the partnership with Egypt was announced, China signed a $23 billion agreement with Nigeria to construct three gasoline refineries and a fuel complex in Nigeria.

The China Daily reported it as follows

The $8.5 billion joint venture, which covers an area of about 5.2 million square meters, is already under construction. It will process 400,000 barrels of heavy crude oil per day. Aramco will hold a 62.5 percent stake in the plant while Sinopec will own the remaining 37.5 percent.

The deal “represents a strategic partnership in the refining industry between one of the main energy producers in Saudi Arabia and one of the world’s most important consumers”, said Aramco president and CEO Khalid Al-Falih.

Sinopec, the largest producer and supplier of oil products in Asia, is already Aramco’s top crude oil customer, according to Al-Falih. Sinopec Group chairman Fu Chengyu said the project propels the two companies’ strategic cooperation and contributes to enhancing the partnership between China and Saudi Arabia.

Al-Falih called the endeavor the latest chapter in a long history of cooperation, collaboration and trade between China and the Arabian Peninsula.

The setting up of the refinery would promote economic development, said Shen Yamei, a researcher with the China Institute of International Studies.

Watch out USA, looks like your place is being taken 🙂

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