Advertisements

France Is Latest To Sign Currency Swap With China. Who Is Next ?

Comments Off on France Is Latest To Sign Currency Swap With China. Who Is Next ?

France now looks to be the latest country to move away from the dollar as China is busy signing up countries to a currency swap line etc. Further evidence that the dollar will hold a much more minor role in future. Some countries to have signed up in the last few years are :

 

France intends to set up a currency swap line with China to make Paris a major offshore yuan trading hub in Europe, competing against London, the China Daily on Saturday cited Bank of France Governor Christian Noyer as saying.

Yuan deposits in Paris amount to 10 billion yuan ($1.6 billion), making it the second largest pool for the Chinese currency in Europe after London. Almost 10 percent of Sino-French trade is settled in yuan, also called the renminbi or RMB, according to French data cited by the official newspaper.

“The Bank of France has been working on ways to develop a RMB liquidity safety net in the euro area with due consideration of a supporting currency swap agreement with the People’s Bank of China,” Noyer told the English-language newspaper.

The yuan’s internationalization and bilateral financial cooperation could be among the main topics during French President Francois Hollande’s visit to China in late April, the paper said.

French Foreign Minister Laurent Fabius paid a two-day visit to Beijing this week.

The planned swap line would be the latest in a string of bilateral currency agreements that China has signed in the past three years to promote use of the yuan in trade and investment.

It followed a similar step by the Bank of England to set up a reciprocal three-year yuan-sterling swap line with China.

Britain, always anxious to maintain London’s status as Europe’s biggest financial center, launched an offshore yuan currency and bond market to great fanfare last year.

Source: ZeroHedge

Advertisements

Euro May Have To Devalue By Mid Year

Comments Off on Euro May Have To Devalue By Mid Year

In an original interview with Handelsblatt, Felix Zulauf founder of  Zulauf Asset Management in Switzerland has declared that the euro will most likely experience a crisis by mid year and will have to devalue.

euroThe Euro crisis will escalate again says Felix Zulauf. Swiss money manager is preparing for a collapse of the stock market. But even greater is his concern that angry citizens could take to the streets.

The markets were expecting the world economy to recover, but he suspected that neither the economy nor corporate earnings would develop as hoped. Once the distance between “wish” and “reality” became apparent, “it could cause a crash.”

Timeframe? This year. Optimism might hang in there for a while; the second quarter would be more problematic. Over time, downdrafts in some markets could reach 20% to 30%. Despite the incessant insistence by Eurozone politicians that the worst was over, he didn’t see “any normalization.” The structural problems were still there, they’ve only been hidden, “drowned temporarily in an ocean of new liquidity.”

“Look at the economic data,” he said. “There is no visible improvement.” As if to document his claim, the Eurozone Purchasing Managers Index was released. It dropped again after three months of upticks that had spawned gobs of hope that “the worst was over.” Business activity has now declined for a year and a half. New orders, a precursor for future activity, fell for the 19th month in a row. While Germany was barely in positive territory, France’s PMI crashed to a low not seen since March 2009 and was on a similar trajectory as in 2008—when it was heading into the trough of the financial crisis!

Sure, the financial markets calmed down, but only because the ECB pulled the “emergency brake” by declaring that it would finance bankrupt states so that the euro would survive. It was a signal for the banks to buy sovereign debt. Borrowing from the ECB at 1%, buying Spanish or Italian debt with yields above 5%, while the ECB took all the risks—”a great business for the banks,” he said. As a consequence, the banks were once again loaded up with sovereign debt. “The problems weren’t solved but kicked down the road,” he said.

Politicians would muddle through. Government debt would continue to rise. But next time something breaks, the pressure would come from citizens, he said. Standards of living have been deteriorating. Many people have lost their jobs. Real wages have declined. “We’ve sent millions into poverty!” People were discontent. And it was conceivable that “someday, they could go on the street and attack these policies.”

Mid year is the timframe for the euro to hit a crisis. Draghi will have no choice but to “lira-ize” the euro.

Countries were devaluing their currencies to gain an advantage. This “race to the bottom” could escalate to where governments would impose limits on free trade. The devaluation of the yen would hit other countries. In Germany, it would pressure automakers, machine-tool makers, and others. By midyear, he said, “Europe will reach a point when it can no longer live with this euro.”

It would have to be devalued. France’s President François Hollande was already agitating for it. “And he has to because the French economy is in a catastrophic condition. It’s no longer competitive. France is becoming the second Spain.”

But didn’t the ECB emphasize that the exchange rate was irrelevant for monetary policy? And wasn’t the Bundesbank resisting devaluation?

“The policies of the Bundesbank are unfortunately dead,” he said, and its representatives were only “allowed to bark, not bite.” Monetary policy at the ECB was made by Draghi, “an Italian.” He’d push for the “lira-ization of the euro,” he said, “not because he likes it, but because he has no choice.” It was the only way to keep the euro glued together. “Mrs. Merkel knows that too, but she cannot tell the truth; otherwise citizens would notice what’s going on.”

So what does Zulauf recommend ?

Given this dreary scenario, what could investors do? Long-term, equities were a good choice, he said, but this wasn’t the moment to buy.

Gold? That it was down from its peak a year and half ago was “normal,” he said. Currently, gold funds were forced to liquidate, which could cause sudden drops, but it also signified “the end of a movement.” He expected the correction to end by this spring. “Long-term, the uptrend is intact,” he said.

Bonds? They had a great run for 30 years but were now “totally overvalued”—in part due to central banks that had bought $10 trillion in debt “with freshly printed money” over the past five years. Debt markets were completely distorted, but central banks would be able to hold the bubble together for “a while longer.” So he admitted, “Last summer, I sold all long-term debt.”

But where the heck was he putting his money now? That’s when he made his sobering remark, “I’m sitting on cash.”

Source: Testosteronepit, Handelsblatt

France Is Bankrupt Admits French Minister

Comments Off on France Is Bankrupt Admits French Minister

The French Minister of Labour let the cat out of the bag and admitting France is bankrupt. Funny to see Hollande trying to put the cat back in. We can’t have the truth getting out there 😉

Things in France must not be very serious, because the French labor minister accidentally let the truth come out a little earlier today. As the Telegraph reports, France’s labour minister sent the country into a state of shock on Monday after he described the nation as “totally bankrupt.

Remember: France is one of the supposedly stable countries in Europe.

“Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage. “There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.” It appears that once one wipes out the propaganda and the smooth politico talk, things are bad and getting worse at Europe’s core. “Data from Banque de France showed earlier this month that a flight of capital has already left the country amid concerns that France’s Socialist leader intends to soak the rich and businesses. The actor Gérard Depardieu has renounced his French citizenship and decamped to Russia in protest, while David Cameron said Britain will “roll out the red carpet” to attract wealthy individuals. Pierre Moscovici, the finance minister, said the comments by Mr Sapin were “inappropriate”.”

Source: ZeroHedge

Pressure Mounts On Syria As US And French Troops Prepare To Enter

Comments Off on Pressure Mounts On Syria As US And French Troops Prepare To Enter

The war rhetoric on Syria has mounted in recent days and the latest news from the Presstitutes is the Assad regime is ready to use chemical weapons. Reports are now surfacing of US and French troops massing on the Syria border.

The 8 day mini war between Israel and Gaza has come and gone and any attempts at provoking a wider regional conflict, one involving Iran (if indeed this was the intention), have failed. Which means the fallback plan – Syria – is back in play. And sure enough, as both the most recent naval map update, which shows a US aircraft carrier and a big deck amphibious warfare ship, both of which house thousands of troops and numerous offensive aircraft, and an RT news flash, indicating that thousands of troops have amassed near the Syrian shore confirm, the time for a US invasion may be near. The alibi? “Chemical weapons” of mass or non-mass destruction. In other words the Iraq playbook all over again.

From RT

The USS Eisenhower, an American aircraft carrier that holds eight fighter bomber squadrons and 8,000 men, arrived at the Syrian coast yesterday in the midst of a heavy storm, indicating US preparation for a potential ground intervention.

While the Obama administration has not announced any sort of American-led military intervention in the war-torn country, the US is now ready to launch such action “within days” if Syrian President Bashar al-Assad decides to use chemical weapons against the opposition, the Times reports.

Some have suggested that the Assad regime may use chemical weapons against the opposition fighters in the coming days or weeks.

“We have (US) special operations forces at the right posture, they don’t have to be sent,” an unnamed US official told The Australian, which suggested that US military troops are already near Syria and ready to intervene in the conflict, if necessary.

 

The alibi used by the “democratic” press to justify what may imminently be a land invasion? Chemical weapons:

The Syrian military is prepared to use chemical weapons against its own people and is awaiting final orders from President Bashar Assad, U.S. officials told NBC News on Wednesday.

The military has loaded the precursor chemicals for sarin, a deadly nerve gas, into aerial bombs that could be dropped onto the Syrian people from dozens of fighter-bombers, the officials said.

As recently as Tuesday, officials had said there was as yet no evidence that the process of mixing the “precursor” chemicals had begun. But Wednesday, they said their worst fears had been confirmed: The nerve agents were locked and loaded inside the bombs.

Sarin is an extraordinarily lethal agent. Iraqi President Saddam Hussein’s forces killed 5,000 Kurds with a single sarin attack on Halabja in 1988.

U.S. officials stressed that as of now, the sarin bombs hadn’t been loaded onto planes and that Assad hadn’t issued a final order to use them. But if he does, one of the officials said, “there’s little the outside world can do to stop it.”

 

Tangentially, remember when Iraq was supposed to have warehouses full of “WMDs”, which story ended up being a fabricated lie. But at least Turkey is ready: after all NATO has already handed over various Patriot missiles to prevent a Syrian retaliation against the ruling Assad regime.

And just to make sure the escalation is complete, the French are coming.

France is preparing its special forces for a mission in war-torn Syria, French weekly magazine Le Point reports.

The mission would only involve a relatively small amount of special forces, and a number of NATO countries — including the UK and the US — would be involved. The mission would be modelled on the Western intervention in Libya, the magazine reports.

The action appears to be in response to fears that the regime is planning on using chemical weapons in the conflict. Earlier this week one US official told reporters that it was believed Bashar al-Assad’s forces had moved two key components of a deadly nerve gas in preparation for an attack (a later report refuted this, however).

Le Point says a large ground operation “is out of the question” and that a smaller action aimed largely at securing chemical weapon stockpiles.

Secretary of State Hillary Clinton today vowed a swift response if Assad’s regime used chemical weapons.

So putting it all together, it appears that once again the imminent escalation play is one where an antagonized Syria is forced to strike back, an act which “hopefully” will get Iran involved in the fray, and from there it is smooth sailing for both Israel and the “democratic” forces of the world.

The only wild card: Russia and China, both of which have made it very clear they have quite strategic interests in the Syria region on numerous prior occasions.

Source: ZeroHedge

Europe Sinking Fast

Comments Off on Europe Sinking Fast

The good being dragged down by the bad or the domino affect. Call it what you will as peakprosperity take a look at the growing crisis in Europe.

You don’t have to be an economic genius to understand that the perpetual uncertainty over the Eurozone’s future has led to a widespread freeze on industrial investment and development. Industrial production is collapsing at an accelerating rate, falling 7% year-on-year in Spain and Greece, 4.8% in Italy, and 2.1% in France. The downtrends for industrial production are readily apparent in the chart below:

The businesses that are doing well are in the stronger countries.

The businesses that are doing well (and there are some) are those businesses with strong balance sheets and solid export order books for non-Eurozone markets; unfortunately, they are concentrated in countries like Germany, Holland, Finland, and Austria. They are not located where they can contribute to economic progress in Spain, Italy, Greece, or France, and so they are not adding to the tax revenue desperately sought by those governments.

Then there is always Greece.

Despite the recent deal worked out with Greece, the old cliché about kicking the can down the road is close to becoming no longer possible. Deferring the inevitable is only a political option so long as there is no immediate damage from doing so. But this is no longer true in the Eurozone, where political procrastination is now identifiably responsible for social unrest. It’s not just the trade unionists in revolt; now it is the middle classes as well. Doctors and teachers in Greece do not get paid anymore, and it is going that way in Spain, with regional governments surviving by simply not paying their bills. Government is destroying society, proving the falsity of the heretofore accepted belief (in Europe, anyway) that government makes society better. But then, anyone who has bothered to read Hayek’s The Road to Serfdom will not be surprised.

What was not anticipated in Hayek’s masterpiece is the divided state that is emerging. Greece is part of a larger EU and Eurozone bureaucracy and cannot achieve statist ends by turning her citizens into serfs. The government itself is subservient to higher authorities and is now having that medicine applied to it by its peers. Every visit by the Troika (collectively the European Central Bank (ECB), International Monetary Fund (IMF), and the European Commission) screws the Greek government further towards its own serfdom.

Keep in mind just one thing: Greece is utterly broke and cannot escape that fact. All of the posturing by the three Troika members is designed to avoid facing this reality. The political elite drive this party line and rigidly conform to it. However, there is increasing unease among powerful elements in the background, and in particular, sound money advocates in the Bundesbank are deliberately pushing for different solutions than those pursued to date.

Weidmann: No solution for Greece.

Jens Weidmann, who is the Bundesbank’s chief and its representative on the ECB’s Governing Council, is remarkably outspoken on this issue. In a recent interview with the Rheinishe Post, Weidmann pointed out that the ECB and other national central banks in the Eurozone are now Greece’s largest creditors and cannot take a haircut on Greek debt. Furthermore, they cannot write off this debt, since that would amount to monetary financing, which is forbidden under Eurozone rules. So, he concludes, the ECB is trapped.

Is Greece the dry run for the others?

The concern, obviously, is that Greece is a dry run for Spain and Italy. It is also, as I argue below, a dry run for France, which is in terrible shape and deteriorating rapidly. This is why the protector of German savers, Herr Weidmann, is worried. He is signalling that the precedents set in dealing with Greece will ultimately destroy Germany.

The ideal for the EuroZone would be

In my last article for PeakProsperity.com, I argued that Germany, not Greece, should and will leave the Eurozone, perhaps taking Holland, Finland, Luxembourg, and Austria with her. It has always been clear that this is the last thing the political elite would consider, but unless Mrs Merkel reconsiders her position, she will be overruled by the Bundesbank, and perhaps also her own finance minister, Wolfgang Schäuble, who is known to be extremely concerned.

ECB has manipulated bonds in an effort to keep the price low but this can’t last forever.

The only reason these bond yields have fallen to thee low levels is because the ECB forced them there. But when these yields rise, which they probably will because there is little doubt the ECB’s manipulation cannot succeed for very long, the accumulation of TARGET2 imbalances on the Bundesbank’s book will quickly exceed €1 trillion.

And there is a further problem. One of the reasons French ten-year government bond yields are only 2.1%, and have even been briefly negative for her six-month bills, is that some of the capital flight out of Spain and Italy has been deposited in French banks, only to be then lent on to the French government.

France itself is going to be a major problem.

But France, as I argue later in Part II of this article, is itself a basket case, only not yet widely recognised as such because it has benefited from this capital flight from Spain and Italy.

At some stage, probably in the next six months, these accumulated deposits in the French banks will, in turn, seek a safer home elsewhere – and where else but in the German banks? And so the Bundesbank faces the prospect of a second wave of capital flight and escalating TARGET2 imbalances.

Of course, this would not matter if it was certain that no one was leaving the Eurozone, and the TARGET2 system was constructed on the assumption that no one ever would. One could argue that Greece leaving would not be too much of a problem, other than the precedent it would create. This is why it is so important to keep Spain and Italy in the system.

…..

After all, TARGET2 is a settlement system with offsetting cash creation and destruction carried out by the national central banks on delegation from the ECB. But nonetheless, it is understandable that the sound-money guardians at the Bundesbank are increasingly alarmed at the progression of events.

To borrow from Dirty Harry, it leaves those tied to Europe’s future pondering a seminal question: “Do I feel lucky?” Well, do ya?

Source: peakprosperity.com

Hollande Is In Big Trouble In France

Comments Off on Hollande Is In Big Trouble In France

It hasn’t been long since the French Presidential election and dissatisfaction with Hollande is rife. The electorate these days want instant action to the pre-election lies promises. Of course politicians only say what you want to hear to get in but usually it takes a lot longer for people to get this upset. Having said that, the french are not noted for their patience.

France is mired in a stagnating economy. The private sector is under pressure, auto manufacturing is heading into a depression. Unemployment hit a 13-year high of 10.2%, leaving over 3 million people out of work. Youth unemployment of 22.7%, bad as it is, belies the catastrophic jobs situation for young people in ghetto-like enclaves, such as the northern suburbs of Paris. The “solution”—fabricating 150,000 jobs for the young at taxpayers’ expense—has been tried before, with little success. Gasoline and diesel prices are hovering near record highs. So there are a lot of very unhappy campers.

In a BVA poll, 55% of the respondents were dissatisfied with President François Hollande’s efforts to tackle the economic crisis. By comparison, only 31% were dissatisfied with Nicolas Sarkozy in 2007 at the end of his honeymoon. Devastatingly, for a socialist: 57% believed that he didn’t distribute the “efforts” equitably—same as Sarkozy, the president of the rich.

People are desperate for solutions now but Hollande is failing to deliver fast enough.

The problem with voters is Hollande’s “inaction,” after some initial half-measures, such as the partial reinstatement of retirement at 60 and raising back-to-school aid for families. Now people “seriously doubt his ability to change things.” They believe that the government spends its time trying to “unravel Sarkozy’s legacy” and “sitting around in meetings,” rather than making decisions.

In an OpinionWay poll, satisfaction with the job Hollande is doing crashed a vertigo-inducing 14 points from 60% in July to 46% in September—compared to the 64% satisfaction score voters heaped on Sarkozy in 2007. And 58% believed Hollande, after four months in office, is already going “in the wrong direction.”

People have the “strange impression” that the government is “only now becoming aware of the crisis,” and they’re worried that the government lacks “clear vision” and “a war plan” to combat it, said Bruno Jeanbart, deputy general director of OpinionWay. Anxiety is engulfing the middle class, and it pummeled Hollande with a 19-point drop in the satisfaction score. During his campaign he’d promised that he’d demand “efforts” from the rich and from large corporations, but now the middle class fears that it will be asked to step up to the plate and pay even more in taxes.

Hollande was so worried, he took to the tv screens to try to appease the people.

To turn things around, Hollande addressed the nation on Sunday night TV (TF1) … and lowered growth expectations for 2012 from the already measly 1.2% to 0.8%. To keep the deficit in line, he’d have to come up with €33 billion in new measures. He’d “save” €10 billion in public service—though he’d already committed to hiring more civil servants for education, law enforcement, and the decrepit justice system. Deep unnamed cuts would have to be made elsewhere. A mystery, because the resulting strikes would paralyze France for weeks.

And he outlined tax measures, some of which he’d already proposed during his campaign, to extract another €20 billion from households and businesses—the 75% top income tax bracket among them. Once again, he emphasized to his incredulous middle-class compatriots that these taxes would hit only the largest corporations and richest households.

Already his policies are causing problems with the predictable result of the wealthy avoiding the tax hikes by taking a hike. Who could have forseen that one coming?

Hence the explosive impact of the “affaire Arnault,” as it has come to be called. Bernard Arnault, richest man in France, fourth richest man in the world, top honcho at luxury retailer LVMH, and close associate of Sarkozy, has applied for Belgian citizenship.

France gasped. Liberation ran a front-page article, “Hit the Road, Rich Idiot.” It lambasted him for his tax-avoidance strategy and called him a “deserter.” Arnault decided to sue the paper. Economy Minister Pierre Moscovici said on BFMTV that he was “shocked” and called for renegotiation of the tax treaties with Belgium, Luxembourg, and Switzerland (unlike Americans, who are taxed on their worldwide income, French citizens are not taxed in France if they don’t live there).

Who would want to be a politician. 😉

Source: TestosteronePit

Eurozone Monetary System Bust And On Verge Of Collapse

Comments Off on Eurozone Monetary System Bust And On Verge Of Collapse

If you needed anymore proof that the euro is on the verge of collapse, Yanis Varoufakis’s article should help confirm it. With the ECB holding interest rates at near zero and having pumped over 1 trillion into the system via LTRO, Christian Noyer (governor of the Central Bank of France) provides the strongest hint yet that nothing has worked.

Under normal conditions, the interest rates that you and I must pay on a home loan, a car loan, our credit card, a business loan are pegged onto two crucial rates. One is the rate that banks charge one another in order to borrow from each other. The other is the Central Bank’s overnight rate. Alas, neither of these interest rates matter during this Crisis. While such ‘official’ rates are tending to zero (as Central Banks try to squeeze the costs of borrowing to nothing), the interest rates people and firms pay are much, much higher and track indices of fear and subjective estimates of the Eurozone’s disintegration.

After 2008, banks failed to lend to each other.

Following the Crash of 2008, banks stopped lending to each other, fearful that they will never get their money back (as most banks became, in effect, insolvent). Thus, the interest rate at which they lend to one another simply ceased being a meaningful price (just like the prices of CDOs, following Lehman’s collapse, lost their meaning as no one bought or sold those pieces of paper). The truly scandalous aspect of the Libor scandal of recent weeks is that banks continued to use (and ‘fix’) an estimate of the interest rate at which they lent to each other (for the purposes of fixing all other interest rates; e.g. mortgage and credit card rates) when they did not lend to each other any more…

The ECB took action by lowering interest rates and stopped paying interest on overnight deposits hoping to force banks to lend.

the ECB lowered its key interest rate to 0.75% – the lowest level since the euro’s inception. At the same time, the ECB did something else that is extraordinary by its own standards: it reduced to zero the interest rate it paid private banks for depositing money with the ECB.

…….

and having no incentive whatsoever to park their idle capital with the ECB, one might have hoped (as the ECB’s President, Mr Mario Draghi, clearly did) that banks would be more willing to lend and at a lower interest rate. However, such hopes would have been baseless.

Noyer admits the system is bust.

“We are currently observing a failure of the transmission mechanism of monetary policy. From the markets’ perspective, the interest rate facing individual private banks depends on the funding costs of the state where they are domiciled and not on the ECB overnight interest rate… Hence the monetary policy transmission mechanism does not work.” Now, this is an admission that should be on every headline in Europe, given that it comes from a governor of the Central Bank of the Eurozone’s second largest economy.

The admission gets even better. He alludes to the fact that LTRO did not have the desired affect.

“We did our best to face up to this phenomenon which is unacceptable for a Central Bank in a monetary union.” What did he mean by that? The clue comes from his follow up sentence: “In future we cannot rely endlessly on a system where the Central Bank is injecting massive liquidity to the banking system, boosting hugely its balance sheet.” Clearly, Mr Noyer was referring to the LTRO; the ECB’s attempt earlier in the year to ‘fix’ the ‘transmission mechanism’ by pumping 1 trillion euros of liquidity into the Eurozone’s banks. Reading between the lines, it is clear that, at least according to Noyer, this ploy failed (as some of us kept saying it would).

You can’t jump start a dead battery.

In short, the fear of a disintegration of the Eurozone (that is aided and abetted by silly talk of Greece’s and Portugal’s expulsion) has broken the umbilical cord that normally connects the ECB’s overnight rate with actual borrowing costs of the private sector. Now, the later reflect the fear that the member-state in which the firm or the household are will not be able to refinance itself. In a never-ending circle this fear ensures that the said member-state will not be able to refinance itself and, crucially, guarantees the ECB’s failure to lower interest rates even when it pushes its official rates to zero. This is what a monetary union on the verge of collapse looks like.

Source: http://yanisvaroufakis.eu/2012/07/17/it-is-now-official-the-eurozones-monetary-transmission-system-is-broken/

Older Entries

%d bloggers like this: