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U.S. dollar share of global currency reserves fall further - IMF

(Reuters) - The U.S. dollar's share of currency reserves reported to the International Monetary Fund fell in first quarter of 2018 to a fresh four-year low, while euro, yuan and sterling's shares of reserves increased, according to the latest data from the International Monetary Fund.

The share of dollar reserves shrank for five consecutive quarters as the greenback weakened in the first three months of 2018 on expectations faster growth outside the United States and bets that other major central banks would consider reducing stimulus. Still the dollar has remained the biggest reserve currency by far.

However, the dollar strengthened in the second quarter on fears about a global trade war and the European Central Bank signaling it would not raise interest rates until latter half of 2019.

Global reserves are assets of central banks held in different currencies, mainly used to support their liabilities. Central banks sometimes have used reserves to help support their respective currencies.

Reserves held in U.S. dollars climbed to $6.499 trillion, or 62.48 percent of allocated reserves, in the first quarter. This compared with $6.282 trillion, or 62.72 percent of allocated reserves, in the fourth quarter of 2017. The share of U.S. dollar reserves contracted to its smallest level since reaching 61.24 percent in the fourth quarter of 2013, IMF data released late on Friday showed.

Ranked second behind the greenback, the euro's share of global reserves reached 20.39 percent in the fourth quarter, up from 20.15 percent in the fourth quarter. This was its largest share since the final quarter of 2014, but well below the single currency's peak share of reserves at 28 percent in 2009.

China's share of allocated currency reserves increased for a third straight quarter to 1.39 percent. The IMF had reported the yuan's share of central bank holdings for the first time in the fourth quarter of 2016.

Sterling's share of currency reserves moved up to 4.68 percent in the first quarter, the biggest since the fourth quarter of 2015, IMF data showed.

The yen's share of currency reserves retreated to 4.81 percent from prior quarter's 4.89 percent, which was its biggest since the fourth quarter of 2002.

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China: Washington opens fire on the world with its trade threats

 2018-07-05 10:08:36 0 comments

fit

 

China said the United States opened fire on the world with its trade threats, vowing to respond to immediate US measures that would come into effect.

The spokesman for the Ministry of Commerce of China warned at a weekly press conference on Thursday that the proposed US tariffs would harm international supply chains, including foreign companies in Beijing, quoting Reuters.

In the event of US tariffs, China will add tariffs to companies from all countries, including Chinese and US companies, he added.

The United States will start applying tariffs on goods worth 34 billion dollars from China.

"The US measures are basically attacking the global supply and supply," he said. "More clearly, the United States is opening fire on the entire world, including Washington itself."

China said yesterday it would not launch the first shot in a trade war with the United States and would not be the first to impose customs duties.

 

http://albaghdadiyagroup.com/news/economy/alsen-oashntn-tfth-alnar-al-alaalm-bthdedatha-altgaret

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China Rejects US "Blackmail" On Eve Of Trade War, Vows To Fight Back

Profile picture for user Tyler Durden
Thu, 07/05/2018 - 08:12

With just hours left until the US officially declares trade war on China at midnight on Friday, when the Trump admin enacts tariffs on $34bn in Chinese products and Beijing retaliates instantly in kindChina on Thursday rejected "threats and blackmail" ahead of the tariff hike, striking the usual defiant stance in the dispute which companies have warned could flare into a full-blown trade war and chill the global economy.

A government spokesman said Beijing will defend itself if U.S. President Donald Trump goes ahead Friday with plans to raise duties on Chinese goods in the escalating conflict over technology policy. The Chinese government has already issued a list of U.S. goods for retaliation, but the Commerce Ministry said it will wait to see what Washington does.

“China will not bow in the face of threats and blackmail, nor will it be shaken in its resolve to defend global free trade,” said ministry spokesman Gao Feng at a news conference.

gao%20feng.jpg

“China will never fire the first shot,” Gao said. “However, if the United States adopts taxation measures, China will be forced to fight back to defend the core interests of the nation and the interests of the people.”

As for shooting, Gao said that the "U.S. is shooting itself in the foot and hurting the world" with its tariff hikes.

Friday’s tariff hikes are the first stage in threatened U.S. increases on up to $450 billion of imports from China over complaints Beijing steals or pressures foreign companies to hand over technology. According to Goldman calculations, if the full scope of Trump's proposed protectionist measures is implemented, this would raise the total amount of tariffs the Trump administration has proposed from around $500bn to nearly $800bn, or about 4 times the cumulative amount that had been proposed as of a few month ago, before President Trump proposed tariffs on global auto imports on national security grounds.

US%20China%20trade%20war%201%20chart.jpg

And while Xi’s government has expressed confidence China can hold out against U.S. pressure, but companies and investors are uneasy. Trade worries are adding to anxiety over cooling economic growth and tighter lending controls that have hit real estate and other industries. The main Chinese stock market index has tumbled 12 percent over the past month.

According to AP, Chinese exporters of tools, lighting and appliances say U.S. orders have shrunk as customers wait to see what will happen to prices.

Ningbo Top East Technology Co., which makes soldering irons in Ningbo, south of Shanghai, used to export 30 percent of its output to the United States, according to its general manager, Tong Feibing. He said American orders have fallen 30 to 50 percent compared with a year ago.

The company wants customers to split the cost of the tariff hike, but few are willing, said Tong.

“There is a chance the company will lose money and might go bankrupt,” said Tong. “I will do whatever I can, including layoffs.”

China's ruling Communist Party has insisted on making changes at its own pace while sticking to a state-led industrial strategy seen as the path to prosperity and global influence. Officials in Beijing reject accusations of theft and say foreign companies have no obligation to hand over technology. But rules on auto manufacturing, pharmaceuticals and other industries require companies to operate through state-owned Chinese partners and share know-how with potential competitors or teach them how to develop their own.

Beijing has announced changes this year including easing limits on foreign ownership in insurance and some other fields. But none directly addresses the complaints that are fueling its conflict with Washington.

The U.S. also has irked some of its closest allies by hiking import duties on steel, aluminum and autos from Europe, Japan, Canada and Mexico.

“The global trade conflict is at risk of a serious escalation,” said Adam Slater of Oxford Economics in a report.

So far tariffs imposed by all sides affect about $60 billion of goods, or 0.3% of world trade, according to Slater. He said that would rise to a full 4% of the global total if Washington, Beijing and other governments follow through on tariff threats.

Ironically, for all the bluster and counter-American rhetoric, yesterday Reuters reports that the EU flatly rejected a Chinese proposal to form s strategic alliance between the two entities and take on the US. The reason for Europe's skepticism? The admission behind the scenes that Trump is correct in his blame of Beijing, and also the complete lack of faith in Brussels that anything China promises to do it will actually implement.

https://www.zerohedge.com/news/2018-07-05/china-rejects-us-blackmail-eve-trade-war-vows-fight-back

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Looming Dollar Shortage Getting Worse As Emerging Markets Implode

Profile picture for user Tyler Durden
Thu, 07/05/2018 - 13:50

Authored by Adem Tumerkan via Palisade-Research.com,

One of the most important macro-situations that’s developing right now is the looming U.S. dollar shortage.

I don’t mean in the sense that banks don’t have enough dollars to lend out – I’m talking about the foreign sovereign markets.

Here are some of the things that’s causing liquidity to dry up...

1. Soaring U.S. deficits – the United States’ need for constant funding is requiring huge amounts of capital

2. A strengthening U.S. Dollar – which is weakening the rest of the worlds currencies

3. Rising U.S. short-term rates and LIBOR rates – courtesy of the Federal Reserve’s tightening 

4. The Fed’s quantitative tightening program – unwinding their balance sheet by selling bonds

These four things are making global markets extremely fragile. . .

I’ve written about this dollar shortage before – but things are getting much worse. 

As a recap of why this all matters – when the U.S. buys goods from abroad, they are taking in goods and sending out dollars. Otherwise said, they are selling dollars out of the country in return for goods.

Those countries that sold to America now have dollars in return. But since countries don’t have a mattress to store their money under – they must find liquid and ‘safe’ places to put it.

With the dollar as the world’s reserve currency – and U.S. treasury market being the most liquid – countries usually take the dollars and funnel them back into the U.S. via buying bonds.

Since the U.S. is a net-debtor – inflows of new money is constantly required to pay out outstanding bills. So there’s always fresh debt that foreigners can buy.

And if you haven’t checked lately, the national debt is over $21 trillion – and growing faster. The latest Congressional Budget Office (CBO) report stated that at the current rate – U.S. debt-to-GDP will be over 100% by 2028 (if not sooner).

So how does this tie into a dollar shortage?

Let me break it down...

The always-rapidly-growing U.S. deficit requires constant funding from foreigners. But with the Federal Reserve raising rates and unwinding their balance sheet through Quantitative Tightening (QT) – meaning they’re sucking money out of the banking system.

US-dolalr-index1.png

These two situations are creating the shortage abroad. The U.S. Treasury’s soaking up more dollars at a time when the Fed is sucking capital out of the economy. 

Not too mention the strengthening dollar and higher short-term yields are making it more difficult for foreigners to borrow in dollars. Especially at a time when Emerging Market’s are imploding. 

And as we know – while the dollar gets more expensive – other currencies are getting weaker.

Here’s some of the largest Asian economies and how much their currencies have weakened against the dollar. . .

asian_dolalr_squeeze.png

Unfortunately – foreign Central Banks have only limited options of what they can do to protect their currencies. . .

One – they can raise rates to defend their local currency. The idea is that if they offer higher interest rates, investors will park money in the country.

But raising rates will slow their growth down and hurt the nations debtors. And with Trump’s trade policies causing concerns for export heavy economies – mainly the Emerging Markets – making borrowers pay more interest isn’t a good thing.

Two – they can sell their dollar reserves instead. The Central Bank can sell their reserves at a discount on the Foreign Exchange market. And buy their local currency in return – pushing the USD down against their own currency.

The problem with this option is that it’s very costly and risky. . .

All the years of surpluses it took for them to build up those dollar reserves can disappear in a blink of an eye. And what do they get in return for all that cost? Temporary stability of their currency until they run out of dollars to sell. This is what happened in the 1998 ‘Asian Contagion’ crisis that decimated Asian economies.

And it appears things are already approaching ‘critical mass’ as foreign Central Banks grow concerned with the Fed’s tightening. Here are a couple of examples. . .

The Vietnamese Central Bank recently announced that they’re willing to intervene in the foreign exchange market to protect the stability of their local currency – the Vietnamese Dong (VND) – which just hit a record low.

This means they’re using ‘Option Two’ – selling their dollar reserves (pushing the USD Forex down) and buying the Dong on the open market (pushing the VND up). 

This will ‘stabilize’ their currency’s value – that is, until they run out of dollars. . .

Another example – the Reserve Bank of India (RBI) governor – Urjit Patel – penned a piece in the Financial Times urging the Fed to slow down their tightening to prevent further chaos in the emerging markets. 

Indonesia’s new central bank chief shared the RBI’s feelings – calling on the Fed to be “more mindful of the global repercussions of policy tightening.”

With the U.S. Treasury requiring significant funding from abroad. And the Fed raising rates while pulling dollars out of the economy via Quantitative Tightening – this is the foundation of a dollar shortage.

The soaring U.S. dollar, Emerging Market chaos, and depreciating Asian currencies are all effects from this.

That means global economies and stock markets will grow far more fragile – until the Fed inevitably reverses their tightening to re-liquidize global markets. 

As usual – expect things to get worse before they get better. 

https://www.zerohedge.com/news/2018-07-05/looming-dollar-shortage-getting-worse-emerging-markets-implode

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President Donald Trump’s tariffs have caused some champions of globalization to predict the decline of the dollar BUXX, -0.28%  as the global currency as other nations take the leadership in cobbling together free trade areas—for example, the TTP less the United States in the Pacific, and China’s attempt to cobble together economic cooperation arrangements in the region.

Central banks around the world hold major foreign currencies—dollars, euros, yen and so forth—to back up their fiat money. Gold GCQ8, +0.85%  can’t be mined fast enough at reasonable cost to accommodate economic growth, and its value—what it buys in soybeans and software—fluctuates much more than major currencies.

As New York offers a deep, sophisticated and reliable capital market and traders can buy virtually anything in America, central banks must hold dollars above all other major currencies to be taken seriously by private investors.

The dollar accounts for 63% of central-bank holdings, followed by the euro EURUSD, +0.3576%  at 20%, even though the U.S. economy is smaller than the eurozone.

Most investors worldwide either buy securities denominated in their home currencies or in dollars. After all, Mexican pensioners and businesses pay their expenses in pesos USDMXN, -0.1601%  but if their home currency drops precipitously in value thanks to a surge in domestic inflation, then a hoard of dollar bonds or CDs is mighty useful insurance.

Consequently, the dollar’s share of cross-border debt financing has jumped from about 45% to over 63% since 2008.

 

Globalization and digitalization have created more intense trading relationships among once-distant and unrelated nations. For example, Chile recently signed a trade agreement with Indonesia but their two-way trade is too small to support a currency market with derivatives that insure against unexpected exchange rate fluctuations. The answer is simple—import contracts can be written in dollars, and traders can purchase forward contracts in the peso-dollar   CLPUSD, +0.030455%  and rupiah-dollar IDRUSD, +0.34263363%  markets to off load risk.

The dollar has gained an outsized role for the same reason English is increasingly the global language. In trade as on the internet, it is easier to have a common denominator—America’s currency and mother tongue.

Chances are those Chilean and Indonesian traders write contracts in English too.

Despite euro aspirations to be a global currency, 23% of German contracts for imports are denominated in dollars even though only 6% are shipped from America.

Overall, about 40% of imports worldwide are invoiced in dollars even though the United States accounts for only about one-tenth of global sales.

Foreign multinationals and trading houses store hoards of dollars to conduct business and hedge risk. Foreign banks take dollar deposits, pay interest on those in dollars and offer dollar loans. Foreign governments and businesses issue dollar-denominated bonds and virtually all of this is electronic, much of it unregulated and most importantly, the result of private-sector choice.

Sorry Bitcoin BTCUSD, -0.46%   , offshore dollars were a private currency for years—largely virtual, without official government sanction and lightly regulated—long before initial coin offerings came along. And it’s run by much more trustworthy and careful people.

Fact is no other currency has the global utility and supporting infrastructure of the greenback.

The dollar stands on top a strong banking system, while the next logical candidates, the euro and yuan USDCNH, -0.6873%   do not. Germany’s largest bank, Deutsche Bank DB, +2.96%  , is a basket case, Italian banks are well, very Italian, Chinese banks sit on a mountain of bad state enterprise and corporate debt, and private property is not safe in the Middle Kingdom.

The U.K. pound GBPUSD, +0.4440%  and Japanese yen USDJPY, -0.02%  sit on economies that don’t provide the same mass and array of goods and services. And if Brexit proceeds, the euro becomes one national election away from collapsing—the Italians could conclude the single currency is a manifestation of German economic imperialism.

All this did not happen by government edict—it’s King Dollar by acclaim of private traders, investors and plain old folks like you and me.

And all along you thought the Federal Reserve made the greenback what it is.

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Will Russia and Turkey knock the last nail into the coffin of dollar dominance?

 Will Russia and Turkey knock the last nail into the coffin of dollar dominance?

 

09 Jul 2018 01:21 PM

Edit نهى النحاس

Direct: Since December 2017 Russia has reduced its holdings of US government bonds by more than half in favor of increasing the share of gold in its international reserves.

An analysis published by Bloomberg View suggests that while this is understandable behavior by a country that must deal with unexpected sanctions by the United States, it is also part of a global trend.

Foreign governments and international organizations have become a declining share of US debt repayments, and some economies have in recent years sharply increased gold holdings in their reserves.

Russia's contribution to American religion

Russia's holdings of US bonds fell to $ 48.7 billion in April from $ 102.2 billion in December 2017, a sharp decline.

But the decline in Russia's holdings of US government bonds was not a crisis for the United States. Moscow's investment in US debt is very small compared to countries such as Japan, China, Brazil and some European countries.

The United States, whose debt is close to $ 21 trillion, can not see fluctuations in tens of millions of dollars as a result of efforts by a country seeking to escape the dollar and combat negative economic effects.

Is this a sign of concern for the United States?

The United States can calm itself down and gain a certain sense of security as it monitors the increasing share of foreigners in its financial debt in absolute terms, while the dollar is slowly declining as a share of official foreign exchange reserves.

According to IMF data, the US currency represented 62.7 percent of the country's foreign reserves, down from 64.59 percent in 2014.

But the euro share also saw a decline to 20.15%, from 21.57%.

However, the United States has some concerns when it comes to dominating the official international reserves of other countries. In relative terms, governments and central banks are less concerned about the ballooning debt of the United States.

Why is there a caution against American debt?

US debt is growing faster than global international reserves, partly explained by the decline in the role of foreign countries in terms of US government funding.

Borrowing growth is faster than global savings . There is an abundance of US debt, but countries do not care to increase the share of those debts in their reserves.

Instead, the share of US bonds in reserves fell to 25.4 percent from 28.1 percent in 2008. By contrast, gold's share had stabilized at 11 percent over the same period, according to the World Gold Council.

This is in part due to the tendency of some authorities to own gold. Along with Russia in this direction are Kazakhstan and Turkey, which recently joined with the belief of President Recep Tayyip Erdogan that the West seeks to punish his country because of the policy of strengthening sovereignty.

 Authorities obsession with gold

Russia, Turkey and Kazakhstan account for 50% of net gold purchases by central banks in the past five years. The major European economies, which have long retained gold as the largest component of their reserves, have kept their stakes stable rather than the additional investment in dollar assets.

In the euro area, including the European Central Bank, countries put 55 percent of their reserves in gold, the same as in 2008.

More recently, total demand for gold fell, falling by 7% yoy in the first quarter of this year as a result of a drop in private investment demand.

Central banks bought 116.5 tonnes of gold in the first three months of 2018, the highest in any quarter since 2014, and 42 percent year-on-year.

For Turkey and Russia, the decision to cut foreign currency holdings appears to be strategic. Like Russia, Turkey recently moved quickly outside the US debt, with a 38 percent reduction since October 2017.

The reason why many countries have not followed the same direction as Turkey and Russia on the background of their concern about the economic policies of US President Donald Trump and his wars, isolationism and the relatively weak US dollar is that the performance of gold is weaker than the US dollar.

Foreign reserve officials in most countries act increasingly like investors as they seek positive returns. This means that politically motivated and politically motivated moves for gold are not the motive for most of them. But when the precious metal starts to rise, perhaps in reaction to accelerating inflation, .

Meanwhile, reserve managers are looking for other non-dollar assets, with all but one of the reserve currencies, except for the dollar, rising slightly since Trump's election.

This is a very shy shift so far, but that should not fool US policymakers. The US dollar has dominated the international reserves for nearly a century, but in relative terms, that is a very short period.

The pound was the preferred currency before the dollar and before it the French franc.

It is unreasonable for the world to continue to buy US debt at the same levels, regardless of US policies and the changing perceptions of the political and economic power of the United States. Therefore, the Russian and Turkish transformation into gold could be a prelude to larger global transformations.

https://www.mubasher.info/news/3309806/هل-تدق-روسيا-وتركيا-المسمار-الأخير-في-نعش-هيمنة-الدولار-

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IMHO, not a sign of concern for the US. Merely a sign of Russia's intention to increase it's gold reserves at the expense of China in the near future; and this way lower the value of the Yuan while also messing with China. Similar to the same way they were messing with the USD in 1967 or 1968 causing Nixion to take the USD off of the gold standard. Us remember the largest holder of US debt ... T Bill is domestic US citizens, Unions, companies and local governments.  

Edited by new york kevin
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Pakistan’s central bank has increased the amount of red tape needed to access dollars, according to people with knowledge of the matter, as the nation’s foreign-exchange reserves drop at the fastest pace in Asia.

The State Bank of Pakistan has told banks after a currency devaluation last month that importers will need to inform the regulator of any requests for the U.S. currency a day in advance and fill out a form for import payments, according to people familiar with the matter, who asked not to be identified as they are not authorized to speak to the media. The measure applies to transactions that are not backed by a bank’s letter of credit, said one of the people. The Karachi-based central bank didn’t respond to a request for comment.

Vanishing Dollars

Biggest foreign reserve erosions in Asia over past year

The finances of South Asia’s second largest economy are showing increased vulnerability ahead of elections in two weeks. Dollar reserves have dropped to the lowest level in more than three and a half years and record imports have widened the current-account deficit. Pakistan has devalued its currency three times since December in an attempt to ease the pressure.

“Once you go into high current account deficit and reserves deplete, this happens,” said Asad Sayeed, director at the Karachi-based consultancy Collective for Social Science Research. “Investments are going to be affected. Your high growth time is over now.”

Pakistan’s economy faces “some very daunting challenges,” but the decision to approach the International Monetary Fund for support will have to be taken by the new government after the July 25 ballot, according to caretaker Finance Minister Shamshad Akhtar. Moody’s Investors Service revised its outlook downward to negative from stable in June citing heightened external vulnerability risk, according to a statement.

Distress Level

Pakistan reserves drop below level previous IMF loans acquired

 

“On the external front, there is a need to arrange external financing in the short-term, and resolve structural issues affecting competitiveness in the medium and long term,” the central bank said in a quarterly report on Wednesday.

Pakistan’s central bank has also doubled its local currency swap deal with People’s Bank of China, the nation’s largest trading partner, and is encouraging banks to make payments in yuan transactions, according to central bank statements. China is financing the construction of power plants and infrastructure projects worth about $60 billion as part of the Belt and Road initiative that has helped limit power blackouts, but has also increased Pakistan’s machinery imports.

Terrorism Financing

The Finance Ministry said in a statement this week that Pakistan will increase monitoring of currency movements after a global anti-money laundering agency in June placed the nation back on its terrorism-financing “grey” monitoring list.

Finance Minister Akhtar said that systems need to be upgraded at all ports and check points along the border to curb smuggling, according to the statement. The central bank’s measure will also help document financial transactions further, according to one of the people familiar with the matter.

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https://www.zerohedge.com/news/2018-07-25/potential-impacts-yuan-gold-peg.......

Potential Impacts of the Yuan-Gold Peg

Written by Craig Hemke, Sprott Money News

 

Two weeks ago, we demonstrated that the yuan-dollar exchange rate is now the primary driver of global gold prices. Today, we attempt to decipher some of the important implications of this phenomenon.

Before we begin, we urge you to review this column from earlier in the month:https://www.sprottmoney.com/Blog/has-the-pboc-take...

 

So again, let's be perfectly clear about this. Though other factors such as headlines and the dollar index can affect price on a minute-by-minute basis, the primary driver of the gold price in the summer of 2018 is the yuan-dollar exchange rate. Though the PBOC has long-maintained a "peg" in the relative valuation of the yuan versus the dollar, the past 90 days have seen a steady devaluation of this peg to the tune of nearly 8%. See below:

f54470cb65332689fbc17cd3cd54dddf.png

Over that same time period, the price of COMEX gold has fallen by more than 10%: 

e8de488116a5ef5d412429efdb5fdcdf.png

To make this correlation more clear, let's plot the two together. This correlation has become extraordinarily tight over the past month, as you can see below where the CNYUSD exchange rate is displayed in candlesticks and COMEX gold is a blue line: 

 

c11439e7108a6d881bae849b1c590a95.png

And when you draw it down to just the past five days, it's quite clear that the two react almost simultaneously: 

2c2e978b4874b20c9896f72eae29d61e.png

This is not a correlation searching for a cause, nor is it a simple act of "traders" reacting to a falling yuan by selling digital gold. No, in a market the size of global gold, this type of sudden and direct correlation can only be accomplished through massive interventions, the size and scope of which is only possible at the state/sovereign level. And which state/sovereign would have a direct interest in linking the dollar price of gold to the yuan? China, of course. 

In the face of massive U.S. tariffs and possible currency war, China has responded by aggressively devaluing their currency versus the U.S. dollar. In order to maintain an "equilibrium" of commodity prices through this process, it's clear that China is now aggressively intervening in the global futures markets.

Of course, the implications of this are significant, and here is the primary question to consider:

  • IF China is moving to systematically devalue the yuan versus the dollar, and
  • IF they are actively intervening in futures markets in order to keep the relative cost of commodities in yuan terms stable,
  • THEN why would they go to all of this trouble simply to protect against just an 8% devaluation?

With this question in mind, consider the potential impacts of a 20-30% yuan devaluation in the months ahead. Many analysts have maintained that this level of devaluation might be necessary for China after years of managing their dollar peg—and these views were long-held and expressed before Trump's plans of taxes and tariffs came into view.

In August of 2015, the S&P 500 index fell by more than 12% in six days, following a 3.5% yuan devaluation. So far, the S&P has held up in the face of this ongoing 7.5% devaluation, but can it overcome a yuan devaluation of 20%? And what about gold? Since price is no longer driven by fundamentals such as physical supply and demand, how much farther might price fall if China attempts to rig it lower in conjunction with their continuing yuan devaluations?

These are important questions to consider regardless of whether you own physical gold, as crashing global equity markets would greatly impact interest rates and the future plans of central banks.

So, please take some time to consider the now-present link of the Chinese yuan and gold/commodity prices, in general. And then pause to reflect upon whether you are prepared for what this correlation may be foreshadowing.

 

 

 

 

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Craig Hemke at Sprott Money: Potential impacts of the yuan-gold peg

Published by  fbtg1l at  25/07/2018
 

9:14p ET Tuesday, July 24, 2018 Dear Friend of GATA and Gold: Craig Hemke of the TF Metals Report, writing tonight at Sprott Money, says the recent tight correlation between Chinese yuan and gold prices indicates massive intervention in the gold market by China to keep commodity prices down as China devalues the yuan in its trade war with the United States. The Chinese intervention, Hemke writes, implies not only a continued decline in the gold price but also a thrashing in the stock market. Hemke’s analysis is headlined “Potential Impacts of the Yuan-Gold Peg” and it’s posted at Sprott Money here: https://www.sprottmoney.com/Blog/potential-impacts-of-the-yuan-gold-peg-… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. CPowell@GATA.org ADVERTISEMENT Storage and Withdrawal of Gold with Bullion Star in Singapore Bullion Star is a Singapore-registered company with a one-stop bullion shop, showroom, and vault at 45 New Bridge Road in Singapore. Bullion Star’s solution for storing bullion in Singapore is called My Vault Storage. With My Vault Storage you can store bullion in Bullion Star’s bullion vault, which is integrated with Bullion Star’s shop and showroom, making it a convenient one-stop shop for precious metals in Singapore. Customers can buy, store, sell, or request physical withdrawal of their bullion through My Vault Storage® online around the clock. Storage rates are competitive. For more information, please visit Bullion Star here: https://www.bullionstar.com/ Join GATA here: New Orleans Investment Conference Hilton New Orleans Riverside Hotel Thursday-Sunday, November 1-4, 2018 https://neworleansconference.com/ * * * Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16
Source: Craig Hemke at Sprott Money: Potential impacts of the yuan-gold peg

 

https://gcil.co.uk/craig-hemke-at-sprott-money-potential-impacts-of-the-yuan-gold-peg/

 

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BA, wow this one is for you!  I'm shocked, and just wondering if this was one of the dprivate conversations Putin had with Trump?

 

Putin: We do not plan to give up the US dollar

Putin: We do not plan to give up the US dollar
 
 
 
 27 July 2018 09:22 PM

Direct: Russian President Vladimir Putin stressed that his country has no plans to give up possession of the US dollar in the international monetary Ahtaattha.

Putin said at a news conference on the sidelines of the summit of the Brix countries of South Africa, on Friday, that Moscow does not plan to make any sudden movements, quoting the agency "Reuters".

Putin's comments come in the wake of official statements that revealed Russia's renunciation of US Treasuries over the past few months, a sign of further deterioration of relations between Moscow and Washington.

The Russian president explained that Moscow used the dollar and will continue to use it to the extent allowed by the financial authorities in the United States.

However, Russia should work to reduce the risks associated with sanctions and illegal restrictions, he said.

Russia has been subject to economic and financial sanctions since 2014 by the West as Moscow annexed Crimea and its role in the Ukrainian crisis.

"We are aware of such risks and we are trying to reduce their damage," he said, referring to the risk of sanctions.

Related Topics currencies 

https://www.mubasher.info/news/3319839/بوتين-لا-نخطط-للتخلى-عن-الدولار-الأمريكي

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The average citizen will NEVER receive warning from either governments or the financial powers unless they are able to read between the lines.

 

That is why it is so critical for us to finds ways to move forward on our own. 

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On 7/29/2018 at 7:18 AM, ChuckFinley said:

The average citizen will NEVER receive warning from either governments or the financial powers unless they are able to read between the lines.

 

That is why it is so critical for us to finds ways to move forward on our own. 

Good Afternoon Chuck . Right ! We have had fantastic opportunities to read what most other countries are doing with monetary reforms. Not as much information about our own . Proceed with caution when the time comes

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10 years on quantitative easing .. What did the markets learn?

10 years on quantitative easing .. What did the markets learn?

 

 08 August 2018 06:31 PM

Editing - Noha Al-Nahhas:

 

Mubasher : Are independent central banks ready to force society to sacrifice growth in order to maintain financial stability? This is the fundamental question that must be answered a decade after the launch of the quantitative easing program.

In an article published on Project Syndicate, US economist Stephen S. Roche said that November 2018 would mark the 10th anniversary of the launch of quantitative easing, the most daring experiment in the modern history of central banks.

The only thing that can be compared to quantitative easing is the US anti-inflation campaign of 1979-80, organized by Federal Reserve Chairman Paul Volcker at the time, and this calls for significant rate adjustments through conventional monetary policy.

By contrast, federal budget adjustments were not traditional and were not tested from the outset.

More recently, the American Enterprise Institute held a seminar to define the overall features of the quantitative easing program, with the program's chief architect, Ben Bernanke, the former Federal Reserve Chairman.

The first and most important lesson is the link between the Fed's policy and its goals of maximizing employment and price stability. At that point, the judgment on QE will be mixed.

This is evident in the fact that the first quantitative easing was very successful in controlling a painful financial crisis in 2009 but the second and third cycles of the program were much less effective. The Fed mistakenly believed that what worked at the time of the crisis could work equally well.

The American Federal Reserve's mistake is evident in the fact that the slow and unprecedented economic recovery has been at 2% per annum over the past nine years, compared to 4% in previous economic cycles.

Whatever the reason for the weak economic recovery and whether the weak liquidity trap like the 1930s or the recession is due to the trend of savings rather than investment or consumption, the results of the quantitative easing process were disappointing.

From September 2008 to November 2014, successive quantitative easing programs added $ 3.6 trillion to the federal budget, equivalent to 25% more than $ 2.9 trillion of GDP gains over the same period.

The second lesson is about addiction. In other words, the real economy, which has become too dependent on supporting the quantitative easing of asset markets. The increased liquidity resulting from expansions in the federal budget has not only extended to the stock markets, but even to the bond market.

This concessional monetary policy has become the primary factor that constitutes asset prices rather than economic fundamentals.

In an era of weak income growth, the effects of wealth from QE from the bad asset markets have provided support to US consumers affected by the crisis.

But with support comes the pain of withdrawing support, not only for consumers and US-based asset-based companies, but for foreign economies that rely on capital inflows driven by distorted interest rate differentials as a result of quantitative easing.

These effects have emerged in current crises and fluctuations in Argentina, Brazil and other emerging markets.

As for the third lesson, it is related to the increasing inequality in income. The effects of wealth were for the rich, whether driven by market fundamentals or quantitative easing.

According to the US Bureau of Budget, all growth in household income before tax calculation during the quantitative easing period from 2009 to 2014 occurred in high-income families.

The fourth lesson is blurry, quantitative easing erases the ability to distinguish between fiscal policy and its monetary counterpart.

Fed purchases of government bonds softened the market's discipline on federal spending, and it may be of little importance when debt service spending was limited by low interest rates.

But with the public-owned federal debt between 2008 and 2017 doubling from 39% to 76% of GDP and its potential to rise further in the coming years, what is illogical today can be taken more logically in an interest-rate environment lacking quantitative easing support to finance the Treasury .

And on the fifth lesson it relates to the distinction between tactics and strategy, and with the fact that the Fed is the lender of last resort, the bank deserves a lot of appreciation after his involvement in a painful financial crisis.

But the problem is that the Fed played a big role in ignoring the predecessors of the previous crisis, which pushed the regime to the brink.

This raises the question of whether we need an active central bank that focuses on removing the effects of the financial crisis or a proactive central bank fighting against abuses before the crisis.

This raises questions about whether independent central banks can force society to sacrifice growth for financial stability. Could a proactive policy of the Federal Reserve prevent a crisis in the first place? Should it be more powerful in normalizing interest rates?

And the Fed's preference for the slow normalization of monetary policy at the beginning of the millennium and now keeps monetary policy in an emergency even after this situation.

This raises the clear possibility that the Fed will lack the ammunition it will need to face the next economic recession inevitably, and this makes the previous five lessons more problematic for the US economy.

The tenth anniversary is an opportunity for reflection and accountability, and it can only be hoped that circumstances will not require other non-traditional monetary policy such as quantitative easing, but in the case of another crisis, it will particularly show the shortcomings of quantitative easing.

Steven S. Roche concludes his article by saying he fears there is good reason to worry that the next experiment is unlikely to work as well.

https://www.mubasher.info/news/3326720/10-سنوات-على-التيسير-الكمي-ما-الذي-تعلمته-الأسواق-

Edited by Butifldrm
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Russian PM: "New US Sanctions Would Be Declaration Of Economic War"

Profile picture for user Tyler Durden
Fri, 08/10/2018 - 07:48

As diplomatic tensions again escalate between the US and Russia following the announcement of new sanctions against Moscow earlier this week by the Trump administration, Russia's prime minister Dmitry Medvedev warned the United States on Friday that Russia would regard any U.S. move to curb the activities of its banks as a declaration of economic war which it would retaliate against.

Medvedev said Moscow would take economic, political or other retaliatory measures against the United States if Washington targeted Russian banks.

medvedev%203.jpgmedvedev%203.jpg

"If they introduce something like a ban on banking operations or the use of any currency, we will treat it as a declaration of economic war. And we’ll have to respond to it accordingly – economically, politically, or in any other way, if required," Medvedev said during a trip to the Kamchatka region.

"Our American friends should make no mistake about it," he cautioned.

Medvedev also noted that Russia has a long history of surviving economic restrictions and never caved in to the pressure in the past. "Our country had been living under constant pressure through sanctions for the last hundred years," Medvedev said, accusing the US and its allies of employing sanctions to undercut global competition. "Nothing has changed."

The Russian PM said that by targeting Russia’s gas exports to Europe, Washington wants to push its own LNG shipments to the continent. “It’s an absolutely nonmarket anti-competition measure aimed at strangling our capabilities.” Medvedev also pointed out that the US is simultaneously imposing tariffs on China. “The Chinese, obviously, don’t like it. No one does. And our goal is to resist all these measures.”

According to Reuters, Medvedev's statement reflects Russia's fears over the impact of new restrictions on its economy and assets, including the rouble which tumbled 6% of its value this week on sanctions jitters. With economists expecting the economy to grow by 1.8% this year, some fear that if new sanctions proposed by Congress and the State Department are implemented in full, growth would be almost cut to zero.

On Wednesday, the State Department announced a new round of sanctions targeting Russian exports of dual-purpose electronics and other national security-controlled equipment, which will come into effect on August 22, and which pushed the Russian currency to two-year lows and sparked a wider sell-off over fears Russia was locked in a spiral of never-ending sanctions.

USDRUB%208.8_0.jpgUSDRUB%208.8_0.jpg

Separate legislation introduced last week in draft form by Republican and Democratic senators, dubbed “the sanctions bill from hell” by one of its backers, proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of the dollar.

Moscow’s strategy of trying to improve battered U.S.-Russia ties by attempting to build bridges with President Trump backfired after U.S. lawmakers launched a new sanctions drive last week because they fear Trump is too soft on Russia. That in turn piled pressure on Trump to show he is tough on Russia ahead of mid-term elections and the possible release of Mueller's report on Russian collusion.

The problem for Russia is that there is little it could do to hit back at the United States without damaging its own economy or depriving its consumers of sought after goods as the sanctions episode of 2014 showed, and officials in Moscow have made clear they do not want to get drawn into what they describe as a mutually-damaging ***-for-tat sanctions war, similar to the one the US is waging with China.

The threat of more U.S. sanctions kept the rouble under pressure on Friday, sending it crashing past two-year lows at one point before it recouped some of its losses.

Commenting on the currency slide, the Russian central bank said the rouble’s fall to multi-month lows on news of new U.S. sanctions was a "natural reaction" and that it had the necessary tools to prevent any threat to financial stability. One tool it said it might use was limiting market volatility by adjusting how much foreign currency it buys. Central bank data showed on Friday it had started buying less foreign currency on Wednesday, the first day of the rouble’s slide. As a reminder, Russia recently liquidated the bulk of its US Treasurys holdings over the past two months as it sought to diversify away from the dollar.

TIC%20Russia.jpgTIC%20Russia.jpg

For now, the fate of the U.S. bill Medvedev was referring to is not certain. Congress will not be back in Washington until September, and even then, congressional aides said they did not expect the measure would pass in its entirety.

https://www.zerohedge.com/news/2018-08-10/russian-pm-new-us-sanctions-would-be-declaration-economic-war

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