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- Inquiring minds are diving into Kaiser Family Foundation reports on health care. The charts and stats are not pretty, and they are sure to get worse.
- Health Care Expenditures 1960-2014
- The above chart from the Kasiser Family Foundation report Health Spending Explorer.
- Deductible Spending Soars
- Between 2004 and 2014, average payments for deductibles and coinsurance rose considerably faster than the overall cost for covered benefits, while the average payments for copayments fell. As can be seen in the chart below, over this time period, patient cost-sharing rose substantially faster than payments for care by health plans as insurance coverage became a little less generous.
- The above chart from the Kasiser Family Foundation report Cost Sharing Payments Increasing Rapidly Over Time.
- The above via Kaiser Family Tweet.
- Huge Cost Increases Coming
- Those charts hugely understate the problem. All date to 2014.
- In January, CNSNews reported CBO: Obamacare Costs to Increase in 2016 As Millions More Get Subsidized Insurance.
Taxpayers will have to shell out an estimated $18 billion more to subsidize Obamacare in 2016 despite lower than expected enrollment in the health care exchanges, according to a forecast by the non-partisan Congressional Budget Office (CBO).
In its latest 10-year economic forecast, CBO predicted that 13 million Americans would purchase health insurance through the Obamacare exchanges in 2016, with 11 million of them receiving government subsidies to help pay for their premiums.
But that figure is 40 percent lower than the 21 million enrollees CBO predicted last year would sign up.
Despite fewer than expected enrollees, the cost of running the exchanges will increase $18 billion, according to the CBO’s Budget and Economic Outlook: 2016 to 2026.
- November Surprise
- Many consumers will see large rate increases for the first time Nov. 1 — a week before they go to the polls.
- Politico comments on Obamacare’s November Surprise.
The last thing Democrats want to contend with just a week before the 2016 presidential election is an outcry over double-digit insurance hikes as millions of Americans begin signing up for Obamacare.
But that looks increasingly likely as health plans socked by Obamacare losses look to regain their financial footing by raising rates.
Just a week after the nation’s largest insurer, UnitedHealth Group, pulled out of most Obamacare exchanges because it anticipates $650 million in losses this year, Aetna’s CEO said Thursday that his company expects to break even, but legislative fixes are needed to make the marketplace sustainable.
“I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, who oversees Deloitte’s health plans practice. “A number of carriers need double-digit increases.”
Republicans are already pouncing on UnitedHealth’s decision as proof the law is unworkable. “You’re seeing the beginning of the so-called insurance death spiral,” Sen. John Barrasso (R-Wyo.) said last week.
- Thanks to Obamacare, it is frequently better for a middle class family to get no raise than even a decent sized raise.
- The wage point varies, but many will say “Dear employer, please don’t pay me more. It will cost me a lot of money”.
- Marine Le Pen writes a powerful argument for nationalism and the end of the EU in the New York Times:
- The European Union has become a prison of peoples. Each of the 28 countries that constitute it has slowly lost its democratic prerogatives to commissions and councils with no popular mandate. Every nation in the union has had to apply laws it did not want for itself. Member nations no longer determine their own budgets. They are called upon to open their borders against their will.
- Countries in the eurozone face an even less enviable situation. In the name of ideology, different economies are forced to adopt the same currency, even if doing so bleeds them dry. It’s a modern version of the Procrustean bed, and the people no longer have a say.
- And what about the European Parliament? It’s democratic in appearance only, because it’s based on a lie: the pretense that there is a homogeneous European people, and that a Polish member of the European Parliament has the legitimacy to make law for the Spanish. We have tried to deny the existence of sovereign nations. It’s only natural that they would not allow being denied.
- Brexit wasn’t the European people’s first cry of revolt. In 2005, France and the Netherlands held referendums about the proposed European Union constitution. In both countries, opposition was massive, and other governments decided on the spot to halt the experiment for fear the contagion might spread. A few years later, the European Union constitution was forced on the people of Europe anyway, under the guise of the Lisbon Treaty. In 2008, Ireland, also by way of referendum, refused to apply that treaty. And once again, a popular decision was brushed aside.
- When in 2015 Greece decided by referendum to reject Brussels’ austerity plans, the European Union’s antidemocratic response took no one by surprise: To deny the people’s will had become a habit. In a flash of honesty, the president of the European Commission, Jean-Claude Juncker, unabashedly declared, “There can be no democratic choice against the European treaties.”
- Brexit may not have been the first cry of hope, but it may be the people’s first real victory.
With eloquent nationalist leaders like her, Viktor Orban, and Matteo Salvini, among others there is reason to believe it will not be the last one. The EU is immoral, unnatural, anti-democratic, and evil. The sooner it collapses, the better off everyone will be.
- The globalists are the Nazis of the 30s and 40s and the Communists of the Cold War. They are the enemy of Man. As Le Pen aptly notes, “more and more, the destiny of the European Union resembles the destiny of the Soviet Union, which died from its own contradictions.”
- One thing is certain: Britain’s departure from the European Union will not make the union more democratic. The hierarchical structure of its supranational institutions will want to reinforce itself: Like all dying ideologies, the union knows only how to forge blindly ahead. The roles are already cast — Germany will lead the way, and France will obligingly tag along.
- Here is a sign: President François Hollande of France, Prime Minister Matteo Renzi of Italy and acting Prime Minister Mariano Rajoy of Spain take their lead directly from Chancellor Angela Merkel of Germany, without running through Brussels. A quip attributed to Henry Kissinger, “Who do I call if I want to call Europe?” now has a clear answer: Call Berlin.
- So the people of Europe have but one alternative left: to remain bound hand-and-foot to a union that betrays national interests and popular sovereignty and that throws our countries wide open to massive immigration and arrogant finance, or to reclaim their freedom by voting.
06.29.16 – What Is The Government Preparing For?
- You may not be getting prepared for a major national disaster, but the government sure is. I have been informed that in recent months numerous emergency food companies have been contacted by the government, and they have been told that their inventories could potentially be seized in the event of a significant emergency. And as you will see below, the government recently participated in an exercise that simulated “an unprecedented global food crisis lasting as long as a decade”. In addition, NPR has just revealed details about the very secretive Strategic National Stockpile program that is storing billions of dollars worth of medical supplies in warehouses around the nation. This is a program that most Americans do not even know exists. On top of everything else, strange reports of military vehicles with UN markings have been coming in from all over the nation. So what in the world is the government up to? Why are they working so feverishly hard to get prepared?
- Let’s begin our discussion with the Strategic National Stockpile. According to NPR, there are at least six of these warehouses at various locations around the country, and they are holding at least seven billion dollars worth of supplies…
Thousands of lives might someday depend on this stockpile, which holds all kinds of medical supplies that the officials would need in the wake of a terrorist attack with a chemical, biological or nuclear weapon.
The location of these warehouses is secret. How many there areis secret. (Although a former government official recently said at a public meeting that there are six.) And exactly what’s in them is secret.
“If everybody knows exactly what we have, then you know exactly what you can do to us that we can’t fix,” says Burel. “And we just don’t want that to happen.”
What he will reveal is how much the stockpile is worth: “We currently value the inventory at a little over $7 billion.“
- The NPR report indicates that most of the supplies are medical in nature, and this includes “millions of doses of vaccines“.
- Could it be possible that the government is anticipating a major pandemic in our near future?
- As I mentioned above, the government has also been preparing for a major food crisis. The following comes from Vice…
The US national security industry is planning for the impact of an unprecedented global food crisis lasting as long as a decade, according to reports by a government contractor.
The studies published by CNA Corporation in December 2015, unreported until now, describe a detailed simulation of a protracted global food crisis from 2020 to 2030.
The simulation, titled ‘Food Chain Reaction’, was a desktop gaming exercise involving the participation of 65 officials from the US, Europe, Africa, India, Brazil, and key multilateral and intergovernmental institutions.
- So could we actually see such a major food crisis during the years ahead?
- Well, according to Reuters global demand for food has already been surging, and one new report indicates that it won’t be too long before we could see “a doubling of food prices”…
Swelling populations and demand for food combined with ever scarcer water and land resources could lead to a doubling of food prices and trigger civil unrest in some developing countries, a new report says.
Demand for food with a higher environmental impact, such as meat, has surged as emerging countries like China and India grow in size and in wealth, said Martin Halle, policy analyst at Global Footprint Network (GFN).
“A few things are very clear: the demand for food is going up tremendously because of population growth,” he told the Thomson Reuters Foundation.
- Of course it is the job of the government to prepare for various apocalyptic scenarios. If government officials weren’t planning for how our nation would make it through a major disaster, they wouldn’t be doing their jobs.
- But what are we to make of all of the strange sightings of UN vehicles all over America recently?
- According to my friend Ray Gano, UN military vehicle activity has recently been reported “in Texas, Mississippi, Arizona, Florida and now in Virginia“.
- In particular, a series of photos of white UN military vehicles traveling through Virginiathat were posted on Facebook by Jeff Stern has popped up in news stories worldwide.
- Is all of this activity unusual? If so, should we be alarmed by it? Brandon Turbeville apparently thinks so…
For the past day or so, military convoys have been witnessed traveling both North and South, with lines of equipment ranging from Humvees, troop transport trucks, and tankers to military personnel following the convoy in civilian vehicles. Interestingly enough, many of the soldiers traveling in the convoy were seen wearing helmets, an unusual procedure for a simple convoy. In addition, the convoys were carrying what appeared to be construction equipment.
Although the troop movement may indeed have been a routine convoy and the United Nations vehicles may also have been a routine shipment from a manufacturing facility or even a simple and benign transport, the controversy brewing in the United States elections and the potential for civil unrest, the dangers of economic collapse, and the potential conflict with Russia are all potentials for use of United Nations “peace keepers” inside the United States as many have posited in the past as well as for some type of “martial law” scenario.
- The armored UN vehicles that were spotted being transported through Virginia are quite impressive. Here is some info on them from the Daily Mail…
The VX weighs in at 16,600lbs.
Seating for two plus eight crew.
Windows do not roll down, instead there are locked gun ports on the vehicle that can be opened to shoot bullets out or accept documents in and are even big enough to pass through a can of soda.
- In addition, these heavily armored vehicles are designed to withstand a gas attackand to be impervious to small arms fire…
Internal fans can keep bad air out, such as in the event of a gas attack, or bring fresh air in when reversed.
PA system to speak to the outside world.
Remote-controlled spotlights on the roof and pairs of red and blue strobe lights are mounted to each four sides of the vehicle.
Every window on the vehicle is filled with ballistic glass that’ll shed small arms fire like they’re pebbles and even resist a close-range shot from a high-powered rifle.
- Each vehicle has nine gun ports, and so when they are fully manned they can lay down a very impressive field of fire.
- At the end of the day, I don’t know what all of this means.
- Everything that I just detailed could just be part of normal government activity that is simply receiving some unusual attention right now.
- Or of course it could also be possible that the government is getting prepared for something really big, but even if they were, they would not tell us in advance anyway.
- Personally, I am convinced that this period of time leading up to the election will be highly chaotic in America, and so my eyebrows definitely perked up when I came across these various news stories.
- But ultimately the significance of all of this will be determined by what happens during the weeks and months to come. Without a doubt things have become much more serious in this nation lately, and I have a feeling that they are about to get a whole lot more serious…
- With admiration, many have been observing Iceland’s handling of the banking crisis that jolted the entire world in recent years. Now experiencing a unique economic recovery, the Icelandic public became aware in 2008 that the nation’s private banks had borrowed some $120 billion dollars, ten times the size of Iceland’s economy, creating an economic bubble which forced housing prices to double, and saddled the nation’s people with debt.
- While other Western nations initiated bank bailouts in 2008, a popular uprising in Iceland led to a peaceful revolution against corrupt government and banks, and has since become the example for the global movement for liberation from central banking and unaccountable government.
“In the duration of five months, the main bank of Iceland was nationalized, government officials were forced to resign, the old government was liquidated, and a new government was put in its place.” [Source]
- The resolve of Iceland’s people to correct the systemic problems in their government and economy was again demonstrated in 2015 when dozens of high-level financial executives were jailed for their involvement in manipulating Iceland’s financial markets after financial deregulation in 2001.
“After Iceland suffered a heavy hit in the 2008-2009 financial crisis, which famously resulted in convictions and jail terms for a number of top banking executives, the IMF now says the country has managed to achieve economic recovery—“without compromising its welfare model,” which includes universal healthcare and education. In fact, Iceland is on track to become the first European country that suffered in the financial meltdown to “surpass its pre-crisis peak of economic output”—essentially proving to the U.S. that bailing out “too big to fail” banks wasn’t the way to go.” – Claire Bernish
- Following the resignation of Icleand’s former prime minister, Sigmundur Davíð Gunnlaugsson, who quit after being implicated in fraud by the release of the Panama Papersin April of 2016, the public has again grown impatient with the political class. While another US presidential election enters the severe mud-slinging phase, this time between a career politician with an alleged lengthy criminal past, and an arrogant celebrity businessman, Iceland has just demonstrated that a true political outsider and common person can be elected to the office of president.
- Guðni Jóhannesson, a professor of history, has just been elected president of Iceland, ousting the 20 year incumbent, Ólafur Ragnar Grímsson, with 39% of the popular vote. The political newcomer also beat chief opponent, businesswoman Halla Tómasdóttir, meaning that the office of president will not be held by a career politician or businessperson.
- President elect Jóhannesson, a scholastic expert on political history, diplomacy and the Iceland constitution, has never been a member of a political party, is a husband and father, and reportedly chose to run for president after the release of the Panama Papers,
- The global struggle for honest money will only heat up in the coming years when the next financial bubble bursts. Sovereign, anti-globalist movements to correct systemic issues will be more common, such as we have just seen with Brexit. Recently, Switzerland also made overtures against the current banking model by seeking a referendum to ban commercial banks from printing money.
- Iceland again sets a unique example of leadership for populist movements around the world who are eager for an end to corrupt politics, central reserve-banking tyranny and the takeover of government by corporate interests.
“Reserve banking is the policy that guarantees insurmountable debt as the outcome of all financial transactions.” [Source]
- Two explosions, together with gunfire, took place moments ago at Ataturk International Aiport in Istanbul, the third largest airport in Europe, according to Bloomberg and the major newswires. The interior ministry adds that there have been multiple injuries following the explosions, while CNN Turk adds that there are casualties.
- 2 EXPLOSIONS OCCURED IN ISTANBUL ATATURK AIRPORT: INTERIOR MIN.
MULTIPLE INJURIES IN ISTANBUL AIRPORT BLASTS: INTERIOR MIN.
TAXIS FERRYING WOUNDED PEOPLE FROM ISTANBUL AIRPORT – WITNESS ON CNN TURK
TURKISH JUSTICE MINISTER SAYS 10 DEAD IN ISTANBUL AIRPORT ATTACK
It was not immediately clear what caused the explosions. An eye witness told CNN Turk television that blasts took place shortly after gun fire between police officers and unknown persons near the airport’s car park. CNN Turk also adds that casualties have been reported.
Turkish media adds that two grenades were thrown into the airport while Reuters writes that the suspects detonated explosive before passing x-ray security check citing a Turkish official. According to Twitter reports, the attack took place in the parking lot.
According to Reuters at least 40 have been injured.
More details from CBS:
Turkish officials say at least two explosions rock country’s largest airport in Istanbul on Tuesday, leaving multiple people injured.
- A witness told broadcaster CNN Turk that gunfire was heard from the car park at Ataturk airport. Turkish official said Tuesday it was unclear whether the explosions were caused by bombs or a suicide attack. The official spoke on condition of anonymity in line with government protocol. airport. Taxis were ferrying wounded people from the airport, the witness told CNN Turk.
- Turkey has suffered several bombings in recent months linked to Kurdish or Islamic State of Iraq and Syria (ISIS) militants.
- The attacks have increased in scale and frequency, scaring off tourists and hurting the economy, which relies heavily on tourism revenues.
- In December, a blast at Istanbul’s Sabiha Gokcen killed one person and wounded another. Both were cleaners. Kurdish rebels later claimed responsibility for the explosion, believed to have been caused by a bomb.
Security checks within Ataturk Airport is often frustratingly slow and frequent – but for a good reason, apparently.
Photos from the scene of the explosion below.
مسؤولون اتراك يؤكدون وقوع انفجارين في مطار اتاتورك في اسطنبول ووقوع جرحى – جريدة صباح اليومية التركية
— AIRLIVE (@airlivenet) June 28, 2016
06.28.16 – Brexit “Do Over” Petition Exposed As A Scam…
- As if we needed further proof that the mainstream media are barren of a single shred of journalistic integrity and that its members are in dire need of public flogging…
- So desperate are media elite for a Brexit vote reversal that they are literally reporting lies as incontrovertible fact. No sooner had the majority of British voters made their voices heard with a vote to exit the European Union, than mainstream media at home and abroad begin peddling the narrative that Brits were “remorseful” over their decision and wanted a “do-over.”
- How on earth members of media knew precisely how millions of British voters felt in the 24 hours following the vote is beyond us. Perhaps they went door to door to ask. Perhaps they acquired new telepathic abilities.
- No. They just lied. As they always do.
- You’ve probably seen the popular story circulating MSM this weekend that claims a referendum petition is in the works calling for a Brexit re-vote and that it’s garnered around 3 – 3.5 million signatories thus far.
- As recently as Monday, June 27, CNN reported that so many people rushed to sign the petition that the official government site where it is housed crashed. Yes, that’s how badly MSM wants you to believe that Brits realized the “error of their ways” and that, despite their conclusive vote to exit the E.U., what Brits “really want” is a chance to re-cast their votes to “remain.”
- Worst of all was ABC’s George Stephanopolous, who on Sunday touted the 3-million “strong” petition and who, along with guests, actually had the gall to say Britain’s standing in the world has been, “slightly diminished” and that also diminished is the U.S.-Britain “special relationship.”
- Only it turns out that many of the petition’s signatories are fabricated in a prank engineered by hackers 4Chan and Anonymous (we are unclear if it is “the” Anonymous or just a lone hacker posting as “anonymous”).
- The blog HeatStreet did the journalistic work the BBC, CNN, NBC, ABC, SkyNews and just about every other mainstream outlet failed to do, exposing the petition’s signatories as fraudulent. The site reports:
The BBC’s desperate shilling for Remain will come under increasing scrutiny as we exclusively reveal that the supposed ‘popular petition’ for a second referendum – wholly illegal and unworkable, and unprecedented in British history – is a prank by notorious sh*tposters 4 Chan.
The BBC, the UK’s national broadcaster, gleefully reported, as real, with no basic journalistic checks, an online petition that appeared to be growing at a colossal rate. By 1:30 pm, it was one of the fastest-growing petitions in history.
So fast, in fact, that somebody should have checked for bots and scripts. The BBC is failing totally in its Charter Duty to perform basic journalistic research.
- HeatStreet provides a screenshot of the actual script used to fabricate the new Brexit re-call petition votes:
- HeatStreet rightfully boasts that it did the “basic journalistic work that the BBC failed to do” and that it alone brought readers “the proof that the spamming of the petition is a magnificent 4Chan prank that the Chads and Stacys of the BBC and liberal media swallowed whole.” Indeed.
- Among the more glaringly obvious indicators that the petition was a prank? The IP addresses for so-called signatories came from all over the globe, including Ghana, Vietnam, Uganda and Turkmenistan. In addition, between 40,000 to 50,000 “signatories” came from Vatican City, which has a population of about 800 and another roughly 30,000 signatories came from — wait for it — North Korea.
- HeatStreet also scoured online hacker forums and found what some on the web are saying about the hoax:
They’ll look at the IPs and wonder how the fuck people from north Korea and the Vatican are voting
Most online petitions are fraudulent as fuck anyway due to the lack of any verification needed and the fact that you can make a petition over anything.
Anyone remember the whitehouse.gov petition by /jp/ to ban normalf*gs and janitors? Something to that effect anyway.
How long until they blame Putin’s hackers for it?
- Hackers were boasting on social media about their hilarious prank from the get-go, yet the MSM and leftwing globalists just couldn’t accept it:
- Ironically, only RussiaToday, The Telegraph and the Mirror UK thus far have reported that a “fraud probe” is underway after finding that at least “77,000” signatures proved fake.
- The HeatStreet site provides additional proof, however, that the hoax goes deeper than a mere 77,000 signatures. The site shares screenshots of hackers boasting about the prank as well as additional code hackers have used both past and present to crash Parliament’s websites and petitions.
- Obvious questions that should have been ever-present in any journalist’s mind are: how could a petition garner that many signatures in such short order, and, where do these signatories come from? Prompting said journalist to think: surely, there must be something awry with that poll, I best look into the origins of these so-called “signatures” before reporting them to the world as factual.
- That would, however, mean doing one’s job and presenting facts rather than revisionism.
- There are no depths too low for the mainstream media, which time and again expose themselves as the shameless cretins that they are.
06.27.16 – “Death To All Zombies!”
- Wait a minute. They’re already dead. Brexit just reveals that not everybody’s brains have been eaten. A viral contagion now threatens the zombified institutions of daily life, especially the workings of politics and finance. Just as zombies exist only in the collective imagination, so do these two principal activities of society operate mainly on trust, an ephemeral product of the hive-mind.
- When things fall apart in stressed complex systems, they tend to fall apart fast. It’s called phase change. Too many things in 21st century life have depended on sheer trust that the people-in-charge know what they are doing. That trust has subsisted on the doling out of money-from-nothing: debt, reckless bond issuance. TARP, QEs, bailouts, bail-ins, Operation Twists, Ponzi schemes… the whole sad-ass armamentarium of banking necromancy. The politicians let it get out of hand. Things that can’t go on don’t, and now they won’t.
- The politics of Great Britain are now falling apart landslide-style. Since just about everybody in or near power can be blamed for the national predicament, there’s nobody to turn to, at least not yet. The Labour party just acted out The Caine Mutiny, starring Jeremy Corbyn as Captain Queeg. The Tory Cameron gave three months notice without any plausible replacement in view. Now Cameron’s people are hinting in the media that they can just drag their feet on Brexit, that is, not do anything to enable it from actually happening for a while.Of course, that’s what the monkeyshines of banking and finance have done: postponed the inevitable reckoning with the realities of our time: growing resource scarcity, population overshoot, climate change, ecological holocaust, and the diminishing returns of technology.
- Britain illustrates the problem nicely: how to produce “wealth” without producing wealth. It’s called “the City,” their name for the little district of London that is their Wall Street. In the absence of producing real things, the City became the driver of the UK’s economy, a ghastly parasitical organism that functioned as the central transfer station for the world’s swindles and frauds, churning the West’s dwindling residual capital into a slurry of fees, commissions, arbitrages, rigged casino bets, and rip-offs. In the process, it enabled the European Central Bank (ECB) to run the con-job that the European Union (EU) became, with the fatal distortions of credit that have put its members into a ditch and sent the private European banks off a cliff, Thelma and Louise style.
- The next stage of this protean global melodrama is what happens when currencies and interest rates become completely unglued from their assigned roles as patsies in financial racketeering. Sooner or later we’ll know what’s going on in the vast shadowy gloaming of “derivatives,” especially the “innovative” arrangements that affect to be “insurance” against losses in currency and interest rate “positions” — bets made on the movements of these things. When currencies rise or fall quickly, these so-called “swaps” are “triggered,” and then some hapless institution is left holding a big bag of dog-shit. A zombie is a terrible thing to behold, but a zombie holding a bag of dog-shit is like unto the end of the world.
- Once this contagion starts burning, the people-in-charge won’t be able to quell it the way they did last time: by drowning it in torrents of money-from-nowhere. At least not without inducing real-deal inflation, the kind that leads to epochal ruin and more intense political upheaval: the nation-changing kind. We’re about five minutes away from that in the USA already, with the loathsome duo of Hillary and Trump putting on a Punch and Judy show for a disgusted public. If nothing else, Hillary and Trump represent the withering of political trust in America. The parties that spawned them are also whirling around the drain of credibility. They won’t survive in the form we knew them.
- Who knows what comes out of this vacuum, what rough beast slouches towards Washington.
- If anyone needs another confirmation that the European Union is fundamentally the most anti-democratic entity currently in existence, then the following statement by European Parliament Martin Schultz should put all confusion to rest.
- Schulz: “The British have violated the rules. It is not the EU philosophy that the crowd can decide its fate“.
- Confused: Here is what Deutsche Bank said earlier today:
The shockwaves and consequences around Brexit will resonate for years. It’s probably an understatement to say that most in financial markets regret the UK’s decision to leave but we should respect the forces that have been pushing us towards what has always been an inevitable political accident sometime soon. I wasn’t sure whether the Brexit vote was the one but I was pretty convinced one was coming and this is probably not the last. Spain yesterday started a general election cycle (more below but relatively market friendly) of the largest 5 euro-area economies (Spain, Holland, France, Germany and Italy) over the next 18 months or so, not forgetting the US this November. Throw in the crucial senate reform vote in Italy in October and you’ve got plenty of opportunity for rebellion against the establishment that haven’t managed to produce satisfactory enough growth for the lower paid/lower skilled to offset the forces of globalisation and immigration.
It’s worth looking at the voting split in the UK’s EU referendum based on polls compiled by Lord Ashcroft to get an idea of the disenfranchisement. In terms of socio-economic groups, 57% of ABs (upper/middle class – professional/managers etc) voted remain, 49% of C1s (lower middle class – supervisory/clerical or junior management/administrative), 36% of C2s (skilled working class) and 36% of DEs (Ds – semi & unskilled manual workers. Es – casual/lowest grade worker or state pensioner). So there’s no escaping the fact that this is a class war. Whether its globalisation, immigration, inequality, poor economic growth or a combination of all of them it’s quite clear from this and other anti-establishment movements that the status quo can’t last in a democracy. Eventually you’ll have a reaction. This is one such major reaction and given that the UK growth rate has been ok of late, it would be strange if pressure didn’t continue to build elsewhere where growth has been lower for longer.
- It is indeed a class war, and the European “Union” is not used to losing…
- While the global market eagerly awaits outgoing UK PM David Cameron’s address to Parliament on Monday after a weekend of political turmoil that left Britain looking rudderless following the shock vote to leave the European Union, this morning Chancellor George Osborne made his first statement since the EU referendum in a bid to calm the turmoil in financial markets that has followed the UK’s vote to leave the EU last Thursday.
- As Open Europe summarized, Osborne stressed that the UK government is “ready to deal with the consequences” and that the UK economy is strong. However, he also warned that there will need to be “a period of adjustment” and that “there is going to be an impact on public finances”, although he said any new budget would be a job for the new government. He insisted he doesn’t “resile” from any of the forecasts made during the campaign. He added that he agreed with the decision to delay triggering Article 50 of the EU Treaties – which sets out the process for leaving the EU.
- It is unclear if the decision to delay the trigger, a process the EU wants implemented immediately, is to spook the UK population further in hopes of a second Brexit vote, one which would result in a “Remain” outcome.
- Still, despite Osborne’s “attempt to calm the markets”, the pound resumed its historic slide in the wake of the UK’s decision to leave the EU, touching a fresh 31-year low despite as turmoil in financial markets persisted, with numerous UK bank and other stocks halted due to excess volatility.
- Breaking his silence since the referendum, the UK chancellor told a news conference that the result of the referendum was “not the outcome that I wanted” but that authorities were “ready to deal with the consequences”. As noted earlier, The pound has continued to fall this morning and is down more than 3% against the US Dollar, hitting new 31 year lows below 1.32, while the FTSE 100 was down well over 1%.
- More details from the FT:
Accepting he did not have a mandate to change tax and public expenditure policy immediately, Mr Osborne shelved plans for an emergency Brexit budget of higher taxes and spending cuts. He indicated instead that similar action to shore up the public finances would still be needed later in the year when new forecasts from the Office for Budget Responsibility are published.
Mr Osborne could not give a reassurance to the British people that the UK would avoid a recession, lost jobs and a hit to the public finances. He said he “did not resile” from any of the forecasts of recession he had made before the vote and Britain needed to undertake “a period of adjustment”. There was already evidence that some companies had put investment plans on hold and “there is going to be an impact on the public finances”.
Mr Osborne said the outlook for the UK economy and the public finances had deteriorated since Thursday. “I made a series of predictions . . . about the impact on the economy if we voted to leave the EU and there were a range of impacts depending on the kind of new relationships we arrived at with the EU. All of them required an adjustment in the economy.”
He said: “I don’t resile from that and of course will work very hard to make sure we mitigate the impact and remind people of the fundamental strengths of the British economy.” Mr Osborne said the UK should not trigger Article 50 of the EU treaty, which sets a two-year deadline for leaving the EU, until it has a “clear view” on the future.
“The prime minister has given us time as a country to decide what that relationship should be by delaying the decision to trigger the Article 50 procedure until there is a new prime minister in place for the autumn,” he said.
“Only the UK can trigger Article 50, and in my judgment we should only do that when there is a clear view about what new arrangement we are seeking with our European neighbours.”
Financial market volatility is likely to continue, Mr Osborne said, but over the past 72 hours he has been coordinating with fellow finance ministers in Europe, the International Monetary Fund, central banks and the US Treasury secretary to ensure markets can handle the shock. “It will not be plain sailing in the days ahead but let me clear you should not underestimate our resolve. We were prepared for the unexpected and we are equipped for whatever happens,” he said.
- Osborne refused to give indications on his political future. According to the FT, his closest friends say he will not quit for now as chancellor, and he sees it as his duty to stay at the Treasury at a time of severe market turmoil and growing doubts about Britain as an investment destination. Although Mr Osborne’s allies insist he is thinking only about the UK’s economic stability, his network of supporters at Westminster are busy trying to work out his political future. “George’s team have been ringing around taking soundings on the level of support for him,” said one member of the “Friends of George” Tory cadre, a powerful group that includes many ministers.
- Osborne’s team, communicating via a pro-Remain WhatsApp group, are considering whether the chancellor’s machine should be deployed in favour of an “anyone but Boris” candidate for the Tory leadership to prevent a win for Mr Johnson, the former London mayor. Stephen Crabb, the work and pensions secretary, is one option, while Mr Osborne might decide to endorse the more obvious candidature of Theresa May, home secretary, with whom he has scratchy relations.
- Osborne would expect to be rewarded for such a move. His friends say a move to the Foreign Office would be the only other job that would appeal to a politician obsessed with history and global affairs, including the rise of China. Such a move would keep Mr Osborne, aged just 45, at the top table of politics and potentially in the game for a future run at the leadership, with his reputation as a sound steward of the economy still on his CV.
- His full statement is below.
- And now the market will focus its attention on today’s key event, David Cameron’s address to Parliament.
- It’s late June which means it is time for the annual warning by the Bank of International Settlements about the growing futility of monetary policy and central bank impotence. Exactly one years ago, the BIS asked “Of What Use Is A Gun With No Bullets?”, in which the BIS said central banks are defenseless against the coming crisis. Well, it underestimated just how far the central banking “magic people” are willing to reach inside their “magic bag of tricks” to preserve the status quo: to be sure nobody at the time expected the ECB to begin buying not just corporate bonds but junk bonds too.
- Fast forward one year and the song and dance has been repeated, with the issuance of theBIS’ 86th Annual report in which we read that “Easy-money policies and unprecedented monetary stimulus have started to backfire in global financial markets” as Bloomberg summarizes the 130 page report, which is largely full of data and analyses quite familiar to regular readers.
- In its report, the BIS “says that historically low interest rates and bond-buying programs – which have sent yields below zero on more than $8 trillion of government bonds, a record amount – are causing anomalies in asset values. One example is that small price differences in related securities or assets, which banks traditionally eliminated through arbitrage, are persisting more often.”
- “Monetary policy is running out of room for maneuver,” said Hyun Song Shin, head of research at the BIS, in an interview. “It is not clear how much further stimulus of the real economy can be achieved using monetary-policy tools alone without inviting unwanted distortions.”
- Like on virtually every occasion since 2013, the BIS on Sunday once again called on governments to reduce their reliance on extraordinary monetary policy for spurring economic growth. “Instead, they should redouble efforts on structural and financial reforms, it said. The stimulus produced by the world’s monetary authorities will approach the limits of its effectiveness, according to the BIS, which was formed in 1930 and acts as the central bank for many of those institutions.”
- One lament raised by the BIS is one we have heard loud and clear in recent weeks from both Deutcshe Bank as well as Citi:
With the cost of money so close to zero, the profitability and resilience of banks has been sapped, impairing their ability to lend to the wider economy and make markets for securities… When banks choose not to hold as many securities, that reduces depth and liquidity in bond and currency markets, threatening to disrupt their smooth functioning.
Lenders across Europe from Deutsche Bank AG to Societe Generale SA are struggling to increase revenue as the European Central Bank pushes interest rates below zero, regulators demand bigger capital buffers and market volatility spooks investors, according to their financial reports last month. Intesa Sanpaolo SpA, Italy’s second-largest bank, said in May its first-quarter profit dropped 24 percent due to such reasons.
- “It’s far better for banks and broker-dealers to have a strong capital base because it allows them to lend more in support of the real economy and on better terms,” the BIS’s Shin said. “It allows them to make markets in a robust way.”
- Another point the BIS makes is something we have discussed over the past year, namely the blow out in cross-currency basis swaps, which as we futher pointed out on Friday, blew out to the most negative print since 2012:
- Following up on a report the BIS’ Hyun Song Shin wrote just a few days ago, the BIS makes the case that “under the theory of so-called covered-interest parity, interest rates implied by currency trading should be consistent with market interest rates. Yet, current implied dollar rates from currency swaps are above Libor. This means that borrowers in dollars through the currency swap market are paying more than the rate available in the open market.”
- What is new and notable in the current report is the BIS’ indirect allegation that the ongoing period of economic malaise, record low rates, and collapsing productivity is itself the result of previous (and current) central bank policy.
We suggest that the current predicament in no small measure reflects the failure to get to grips with hugely costly financial booms and busts (“financial cycles”). These have left long-lasting economic scars and have made robust, balanced and sustainable global expansion hard to achieve – the hallmark of uneven recovery from a balance sheet recession. Debt has been acting as a political and social substitute for income growth for far too long.
- More on debt:
Debt can help better explain what would otherwise appear as independent bolts from the blue. First, it sheds light on the EMEs’ slowdown and on global growth patterns. Debt is at the heart of domestic financial cycles and of the tightening of financing conditions linked to foreign currency borrowing. This is most evident for commodity producers, especially oil exporters, who have seen their revenues and collateral strength collapse – hence the large holes in fiscal accounts and big investment cuts. And debt may be one reason why the boost to consumption in oil-importing countries has been disappointing: households have been shoring up their balance sheets.
* * *
… debt may even shed light on the puzzling slowdown in productivity growth. When used wisely, credit is a powerful driver of healthy economic growth. But as the previous evidence indicates, unchecked credit booms can be part of the problem and leave a long shadow after the bust, sapping productivity growth. In addition, debt overhangs depress investment, which weakens productivity further. In turn, weaker productivity makes it harder to sustain debt burdens, closing the loop.
- But, but… Janet Yellen was so confused just this past week:
BARR: In your prepared remarks, you indicated that business investment was surprisingly weak. Maybe the reason why the Fed is surprised and continued to miss on forecasts. And the Fed as the Washington journal pointed out, estimated 2.4 percent growth in December, that had fallen to 2.2 percent by March. This month, it was down to 2 percent. And it follows the Federal Reserve’s consistent record of forecasting error from a standpoint of predicting stronger growth than is actually occurring…. I would like you to comment on that.”
YELLEN: Well, growth has been disappointing. I’m not sure of the reason.
- Now you know Janet.
- Incidentally, this is another thing that this tinfoil, “conspiracy” site has been warning about for the past 7 years: in lieu of real reform and structural changes, the entire world has relied exclusively on more debt, and thus, permissive lower rates, to buffer the failure of politicians and to thrust all responsibility for “growth” in the hands of central bankers. Seven years later, with growth faltering and the world on the edge of a recession, is it any wonder central bank credibility has never been lower.
- It may also be the BIS’ code word that it is time for a global, debt jubilee or reset, since the very same central bank policies have made rising rates impractical, and thus “inflating the debt away” is impossible. It only leave bankruptcies as an option. To be sure, the BIS is more nuanced in its wording:
This interpretation argues for an urgent rebalancing of policy to focus more on structural measures, on financial developments and on the medium term. A key element of this rebalancing would be a keener appreciation of the cumulative impact of policies on the stocks of debt, on the allocation of resources and on the room for policy manoeuvre. For it is this lack of appreciation that constrains options when the future eventually becomes today. Intertemporal trade-offs are of the essence.
- The problem is that going forward, central banks will have far less room to maneouvre, and if anything, may be forced to tighten policy as further easing may now be frowned upon by markets:
… we witnessed a rotation in financial booms and busts around the world after the crisis. The private sector in the advanced economies at the heart of the crisis slowly started to deleverage; elsewhere, especially but not only in EMEs, the private sector accelerated the pace of releveraging as it left behind the memory of the 1997–98 Asian crisis. Signs of unsustainable financial booms began to appear in EMEs in the form of strong increases in credit and property prices and, as in previous episodes, foreign currency borrowing. Currency appreciations failed to arrest the tide. In fact, as BIS research suggests, they may have even encouraged risk-taking, as they seemingly strengthened the balance sheet of foreign currency borrowers and induced lenders to grant more credit (the “risk-taking channel”).
What we have been witnessing over the past year may be the beginning of a major, inevitable and needed realignment in which these various elements reverse course. Domestic financial cycles have been maturing or turning in a number of EMEs, not least China, and their growth has slowed. Commodity prices have fallen. More specifically, a combination of weaker consumption and more ample production has put further pressure on the oil price. In addition, actual and expected US monetary policy tightening against the backdrop of continued easing elsewhere has supported US dollar appreciation. This in turn has tightened financing conditions for those that borrowed heavily in the currency .
- The most eye-opening part in today’s report was the BIS’ admission that it really is all the central banks’ fault in the form of boom-bust cycles “gone wrong” which in turn lead to “long-lasting damage” to wit:
The world has been haunted by an inability to restrain financial booms that, once gone wrong, cause long-lasting damage. The outsize and unsustainable financial boom that preceded the crisis masked and exacerbated the decline in productivity growth. And rather than being the price to pay for satisfactory economic performance, the boom contributed, at least in part, to its deterioration, both directly and owing to the subsequent policy response. The key symptom of the malaise is the decline in real interest rates, short and long, alongside renewed signs of growing financial imbalances.
- There is much more in the report which clearly “gets it”, even the unpleasant observation what monetary policy failure means for the world’s politicians: namely, that they wil finally have to do their job!
The need to rebalance the policy mix puts a greater onus on structural policies. Their implementation, of course, faces serious political economy obstacles. In addition, they do not necessarily yield near-term results, although this depends on the specific measures and their impact on confidence. But they provide the surest way of removing impediments to growth, unlocking economies’ potential and strengthening their resilience.
- What this means is that for anyone who thinks we have seen the full extent of populist revulsion to New Normal policies is hang on to your hats cause we ain’t seen nothing yet: if the BIS’ prescription of the world’s ills is taken seriously by policymakers, it means that only now will politicians no longer be able to punt to central banks in lieu of making unpopular, debt-funded decisions, and the result will be an historic surge in popular anger as suddenly the debt-funded welfare state sees its funding to keep the majority content, is no longer quite so generous.
- The BIS’ conclusion:
A shift to more robust, balanced and sustainable expansion is threatened by a “risky trinity”: debt levels that are too high, productivity growth that is too low, and room for policy manoeuvre that is too narrow. The most conspicuous sign of this predicament is interest rates that continue to be persistently and exceptionally low and which, in fact, have fallen further in the period under review. The global economy cannot afford to rely any longer on the debt-fuelled growth model that has brought it to the current juncture.
A shift of gears requires an urgent rebalancing of the policy mix. Monetary policy has been overburdened for far too long. Prudential, fiscal and, above all, structural policies must come to the fore. In the process, however, it is essential to avoid the temptation to succumb to quick fixes or shortcuts. The measures must retain a firm long-run orientation. We need policies that we will not once again regret when the future becomes today.
- As the UK has found out the hard way, it’s too late for that now.
- * * *
- In closing we will remark what we said one year ago today:
If you know anything about the history of the BIS, you know that the bank’s latest annual report is glaringly ironic and somewhat hypocritical. The “bank for central banks” as the highly profitable institution is known, has for decadesserved as a secretive club for the world’s most influential central bankers. The lavish governors’ weekends hosted by the bank in Basel allow the world’s most powerful monetary policy mavens to discuss the most important issues facing the global financial system in complete privacy with no fear that anything will leak to the public or to the press.
In other words, the BIS serves to encourage and perpetuate the power and prestige of the world’s central bankers and provides a top secret forum for the monetary policy cabal to meet and commiserate safe at all times from the prying eyes of those to whom the bankers should by all rights be accountable.
In this context it’s somewhat absurd that the bank’s annual report — which, as a reminder, is required reading in treasury departments and monetary policy circles around the globe — contains a scathing critique of the very same policies which were no doubt devised, tweaked, and honed over dinner and fine wine in Basel. Nevertheless, the BIS’ latest tome is replete with criticism for the idea that the very people who make up the bank’s Board of Governors are indeed omnipotent.
- Last but not least, let’s not forget where the world’s central bankers were located on Friday morning when they announced the barrage of monetary policy responses they would unleash in the aftermath of Brexit to soothe global capital markets: the 18th floor of the BIS tower.
- So you will please excuse us if we ignore this latest annual rant by the BIS against the policies implemented by the BIS’ very own board of directors. If anything, we would expect much more of the same failed policies; we certainly will expect even louder and more dire warnings from the BIS one year from today when everything else that central banks unveil between now and June 2017 is implemented, and fails to do anything but keep global equity markets propped up “whatever it takes.“
- The idea of a common European military headquarters has been revived by the head of the European Parliament Committee on Foreign Affairs, shortly after the UK’s citizens voted in favor of Brexit.
“We need more cooperation in the European defense policy,” Elmar Brok told Die Welt.
- The new armed forces could be modeled after the Franco-German model, making European foreign policy much more effective, Brok believes.
- “We need a common (military) headquarters and a coalition (of EU countries) acting in accordance with the permanent structural cooperation of the EU Treaty. From such a group an EU army could eventually emerge,” said Brok.
- A united EU armed force would “strengthen the role of Europeans in [global] security and defense policy, make Europe fulfill better its responsibilities in the world and would also achieve more synergies in defense spending,” the MEP said.
- The head of the Foreign Affairs Committee acknowledged that at present an EU army is not possible due to legal restraints and restrictions, and creating one would imply making changes to the European constitution and international treaties. The European Parliament would also have to be given ancillary powers.
- Next week, the EU’s high representative for foreign affairs and vice-president of the European Commission, Federica Mogherini, is expected to present a new “global strategy” of European foreign and security policy.
- The draft document will be delivered at a meeting of EU heads of state or government. The new military concept is being called to replace the European Security Strategy (ESS) policy document enacted in 2003.
- European leaders regularly speak in favor of boosting military spending, citing looming “Russian aggression” against the NATO member states in Eastern Europe.
- On the eve of the 70th anniversary of the Nazi invasion of the Soviet Union, Chancellor Angela Merkel said Germany should substantially increase its defense spending.
- The EU cannot rely on the transatlantic partnership with the US to deal with “external threats,” the chancellor said.
“Sure enough this means that a country like Germany, which today spends around 1.2 percent of its gross domestic product (GDP) on defense, and the United States, which spends 3.4 percent of GDP for defense will have to converge,” Merkel said.
- A Pew poll has shown Europeans are weary of hard power and are reluctant to boost defense spending, despite the commitment to do so by their governments.
Deterring an “aggressive Russia” with an increased military presence in Europe has been the stated goal of NATO since 2014, but public opinion in Europe doesn’t seem to buy the plan. According to the Pew Research Center’s Spring 2016 Global Attitudes Survey, people in Europe don’t see Russia as a major threat and don’t see hard power as a viable solution either for tensions with Moscow, or for international terrorism, a threat they consider the biggest to Europe.
- Janet Yellen should send a note of congratulations to Nigel Farage and Boris Johnson, the British politicians most responsible for pushing the Brexit campaign to a successful conclusion. While she’s at it she should also send them some fruit baskets, flowers, Christmas cards, and a heartfelt “thank you.“ That’s because the successful Brexit vote, and the uncertainty and volatility it has introduced into the global markets, will provide the Federal Reserve with all the cover it could possibly want to hold off on rate increases in the United States without having to make the painful admission that domestic economic weakness remains the primary reason that it will continue to leave rates near zero.
- For months the corner that the Fed has painted itself into has gotten smaller and smaller. It continues to say that rate hikes will be appropriate if the data suggests the economy is strong. Then its representatives continually cite (arguably bogus) statistics that suggest a strengthening economy, which cause many to speculate that rate hikes are indeed on the horizon. But then at the last minute the Fed conjures a temporary reason why it can’t raise rates “right now,” but stresses that they remain committed to doing so in the near future. But each time they conduct this pantomime, they lose credibility. Sadly, Fed officials are discovering that their supply of credibility is not infinite, even among those who would like to cut them a great deal of slack.
- But the Brexit vote saves them from all this unpleasantness. Now when critics question the Fed’s unwillingness to deliver on the suggested rate hikes, given what they believe to be a strong economy, all the Fed needs to do is point to the “uncertainty” that will be in play now that the world’s fifth largest economy is disengaging from the European Union. And since this process is bound to be long, messy, and fraught with uncertainties (as there is no precedent for a country leaving the EU), this will be a handy excuse that the Fed will be able to rely on for years.
- Brexit could also place severe strains and uncertainties on the global currency markets. The fear of financial losses could encourage investors to seek safe haven assets like gold and, at least for now, the U.S. dollar. Given that there is already much concern that the dollar is valued too highly against most currencies, and that this has created imbalances in the global economy, any surge in the dollar that results from Brexit may have to be fought by the Federal Reserve through lower interest rates and quantitative easing. This would rule out the potentially dollar-strengthening interest rate hikes that they supposedly planned on delivering. So as far as Janet Yellen is concerned, the British have given her the gift that keeps on giving.
- On another level, the vote in the UK illustrates the fundamental inefficacy of the monetary and financial policies that have been implemented by the world’s dominant central banks and central bureaucracies. For years, global elites have been telling us that deficit spending, government regulation, and central bank stimulus is the best way to cure the global economy in the wake of the 2008 Financial Crisis. To prove these points, elite economists associated with the government, academia, and the financial sector have pointed to all kinds of metrics to show how their policies have been successful. But the man on the street perceives a very different reality. They know that their living standards have fallen, their cost of living has risen, and that their job prospects have deteriorated. They see a loss in confidence and economic stagnation when they are being assured the opposite.
- This disconnect has fueled anti-establishment sentiment on both sides of the Atlantic. In the United States, it has given rise to the insurgent candidacies of both Donald Trump and Bernie Sanders. The unexpected successes of both reflect a deep distrust of the establishment. Such discontent would not be in play if the positive stories being told by the elites had made any resonance with rank and file voters.
- The same holds true with the unexpected strength of the anti-EU voters in Britain. The “Remain” camp had the support of virtually all the elite members of the major UK political parties, the media, and the cultural world. In addition, foreign leaders, including President Obama in a state trip to England, harangued British voters with warnings of economic catastrophe if the British were to make the grave error of defying the advice of their “best” economists.
- Given all this, poll numbers that suggested the vote could be close had been dismissed. The elites, as evidenced by recent drifts in currency and financial markets, had all but assumed that British voters would fall into line and vote to remain. Instead, the people revolted. After having been misled for so many years by the very elites who urged them to remain, the rank and file finally asserted themselves and voted with their feet.
- British voters may not know what they will get with an independent Britain, but they knew that something was rotten, not just in Denmark, but all over the European Union. The same holds true in the United States. Until our leaders can paint more realistic pictures of where we are and where we are going, we should expect more “surprises” like the one we got yesterday.
06.24.16 – A Legendary Day in the Making
- In what was an extraordinary day for global financial markets, and a day which will no doubt become legendary and enter folk memory in the UK and elsewhere, the electorate of the United Kingdom voted 51.9 % to 48.1% to leave the European Union. As the first count results began trickling in during the very early hours of Friday morning London time from northern England constituencies such as Newcastle and Sunderland, the cosy optimism that had prevailed in the Remain camp became increasingly agitated as the voting majority swung to the Leave side and quickly snowballed, in what was a shock to many.
- The Sterling – Dollar cable rate plummeted, gold took off, especially in GBP, and BBC presenters became increasingly stony-faced and pale looking. By 3:40am UK time, Leave was ahead by 500,000 votes, and just an hour later the major UK networks of first ITV and then the BBC called the election to the Leave camp. Nigel Farage, promoter of the Leave side and leader of the UK Independence Party (UKIP), who had earlier conceded then un-conceded defeat, reappeared to the press and when asked what he would do next announced that he was going for a celebratory drink. As Farage and his boisterous entourage were undoubtedly finding a suitable early hostelry to settle into in Westminster, an ashen-faced British Prime Minister David Cameron appeared in Whitehall to announce his resignation in what had already become a day of records.
- All this time gold was soaring and the British Pound was folding. Gold in GBP started moving at 2:45am UK time when it was at £852, and as the voting tide turned, gold in GBP peaked at 5:30am at approximately £1004, an 18% move in less than 3 hours. GBP gold then fell slightly from the peak and has settled into a roughly £950 to £960 range.
- Gold In GBP 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=XAU&toIndex=GBP&period=DAY_1&weightUnit=tr_oz
- US Dollar gold, which had been as low as $1250 before the voting pattern emerged, surged past $1300 before 3am UK time, and peaked at just under $1340 before 6am UK time, for an up move of 90 bucks, before it too fell back slightly into a range of $1310 to $1325.
- Gold in USD 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=XAU&toIndex=USD&period=DAY_1&weightUnit=tr_oz
- Silver also had dramatic gains intraday, especially in GBP.
- Silver in GBP 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=XAG&toIndex=GBP&period=DAY_1&weightUnit=tr_oz
- GBP – USD suffered an unprecedented fall by over 11% at one stage today, moving down 18 cents at one point from $1.50 to a 31-year low of $1.32, a level not seen since mid-1985. It was since recovered partially to trade at $1.375, still down over 8% on the day.
- GBP – USD one day rate, 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=GBP&toIndex=USD&period=DAY_1&weightUnit=tr_oz
- The Euro weakened significantly against major currencies, one of the reasons being that the uncertainty of the UK’s exit from the EU may precipitate further defections that could include a Eurozone member country. FTSE equity indices fell sharply intraday before recovering somewhat. Bank shares were hammered especially the shares of UK and European banks.
- The massive moves and volatility spikes caught much of the financial markets off-guard, hence the dramatic price movements and flight to safety. As gold was bid, it has yet again proved its role as one of the world’s preeminent safe havens and protectors of wealth that investors will flock to in times of crisis and fiat currency uncertainty. According to ICBC Standard Bank, as cited by the Financial Times, the Shanghai Gold Exchange traded a record equivalent of 143 tonnes of gold during its trading day today – 24th June. One person who seems to have been confident of a Leave win is Arron Banks, a rich donor to the Leave side. He was said to have commissioned a poll of 10,000 people (which is a large sample size), and the results of this poll, released today, revealed a 52 – 48 win for Leave. So perhaps some hedge funds and investment banks were privy to similar data last night.
- The world’s major central banks, who were meeting in Basel at the Bank for International Settlements this week, may appear to have been also blindsided by the election result, however, being the conservative types, they seem to have been prepared for this contingency and have, in a not too subtle way, indicated their collective intention to intervene in the FX and funding markets in a coordinate fashion, and with total disregard of the free functioning of financial markets. Central banks are by their very nature interventionist, meddling and secretive in their interventions, so this is hardly surprising. However, its more blatant than usual.
- The Bank of England announced that it “will continue to pursue responsibilities for monetary and financial stability relentlessly”. This use of ‘relentlessly, is quite ominous bank-speak and could even suggest intervention in the gold market, since after all, the Bank of England houses its FX and Gold operations on the same desk and is allowed to use all assets of the HM Treasury’s Exchange Equalisation Account (EEA) to pursue monetary stability. So some ‘smoothing operations’ or ‘stabilisation operations’ on the gold price by the Bank of England (or by the BIS) are not beyond the bounds of possibility. In fact, it is logical for the major central banks to intervene in the gold market since they do not want gold to play the role of canary in the coalmine as this counters their ‘stability’ meme.
- The ECB said this morning that it “stands ready to provide additional liquidity in Euro and foreign currency, in close contact with other central banks
- In its statement today, the Bank of Japan said that it has ”a network of currency swap arrangements is already established by the central banks of major countries. The Bank of Japan will take appropriate measures as necessary, including activation of this network”.
- Meanwhile, the US Federal Reserve announced that it is “carefully monitoring developments in global financial markets, in cooperation with other central banks,….The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets..”
- Not to be outdone, the Swiss National Bank (SNB) didn’t just threaten to intervene, it did intervene today as the ‘Swiss franc came under upward pressure’. According to an email sent to Bloomberg by the SNB “has intervened in the foreign exchange market to stabilize the situation and will remain active in that market”.
- BullionStar saw noticeably higher website traffic today in its gold and gold bar featured web pages, and somewhat higher demand and sales than normal, but BullionStar does not have the shortages in inventories that are being reported by other dealers. In fact, BullionStar has plenty of stock.
- Where there does seem to be tightness in the physical gold market is in the London wholesale market, where gold has now flowed into London from Switzerland for 3 consecutive months (69 tonnes in May, 80 tonnes in April, and over 40 tonnes in March), most likely to top up gold holdings of the SPDR Gold Trust, whose inventory has now recorded a latest multi-year high of 915.9 tonnes. This importation of gold into London from Switzerland does seem to indicate that there is not much free float of gold sloshing around the London Gold Market.
- The seismic shifts brought about by today’s extraordinary day in the UK will not settle quickly and may only just be the beginnings of further tremors that have been unwittingly released in into the global economic system. Politically, the UK is in a place where it did not think it would be. Cameron is resigning, Boris Johnson is favourite to take his place, and there is pressure on the opposition Labour leader Corbyn to resign with accusations that he is out of touch with the electorate. In the financial markets, the major banks are in deep trouble and dollar funding is an issue, even according to the central bank interventionalists. In such a climate of evaporating paper wealth, gold, and to an extent silver, are stepping forward to play their traditional roles of war chest assets, assets with real intrinsic value.
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