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Ukraine Exposure Rattles Russian and Austrian Banks |

Ukraine Exposure Rattles Russian and Austrian Banks |.

February 28, 2014 | Author 

Foreign Currency-Denominated Loans Strike Again

You can’t teach an old dog new tricks. At least that is the impression one gets when considering the credit exposure of the two large Austrian Banks still active in the Ukraine (a third one, Erste Bank, wisely shut up shop in Kiev in late 2012).

The two banks concerned are Raiffeisen International (RBI) and Bank Austria (BA), which together have exposure of 8 billion euro (approx. $10.9 bn.)  in the Ukraine. This is only a small percentage of their total loan book, but still, it is quite a bit of money for banks based in Austria. Guess what: 70% of the credit extended to Ukrainian borrowers is denominated in foreign currencies. Right now there is no foreign currency against which the hryvnia is not crashing. Evidently, European banks have learned nothing from foreign currency lending debacles suffered elsewhere, from Hungary (where the government forcibly converted the loans into Forint and saddled the banks with huge losses), to the extremely popular Swiss franc loans they have extended just about everywhere they are doing business.

In the context of the once highly popular CHF loans, the customers the banks favored with these ‘excellent opportunities to save money’ were as a rule not sophisticated financial market wizards, and so were relying on the ‘expert advice’ dispensed along with the banks’ sales pitch. They were told that the Swiss franc would always remain stable against the euro. Since Swiss interest rates were considerably lower than euro interest rates at the time most of these loans were peddled, there was ‘free money’ waiting to be picked up. And then the crisis hit, and suddenly the Swiss Franc became worth a lot more. Instead of saving money, borrowers suddenly found themselves in dire straits.

Guess what is going to happen with foreign exchange denominated loans in the Ukraine.

 

 


 

Hryvnia-Daily-27-FebA daily chart of the hryvnia – its  crash continued with gusto on Thursday – click to enlarge.

 


 

As noted above, in terms of their total lending, the exposure of Austria’s banks is not very large (in RBI’s case an estimated 3.5% of its assets). Don’t forget though that for fractionally reserved banks the loss of even a small portion of their total exposure is meaningful.

With only about $1 bn. in government debt owed to foreign creditors falling due this year, a Ukrainian government default can probably be avoided for a while yet. However, the Ukraine is bleeding foreign exchange reserves fast. That is eventually going to have an effect on the economy, as imports can obviously not be paid for in hryvnia and the Ukraine has a perennial current account deficit. Press reports meanwhile indicate that businesses in Kiev largely remain closed post revolution, boarded up and guarded by the apparently still ubiquitous street fighters of the revolution.

 


 

ukraine, shop in KievShopfront in Kiev. Many shops have been barricaded since the riots began – now they are guarded by people employed by the new rulers.

(Photo via AP / Morenatti)

 


 

ukraine-current-accountThe Ukraine has a perennial current account deficit, recently amounting to about 6% of GDP – click to enlarge.

 


 

Is a Breakup Coming?

More signs of a possible breakup of the Ukraine are emerging as well. Note that the new government immediately declared that Russian will no longer be used as an official language. This order indicates that what has happened in the Ukraine is a struggle along ethnic lines (to be more precise, people’s ethnically motivated animosities were used to achieve geopolitical aims).

If not for a split along ethnic lines, why would the newly installed government declare that a language that is predominantly spoken in more than 60% of the country’s territory will no longer be recognized as official? This is a highly confrontational decision. Consider South Africa as a pertinent counter-example. There, 11 languages have become official languages after the country’s political system was changed – a clear step toward reconciliation. Language is an important part of peoples’ identity. Wherever there are conflicts between different ethnic groups within a country, language usually becomes a major bone of contention.

In Simferopol in the Crimea, gunmen said to be supporting Russia have captured the parliament building as well as a major airport, demanding a referendum on independence. In fact, the Crimean parliament has already announced that a referendum will be held. There are Crimean Tartars who are against this move, but in the Crimea, they are the minority. There can be little doubt as to the outcome of such a referendum and it seems possible that other regions with a large Russian majority will follow suit.

The new government in Kiev is repeating its Western supporters verbatim by insisting that the ‘territorial integrity’ of the Ukraine must be preserved. Somehow we don’t think that this concern about the country’s territorial integrity is shared by those who have just seen their language demoted. In the meantime it has turned out that ex-president Yanukovich is now holed up in Russia (he is planning to hold a press conference sometime on Friday). Regardless of what part of the Ukraine people are from, they have every reason to have misgivings about Yanukovich and all who were holding the reins of power before him (including Ms. Tymoschenko, who is aligned with the new rulers). The Ukraine is still poorer today than it was on the day it split from the Soviet Union:

 


 

ukraine-gdp-per-capita-ppp

The Ukraine’s GDP per capita (at purchasing power parity) is still down almost 25% from the time when the country became independent right after the collapse of communism – click to enlarge.


It should be pointed out though that the first decade after the Soviet Union’s dissolution was a time of contraction in nearly all the former Soviet Republics, as the malinvestments of the socialist era had to be liquidated. This is still an appalling economic performance even so, and it is undoubtedly a direct result of the ruling elite stealing the country blind from day one. We strongly suspect – given the experience with the ‘Orange Revolution’ – that the average Ukrainian citizen will soon witness a case of ‘new boss, same as the old boss’.

Russian Banks Stop Lending Activities

The exposure of Russian banks in the Ukraine is fairly sizable as well, at about $28 bn. – however, it also represents a fairly small part of their total loan books. According to Reuters they are now belatedly stepping on the brakes:

“Russia’s second-largest bank VTB has joined Sberbank in saying it would halt new lending in Ukraine, underlining concerns over financial risks due to political turmoil in Kiev.

Ukrainian President Viktor Yanukovich was driven from power over the weekend after months of upheaval sparked by his decision to spurn deals with the European Union and improve ties with Russia. While the country has an interim leader, a new government is yet to be formed.

“It is hard to evaluate the risk at the moment,” VTB Chief Executive Andrei Kostin said at a press conference on Wednesday. While other foreign lenders have cut their Ukraine exposure in the five years since the 2008 collapse of Lehman Brothers – to 20 percent of Ukraine banking sector assets in 2012 from 40 percent in 2008, according to a Raiffeisen Research survey – Russian banks stayed. They now account for 12 percent of the sector.

Russia’s President Vladimir Putin said that Russian banks have an estimated $28 billion of exposure to its neighbour, with Gazprombank, Vnesheconombank (VEB), Sberbank and VTB among the main creditors. Ratings agencies Moody’s and Fitch this week cautioned of the risks these banks faced in their loans to Ukrainian businesses if the economy slides into recession and the currency continues to plummet.

Kostin said the bank had stopped issuing new loans. VTB later clarified that the bank was no longer issuing new loans to either companies or individuals. The move followed a similar statement from German Gref, head of Russia’s largest bank Sberbank, who said on Friday that the bank had temporarily suspended lending, although the bank would continue to extend credit to large enterprises whose financial condition was sound.”

(emphasis added)

The Russian Ruble has recently weakened considerably as well, but it is debatable to what extent this owes to the troubles in the Ukraine – after all, a great many EM currencies have been falling sharply in recent months. As a monthly chart of the ruble shows, its decline definitely isn’t any worse than the falls seen in many other EM currencies since 2011:

Ruble,monthly

The Russian ruble monthly from 2009 to today – click to enlarge.

 

Conclusion

The foreign banks with large exposure to the Ukraine can probably handle the fallout, as the size of their commitment isn’t overly big on a relative basis. Keep however in mind that according to statistical studies, currency crises in emerging markets have invariably been followed by a very large percentage of foreign loans become non-performing (40% on average). In a case like Ukraine’s where such a large percentage of foreign loans is denominated in foreign currencies, the portion of outstanding loans likely to become NPLs is probably even higher.

Ccharts by: Investing.com, Tradingeconomics

Ukraine Exposure Rattles Russian and Austrian Banks |

Ukraine Exposure Rattles Russian and Austrian Banks |.

February 28, 2014 | Author 

Foreign Currency-Denominated Loans Strike Again

You can’t teach an old dog new tricks. At least that is the impression one gets when considering the credit exposure of the two large Austrian Banks still active in the Ukraine (a third one, Erste Bank, wisely shut up shop in Kiev in late 2012).

The two banks concerned are Raiffeisen International (RBI) and Bank Austria (BA), which together have exposure of 8 billion euro (approx. $10.9 bn.)  in the Ukraine. This is only a small percentage of their total loan book, but still, it is quite a bit of money for banks based in Austria. Guess what: 70% of the credit extended to Ukrainian borrowers is denominated in foreign currencies. Right now there is no foreign currency against which the hryvnia is not crashing. Evidently, European banks have learned nothing from foreign currency lending debacles suffered elsewhere, from Hungary (where the government forcibly converted the loans into Forint and saddled the banks with huge losses), to the extremely popular Swiss franc loans they have extended just about everywhere they are doing business.

In the context of the once highly popular CHF loans, the customers the banks favored with these ‘excellent opportunities to save money’ were as a rule not sophisticated financial market wizards, and so were relying on the ‘expert advice’ dispensed along with the banks’ sales pitch. They were told that the Swiss franc would always remain stable against the euro. Since Swiss interest rates were considerably lower than euro interest rates at the time most of these loans were peddled, there was ‘free money’ waiting to be picked up. And then the crisis hit, and suddenly the Swiss Franc became worth a lot more. Instead of saving money, borrowers suddenly found themselves in dire straits.

Guess what is going to happen with foreign exchange denominated loans in the Ukraine.

 

 


 

Hryvnia-Daily-27-FebA daily chart of the hryvnia – its  crash continued with gusto on Thursday – click to enlarge.

 


 

As noted above, in terms of their total lending, the exposure of Austria’s banks is not very large (in RBI’s case an estimated 3.5% of its assets). Don’t forget though that for fractionally reserved banks the loss of even a small portion of their total exposure is meaningful.

With only about $1 bn. in government debt owed to foreign creditors falling due this year, a Ukrainian government default can probably be avoided for a while yet. However, the Ukraine is bleeding foreign exchange reserves fast. That is eventually going to have an effect on the economy, as imports can obviously not be paid for in hryvnia and the Ukraine has a perennial current account deficit. Press reports meanwhile indicate that businesses in Kiev largely remain closed post revolution, boarded up and guarded by the apparently still ubiquitous street fighters of the revolution.

 


 

ukraine, shop in KievShopfront in Kiev. Many shops have been barricaded since the riots began – now they are guarded by people employed by the new rulers.

(Photo via AP / Morenatti)

 


 

ukraine-current-accountThe Ukraine has a perennial current account deficit, recently amounting to about 6% of GDP – click to enlarge.

 


 

Is a Breakup Coming?

More signs of a possible breakup of the Ukraine are emerging as well. Note that the new government immediately declared that Russian will no longer be used as an official language. This order indicates that what has happened in the Ukraine is a struggle along ethnic lines (to be more precise, people’s ethnically motivated animosities were used to achieve geopolitical aims).

If not for a split along ethnic lines, why would the newly installed government declare that a language that is predominantly spoken in more than 60% of the country’s territory will no longer be recognized as official? This is a highly confrontational decision. Consider South Africa as a pertinent counter-example. There, 11 languages have become official languages after the country’s political system was changed – a clear step toward reconciliation. Language is an important part of peoples’ identity. Wherever there are conflicts between different ethnic groups within a country, language usually becomes a major bone of contention.

In Simferopol in the Crimea, gunmen said to be supporting Russia have captured the parliament building as well as a major airport, demanding a referendum on independence. In fact, the Crimean parliament has already announced that a referendum will be held. There are Crimean Tartars who are against this move, but in the Crimea, they are the minority. There can be little doubt as to the outcome of such a referendum and it seems possible that other regions with a large Russian majority will follow suit.

The new government in Kiev is repeating its Western supporters verbatim by insisting that the ‘territorial integrity’ of the Ukraine must be preserved. Somehow we don’t think that this concern about the country’s territorial integrity is shared by those who have just seen their language demoted. In the meantime it has turned out that ex-president Yanukovich is now holed up in Russia (he is planning to hold a press conference sometime on Friday). Regardless of what part of the Ukraine people are from, they have every reason to have misgivings about Yanukovich and all who were holding the reins of power before him (including Ms. Tymoschenko, who is aligned with the new rulers). The Ukraine is still poorer today than it was on the day it split from the Soviet Union:

 


 

ukraine-gdp-per-capita-ppp

The Ukraine’s GDP per capita (at purchasing power parity) is still down almost 25% from the time when the country became independent right after the collapse of communism – click to enlarge.


It should be pointed out though that the first decade after the Soviet Union’s dissolution was a time of contraction in nearly all the former Soviet Republics, as the malinvestments of the socialist era had to be liquidated. This is still an appalling economic performance even so, and it is undoubtedly a direct result of the ruling elite stealing the country blind from day one. We strongly suspect – given the experience with the ‘Orange Revolution’ – that the average Ukrainian citizen will soon witness a case of ‘new boss, same as the old boss’.

Russian Banks Stop Lending Activities

The exposure of Russian banks in the Ukraine is fairly sizable as well, at about $28 bn. – however, it also represents a fairly small part of their total loan books. According to Reuters they are now belatedly stepping on the brakes:

“Russia’s second-largest bank VTB has joined Sberbank in saying it would halt new lending in Ukraine, underlining concerns over financial risks due to political turmoil in Kiev.

Ukrainian President Viktor Yanukovich was driven from power over the weekend after months of upheaval sparked by his decision to spurn deals with the European Union and improve ties with Russia. While the country has an interim leader, a new government is yet to be formed.

“It is hard to evaluate the risk at the moment,” VTB Chief Executive Andrei Kostin said at a press conference on Wednesday. While other foreign lenders have cut their Ukraine exposure in the five years since the 2008 collapse of Lehman Brothers – to 20 percent of Ukraine banking sector assets in 2012 from 40 percent in 2008, according to a Raiffeisen Research survey – Russian banks stayed. They now account for 12 percent of the sector.

Russia’s President Vladimir Putin said that Russian banks have an estimated $28 billion of exposure to its neighbour, with Gazprombank, Vnesheconombank (VEB), Sberbank and VTB among the main creditors. Ratings agencies Moody’s and Fitch this week cautioned of the risks these banks faced in their loans to Ukrainian businesses if the economy slides into recession and the currency continues to plummet.

Kostin said the bank had stopped issuing new loans. VTB later clarified that the bank was no longer issuing new loans to either companies or individuals. The move followed a similar statement from German Gref, head of Russia’s largest bank Sberbank, who said on Friday that the bank had temporarily suspended lending, although the bank would continue to extend credit to large enterprises whose financial condition was sound.”

(emphasis added)

The Russian Ruble has recently weakened considerably as well, but it is debatable to what extent this owes to the troubles in the Ukraine – after all, a great many EM currencies have been falling sharply in recent months. As a monthly chart of the ruble shows, its decline definitely isn’t any worse than the falls seen in many other EM currencies since 2011:

Ruble,monthly

The Russian ruble monthly from 2009 to today – click to enlarge.

 

Conclusion

The foreign banks with large exposure to the Ukraine can probably handle the fallout, as the size of their commitment isn’t overly big on a relative basis. Keep however in mind that according to statistical studies, currency crises in emerging markets have invariably been followed by a very large percentage of foreign loans become non-performing (40% on average). In a case like Ukraine’s where such a large percentage of foreign loans is denominated in foreign currencies, the portion of outstanding loans likely to become NPLs is probably even higher.

Ccharts by: Investing.com, Tradingeconomics

India’s Central Bank Governor: “International Monetary Cooperation Has Broken Down” | Zero Hedge

India’s Central Bank Governor: “International Monetary Cooperation Has Broken Down” | Zero Hedge.

India’s recently crowned central bank head (and predecessor of the IMF’s Nostradamal Olivier Blanchard), Raghuram Rajan, has not had it easy since taking over India’s printer: with inflation through the roof, and only so much scapegoating of gold as the root of all of India’s evils, Rajan announced an unexpected 50 bps interest rate hike two days ago in an attempt to preempt the massive EM capital flight that has roundhoused Turkey, South Africa, Hungary, Argentina and most other current account deficit emerging markets. Whether he succeeds in keeping India away from the EM maelstrom will be unveiled in the coming days, although if last summer is any indication, the INR has a long way to fall.

Hinting that the worst is yet to come, was none other than Rajan himself, who yesterday in an interview in Mumbai with Bloomberg TV India, said that “international monetary cooperation has broken down.” Of course, when the Fed was monetizing $85 billion each and every month and stocks could only go up, nobody had a complaint about any cooperation, be it monetary or international. However, a 4% drop in the S&P from its all time high… and everyone begins to panic.

The reason for Rajan’s displeasure is because he believes that the DMs owe the EMs a favor: “Industrial countries have to play a part in restoring that, and they can’t at this point wash their hands off and say we’ll do what we need to and you do the adjustment.”Sorry Raghu – Bernanke hightailed it out of here and as Citi’s Steven Englander pointed out yesterday, left you “to twist in the wind.” Feel free to submit your thoughts on the matter in the overflowing complaint box in the Marriner Eccles lobby.

Instead of doing this, however, Rajan continued complaining to Bloomberg:

“Fortunately the IMF has stopped giving this as its mantra, but you hear from the industrial countries: We’ll do what we have to do, the markets will adjust and you can decide what you want to do,” Rajan said. “We need better cooperation and unfortunately that’s not been forthcoming so far.”

Rajan said yesterday developed countries might not like adjustments emerging markets take to cope with the outflows, without elaborating on specific measures. His surprise Jan. 28 move to raise the benchmark repurchase rate by a quarter point – – adding to increases of 50 basis points since he took over the Reserve Bank of India in September — was to stem consumer-price inflation running at close to 10 percent, he said.

 

“In an environment when there is external turmoil, we have to get our house in order and we can’t postpone that,” Rajan said. “So a collateral benefit of getting inflation down is that you also strengthen the belief in the value of the rupee.”

“When there is huge outside turmoil, even today post the Federal Reserve withdrawing stimulus further, it is extremely important that we both be seen on the same page.”

You know – this is truly wonderful: for once a central banker admits that his peers are on the verge of losing control of the globe – of course not in those words as the result would be sheer panic upon the realization that central bankers are just as clueless as everyone else – because while conducting central planning in one country is somewhat feasible for a period of time, doing so across every country across currencies, and capital markets, is impossible. And the Indian knows this.

He also knows that in a worst case scenario, the Indian Rupee will crash and burn and make last year’s record devaluation of the INR seem like breakfast at Gideon Gono’s. Which means that doing the right thing would mean allowing the people – his people – to preserve their wealth in the only real currency that will withstand whatever Emerging Market collapse may be headed this way. Gold.

Instead, what did the Indian Central Bank do? This.

  • Jan 21 – The government raises the gold import duty by 2% to 6%.
  • Jan 22 – The government more than doubles the duty on raw gold to 5%.
  • Jan 30 – Finance Minister P. Chidambaram says there are no plans for additional taxes or curbs on gold imports.
  • Feb 1 – The Reserve Bank of India (RBI) plans to introduce three or four gold-linked products in the next few months.
  • Feb 6 – The RBI says it would consider imposing value and quantity restrictions on gold imports by banks.
  • Feb 14 – The central bank relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities.
  • Feb 20 – The Trade Ministry recommends suspending cheaper gold jewellery imports from Thailand.
  • Feb 28 – India keeps its gold import duty unchanged in its annual national budget, defying industry expectations.
  • Feb 28 – India proposes a transaction tax of 0.01% on nonagricultural futures contracts, including for precious metals.
  • March 1 – The Finance Minister appeals to people not to buy so much gold.
  • March 18 – The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify “systemic issues”, with a view to closing any legal loopholes.
  • April 2 – The Finance Ministry suggests it is unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments.
  • May 3 – The RBI restricts the import of gold on a consignment basis by banks.
  • June 3 – The Finance Minister says India cannot afford high levels of gold imports and may review its import policy.
  • June 5 – India hikes the gold import duty by a third, to 8%.
  • June 21 – Reliance Capital halts gold sales and investments in its gold-backed funds.
  • June 24 – India’s biggest jewellers’ association asks members to stop selling gold bars and coins, about 35% of their business.
  • July 10 – India’s jewellers announce they might continue a voluntary ban on sales of gold coins and bars for six months.
  • July 22 – The RBI moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.
  • July 31 – India hopes to contain gold imports well below the 845 tonnes that were shipped last year, the Finance Minister says.
  • Aug 13 – India hikes the import duty on gold for a third time in 2013, to 10%. Duties for silver and platinum are also increased to 10%. The customs duty on gold ore bars, ore, and concentrate are increased to 8% from 6%.
  • Aug 14 – India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.
  • Aug 29 –  India considers plan to allow commercial banks to buy gold direct from ordinary citizens
  • Sept 19 – India hikes import duty on gold jewerly to 15%

And so on.

So thank you for your fake concern Raghuram, but if you really wanted to help your people when the hammer hits, you would lift all capital controls on gold now, and allow your population to preserve their wealth in the only way they have known for the past two thousand years – by converting it into the barabrous relic. And since you won’t, enjoy reaping what you and your demented central-planning peers have sown.

Gold And Silver – There Are Reasons Greater Than Demand For Owning Them. | InvestmentWatch

Gold And Silver – There Are Reasons Greater Than Demand For Owning Them. | InvestmentWatch.

by Michael Noonan

Here is some very cogent rationale for owning gold and silver.  None pertain to the
ever-ending reasons that demonstrate great demand.  Everyone has been hearing
about them in a steady stream for the past year, and the impact on the market has
been nil.  Often in tandem with the latest news, like record coin sales from…[pick a
mint or country], is the lament from PM holders on where the current price of gold
is, at lows for the past two + years, making many question the validity of owning PMs.

For any self-doubters, especially those who paid for their PMs at 50% to 100% higher
in the past year or two, by example, we still hold some gold purchased at $1800 the
ounce, some silver at $48 the ounce.  That just happened to be where gold and silver
were at the time.   We were engaged on a consistent plan of purchasing, regardless of
price.  There were specific reasons for wanting to own physical gold and silver, and none
of those reasons have changed.  In fact, they have increased.

We now live in a financially insane world.  The government tells everyone that 2 + 2 =
5, consistently, and people continue accept the lies.  If you listen to the government
and the bought-and-paid-for mainstream media, all is well in this country, when in
reality, we are dealing with recession, inflation, joblessness, and general instability.

The biggest problem is debt.  Actually, it is the core issue.  Bury people and countries in
debt, and demand their hard assets as payment in return, aka the Rothschild formula,
in use for hundreds of years.  The debt burden is now so onerous that it is becoming
almost impossible to keep under control.  The elites are so skilled at getting their false
message out, through governments, that people are more than willing to believe the
lies.

Greece was a warning shot for the rest of what passes as a [not so] free world.  The
message?  It is mathematically impossible to sustain the growing debt burden in any
given country with no ability to ever pay it back.  The United States has become a
welfare state for too many of its citizens.  The largest growth sector in this country is
the federal government.  The government produces nothing.  Everything it spends
has to come from the people, or increased borrowing.  It is a tapeworm consuming
its host

The Fed has kept the stock market propped up by tapered window dressing.  Interest
rates are artificially being held low to enable the government and all the banks to keep
the debt Ponzi scheme on life-support, which ultimately leads to death, financially.

Zero rates means keeping the accumulating interest costs of government lower.
Allowing rates to rise to a more normal 3% – 5% would collapse the federal government
and all of the insolvent banks which are responsible for every financial problem everyone
now faces, except the privileged 1%.

No one in the past 100 years, since the Federal Reserve Act was passed and the privately
owned Federal Reserve bank usurped the organic Constitution and took over issuing this
nation’s money, has done anything to abolish the Fed.

“Give me control of a nation’s money, and I care not who makes the laws.”
    -Mayer Amschel Rothschild

It really is not hard to connect the dots if one truly wants to do so.  The information is out
there, but few are willing to seek out the truth, and instead, prefer dwelling in the [dis]
comfort of debt-laden lives.

There was one person who tried to make a difference:  John F Kennedy, when he decided
to print billions of silver-backed  dollar certificates.  The world knows that Kennedy was
assassinated and replaced by Lyndon Baines Johnson.  One of Johnson’s first official acts,
within days of being sworn in, was to rescind Kennedy’s order to issue the silver-backed
certificates.  The elites have their priorities, and puppet presidents must do their bidding.

Why aren’t politicians doing everything possible to get rid of the legal [but not lawful]
privately owned Federal Reserve Banking system that charges the government interest
on the purely fiat money the Fed issues?  Very few people in this country wonder why the
U S government does not issue its own currency, [as it did prior to the Federal Reserve
Act of 1913], and not have to pay interest on the currency issued.  One of the largest
expenses is the federal government is the debt owned to a foreign entity that controls
this country’s own money.  Federal Reserve Notes are not money.  They are debt
instruments.  Debt can never be money.  Dwell on that thought for a while.

The elites use the Federal Reserve to entirely control the government and used FDR
to ban gold ownership in 1933.  Previously, gold and silver were used exclusively in
backing United States Notes and gold and silver coins issued by the U S Treasury.
Since 1933, gold has been absent from the public arena, and 1963 for silver.  So many
in this country are unaware of the important role gold and silver have played.

Prior to 1933, people used gold and silver in all ways of their daily lives.  No one used
credit cards, and people had no need for socialist government services.  This is why
the elites had gold and silver removed from circulation as money.  It was accomplished
over decades, by design, so people would not notice the change and gradually accept
the substituted Federal Reserve Note system.

United States issued Treasury Notes, backed by gold and silver, were allowed to circulate
along side Federal Reserve Notes, [debt instruments], and people began to equate the
two as the same.  At that point, the Federal Reserve began withdrawing all US Treasury
Notes and had them destroyed.

You do not need more statistics about the current shortage of gold and silver, or more
citing on the number of tonnes of gold China continues to import.  That information has
been of little practical use.  What you need to know is the kind of factual history we just
briefly presented in order to know that it is incumbent upon your future to take whatever
measures necessary for surviving the financial time bomb waiting to explode.

It is not important to know what others are doing, but it is critically important to know
what others are doing to you, and what you are going to do for yourself and your family.
It is a proven historical fact that every fiat system has failed, utterly.  The U S is in that
process, right now.

The actions of the government will be your first signs of imminent collapse.   Anyone
who chooses to keep money in the banking system is fodder for the banking whores.
They will steal your money.  It is a known fact that all money you deposit into the banking
system becomes their money, and you, by banking laws, become an unsecured creditor.

The government will raid private pensions, like Hungary and Poland have done.  Your
pension will likely become nationalized, and you may receive a 10 year government bond
in return for whatever money you have saved.  It happened in Argentina just a decade ago.
There is ample evidence throughout the world of what a government will do to survive, at
your expense.

You  want a reason to own gold and silver instead of anything paper-issued?  Forget
about statistics and the demand side of the equation.  All of the events discussed here,
and worse, are on the agenda of the elites to gain world control over everyone.  Without
gold and/or silver, it will be almost impossible to survive what is to come.  No one knows
when, but when it does, and it is a historical certaintyare you really going to care
what you paid for your gold and silver?

We all have choices to make, and we all deal with the consequences of these choices.  Do
not worry if you paid a high price for your gold and silver.  You do not intend to sell it,
so any loss is imagined.  Stay true to what history has proven.  No one knows when the
collapse will be realized, but one has to continue to prepare for the inevitable in a world
that makes no sense, financially.

We were interviewed on this topic, last week, and the audio can be found on our site,
edgetraderplus.com, under the category “Interview,” for anyone interested.

The charts may be closer to showing signs of bottoming.  Here is our current read.

Bearish spacing develops when a low is broken, last April, and the next rally swing high,
August, fails to reach and retest the previous swing low, leaving a space.  It indicates a
weak market.

There was a strong rally on Friday, but when seen on the weekly chart, the results are
less impressive.  That observation is amplified when you compare the last two bar ranges
and respective volume.  The second bar from the end shows ease of upward movement by
a wide range and strong close with volume greater than the previous day.

On Friday, volume increased sharply compared to day 2, yet the price bar range narrowed.
Increased effort, volume, yielded less results, a smaller range.  The reason why the range
narrowed was due to sellers meeting the increased effort of buyers and preventing the
price range from extending higher.

You can expect to see this kind of activity in a down trend where sellers have been in
control.  From a weekly chart perspective, gold continues to struggle, even with a strong
rally effort on Friday.  This is the way to read the “message” of developing market activity.

 

GC W 11 Jan 14

Friday’s rally stopped at a minor resistance area, [thin horizontal line].  Continuation to
the upside would be expected on Monday.  We will now begin to see if gold can develop
a sustained upside rally and begin to change the trend, from down to at least sideways.

GC D 11 Jan 14

The last time silver spent 8 weeks in a TR, June – August, the 9th week was a strong rally.
There are now 8 weeks completed in the current TR, and Monday starts week 9.   The last
three weeks have a close clustering of closes.  This reflects balance between sellers and
buyers, and from balance comes unbalance.

All three of the last closes are upper range, indicating buyers won the battle each week,
and it would indicate that buyers are absorbing the effort of sellers prior to moving
higher.  That is the probability read, but the market always has the final say.

SI W 11 Jan 14

The daily does not have a similar positive read as the weekly, and as we noted on the
chart, the increased volume, last bar, did not quite generate as wide a price range as
occurred 6 bars earlier.  Price is still within the established TR, moving farther along
the Right Hand Side, where resolve takes price out of the TR.

For the moment, momentum is on the buy side.

The futures still have issues, and one cannot buy into rallies in a down trend.  The
physical gold and silver metals also have issues, but the resolve is going to eventually
lead to an explosive upside.  Continue to buy the physical.  These are great prices.

SI D 11 Jan 14
Read more at http://investmentwatchblog.com/gold-and-silver-there-are-reasons-greater-than-demand-for-owning-them/#pgbtod7IBmvBXxH2.99

Rampant corruption, massive protests. Is Eastern Europe coming undone? – World – CBC News

Rampant corruption, massive protests. Is Eastern Europe coming undone? – World – CBC News. (source)

It’s the “Wild East” of the European Union. Here nationalism, cronyism,anti-Semitism, anti-Roma racism and corruption — above all corruption— strut and dominate the public arena.

Where to begin?

Perhaps in the Czech Republic. They’re holding parliamentary elections on the weekend. The reason? The Czech government collapsed because the prime minister, Petr Nečas, was forced to resign.

His senior aide, who was also his lover and is now his wife, had ordered the country’s security services to spy on the prime minister’s then wife and report back. The aide wanted to push through a speedy divorce.

Then there’s Romania where large street demonstrations against corruption are the order of the week, the month, the year, not to mention last year and the year before.

The demonstrations have brought down ministers and governments without ending the problem.

The added twist this fall is that the demonstrations have been against corruption AND the development of the Rosia Montana open-pit gold mine, the biggest in Europe, which is owned by a Canadian company.

Next door, in Bulgaria, things are even wilder. In February, 100,000 people stormed through the streets protesting against unemployment, corruption and high electricity prices. The government resigned.

In June, a new government appointed a so-called security czar, Delyan Peevski, a 32 year old referred to coyly as “a media mogul with dubious friends.”

He also had no experience in policing or security. Within 36 hours he was gone, the victim of a huge public backlash. The backlash continued for 40 days, with demonstrations getting bigger and bloodier.

The irony is that bringing these countries into the union in the last dozen years was supposed to be the first step to emptying the swamp of corruption.

Petr NecasFormer Czech prime minister Petr Necas shown here attending a party congress in 2012. The woman behind him is Jana Nagyova, the former aide, now his wife, who precipitated the Necas government downfall and was charged with abuse of power and bribery. (Petr Josek Snr / Reuters)

Each of these nations had to sign “governance agreements” that committed them to cleaning up their acts. That clean-up hasn’t happened.

Instead European money, rivers of it, has flowed in to build roads, restore buildings and improve a stagnant infrastructure.

Large chunks of that money has simply gone missing. In effect, Europe has magnified, not reduced, the corruption problem by putting more cash up for grabs.

Hungary, a special case

Hungary doesn’t quite fit the mould of the other three countries as it combines nationalism, corruption and the rise of the extreme right.

Once, a dozen years ago, Viktor Orban, Hungary’s prime minister, was hailed by outsiders as the best post-Communist leader the country had had.

Now, three years after his return to power in 2010 he has become a strident nationalist who denounces Brussels, the headquarters of the European Union, of which his country is a member, as the “new Moscow.”

The EU parliament returned the compliment, officially rebuking his government for working to strip the Hungarian judiciary and media of their independence and for rewriting the country’s constitution to suit its whims.

But that’s only a taste of Hungary’s current anxieties.

The country’s fastest growing party is Jobbik, an extreme right-wing group that polled 17 per cent in the 2010 elections, largely by attacking the Roma minority (roughly 800,000 in a country of 10 million) in virulent terms.

Jobbik HungarySupporters of the Hungarian far-right Jobbik party take part in an anti-Roma demonstration at the Avas apartment projects in Miskolc, about 180 km east of Budapest last year. (Bernadett Szabo / Reuters)

Roma were “Gypsy criminals,” Jobbik leader Gabor Vona, shouted from podiums. Other Jobbik leaders railed against “Jews and financiers” as well.

Jobbik created its own vigilante group, calling it the Hungarian Guard and giving it uniforms and symbols that intentionally recalled those of the pro-Nazi militia of the 1930s and ’40s.

The Orban government tolerated this and then, this spring, went further when its minister of culture awarded the country’s highest award for journalism to a man who had called the Roma “monkeys” and was known for his scarcely-veiled anti-Semitic remarks.

Oligarchs and mafia

Hungary’s position on the Roma is the most glaring, but official attitudes towards that group in all four countries are unforgiving.

It’s an ongoing headache for Brussels and for countries like France that find themselves trying, and failing, to cope with the inflow of Roma from Eastern Europe.

Just as worrying for Brussels is the continuing rampant corruption in these former Soviet satellites.

Bulgaria is the worst case. It is the poorest country in the EU and many leaders in Brussels, not to mention the legion of Bulgarian protestors, believe that much the state is beholden to “oligarchs” or “mafias.”

So glaring is the problem that when tens of thousands of protesters filled the streets of Sofia, the Bulgarian capital, this summer to denounce corruption and the government, European justice commissioner Viviane Reding went along, to meet the demonstrators, and tweeted, “Here in Sofia my sympathy is with Bulgarian citizens who are protesting against corruption.”

Alas, the tweets and weeks of protests were not enough to force the government to resign.

Roma HungaryA Roma man stands amid his wares in one of eastern Europe’s largest flea markets near Devecser, Hungary, the site of a huge anti-Roma protest last year. (Laszlo Balogh / Reuters)

Compared to Bulgaria, the Czech Republic is far richer but hardly immune from corruption and cronyism. In the two-year period before Nečas was forced to resign, a former defence minister, a former top aide to a prime minister, an MP and governor of a large province and the mayor of Prague were all charged with crimes relating to fraud, bribes and corruption.

In Romania, a report in July by the country’s National Agency for Integrity said that half the mayors should resign because of conflicts of interest. They sat on the boards of companies their cities were giving contracts to.

Throughout all of this, EU leaders look on and cluck censoriously. They do little more.

It has been less than a quarter-century since these countries cast off the Communist yoke. But whether it’s the centralization of all power, as in Hungary, or the dead hand of corrupt elites, the ways learned in the days of Soviet domination persist.

The Wild East still thrives.

 

 

 

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