Hungary issued first bonds in Yuan
Viktor Orban tipped his hat towards Beijing. Bonds are worth only 1 bn CNY – 154 bn USD. Not only the amount of money is small but also the interest rate is high – 6.25%. If Budapest decided to use USD and then denominate their bonds thanks to swaps into Yuan, Orban could have saved even 1%.
This begs a question: if profit was not the goal, was all this a test to check demand for a new instrument? The decision is also a clear political signal in which direction (East or West) Hungary wants to intensify cooperation. Orban hopes to be included in the New Silk Road project and with weakening position of the US we can anticipate more demonstrations of this sort.
Will Deutsche Bank join SGE’s precious metal fix?
Deutsche Bank is the biggest bank in Europe. It has one of the biggest derivative exposures (20% of the whole market) and is engaged in many projects all over the world. Thanks to its position in the Western financial system it can be the key to deal with London and New York banking centres.
China wants to increase their presence in Germany. It looks for new business partners and enters new markets especially after recent attacks on DB and VW that hurt the brands’ image and position in their respective markets.
As of today, no Western bank accepted the SGE's invitation to join precious metal price fix. Looking for a European partner is ongoing and it is possible that DB may be the perfect candidate. We are still waiting for an official statement from DB.
By accepting SGE’s cooperation, DB could dethrone London LBMA trading platform that fixes prices of precious metals. London’s leadership is already at risk due to big outflows of bullion from the West towards the East. The rigging scandal in which DB took part is not an obstacle as SGE having their own fix also lent a hand in setting prices independently from the real level of demand and supply.
Reanimation of Italy’s banking sector with an emergency fund
In 2016, equities of Italian banks were halved. No agreement with the ECB on how to help Banco Popolare and Banco Popolare Di Milano scared some politicians. A new plan according to which all Italian banks should receive and additional capitalisation is being negotiated. The whole banking sector would need to pitch in and create 5 bn EUR ‘Atlante’. ‘Atlante’ fund may not help solvency problems of Italian banks as the amount of non-performing loans and other obligations it tries to aid amounts to 360 bn EUR.
Rome has to decide. On the table, there is also a "bail-in" directive but it can initiate a domino effect which can incinerate the whole sector.
‘Atlante' is a very poor alternative as it doesn't address the root of the problem. It just apportions the burden of the debt across all participants. This, in turn, can cause liquidity problems for some smaller banks.
Puerto Rico goes bankrupt
Alejandro Garcia Padilla, the Governor of Puerto Rico decided not to make payments (until January 2017) on the government’s debt. When public’s wallet became empty it was bureaucrats and clerks who got the better end of the deal than creditors. The latter group represented by hedge funds didn't wait long to go to court which froze the portion of the budget committed to administration’s salaries.
The 1st May deadline to return 400 million USD was missed due to lack of resources. In San Juan, American investors met the government’s side and talked about 5 billion USD debt restructuring plan which included privatisation of a number of public companies. Government officials walked out of the negotiations.
The full amount of debt – 70 billion USD – is impossible to handle for the society and Governor Padilla asked for a bail-out from Washington. The US refused and Puerto Rico is going to join Detroit as another black hole on the US map.
The United States of America is the biggest tax haven in the world
Zero Hedge tells us that Rothschild&Co, a Rothschild’s trust in Reno, Nevada is the biggest tax avoidance entity known. According to Nevada’s liberal law, the construction of the trust makes it legal to prevent capital from being taxed. After 2008, the US started a war against tax havens. This resulted in Swiss regulation being changed (no more bank's confidentiality), Cyprus had first bail-in, and Bermuda and Bahamas tax haven were no more. Account numbers and clients’ addresses of Qatar National Bank were leaked, the biggest tax haven leak – the Panama Papers – were published. All this compiled into one result: eliminating competition of Rothschild’s trust and bringing money to the US.
Zimbabwe eyes backing it’s currency with gold
Government officials and consultants from the US and Canada met to deliberate about the possibility of introduction of a gold-backed currency. Doug Casey, owner of Casey Research, investor and well-known analyst was one of them.
To accomplish this plan, Zimbabwe aims to create a gold reserve bank which should buy enough metal from the market to introduce currency backed by it. Harare has an advantage of being one of the biggest exporters of precious metals in the world. In the case of any troubles with acquiring the metal, they can use their own production.
This strategy is not only about healing public deficit and reclaiming the trust of citizens towards local currency. The international image of the country is at stake and foreign investors with their capital can help the economy that suffered after years of hyperinflation.
Gold standard in the light of Sharia law
An introduction of the gold standard is being discussed by the World Gold Council and the Accounting & Auditing Organization for Islamic Financial Institutions. Gold has a special place in the Sharia law – it is one of the means of trade but cannot be subject to interest payments from it. Today, financial instruments substituting physical gold are allowed but they have to be backed by the metal. This eliminated Comex futures but still enables instrument trade in the SGE.
The chance of working out a common standard before 2016 is very high. The United Arab Emirates, Morocco, Malaysia, Indonesia are countries spearheading this project as they may be the first ones to enjoy those standards.
Tremors hit the US – Saudi relationship
The US debt lies at the heart of this issue. A rapid nosedive of the oil price has put Saudi budget in an uncomfortable position. Money made on exporting the oil can't cover government spending. Arabs require a steady influx of currency for their war in Yemen and sustaining social welfare programs.
The easy solution to go through tough times would be to sell the share of the currency reserves – mainly in the form of US treasuries. Unfortunately for Riyadh, Washington doesn't feel that another country joining the trend of selling debt made in the US is a good idea. Through diplomatic channels, Saudi currency reserves are still owned by the Kingdom.
As a result, the country without public debt and with 600 bn USD reserves had to issue their own bonds.
The situation worsened after a report about Saudi connections to 9/11 attacks was about to be published. Arabian diplomats were allegedly helping and funding terrorists that conducted the attack in the US. Repercussions that the US was threatened with? Dumping American assets worth 750 billion USD.
The situation is still developing. One thing is for sure: drastic diplomatic actions and treating partners as instruments don’t strengthen any Washington alliances. It can have dire consequences especially before the confrontation with Russia, Iran and China. Actions like those only demonstrate the weakness of the world hegemony.
Reasons behind Saudi campaign against Yemen
Slowly but surely, Saudis are losing access to cheap and easily recoverable oil and gas reserves. The attack on Yemen coincided with significant hydrocarbon discoveries in this country announced recently. Additionally, Riyadh already started to exploit oil reservoirs found underneath the seabed – this costs them much more than their conventional production. A number of wells climbed from 88 to 170 but Saudi energy minister Ali al-Naimi said that an overall production should not rise above 12.5 MM barrels per day.
There is also one more reason why Saudis want to get inside Yemen before this potential threat to their oil dominance could get access to the global oil market. Yemen a poorly developed country with big energy resources could marginalise importance of the Saudi kingdom. Chinese would love to help Yemenis to raise their standard of living in exchange for oil but neither Saudi Arabia nor the US can allow that to happen.
Taking control over oil in Yemen is just part of the profit from this invasion. The Bab al-Mandab Strait can now be in Saudi hands. There is also a plan to build new ‘Salman Canal’ starting from Qatar coastline through Saudi Arabia, Yemen and ending in the Arabian Sea. This project can help bypassing the Strait of Hormuz.
Greece is tightening their relationship with China
On April 8th, the deal making Chinese a majority shareholder in the biggest Greek port in Piraeus was finalised. China has access now to all Mediterranean countries from port South-West from Athens. Militarily it is in the vicinity of Russian Tartus naval base and Syria itself, a viable position to increase presence and strategic capabilities of the Sino-Russian alliance.
A Chinese corporation COSCO Shipping, a party to the deal, is already an owner of handling port in Piraeus and plans to invest 230 mn EUR in building an additional one. Piraeus is intended to be the biggest (in Europe) Chinese hub for international maritime trade. Upon completion of this deal, Greece joined Eurasian Free Trade Zone.
Greek government looks at Eastern partners for help to end economic misery after 2008 crisis. It is important for Greeks to show Berlin that the EU is not their only choice. This can help the Greek negotiating position before another debt payment of 3.5 bn EUR in June.
The visible turn towards East is an inevitable consequence of a recent IMF correspondence leak. Published emails showed that the IMF is not happy with the speed of austerity cuts in Greece and to give incentive to further sell and privatise parts of Southern economy, another financial liquidity crisis would be useful. After all, France and Germany, two main creditors of Greece have financial problems on their own and rather than writing off Greek debt they would more likely agree to kill the Greek economy once and for all.