Sunday, October 20, 2019

US Asset Bubbles Crack as Frantic China “Restricts” Outbound Investments

by Wolf Richter, Wolf Street:

What happens to prices when the biggest, reckless buyer walks away?

China’s State Council has issued guidelines on what Chinese companies can and cannot acquire overseas. The purpose is to “promote healthy growth of overseas investment and prevent risks.” These risks would be that the $18 trillion of Chinese corporate debt will balloon further, though much of this debt is already going bad, and that it will blow up, triggering a spectacular financial crisis. This is to be avoided.

So Chinese companies have been given priorities, and their efforts to invest in overseas commercial real estate – such as office towers and apartment buildings – in hotels, and in Hollywood will be axed.

What’s on:

The guideline intends to drive the output of China’s products, technology and services, and deepen cooperation with countries involved in the Belt and Road Initiative.

The government will support “eligible” Chinese companies “to make overseas investment and join in the construction of projects in the Belt and Road Initiative.”

These enterprises should take the lead to export China’s superior technology and equipment, upgrade the nation’s research and manufacturing ability, and make up the shortage of energy and resources through prudent cooperation in oil, gas and other resources.

What’s off:

Other investments will be “restricted,” particularly those “against the peaceful development, win-win cooperation, and China’s macro control policies.” These policies are now being implemented to dodge this spectacular financial crisis.

Among those outbound investments and acquisitions that will be “restricted” and that directly impact US markets and valuations are:

  • “Real estate”
  • “Hotels”
  • “Entertainment”

There have already been examples of big deals in the US in these three categories that got scuttled – or that succeeded and the Chinese acquirer is now being pushed to unload the property – because Chinese authorities have been putting pressure on their state-owned banks to curtail lending to fund these overseas acquisition binges at peak prices by Chinese conglomerates. Here are just a few:

Real Estate: In April 2016, LeEco, a Chinese company that had surged out of nowhere, bought Yahoo’s 49 acres of land in Santa Clara, Silicon Valley, for $250 million. LeEco was going to build its global headquarters on it and hire 12,000 people. Earlier this year, LeEco scuttled those plans and pulled back from the US, after China’s state-owned banks had refused to lend it more money. It is now trying to unload assets, including this property.

Hotels: Anbang efforts in September 2016 to acquire Starwood Hotels & Resorts Worldwide fell apart. In June this year, its chairman was detained by the Chinse government.

Entertainment: In March this year, Eldridge Industries said that it had terminated its agreement, made in November, to sell its Dick Clark Productions – the company behind the Golden Globes telecast – to China’s Dalian Wanda Group for $1 billion because Wanda had “failed to honor its contractual obligations.” The state-owned banks had turned off the spigot. This comes after Wanda had bought movie producer Legendary Entertainment for white-hot price of $3.5 billion. Wanda, under pressure from Chinese authorities, has since been unloading a number of it Chinese properties.

China outbound M&A targeting US companies has plunged 65{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} so far this year, compared to the same period last year, according to Dealogic, “amid growing regulatory scrutiny.” Last year, Chinese companies made $65.2 billion in acquisitions in the US, including HNA’s acquisition of 25{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of Hilton Worldwide.

“Since then, regulatory agencies have been reviewing and rejecting an increasing number of transactions,” Dealogic said. This is “an effort to stem capital flight and depreciation of the yuan.” There was also more intense scrutiny in the US, particularly by the Committee on Foreign Investment, which is concerned that Chinese investments may threaten national security.

How big of a deal is this Chinese crackdown on outbound investments for the US?

Read More @ WolfStreet.com

Dave Janda’s Operation Freedom Sunday, August 20, 2017 – John Titus, Dane Wigington and Eric Dubin

by Dave Janda, Dave Janda:

Topics Discussed

Benghazi, Bank of International Settlements, Weather Modification, Manipulation of financial markets, SEAL Team 6, Extortion 17, Benghazi, New World Order Syndicate, Obama Care, Free Market Health Reform, Putin, The Ukraine, ISIS, Syria, The Constitution, Natural resources, Reserve currency, Corruption, gold, silver, Global Elite, International Banking Cabal, debt, Federal Reserve, Too Big To Fail Banks, Crony Capitalism, Debt Ceiling, Financial implosion, Recession, Economic Depression, Freedom, Liberty

Click HERE for John Titus

Click HERE for Dane Wigington

Click HERE for Eric Dubin

Read More @ DaveJanda.com

10 Reasons Why Central Banks Will Miss the Cryptocurrency Renaissance

by Eugéne Etsebeth, CoinDesk:

It’s a familiar trend, one that happened in communications (internet), and that is now playing out in energy (solar), manufacturing (3D printing) and finance (cryptocurrency) – power and control are moving into the hands of the individual and away from nation states.

This has huge implications for central banks, which today enable nation states to maintain their monopolies over the issuance of notes, coins and sovereign bonds. While communications and manufacturing are not their focus, cryptocurrencies and initial coin offerings (ICOs) fall predominantly in the realm of central banks.

In these systems, central banks don’t issue legal tender. Rather, miners and algorithms now control the issuance of tokens – effectively, the money supply. Whereas previously banks were licensed to store, send and spend currency, now wallet providers and exchanges allow the same features.

The currency renaissance has arrived and central banks are studying cryptocurrencies, though some central banks are more open to change than others.

Singapore has been investigating the notion of using distributed ledger technologies to settle cross-border transactions in real time, and the Bank of England has experimented with Ripple. Central banks are even looking to build their own versions of central bank-issued digital currency (CBDC).

Even still, central banks are not well equipped to deal with the cryptocurrency renaissance.

In fact, there are 10 good reasons why most central banks will find cryptocurrencies insurmountable. Sure, a small number of forward-thinking (and acting) central banks will maintain monetary competiveness with the burgeoning cryptocurrencies and ICOs that have reared their decentralized heads.

Still, most will succumb to a mix of the following issues:

1. Workforce of the past

Central banks will need to attract and retain fresh talent that will enable them to deal with the new openness and transparency demands, as well as digital transformation and the increasingly complex global world.

2. Slow decision-making

Decision-making in central banks is like wading through treacle – decisions take months because of numerous layers of hierarchy.

Working groups need to compile voluminous and detailed documents that need to be reviewed and signed by all parties before they can proceed to the heads of departments or the deputy governors.

3. Too few technologists and innovators

Academics, economists and big-picture thinkers excel in central banks. The academics ponder on conceptual issues and the economists make interpretations from data, whereas the policy makers and regulators mull over the cause and effect of promulgating laws.

However, technologists are generally not part of the discussion when it comes to policy and economic decisions for currency.

4. Fear of experimentation

Although some central banks are engaging in experimentation, there is a fear of going from proof-of-concept to pilot phase.

This is natural, should a central bank make an error, it may turn out to be a reputation buster – and reputation is the cornerstone of central banks. There is also some trepidation that the early regulation of cryptocurrencies, and associated new technologies, may legitimize their adoption.

5. Territorial and siloed thinking

Central banks are similar to conglomerates in that they have a number of different and distinct departments that require diverse skills and outputs.

These differences make it difficult to approach a new technology and economic tour de force like cryptocurrency, because it doesn’t fit neatly into any one of the industrial-style conglomerate domains.

To highlight the conglomerate type nature of central banks, the core departments and skill sets are listed below:

  • Bank supervision: mainly supervisors and regulators who manage banking licenses and audit
  • Currency management: manufacturing and logistical planners
  • Financial markets: front, middle and back office currency and bond traders
  • National payments: a combination of regulators for payments and technical resources running the RTGS system
  • Research: mainly economists who produce statistics based reports and input into repo-rate decisions.

6. Buy versus build approach

Most central banks do not have substantial software development capability. Therefore any new project will have to buy its technology. There is an acute shortage of central bankers who can explain or use Merkle trees.

7. Stuck in the status quo

A large portion of central bankers are career central bankers, so the desire and ability to change are not incentivised. Change is often considered a threat to staff, and threats are met with jelly-like stickiness to the status quo.

8. Incumbent relationships

Banks are licensed to operate by central banks, giving them the ability to create money from customer deposits.

The central bank asks the banks to protect depositor’s hard-earned money and to serve as many customers as it can: i.e. maximizing financial inclusion. The task of banks is therefore to service a nation’s citizens at the behest of the central bank.

These relationships and licenses are expensive to buy and will not easily be changed to include new members.

Read More @ CoinDesk.com

Australia Cracks Down On Bitcoin Exchanges; Shrugs Off Banks’ “Systemic” Money-Laundering Violations

from ZeroHedge:

Australian Government Is Cracking Down On The Nonexistent Bitcoin Money-Laundering Epidemic

Australia’s largest banks can’t seem to go six months without a new scandal. In April, regulators accused Commonwealth Bank, one of the country’s largest financial institutions, of “systemic” money laundering violations, sparking an investigation into the broader banking sector, and the promise of heavy-handing civil penalties.

But instead of pursuing penalties that could lead to lasting reforms, Australia’s regulators are cracking down on bitcoin, creating a new set of guidelines that will make it more difficult for customers to trade on local cryptocurrency exchanges by mandating needless anti-money laundering controls. They’re prioritizing bitcoin over banks even though all relevant data suggest that organized criminal enterprises and terrorist groups overwhelmingly prefer to transact in cash.

According to Bitcoin.com, Australia’s Coalition Government has introduced a bill that would regulate digital currency exchanges, introducing “reforms” that will “strengthen the Anti-Money Laundering and Counter-Terrorism Financing Act and increase the powers of the Australian Transactions and Reporting Analysis Centre (Austrac).”  

Here’s Bitcoin.com with more:

“Among other proposals, the bill will “strengthen Austrac’s investigation and enforcement powers” as well as “close a regulatory gap by bringing digital currency exchange providers under the remit of Austrac,” the announcement reads, adding that:

‘The bill provides a net regulatory relief to industry of $36 million annually, with the digital currency exchange sector being regulated for the first time, while deregulating low-risk industries such as cash-in-transit, which is already subject to state and territory licensing requirements.’”

As Bitcoin.com explains, Australia’s new AML rules resemble regulations adopted by Japan and China over the past 18 months. In China, the crackdown on intraday high frequency trading triggered a decline in trading volume that caused the country to surrender its position as the bitcoin market leader.

“Earlier this year, following investigations by the People’s Bank of China (PBOC), many Chinese bitcoin exchanges halted bitcoin withdrawals to extensively upgrade their systems for the purpose of AML and KYC compliance. Also the European Union has been discussing how to impose rules on bitcoin exchanges as part of its Fourth Anti-Money Laundering Directive.”

Meanwhile, in what looks like an effort to compensate bitcoin traders for the overly stringent new regulations, Australia ended the double taxation treatment of bitcoin in July.

Read More @ ZeroHedge.com

Bitcoin & Bitcoin Cash Smash Through $5,000!

by Jeff Berwick, The Dollar Vigilante:

Now, I realize I can’t do this forever. I can’t continue for years to combine the value of both Bitcoin and Bitcoin Cash and quote it as a “total value” of bitcoin.

But, considering that it was just 19 days ago that every person in the world who owned bitcoin, if they stored it correctly, also became a new owner of an equal amount of Bitcoin Cash… it is still a very reasonable thing to take note of the two currencies combined price as being the value that the grand majority of bitcoin holders currently hold… or “HODL”, to talk more like the cool kids.

I’d say that this is a perfectly viable thing to mention for at least another month or two… then it’s probably best to completely delineate the two as totally separate entities for the most part.

In any case, since I’ve now officially decided that it is fine for me to do so… I will now make mention that the combined price of Bitcoin and Bitcoin Cash surpassed $5,000 this afternoon!

As you can see, during the day on Saturday, bitcoin was valued over $4,117 and Bitcoin Cash continued to skyrocket, peaking over $900 which equated to a combined value of more than $5,000!

This is no small feat!

On July 17th, just over one month ago, bitcoin hit a low of $1875.

At a combined price of $5,000 today, that means people who held bitcoin on July 17th and haven’t since sold their bitcoin or Bitcoin Cash have had a gain of 167{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}!

Not bad considering the Health Ranger warned, “Bitcoin collapse now under way… has already plunged nearly 40{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} from its high.”

He warned that the August 1st fork was a “bitcoin civil war” and that the bitcoin Ponzi scheme was unraveling.

Soon after we wrote, “Don’t Fear The Fork: The Future of Bitcoin” where I told people to ensure they held their bitcoin properly, so they received Bitcoin Cash and to just HODL and not worry about the fork.

That’s probably why you should get your vitamin advice from health websites and your financial advice from financial websites.

It’s a crazy way of doing things I know…

Read More @ TheDollarVigilante.com

If the Lights Go Out, You’ll Want to Own Gold

by Peter Schiff, Schiff Gold:

Imagine the financial chaos that would ensue if there was a widespread, long-term, power grid failure. Business would literally halt.

Stop and think for a moment about how dependent the financial system is on computers. Banking, stock and bond trading, and the vast majority of our day-to-day transactions, rely on computer networks. Many people don’t even use cash anymore. Everything is digital. We even have wholly digital currencies like Bitcoin.

We take these computer systems for granted. In reality, they put us at considerable financial risk. This vulnerability is another reason you should buy gold.

During a recent interview covered in Forbes, Marc Faber talked about the importance of owning physical assets like gold and silver, and holding them outside of the banking system. He said the biggest geopolitical risk isn’t a conventional war. It’s a cyber attack that could take down the power grid.

What is our vulnerability? It is unlikely somebody would invade the US. I mean, nobody is as foolish as that. It’s unlikely that someone will go invade China … So, I think the vulnerability of society is less in direct, big world wars that are fought not with tanks. They are fought by say somebody could turn off the lights in New York, or the electricity, or the internet. If you switched off the internet, what would happen? First of all, nobody could go shopping because everybody shops with a credit card. So, in these times, you want to actually have access to something physical that is recognized as a medium of exchange.”

Of course, it wouldn’t take a cyber attack for you to lose access to your money. Governments can limit your ability to get cash. As we recently reported, EU member states are considering a proposal that would allow them to temporarily stop people from withdrawing their own money from their accounts. The policy is intended to help prevent bank runs.

During the Greek financial crisis, people faced withdraw limits and currency shortages. The entire banking system shut down for three weeks. Even when banks reopened, depositors faced withdraw limits of 420 euros a week. As a result, a robust barter economy quickly developed out of sheer necessity.

These risks underscore the importance of having access to physical gold or silver. In the event of a total electrical grid shutdown, or a successful cyber attack, or a government induced collapse, you can continue to transact business if you own precious metals.

Faber also emphasized the importance of diversification in general. In the event of a financial collapse, you don’t want to have all of your eggs in one financial basket.

By being in equities and by being in gold, and also having some exposure to bonds, you have some diversification. Then you can hope when the hour of truth occurs, you will only lose, say, 50{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of your assets, but your neighbor loses everything. So relatively speaking, you will have done very well.”

Read More @ SchiffGold.com

Major Sanctions Escalation? Informed Sources Say Russian Bank Disconnected From SWIFT

by Paul Goncharoff, Russia Insider:

Rumors are swirling in Moscow that a Russian bank has been removed from SWIFT

What is the foreign policy game plan ranged against Russia? It looks like the first serious baby-steps to an existential sanctioned escalation may have just been quietly taken. It may very well be that the first Russian bank was disconnected from SWIFT. While I have not heard any confirmation, the word on the Moscow financial grapevine persists.

The Russian “Tempbank” (http://www.tempbank.ru/eng/) whose management has been individually sanctioned by the US for ongoing trade with Syria and Iran was disconnected from SWIFT according to apparently “informed sources”. It seems after the sanctions were removed from Iran a while ago Tempbank went ahead and legally opened correspondent accounts with the Iranian Central Bank and a number of large banks of that country. It has further been rumored that the Tempbank chairperson, Mr. Mikhail Gagloyev received a letter from the “human rights” organization “Associations against the Nuclear Program of Iran” (UANI). This is an interesting organization in its own right. In the letter, UANI warned the Russian bank against cooperating with Iranian or Syrian companies. Meanwhile, the talk in the financial street was that the management of Tempbank was targeted for personal sanctions because of their cooperation with Iranian and Syrian businesses. If these reports are correct, then it follows that with the right amount of influence from the right sources, any Russian bank can be disconnected from SWIFT without much legal recourse or chitchat. This does not look to be a de-escalation of tensions. Then what other domino’s might follow, and to whose real advantage?

While on the subject of money and banks. Governments are struggling to discover just the right fix to get a balance between controlling public debt, which now exceeds 110 per cent of GDP for the advanced economies, and boosting the rate of economic growth. The first goal requires quite a bit of budgetary tightening, while the second needs just the opposite. What is a government or central bank to do?

One option I overheard recently being discussed by some (very respectable) EU bankers recently imbibing vodka in Moscow is to restructure (i.e.; write off, disappear) part of the government debt that has been bought up by the central banks as a direct result of quantitative easing. Their logic was since both the government and the central bank are the public sector; a consolidated public sector balance sheet would net this debt out entirely. I paused and tried to puzzle this one out over my cappuccino as I stirred in my sweetener, but no bright lights illuminated my thinking. All I could come up with was a deep breath and a vision of hyperinflation spreading like diaper rash across the world’s financial backside.

Now consider what might happen if those bonds held by central banks were simply cancelled, instead of being sold at some point in the future back into the private sector as was initially dreamed up (before NIRP’s and ZIRP’s became household monikers). Should that happen the long-term restraining effect of bond sales would also be cancelled out, so theoretically there should be an immediate stimulatory effect on nominal demand in the economy. Theoretically. In fact, the central banks in both the USA, Japan and EU have purchased so much government and commercial debt since 2008 that the effects of such an action could be rather volatile putting it mildly. It follows also that the volatility of the financial markets would be even greater if instead of just cancelling past debt, the central bank were to agree with the government to further enhance financing increases in the budget deficit by printing even more money. We would then really be in a world of hurt, as the specter of “helicopter money” becomes reality. Say goodbye to pretending there is a firewall between monetary and fiscal policy. I wonder if this way of thinking has taken root at the Fed as well, time will tell no doubt.

Except in times of war, countries have not seriously considered unleashing such extreme actions. The hyperinflationary damage, which results from the elimination of central bank capital, has normally been considered too dangerous to let out of the financial cage.

Read More @ Russia-Insider.com

Audioblog #206-Gold’s Win-Win Scenarios, In The Upcoming, Historic Crypto-Currency Explosion

by Andy Hoffman, Miles Franklin:

Andy joined Miles Franklin as Marketing Director in October 2011. Prior to joining the company, he spent sixteen years on Wall Street and five in the mining business. He has been writing free missives about precious metals, markets, and economics since 2004.

Click HERE to listen.

Read More @ MilesFranklin.com

Greg Weldon: Gold is a “coiled spring… the breakout is here, fundamentals are in place, technicals are compelling”

by Mike Gleason, Money Metals:

Coming up we’ll hear a wonderful interview with Greg Weldon of Weldon Financial and author of the book Gold Trading Boot Camp. Greg gives us his thoughts on the dangerous scenario that could ensure if a selloff drives everyone out of stocks all at the same time, shares his opinion on Bitcoin and also tells us why he views gold as a coiled spring waiting to release. Make sure you stick around for my conversation with Greg Weldon, coming up after this week’s market update.

Downside volatility hit financial markets on Thursday as concerns grow about the political path forward for the White House. President Donald Trump again finds himself under heavy criticism from the media and also from a growing chorus of establishment Republicans. More on that in a moment…

Click HERE to listen.

Read More @ MoneyMetals.com