Rand Tumbles On Report South Africa Seeks To Nationalize Central Bank

The South African rand has tumbled following a report confirming recent speculation that South Africa’s ruling African National Congress will propose that the country’s central bank, the Reserve Bank be nationalized and wholly owned by the state, according to three people familiar with the discussions quoted by Bloomberg.
S. AFRICA’S ANC SAID TO PROPOSE CENTRAL BANK BE STATE-OWNED S. AFRICA’S CENTRAL BANK CURRENTLY HAS PRIVATE SHAREHOLDERS S. AFRICA CENTRAL BANK’S SHAREHOLDERS HAVE NO SAY ON POLICY Bloomberg adds that the proposal which will surely have negative consequences on the country’s financial stability was approved in plenary session of the party’s policy conference taking place in Johannesburg. However, the decision still to be ratified at the ANC electoral conference in December, so nothing is imminent. By way of background, Bloomberg reminds us that the central bank’s currently has about 600 private shareholders who have no say over the setting of monetary policy.

This post was published at Zero Hedge on Jul 5, 2017.

Auto Sales Tank Again In June – It’s Worse Than Headline Reports

June auto sales on a ‘SAAR’ basis (seasonally adjusted annualized rate) fell 1.2% from May to 16.5 million ‘SAAR.’ The non-SAAR number available from sources like Autonews.com show a 3% year over year drop from June 2016. The year over year comparison for the same month eliminates seasonality and it eliminates statistical errors compounded by the annualization calculation.
It was the 6th month in a row that auto sales declined. June’s 16.5 million SAAR was 11.7% below the all-time high of 18.7 million SAAR (December 2016). This is a large decline that is not being given much attention in the financial media.
But it’s worse, especially for the domestic OEMs (GM, Ford, Chrysler). GM’s sales dropped 4.8%, but its car sales plunged 38.2% (truck sales were up 11% with huge incentives). Ford’s sales fell 5%, truck sales were up 2.2% but car sales tanked 23%. Chrysler’s sales were down 7.4%. These numbers are on a year over year basis for June.
Sales are plummeting despite the fact that automakers spent a record amount on cash incentives. Financing terms for the subprime debt being used to pay new cars continues to loosen. The average monthly car payment increased to $517 from $510 in May and the average term rose to a record 69.3 months and the total amount financed hit another all-time high (just under $31,000). You’ll note that subprime delinquency/default rates are starting to approach 2008 levels.

This post was published at Investment Research Dynamics on July 5, 2017.

The Golden Revolution, Revisited: Chapter 5

This Insight is the sixth in the serial publication of the new, Revisited edition of my book, The Golden Revolution (John Wiley and Sons, 2012). (The first instalment can be found here.) The book is being published by Goldmoney and will also appear as a special series of Goldmoney Insights over the coming months. This instalment comprises the fifth chapter of Section I.
View the Entire Research Piece as a PDF here.
The “Reserve Currency Curse” amd the International Aspects of Cantillion Effects
‘The fact that many countries as a matter of principle accept dollars to offset the US balance-of-payments deficits leads to a situation wherein the United States is heavily in debt without having to pay. Indeed, what the United States owes to foreign countries it pays – at least in part – with dollars that it can simply issue if it chooses to. It does so instead of paying fully with gold, whose value is real, which one owns only because one has earned it, and which cannot be transferred to other countries without any danger or any sacrifice. This unilateral facility that is available to the United States contributes to the gradual disappearance of the idea that the dollar is an impartial and international trade medium, whereas it is in fact a credit instrument reserved for one state only.’
FRENCH PRESIDENT CHARLES DE GAULLE, FEBRUARY 1965
Having shown that monetary Cantillon effects can have a material impact on economic inequality within an economy, it remains to consider how these effects can also spill over internationally. As the issuer of the primary global reserve currency, the US Federal Reserve may be the source of significant international Cantillon effects. Indeed, I believe that these effects are in certain respects easier to identify than those observed domestically. There have also been some major studies supporting this view. First, let us consider the important role played by a reserve currency in the international monetary system.
What, exactly, is a reserve currency? It is one that is used to pay for imports from abroad and is then subsequently held in ‘reserve’ by the exporting country, as it does not have legal tender status outside of its country of issuance. In the simple case of two countries trading with one another, with one being a net importer and one a net exporter, over time these currency ‘reserves’ will accumulate in the net-exporting country. In practice, as reserves accumulate, they are initially held as bank deposits but are subsequently invested in some way, for example, in government bonds issued by the importing country or perhaps purchases of corporate securities. In this way, the currency reserves earn some interest and possibly realize some capital gains, rather than just sit as paper scrip in a vault.

This post was published at GoldMoney on July 04, 2017.

Global Markets Mixed; Geopolitics Moving Into Spotlight Again

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
(Kitco News) – World stock markets were mixed overnight. U. S. stock indexes are pointed toward mixed openings when the New York day session begins. Many U. S. traders are just now returning from a long holiday weekend. Gold prices are trading near steady after hitting a nearly four-month low overnight. The bears have technical momentum as gold prices are in a four-week-old downtrend on the daily bar chart.
The world geopolitical scene has heated up again, but safe-haven gold is not reacting much, at least not yet. North Korea says it has an intercontinental ballistic missile that the regime says can reach anywhere in the world. This has riled the U. S. and other Western nations. The Trump administration wants to take a hardline against the North Koreans, but its options are very limited.
In other overnight news, the Eurozone got some upbeat economic data. Retail sales were up 0.4% in May from April, and were up 2.6%, year-on-year. These numbers were better than market expectations. Meantime, the Eurozone Markit composite purchasing managers index (PMI) came in at 56.3 in June, which was slightly down from the May reading but still above market expectations.

This post was published at Wall Street Examiner on July 5, 2017.

SocGen: “Are We Just Prisoners Here, Of Our Own QE?”

In the aftermath of recent hawkish jawboning by central bankers around the globe, and especially FOMC members who now appear set to hike even if only to just spite momentum chasing market algos by “shocking” easy liquidity conditions in tightening as Goldman suggested in May, SocGen’s Kit Juckes asks a more existential question: channeling the eagles he wonder if we “Are we just prisoners here, of our own QE?” and points out that as a result of the $15 trillion in CB liquidity injections, the US is “sort of” stuck in a 1990s-style Japanese “lost decade” and the impact on the global economy has been minimal yet “we’ve all seen the political consequences.” As a result, he blasts any idea that the ECB will be able to exit its own “Hotel California” any time soon if ever:
I meet a lot of people while I talk to clients who think the ECB simply won’t be able to escape its current policy setting because a stronger currency is too damaging. I think they’ll try, both to contain the currency, and to exit QE, because pressure within the ECN demands it, and practicality demands that they slow down. Luckily, thanks to Bullard’s guidance from last week, we already know that when the exit attempt fails, and leads to a sever recession, the Fed and central banks will have no choice but to unleash even more QE, and so back to square one.

This post was published at Zero Hedge on Jul 5, 2017.

Russian academic and political leaders listen to Hugo Salinas Price about silver

Accepting an academic honor last week at a ceremony at the Russian embassy in Mexico City, Hugo Salinas Price, president of the Mexican Civic Association for Silver, argued that Mexico’s central bank should purchase a portion of the country’s silver production for monetary reserves just as China is buying the whole of that country’s gold production. Salinas Price discloses that he has urged Russia to issue a silver ruble in anticipation of replacement of the U.S. dollar standard with a metallic money standard in the world financial system. Salinas Price also discusses the suppression of gold and silver prices by a cabal of U.S.-led central banks and financial institutions.

This post was published at Plata.com.mx

Tarnished Abe Plunged Into Crisis After Tokyo Election Loss

Scandal-hit Japanese Prime Minister Shinzo Abe faces one of his biggest tests since coming to power in late 2012, after his ruling party lost to an upstart outfit in an election for Tokyo’s assembly.
The Liberal Democratic Party lost more than half its seats to end up with 23, the lowest number ever in the capital, in a vote that could be a harbinger for national elections. Voter turnout was up about eight percentage points on the previous poll four years ago.
Tokyo Governor Yuriko Koike’s Tomin First (Tokyo Residents First) party won 49 spots in the 127-seat assembly, up from six beforehand. That will give her a majority after she formed a local alliance with parties including Abe’s national coalition partner Komeito.
Somber-faced party executives sat in silence at the opening of an extraordinary meeting on Monday morning to discuss the defeat.
‘At times like this we must pull ourselves together and reflect on the things that should be reflected on, then move ahead carefully but decisively,’ Abe said Monday in remarks carried on NHK. ‘It’s been almost five years since the administration was launched and there was severe criticism that we might be lax. We have to accept that with sincerity.’

This post was published at bloomberg

Where’s Your Loyalty? — Jeff Thomas

Recently, after reading an essay of mine, a reader angrily questioned my loyalty to the USA. My immediate reaction was that I’m not a U.S. citizen. I therefore tend to observe the U.S. dispassionately, just as I’d observe any of the nearly 200 ‘foreign’ countries in the world.
But, as I’m British, what if he’d questioned my loyalty to the U.K.? Would he have a valid point? Well, at the very least, he’d certainly have a question worthy of an answer.
I, of course, have a legal right to live and work in the U.K., and yet I choose not to. It’s simply not my idea of a great country in which to reside. As much as I regard the traditional English village to be an ideal environment in which to live, I reside elsewhere. The reason is that I place a very high value on personal freedom, a non-intrusive government, and a populace that doesn’t feel that it’s entitled to largesse that’s been forcibly taken from another segment of the population.

This post was published at International Man

Mapping Europe’s Temp Worker Epidemic

As we’ve reported time and time again, once one looks past the headlines extolling the labor market “recovery” in the US, the details of these reports paint a much more discouraging picture. One need only look to the establishment survey – one of two measures used to calculate the Labor Department’s monthly jobs figures – which shows that full-time jobs with benefits are increasingly being supplanted by low-paying part-time jobs. In the employment data, many of these jobs are misleadingly double- and triple-counted as the data fail to reflect that many workers are being forced to work two or three part-time jobs, instead of one full-time job.
Unsurprisingly, a recent report from Stratfor reveals that many European countries are struggling with the same problem – except the situation is even more dire. As Stratfor explains, jobs offered under part-time and temporary contracts are accounting for an increasingly large share of total employment, while full-time jobs are disappearing at an alarming clip.
In 2003, well before Europe’s economic crisis, 15 percent of workers in the European Union were employed under part-time contracts. By 2015, that had risen to 19 percent. Meanwhile, in the US, about 18% of workers are part-time, according to the most recent data available from the Bureau of Labor Statistics.

This post was published at Zero Hedge on Jul 5, 2017.