Why it’s essential you keep a portion of your savings in physical cash

[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles. Today’s was originally published on January 6, 2016] Think of the word ‘money’ for moment. What’s the first image that comes to mind?
Perhaps the folded paper in your wallet. Or the balance in your bank account.
Or perhaps the investments in your brokerage account.
In our modern financial system where unelected central bankers wield totalitarian control over the financial system, all three of these are forms of money.
But the relationship between them is very tenuous, and very risky. I’ll explain:
1) Physical cash No matter where you live in the world, just about every civilized nation on the planet has some form of physical currency in various denominations. Dollars. Pounds. Euros. Yen. Renminbi.
We pass around these pieces of paper as a medium of exchange.

This post was published at Sovereign Man on December 21, 2017.

Former JPMorgan Quant On Evading Chinese Capital Controls Via Bitcoin

Mainland Chinese buyers have become a dominant force in real estate markets across the world. The Chinese government crackdown on outflows earlier this year severely throttled that money.
While this money has been throttled, it’s still appearing in certain markets, most notably the United States.
We wanted to know how exactly this is still happens, so we connected with Dr. Joseph Wang – a Bitcoin and Chinese capital outflow expert.
Hong Kong-based Dr. Joseph Wang is an OG of monitoring China’s capital flows and Bitcoin. He currently serves as Chief Science Officer at BitQuant, a fintech that specializes in technologies for the upcoming China yuan renminbi equities option market, as well as options and futures for digital currencies. He previously served as Vice President of Quantitative Research for JP Morgan, the sixth largest bank in the world – whose CEO is now an outspoken critic of the cryptocurrency. He’s got a ton of street cred, but even more important – he monitors China’s capital outflows to seek business opportunities.

This post was published at Zero Hedge on Sep 14, 2017.

China’s Plunge Protection Team Holds $150 Billion In Stock, Claims “State Meddling” Stabilizes Markets

It was two years ago, in June of 2015, when just as the Shanghai Composite was flirting with 5,000 and when literally the local banana stand guy was trading stocks, that the Chinese stock bubble burst, unleashing an unprecedented selling spree, a 40% drop in just two months, and Beijing’s nationalization of the stock market, courtesy of the domestic plunge protection team, the China Securities Regulatory Commission also known as the “National Team”.
The decision by local authorities to effectively shut down price discovery had a huge confidence crushing impact on local investor confidence. As Gavekal Research put it overnight, “the lack of trust was crystallized by the decision in the summer of 2015 to ‘shut down’ the equity markets for a while and stop trading in any stock that looked like it was heading south. That decision confirmed foreign investors’ apprehension about China and in their eyes set back renminbi internationalization by several years, if not decades.”
Understandably, with the realization that China (or any other nation for that matter), no longer has a an efficient, discounting stock market, but merely a policy tool meant to inspire confidence on the way up, and punish short sellers and “speculators” on the way down, the China Securities Regulatory Commission kept a low profile: after all why remind traders and investors that the local market only exists in the imaginations of several Beijing bureaucrats who sit down every day to decide the “fair value” of all market-traded equities.

This post was published at Zero Hedge on Aug 20, 2017.

Lagarde Hints At IMF Being Based In China In Future

In a comment sure to stir up questions over dollar hegemony (and new world order conspiracy thoughts), IMF Managing Director Christine Lagarde admitted during an event today in Washington that The International Monetary Fund could be based in Beijing in a decade.
As Reuters reports, Lagarde said that such a move was “a possibility” because the Fund will need to increase the representation of major emerging markets as their economies grow larger and more influential.
“Which might very well mean, that if we have this conversation in 10 years’ time…we might not be sitting in Washington, D. C. We’ll do it in our Beijing head office,” Lagarde said. Lagarde’s comments build on questions raised in May on The IMF’s push for World Money… Yi Gang, the Deputy Governor of the People’s Bank of China disclosed to the IMF panel that,
‘China has started reporting our foreign official reserves, balance of payment reports, and the international investment position reports.’ ‘All of these reports, now, in China are published in U. S dollars, SDR and Renminbi rates… I think that has the advantage of reducing the negative impact of negative liquidity on your assets.’

This post was published at Zero Hedge on Jul 24, 2017.

5 Things We’ve Learned Since China Entered the World Money Basket

Beginning in October of last year, China’s renminbi was added to the International Monetary Fund’s currency basket known as the Special Drawing Rights, or SDR.
The IMF, founded after Bretton Woods, established the SDR to be its own international reserve asset – what many have identified as world money.
Prior to Chinese inclusion, the elite currency basket was calculated with the U. S dollar, Euro, Japanese yen and British pound sterling. While China joining the SDR may have been largely status-driven at the time, the yuan and the Chinese economy have become open to heightened concern.
Significant worries over debt, wasted investments and threats of sweeping deflation left macroeconomists seeing a Chinese financial crisis on the horizon. Financial commentators ranging from hedge fund manager Kyle Bass to economist Jim Rickards highlight that the Chinese economy is on a dangerous course.
So what does that mean for China and its inclusion with the SDR’s world money basket?
Here’s five things we’ve learned from the Chinese entrance into world money:
1. October 2017 is Crucial
This October, the 19th National Congress of the Communist Party of China will be held. Thousands of lawmakers will gather in Beijing for the Congress. The Chinese Communist Party (CCP) does hold ultimate power, but certain influencers are beginning to rise.

This post was published at Wall Street Examiner on June 26, 2017.

China’s ‘official’ gold reserves unchanged for 7th straight month — Lawrie Williams

Latest reports from the People’s Bank of China for May indicate that the World’s No. 2 economic power has kept its official gold reserve unchanged – at 59.24 million ounces (1,842.6 tonnes) – for the seventh successive month. Indeed China’s officially reported gold reserves have remained unaltered since the Chinese renminbi (or yuan) was confirmed as an integral part of the IMF’s Special Drawing Right (SDR) back in October last year. Currently the Chinese currency accounts for 10.92% of the basket of currencies which make up the SDR – the others are the US dollar 41.73%, the Euro 30.93%, the Japanese yen 8.33% and the pound sterling at 8.09%.
The IMF notes on its website that the SDR was created in 1969 as a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves – government or central bank holdings of gold and widely accepted foreign currencies – that could be used to purchase its domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets – gold and the US dollar – proved inadequate for supporting the expansion of world trade and financial flows that was taking place. Therefore it was decided to create a new international reserve asset under the auspices of the IMF.
Although the idea was to create a new reserve currency as defined by the SDR basket, the composition of which is reviewed every five years, the inclusion of a currency in the basket does lend a degree of acceptance as a potential reserve currency in its own right, which is presumably why China was so keen for the renminbi to become part of the SDR basket. To help achieve this the Chinese central bank began to announce monthly additions to its gold reserves in the interests of transparency. Prior to that it had only announced its gold reserve increases at five or six year intervals saying that this additional gold, which it then moved into its official reserve, had been held in accounts which were outside the purview of its gold reserve reporting to the IMF.

This post was published at Sharps Pixley

Doug Noland: Liquidity Trade

It’s not quite 1999 at this point, but it’s been moving in that direction. In about five months’ time, the Nasdaq 100 (NDX) has posted a gain of 20.5%. NDX stocks with greater than 50% y-t-d gains include Vertex Pharmaceuticals (74%), Activision (64%), Tesla (60%), JD.com (58%), Wynn Resorts (54%), CSX (53%), Autodesk (52%), Liberty Ventures (51%) and Lam Research (50%). Amazon’s 34% 2017 rise has increased market capitalization to $481bn (P/E 189). Apple’s 33% gain pushed its market cap to $806bn. Facebook has gained 33% y-t-d, Google 26%, and Netflix 32%.
There’s an interesting similarity to the 1999 backdrop: A Federal Reserve (and global central bank community) way too timid in implementing a ‘tightening cycle’ despite bubbling asset markets. Fed funds began 1999 at 4.75%, after rates were slashed 75 bps late in 1998 in response to the Russia/LTCM financial crisis. Despite clearly overheated securities markets, rates ended 1999 at 5.5% – the same level they were for much of 1998. The Fed was content to let the speculative Bubble run, with memories of the previous year’s near financial meltdown clear in their minds. Moreover, Y2K uncertainties provided a convenient excuse to accommodate the raging Bubble.
On the back of the People’s Bank of China’s forceful interventions, the renminbi traded this week to the strongest level since November. Speculative markets have come to welcome heavy-handed Chinese intervention. The assumption is that Chinese officials are absolutely determined to hold bursting Bubble dynamics at bay.

This post was published at Credit Bubble Bulletin

China Q1 gold demand 7.7% Up On 2016 — Lawrie Williams

While the detailed Shanghai Gold Exchange (SGE) Monthly Report figures on its website still seem stuck on the February figures (released on March 7), trawling elsewhere through the site suggests that the March withdrawals figure actually came through at 192.25 tonnes and totalling up the reported year to date figures show that Q1 withdrawals totalled 555.9 tonnes – some 7.7% up on the 2016 Q1 figure, although still 11% behind that for the record 2015 calendar year.
While China’s gold demand as expressed by SGE withdrawals may be up on that of a year ago, it is early days yet for 2017 and it should be recalled that Chinese gold demand was probably at its lowest for four years in 2016, and way below that of the record 2015 year. There are, however, also a number of other factors out there – not least a potential for economic conflict – or even, but probably unlikely, military conflict – between China and the USA over a number of flashpoints such as trade equality, North Korea and the South China Sea any of which could affect gold demand positively.
Whether SGE gold withdrawals should be equated to the real gold flows into China remains a contentious point. As we have pointed out here beforehand the withdrawals data as reported appears to offer a far closer correlation to the sum of Chinese gold imports plus domestic gold production and an estimate of scrap recycling than some of the estimates of demand produced by independent specialist consultancies. In part this divergence of estimates tends to relate to how Chinese demand is calculated, with the consultancies tending to dismiss gold going into the financial and banking sectors. None of the figures take into account anything that may, or may not, be being absorbed by the government for the nation’s gold reserves. Officially these have not increased for the past five months, but doubts are being raised again as to whether China is again hiding gold reserve additions in separate accounts now that the nation has achieved its aim of having the Yuan (Renminbi) incorporated as an integral part of the IMF’s Special Drawing Rights.

This post was published at Sharps Pixley

Doug Noland Q1: Sure Bets That Weren’t

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
An intriguing first quarter. The year began with bullish exuberance for the Trump policy agenda. With the GOP finally in control of Washington, there was now little in the way of healthcare reform, tax cuts/reform, infrastructure spending and a full-court press against regulation. As Q1 drew to a close, by most accounts our new Executive Branch is a mess – the old Washington swamp as stinky a morass as ever. And, in spite of it all, the global bull market marched on undeterred. Everyone’s still dancing. From my perspective, there’s confirmation that the risk market rally has been more about rampant global liquidity excess and speculative Market Dynamics than prospects for U. S. policy change.
It’s not as if market developments unfolded as anticipated. Key ‘Trump trades’ stumbled – longs and shorts across various markets. The overly Crowded king dollar faltered, with the Dollar Index down 2.0% during Q1. The Mexican peso reversed course and ended the quarter up 10.6% versus the dollar, at the top of the global currency leaderboard. The Japanese yen – another popular short and a key funding instrument for global carry trades – jumped 5% . China’s renminbi gained 0.84% versus the dollar. WSJ headline: ‘A Soaring Dollar and Falling Yuan: The Sure Bets That Weren’t’

This post was published at Wall Street Examiner by Doug Noland ‘ April 1, 2017.

China forex reserves break 8-month run of declines

China’s foreign exchange reserves rose in February, surprising analysts by breaking an eight-month string of declines and offering the latest evidence that a stable renminbi and tighter capital controls are succeeding in staunching capital outflows.
China’s currency weakened by a record 6.5 percent against the dollar in 2016 amid unprecedented capital outflows. In response, the central bank sold dollars from its reserves to relieve pressure on the currency. Foreign exchange reserves fell below $3 trillion for the first time in five years in January.
But they rose by $6.9 billion to reach $3.01 trillion at the end of February, the central bank said today. Analysts had expected a decline of $25 billion, according to a Reuters poll.

This post was published at Financial Times

What Will Trump Do About the Central-Bank Cartel?

The US is by far the biggest economy in the world. Its financial markets – be it equity, bonds or derivatives markets – are the largest and most liquid. The Greenback is the most important transaction currency. Many currencies in the world – be it the euro, the Chinese renminbi, the British pound or the Swiss franc – have actually been built upon the US dollar.
The world is effectively on a US-dollar-standard, and the US Federal Reserve (Fed) has risen to the unofficial status of the world’s central bank. The rise of the Greenback has to a large extent been propelled by international banking, which has basically ‘dollarized’ in terms of its lending and issuing activities.
The Fed Sets Global Policy The Fed’s policy not only determines credit and liquidity conditions in the US, but does so in many financial markets around the world as well. For instance, movements of long-term US interest rates regularly have effects on credit and equity markets in, say, Europe and Asia. The Fed’s actions are the blueprint for monetary policymaking in many countries around the world.

This post was published at Ludwig von Mises Institute on February 13, 2017.

China Approaching the Limits of Currency Management

The People’s Bank of China has historically exercised great control over domestic Renminbi valuation, but the traditional tools used for currency management are beginning to come under stress.
This monetary strain will be exacerbated by activities in the United States including an expected rise in interest rates and an aggressive stance against China by the incoming Trump administration. These factors pose significant challenges to China’s long-term growth targets even as Beijing carefully manages the Yuan’s devaluation.
Internal Challenges
China has historically been dependent upon a handful of levers for currency management, and Beijing’s favored lever of control fluctuates as time passes. One of these tools, China’s foreign exchange reserves, has realized rapid depletion from significant use in recent years. In December, reserves fell by $41 billion to $3.01 trillion. While still at a safe level, it is unlikely that Beijing can dip well below the current reserve without realizing increased currency and market volatility. The selling of its reserve of US dollars has been the tool of choice to slow the rate of Yuan depreciation, but further depletion of China’s foreign exchange reserves will have to slow in 2017.

This post was published at FinancialSense on 01/23/2017.

China cuts U.S. Treasury holdings to lowest level since 2010

China cut its holdings of U.S. Treasuries by $66 billion in November, reducing its position in the safe-haven debt to the lowest level since 2010 as the country battles to stabilise its currency.
The acceleration in sales — the largest monthly decline since December 2011 — threatens a rise in U.S. interest rates if it continues and follows an unwinding in October that saw China cede its position as the largest foreign holder of U.S. Treasuries to Japan.
China has been selling its foreign exchange holdings in part to support the renminbi, which has fallen 4 percent against the U.S. dollar since the start of last year. The fall in Treasury holdings is part of a wider campaign by Beijing to stem capital outflows.

This post was published at Financial Times

Trump’s Trade Catastrophe?

‘Trade Cheaters’
It is worse than ‘voodoo economics,’ says former Treasury Secretary Larry Summers. It is the ‘economic equivalent of creationism.’ Wait a minute – Larry Summers is wrong about almost everything. Could he be right about this?
Summers is referring to the paper written by two members of Trump’s trade team: his pick for secretary of commerce, billionaire investor Wilbur Ross, and the director of Trump’s new National Trade Council, Ph. D. economist Peter Navarro.
It calls for a turn away from free trade and toward managed trade – or what is vaguely described as ‘fair’ trade. Colleague Karim Rahemtulla, on an investment scouting trip in India and China, sends this note:
‘I met with a factory owner in China. He pays his workers 2,000 renminbi a month, about US$300. He thinks it’s too expensive and is now opening factories in Vietnam and Cambodia, where he can pay half of what he’s paying just outside Shanghai.
In India, I saw two ads in the newspaper. One was for call center workers with a college degree as a requirement. The pay range was between 9,000 rupees (US$132) and 15,000 rupees (US$220) a month. The other ad was for a chartered accountant with three years’ experience for the Nehru Foundation – a big Indian NGO. The pay for that was 29,000 rupees per month, about US$426.’

This post was published at Acting-Man on January 12, 2017.

China expands forex basket to dilute role of dollar

China said Thursday it would almost double the number of foreign currencies it uses to determine the official value of the yuan, thereby diluting the role of the dollar.
The move to expand the foreign exchange basket used to set a daily reference rate for the yuan, or renminbi, will help Beijing shake off the weakness of the currency against the greenback and project an image of stability in the unit.
The dollar will see its prominence in the basket dented by the newcomers, with its share falling from 26.4 percent to 22.4 percent. It is followed by the euro at 16.34 percent.
Among the 11 currencies to join the 13 existing ones are the South Korean won, the South African rand, the Hungarian forint, the Turkish lira, and the Polish zloty, according to the Chinese Foreign Exchange Trade System, which is run by the central bank. …
The expansion is designed to “strengthen the representativeness” of the basket and will come into force on January 1, it added.

This post was published at India Times

China’s Gold Market Opens Up To Boost RMB Internationalization

China’s Gold Market Opens Up To Boost RMB Internationalization
Last week the Shanghai Gold Exchange (SGE) launched a new English website to offer international customers more information and tools on trading gold in renminbi through its subsidiary in the Shanghai Free Trade Zone the Shanghai International Gold Exchange (SGEI). BullionStar took the opportunity to translate a speech by a Teng Wei, Deputy General Manager of the SGEI, named ‘How China’s Gold Market Can Help The RMB Achieve International Status’ that was held at the Renminbi World summit in Beijing on the 29th and 30th of November 2016. In the speech Teng Wei outlined his vision for the SGEI going forward regarding renmibi (RMB) internationalization, connecting the onshore and offshore renminbi market and increasing gold market share.
My comment before you read the translation:
1) In the financial blogosphere the general perception is that the SGEI has been a failure since it was launched in September 2014. This analysis is based on the assumption that the trading volume of the most popular SGEI contract (1 Kg 9999 – iAu99.99) has been tepid for two years now. But this analysis neglects two important elements.
First, iA99.99 can be traded competitively ‘on Exchange’, but also in the OTC market. The OTC possibility is hardly known by commentators in the English world, though the related volumes are significant. Have a look at the next chart in which I’ve plotted iAu99.99’s weekly trading volume ‘on Exchange’ and in the OTC market. Clearly iAu99.999 is traded mainly in the OTC market.

This post was published at Bullion Star on 24 Dec 2016.

Chinese Reserves Tumble By $69 Billion, Biggest Drop Since January

While in recent months, the PBOC had tried to mask the real pace of reserve outflows, covering up the accelerated selling of US-denominated assets to defend its rapidly devaluing currency, we noted in October that using more accurate calculations, China’s capital outflows are once again surging, having hit $78 billion in September. Overnight, China, unable to continue “covering up” its reserve state, disclosed that, as we warned, FX reserve liquidation had soared with total reserves falling by nearly $70 billion last month as the country’s central bank burned through more of its reserves in the fight to defend the renminbi from greater depreciation on the back of accelerating capital outflows. This was the largest decline since January.
PBOC’s total reserves declined by $69.1 bilion to $3.051 trillion in November, a decline of 2.2 per cent from the previous month and the largest drop since January’s fall of 3 per cent. A median forecast from economists had predicted a fall of only 1.9 per cent from October.

This post was published at Zero Hedge on Dec 7, 2016.

China tightens gold import quotas to curb dollar outflow

China has curbed gold imports in the wake of government attempts to clamp down on capital leaving the country, according to traders and bankers.
Some banks with licenses have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.
The hit to gold imports comes as China tightens restrictions on overseas deals by state-owned companies in an effort to limit capital outflows that has seen the renminbi fall to its lowest against the dollar in eight years.

This post was published at Financial Times

China Curbs Gold Imports To Slow Capital Flight

While all eyes were on India (as rumors swirled of an imminent gold import ban), The FT reports that China curbed gold imports in the wake of government attempts to clamp down on capital leaving the country, according to traders and bankers.
Some banks with licences have recently had difficulty obtaining approval to import gold, they said – a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.
The hit to gold imports comes as China tightens restrictions on overseas deals by state-owned companies in an effort to limit capital outflows that has seen the renminbi fall to its lowest against the dollar in eight years.
When the headline hit, gold futures legged lower, but are rebounding…

This post was published at Zero Hedge on Dec 1, 2016.