Alasdair Macleod
by
Alasdair Macleod
Executive Summary
- Central planning are colluding – but failing – to diminish world demand for bullion
- The BRICS are planning a future of less dependence on the West, and gold will play a role
- The East sees gold as "on sale" at today's prices
- Analysis shows they're right; gold is much cheaper than it should be compared to pre-QE levels
If you have not yet read There Is Too Little Gold in the West, available free to all readers, please click here to read it first.
In Part I, I went through the history of Asian demand for gold, starting with the Arabs’ need to find a home for increasing quantities of petrodollars from the late 1960s onwards. My conclusion was that there is very little bullion in private ownership left in the West, there is an unmanageable short position in the unallocated gold accounts held with the bullion banks, and the bulk of accessible monetary gold controlled by central banks is already leased and has been sold into the market to satisfy Asian demand.
The result is that merely suppressing the gold price to enhance credibility of the dollar as a reserve currency is no longer the problem. The problem is now one of crisis management. Western central banks have done everything they can, even persuading the Reserve Bank of India to suppress India’s gold imports. We know this is most probably the case because the Indian authorities have already learned the lesson that gold imports could not be controlled, which is why the Gold Control Act was abolished in 1990. Furthermore, the newly-appointed RBI Governor, Raghuram Rajan is an ex-IMF chief economist, has spent a significant part of his career in the U.S., and is therefore likely to be fully sympathetic with Western central bank objectives. He appears to be the West’s place-man.
Other than the question of Indian demand, there are two possible reasons for the flows of gold from West to East: geo-political, whereby one or more Asian nations are deliberately creating a potential crisis for the West, and different valuation criteria. Both are true and…
The Very Real Danger of a Failure in the Gold Market
PREVIEW by Alasdair MacleodExecutive Summary
- Central planning are colluding – but failing – to diminish world demand for bullion
- The BRICS are planning a future of less dependence on the West, and gold will play a role
- The East sees gold as "on sale" at today's prices
- Analysis shows they're right; gold is much cheaper than it should be compared to pre-QE levels
If you have not yet read There Is Too Little Gold in the West, available free to all readers, please click here to read it first.
In Part I, I went through the history of Asian demand for gold, starting with the Arabs’ need to find a home for increasing quantities of petrodollars from the late 1960s onwards. My conclusion was that there is very little bullion in private ownership left in the West, there is an unmanageable short position in the unallocated gold accounts held with the bullion banks, and the bulk of accessible monetary gold controlled by central banks is already leased and has been sold into the market to satisfy Asian demand.
The result is that merely suppressing the gold price to enhance credibility of the dollar as a reserve currency is no longer the problem. The problem is now one of crisis management. Western central banks have done everything they can, even persuading the Reserve Bank of India to suppress India’s gold imports. We know this is most probably the case because the Indian authorities have already learned the lesson that gold imports could not be controlled, which is why the Gold Control Act was abolished in 1990. Furthermore, the newly-appointed RBI Governor, Raghuram Rajan is an ex-IMF chief economist, has spent a significant part of his career in the U.S., and is therefore likely to be fully sympathetic with Western central bank objectives. He appears to be the West’s place-man.
Other than the question of Indian demand, there are two possible reasons for the flows of gold from West to East: geo-political, whereby one or more Asian nations are deliberately creating a potential crisis for the West, and different valuation criteria. Both are true and…
by
Adam Taggart
by
Adam Taggart
by
Adam Taggart
by
Alasdair Macleod
Executive Summary
- Spain: after tens of €billions in bailouts, its banks still need more
- Germany: its largest banks are ridiculously levered
- France: its banks are deteriorating fast with the sinking French economy
- UK: bail-ins are now on the table
If you have not yet read Part I: Europe's Precarious Banks Will Determine the Future available free to all readers, please click here to read it first.
Spain and Bankia
The true state of the Spanish economy (i.e., it is in depression) should be uppermost in our minds when we consider recent developments at Bankia, the Spanish mortgage bank formed only thirty months ago out of the wreckage of Spain’s regional mortgage banks. Bankia underwent a subsequent bail-out only a year ago and has been a continuing disaster, as shown by the share price in the chart below.
Having fallen from an adjusted €106 to only 68 cents as recently as last November, the share price tells us that Bankia is simply bust. The new G20 bail-in rules cannot have helped Bankia hold on to its deposits; the only deposits left should be those of the small depositors prepared to rely on government insurance.
The Cyprus bail-in precedent has undoubtedly made Bankia’s position worse than it would otherwise be. At March 31st Bankia…
Where Will the Minsky Moment Occur?
PREVIEW by Alasdair MacleodExecutive Summary
- Spain: after tens of €billions in bailouts, its banks still need more
- Germany: its largest banks are ridiculously levered
- France: its banks are deteriorating fast with the sinking French economy
- UK: bail-ins are now on the table
If you have not yet read Part I: Europe's Precarious Banks Will Determine the Future available free to all readers, please click here to read it first.
Spain and Bankia
The true state of the Spanish economy (i.e., it is in depression) should be uppermost in our minds when we consider recent developments at Bankia, the Spanish mortgage bank formed only thirty months ago out of the wreckage of Spain’s regional mortgage banks. Bankia underwent a subsequent bail-out only a year ago and has been a continuing disaster, as shown by the share price in the chart below.
Having fallen from an adjusted €106 to only 68 cents as recently as last November, the share price tells us that Bankia is simply bust. The new G20 bail-in rules cannot have helped Bankia hold on to its deposits; the only deposits left should be those of the small depositors prepared to rely on government insurance.
The Cyprus bail-in precedent has undoubtedly made Bankia’s position worse than it would otherwise be. At March 31st Bankia…
by
Alasdair Macleod
Executive Summary
- France: Bet on a bankruptcy of the French government
- Italy: Will not be able to fund its debt obligations without external help
- Spain: The best outcome at this point is years of grinding financial repression
- UK: At growing risk of a big upward spike in price inflation, leading to a currency crisis
If you have not yet read Part I, available free to all readers, please click here to read it first.
Individual States
France
Perhaps the cameo event that best describes French attitudes was the recent correspondence between Maurice Taylor Jnr, head of Titan International, the tire manufacturer, and Arnaud Montebourg, France’s Minister for Industrial Renewal. While it was good theatre, the serious points were that on average a French worker at an industrial plant works for three hours a day, and that the Minister resorted to threats that any Titan products imported into France would be “inspected by the relevant authorities with extra zeal.” That is the way things are done in France: Upset the Minister or a government functionary and none of your product gets to market, as Mr Taylor will shortly find out.
France has an official unemployment rate of about 10.5%, which would be somewhat higher if it were not for three-hour days in many of the factories. Taxes on employers are among the highest in Europe, and employment legislation is so onerous that employing an extra hand is the last option for all private sector employers.
Large companies, such as Peugeot-Citroen, generally tolerate poor labour productivity and sub-standard quality products – partly because the unions are strong, and partly because senior managers look to government to “help” by providing subsidies and by other means. Consequently, private-sector manufacturing is not competitive, and sales in the troubled Eurozone are collapsing. Peugeot’s share price says it all.
Decades of government protection have left France’s industrial sector in the weakest position of the larger Eurozone economies. Smaller businesses, outside the major cities, are heavily reliant on agricultural produce and hospitality, much of which is undeclared, untaxed, and untaxable. Furthermore, France’s farmers have long been beneficiaries of the EU’s agricultural subsidies, and have never had to be efficient.
Europe: Welcome to the Domino Effect
PREVIEW by Alasdair MacleodExecutive Summary
- France: Bet on a bankruptcy of the French government
- Italy: Will not be able to fund its debt obligations without external help
- Spain: The best outcome at this point is years of grinding financial repression
- UK: At growing risk of a big upward spike in price inflation, leading to a currency crisis
If you have not yet read Part I, available free to all readers, please click here to read it first.
Individual States
France
Perhaps the cameo event that best describes French attitudes was the recent correspondence between Maurice Taylor Jnr, head of Titan International, the tire manufacturer, and Arnaud Montebourg, France’s Minister for Industrial Renewal. While it was good theatre, the serious points were that on average a French worker at an industrial plant works for three hours a day, and that the Minister resorted to threats that any Titan products imported into France would be “inspected by the relevant authorities with extra zeal.” That is the way things are done in France: Upset the Minister or a government functionary and none of your product gets to market, as Mr Taylor will shortly find out.
France has an official unemployment rate of about 10.5%, which would be somewhat higher if it were not for three-hour days in many of the factories. Taxes on employers are among the highest in Europe, and employment legislation is so onerous that employing an extra hand is the last option for all private sector employers.
Large companies, such as Peugeot-Citroen, generally tolerate poor labour productivity and sub-standard quality products – partly because the unions are strong, and partly because senior managers look to government to “help” by providing subsidies and by other means. Consequently, private-sector manufacturing is not competitive, and sales in the troubled Eurozone are collapsing. Peugeot’s share price says it all.
Decades of government protection have left France’s industrial sector in the weakest position of the larger Eurozone economies. Smaller businesses, outside the major cities, are heavily reliant on agricultural produce and hospitality, much of which is undeclared, untaxed, and untaxable. Furthermore, France’s farmers have long been beneficiaries of the EU’s agricultural subsidies, and have never had to be efficient.
by
Adam Taggart
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