The Role of Central Banks

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When we are speaking about central banks, we are all thinking about a nice traditional building with old style architecture, housing a huge machine inside that’s printing money, and deep below the surface of land, holding huge stores of gold. What is really behind those walls, only few people know.

Many of us we know that central banks have a main role, controlling the economy. They issue more and more money, giving liquidity to the banking institutions in order to lend the money to normal people like us, to build our houses, buy new cars, or to go on holiday. And then, after working like donkeys all our lives, we can pay them back, the money they printed, plus interest, with money that we didn’t print.

Many times, we hear people saying that the banks steal their money, or they lost it in the stock market during a financial crisis. My dear readers, nobody took your money. Nobody stole your money. Did you ever look closely at one of the banknotes you hold every day in your hands? Take a close look and read what is written on it: “ECB”, “FED”, “BOJ”, “BoE”, “SNB” … Those are the names of some of our central banks. As long as your name is not printed on the money, it does not belong to you. It belongs to them. They give the notes to you to rotate in the market, to buy something to eat, so that you will not die, and you will continue to live and work for them. So, as long as their name is written, on their money, they will give it to you, and they will take it back anytime they want, and how they want.

The other role of central banks is to control inflation. According to them, inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar or euro you own buys a smaller percentage of a good or service. The value of money does not stay constant when there is inflation.

According to me, inflation is defined as the gun used by central banks and governments to keep you on the same social level and in the same standard of living from the day you were born until you die unless you belong to the 1% of the earths’ population, or you are a pioneer, or by accident you discover something that will turn you into a multi-billionaire.

Did you ever wonder why central banks are afraid of deflation? If a country’s economy is entering into the territory of deflation, the central bank immediately devalues their currency in order to create inflation. And if they do not succeed in increasing inflation, then the governments introduce extra taxes on products in order to accelerate inflation. And the reason is simple: they do not want people to finish the month with extra money left over in their pocket.

Which One of the Central Banks is the Strongest One?

Many of you may think that the FED of the USA is the strongest central bank or Bank of England or European Central Bank. This is not the case. The world’s strongest bank is in the world’s smallest country and many don’t know about it. It is the SNB (Swiss National Bank) situated in Bern, Switzerland. Known as the most discreet bank, holding money and gold undeclared because of amnesty.

The National Bank Law was enforced on 16 January 1906. The National Bank began business activities on 20 June 1907, and is thought to then be founded sometime during either 1906 or 1907. SNB itself states that it was founded in 1907. Since then, the Swiss franc known as “CHF” has been in circulation. The abbreviation “CHF” is derived from the Latin name of the country, “Confoederatio Helvetica”.

How did a small country like Switzerland managed to survive so many years and remain the most powerful of all? Let’s go back to World War 2. All of the world was at war, except one country, Switzerland. Without an army, without belonging to any military alliance, and by keeping their neutrality, they succeeded. This is not enough, of course. Hitler, while he was creating his empire, was stealing gold from all European countries; and we are speaking about many tons of gold. In order to finance his long-lasting war, he needed to buy food, clothing, and raw materials. Since no country would sell him products in exchange for gold, he had only one solution: to sell the gold to the SNB and receive Swiss francs in order to pay for all the needs and finance his war. So, all those tons of gold are in the SNB. It was unofficially reported that around 500 tons of gold made it to the SNB. At that time, Switzerland was producing goods like textile and food and exported them to Germany. Those goods were paid for with Swiss francs. So, by the end of the war, all countries of Europe were financially destroyed except Switzerland because they had all the gold in the SNB, and people were paying for all their products and services with Swiss francs.

The SNB was in the mass media’s spotlight many times for smuggling Nazi gold, and many times it was forced by the USA to break its secrecy and unveil to the world the truth. Every attempt failed because there is no evidence that the gold came from Germany or that it was the gold stolen by the Nazis. All cases have been archived. The most shocking of all is the gold stolen from the dead bodies of Jews. We may not be speaking about tons, but the gold was still collected from their jewelry and their golden teeth, melted down, and sent to the SNB as gold bars. Recently, when some Jews sued SNB for 10.5 million Euros, the SNBs’ officials answered them with a smile and said they were disturbing them for peanuts. The case was closed again because there were no death certificates for the Jews burned or murdered and buried in mass graves.

THE FED

In 1913, the Federal Reserve Bank was established and it began issuing Federal Reserve Notes the following year. Once free of the restrictions imposed by the limitations of available, physical gold for coinage, the quantity of Dollars in circulation increased dramatically. The increase was mostly in the form of paper money, not specie. The result was an economic “boom”, also known as “The Roaring Twenties” (1923-1929). But like all artificially-induced stimulus, it came to a crash in the fall of 1929. The burden of over-extended credit was the culprit. Prior to the formation of the Federal Reserve, money in circulation consisted of copper, silver, and gold coins, United States Notes, Silver Certificates, and Gold Certificates. All of these were non-interest-bearing, were issued directly by the US Treasury, and did not have any debt associated with their issuance. Notes issued by the Federal Reserve, however, were generally lent out, with interest due. So, for every Federal Reserve dollar in circulation, somebody needed that dollar to pay off a debt. During the Roaring Twenties, a lot of people took on debt, resulting in a great credit expansion. When only physical gold and silver was used as money, institutions were very cautious about lending it out because if the debtor defaulted, the creditor would be out some serious (sound) money.

President Franklin Delano Roosevelt’s 1933 executive order outlawing the private ownership of gold in the United States was arguably unconstitutional. But why did he do it?  Many historians and economists point to efforts to get the economy moving again as the reason, the theory being that people were hoarding gold, and the velocity of money in circulation needed to be sped up. But the real reason for the gold confiscation was a bailout of the privately-controlled Federal Reserve Bank. And the evidence has been printed right in front of our faces.

ECB

The first step towards creating the ECB was the decision, taken in 1988, to build an Economic and Monetary Union: free capital movements within Europe, a common monetary authority, and a single monetary policy across the euro area countries. The ECB took over responsibility for monetary policy in the euro area in January 1999, two years before the euro was introduced into circulation.

The ECB is made up of three decision-making bodies: the General Council, the Executive Board, and the Governing Council. The General Council, which operates largely as an advisory body for the ECB, includes all of the EU’s national central bank governors, as well as the president and vice president of the ECB. The Executive Board of the ECB, the hub of day-to-day operations and decision-making, consists of the ECB president, vice president, and four other members, all of which are appointed by the European Council. The Governing Council is comprised of the entire Executive Board and all of the national central bank governors of countries that use the euro, and meets bi-monthly to adopt decisions on monetary policy for the euro area.

Is ECB a genuine independent body? I say no! I also call them the “Neo-Nazi”; “neo” being the Greek word “new”. With offices in Frankfurt Germany, and mainly financed by the German economy, ECB is created with one publicly unknown scope: to control all European countries financially and to lend to them with traditional printed money as an exchange for interest paid in real money or natural resources.

In conclusion, our central banks aren’t doing anything other than controlling the economy. Do not expect to become super rich in this life because richness belong to central banks.

What Is Bitcoin?

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It took me more than one week to decide how to start this article, and I am still not sure if it is correct.

Is it a new pyramid scheme, which will collapse at a certain point?  Is it a clever Chinese invention to make our lives easier and our payments more cost efficient by avoiding the huge bank charges we’ve all been paying for so many years? Or is it just another attempt at introducing a currency not regulated or controllable by central banks and governments so that the big smugglers can clean their money?

A few years ago, nobody had heard about bitcoin. A year ago, many platforms introduced bitcoin on electronic trading as many other currencies. A few days ago, every mass media was talking about it, and everybody turned their head to take notice, tracing the crazy spike of its price and looking at it as an opportunity to make money.

Some articles were even saying that bitcoin has the same value as gold: 1bitcoin/1200$.

Let’s take it from the beginning: Bitcoin is a crypto-currency designed in 1998 by Wei Dai and introduced as a form of trade in 2009 by Satoshi Nakamoto. Although Satoshi was behind the bitcoin, by keeping his anonymity and letting the crypto-currency be developed through different bitcoin software exchangers, it is still uncertain to this day who really introduced bitcoin in the market and how. Even so, bitcoin took over a big portion of the market very quickly and is expanding worldwide.

Everybody around the world can buy and sell bitcoins as simple as they can buy EUROs or GBPs or USDs through a platform which is connected to the electronic network. The bitcoin network shares a public ledger called the “block chain”.

Anyone can go to any bitcoin exchanger, open an eWallet, and start buying and selling. The only difference is that you don’t need to upload multiple personal documents, and you can also keep your anonymity from being visible. For many, this is an advantage, but you must take into account that these bitcoins and your eWallet are nothing more than an online software. So, it can be erased or hacked or God knows what else.

Not long ago we saw what happened to it when it’s biggest exchanger went bankrupt. The bitcoin price drooped almost 50% in a day. A few months after that, it was hacked and millions were stolen from eWallets. And a few days before an announcement of the possibility of being regulated, its price went from $500 to $1,200 within the span of 2 days, then pulled back to $800 the day after. It’s a volatile instrument because of its low liquidity. There are only 1,500,000 bitcoins in circulation, so any amount changing hands can create turbulences in its price. Its price is calculated mathematically and is based only by demand and supply. Its big price movements are very attractive for profit making, but also risky for big losses. Unless you are a big trader with many millions, the best for you is to trade bitcoin through a platform offering small contracts, peer-to-peer, with small time intervals. For this, www.daweda.com is recommended.

Many questions surround its future as a non-regulated and non-government controlled currency. All normal currencies and their transactions are well monitored by central banks and regulatory authorities, not only for their sovereignty, but also for the newly introduced law on money laundering and funding of terrorist activities. As far as we know, and all central banks and governments know, bitcoin is easily accessible to all kinds of terrorists and people holding illicit money. They can easily and anonymously buy bitcoins from any exchanging point and then change them into USD, then clean them through their bank accounts or transfer them between users without any restrictions.

In my point of view, it’s only a matter of time before bitcoin will belong to the past unless central banks and governments find a way to regulate it and control its transactions.

OIL vs. SOLAR

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Oil became known to humanity about 4,000 years ago, according to some history archives. It was first seen in ancient Persia, (today’s Iran) then in Dacia (today’s Romania), and many other countries thereafter. The first oil well was built in Russian in 1745 under the Empress of Elizabeth of Russia.

Petrol began its road to success and popularity in 1856 when the polish pioneer Ignacy Lukasiewicz built the world’s first refinery and invented the modern kerosene lamp, which later illuminated the streets of Europe.

By 1910, oil was established as a commodity in our lives, in our modern history, and humanity became 100% dependent on it. Refineries and wells started to appear like mushrooms in every country around the world. Three of them were on the top of the list, and they are still today: Saudi Arabia, Russia, and the United States. In that order, they produce and control 80% of world’s oil.

Oil, and many other goods, started to be traded in small markets organized by merchandisers, in the streets, or in in rail stations. In 1933, COMEX was formed and, since then, other exchange groups followed—all of them housed in world trade center.

In August 1994, NYMEX was the main point of trading merchandise goods. Since 2000, electronical trading became commonplace, and everyone could buy and sell oil on their PC from their house.

We all enjoyed and created a modern world dependent on oil, without thinking about and understanding the disaster that would follow. The so called “black gold” will be the main factor behind the coming dark days of our planet. The over-value and super profitability of the product is the only factor behind all the wars that continue around the world today. It took us only 100 years to destroy our planet. A planet that took 5,000,000 years to be created.

However, one war humanity could not foresee, I have named “The Invisible War”. Global warming and climate change are threatening to extinguish our civilization.

The world mostly agrees that something needs to be done about global warming and climate change. The first stumbling block, however, has been trying to get an agreement on a framework. In 1988, the Intergovernmental Panel on Climate Change (IPCC) was created by the United Nations Environment Program (UNEP) and the World Meteorological Organization (WMO) to assess the scientific knowledge on global warming. The IPCC concluded in 1990 that there was a broad international consensus: Climate change was human-induced. That report led way to an international convention for climate change, the United Nations Framework Convention on Climate Change (UNFCCC), signed by over 150 countries at the Rio Earth Summit in 1992. This section looks at this Convention and some of the main principles in it. The United States, plus a few other countries (and many large corporations), have opposed climate change treaties; seemingly afraid of profit impacts if they have to make substantial changes to how they do business. However, as more climate change science has emerged over the years, many businesses are accepting this and even asking their governments for more action so that there is quick clarification on the new rules of the game in order to carry on with their businesses.

Many countries gathering together at different summits finally agreed in 2016 to cut pollution by 0.5%.

Europe introduced a plan ordering all its countries’ members to cover at least 25% of their energy needs with alternative energy solutions, like sun and wind, within 10 years. It looks like it worked. Germany and Denmark are the first countries to succeed in completely eliminating dependence on oil. In Christmas of 2016, Germany announced that electricity cost is below zero for German consumers. Last year, Argentina was also giving free electricity to its consumers due to the over supply of electricity produced by solar parks. Alternative energy is the future. Even the car industry is turning to the production of cars powered by electricity.

Saudi Arabia decided a few months ago, in an annual economic meeting, that by 2027 they will not depend any more on oil for income. Saudi Arabian’s Aramco, known as the world’s biggest oil company, will now become one of the world’s biggest sovereign wealth funds. They will increase its capital up to 2 trillion US Dollars in cash in order to buy APPLE, GOOGLE, and MICROSOFT. Although we don’t know if this can happen, due to the fact that such a purchase must be approved by the high court in the U.S., one is sure that Saudis are not joking; they really want to secure their future income without the oil industry.

Bill Gates has pulled together a multinational band of investors to put billions into clean energy.

The Microsoft co-founder and philanthropist announced his latest endeavor: the Breakthrough Energy Coalition at the climate change summit in Paris.

“We need to bring the cost premium for being clean down,” Gates said Monday in an interview with CNN’s New Day. “You need the innovation so that the cost of clean is lower than the coal based energy generation.” Lowering the cost of clean energy to make it competitive with fossil fuels is the best way to get poor countries to make the switch without sacrificing economic growth, Gates said. Clean energy can make air conditioning, refrigerators, stoves and fertilizer more affordable for poor people. “All these things that enable to modernize lifestyle are very energy intensive,” he said, noting that five years from now, “I see the price of energy actually being lower than today, and that’s for clean energy.” The new Gates fund will be fed by a group that spans more than two dozen public and private entities — including national governments, billionaire philanthropists, investment fund managers and tech CEOs. “The renewable technologies we have today, like wind and solar, have made a lot of progress and could be one path to a zero-carbon energy future. But given the scale of the challenge, we need to be exploring many different paths — and that means we also need to invent new approaches,” Gates said in a statement.

Among the list of backers are Alibaba (BABA, Tech30) CEO Jack Ma, Mark Zuckerberg of Facebook (FB, Tech30), Meg Whitman of HP (HP), and Virgin (VA) Group’s Richard Branson. More than a dozen governments have also committed to double their spending on carbon-free energy development over the next five years in a complementary effort dubbed “Mission Innovation”. Twenty countries — including the U.S., China, and India — have signed the pledge, which was announced in Paris alongside the Gates initiative.

President Obama called the Gates effort a “groundbreaking new public-private initiative”.

According to government data, the U.S. spent about $5 billion on energy R&D in 2013, compared to $31 billion on health care research and nearly $70 billion on defense research.

The Obama Administration said:

“Private companies will ultimately develop these energy breakthroughs, but their work will rely on the kind of basic research that only governments can fund,” Gates added. There is no fund raising goal for private investors in the Gates initiative. But the fund represents billions in money to seed promising ideas in large-scale clean energy production. The fund says it will invest broadly and focus on five key areas: electricity generation and storage, transportation, industrial uses, agriculture, and projects that make energy systems more efficient.  For example, Gates says more research is needed in new kinds of batteries — “flow batteries” — that he says hold more promise than current battery technology. According to Gates, the goal is to spur new clean energy tech while combating climate change by “keeping global temperatures from rising more than 2 degrees.”  Reducing global reliance on fossil fuels also holds the potential for massive economic benefits, Gates added. “It would help millions more people escape poverty and become more self-sufficient,” Gates wrote. “And it would stabilize energy prices, which will have an even bigger impact on the global economy as more people come to rely on energy in their daily lives.”

In conclusion, we can still make money by investing in our green planet and alternative energy solutions instead of oil. It’s in our hands if we want our children to enjoy a clean planet.

Gold from Jungle Ground to LME

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Gold has occupied a unique social status for millennia. It has a long history as a valuable metal and its history is far from over.

The first firm evidence we have of human interaction with gold occurred in ancient Egypt around 3,000 B.C. Gold played an important role in ancient Egyptian mythology and was prized by pharaohs and temple priests. It was so important, in fact, that the capstones on the Pyramids of Giza were made from solid gold.

The Egyptians also produced the first known currency exchange ratio which mandated the correct ratio of gold to silver: one piece of gold is equal to two and a half parts of silver. This is also the first recorded measurement of the lower value of silver in comparison to gold.

The Egyptians also produced gold maps – some of which survive to this day. These gold maps described where to find gold mines and various gold deposits around the Egyptian kingdom.

As much as the Egyptians loved gold, they never used it as a bartering tool. Instead, most Egyptians used agricultural products like barley as a de-facto form of money. The first known civilization to use gold as a form of currency was the Kingdom of Lydia, an ancient civilization centered in western Turkey.

In 1792, the United States Congress made a decision that would change the modern history of gold. Congress passed the Mint and Coinage Act. This Act established a fixed price of gold in terms of U.S. dollars. Gold and silver coins became legal tender in the United States, as did the Spanish Real (a silver coin of the Spanish Empire).

At the time, gold was worth approximately 15 times more than silver. Silver was used for small denomination purchases while gold was used for large denominations. The U.S. mint was legally required to buy and sell gold and silver at a rate of 15 parts silver to 1 part gold. As a result, the market rate for gold rarely varied beyond 15.5 to 1 or 16 to 1.

That ratio would change after the Civil War. During the Civil War, the U.S. was unable to pay off all its debts using gold or silver. In 1862, paper money was declared to be legal tender, marking the first time a fiat currency (not convertible on demand at a fixed rate) was used as an official currency in the United States.

Just a few years later, silver was officially removed from the U.S. Mint’s fixed rate system in a bill called the Coinage act of 1873 (and criticized by American citizens as the Crime of ’73). This removed the silver dollar from circulation, although coins worth less than $1 still contained silver.

The United States would never use silver dollars again. Throughout the late 1800s, the issue remained an important political topic. In 1900, the gold dollar was declared the standard unit of account in the United States, and paper dollars were issued to represent the country’s gold reserves.

Gold has mesmerized humanity for thousands of years, but the metal’s surge to a record $1,900 an ounce in 2011 sent miners to ever-riskier places. Enter Kibali. Randgold Resources and AngloGold Ashanti. They bought a gold ore deposit deep in the jungle of northeastern Democratic Republic of Congo in 2009 as the country recovered from Africa’s worst-ever civil war, which killed at least 3.1 million people. With pioneering hydropower and social cohesion plans, the companies have built one of Africa’s biggest and most profitable gold mines.

Kibali will produce about 600,000 ounces per year for the next decade.

The operation first produced gold in 2013. An underground mine is currently being developed to access deeper gold and is scheduled for commissioning next year.

The mine, processing plant, and power generating units cost Randgold and AngloGold an estimated $2.5 billion to build.

Each year, the mine’s plant can process 7.2 million tons of rock, which contains about 3.5 grams of gold for every ton of ore.

The mine is situated in the extreme northeast of DRC, near the border of Uganda and 1,800 kilometers (1,120 miles) from the Kenyan port of Mombasa.

Over the past two decades, gold has gone through a number of major changes. August 1999 was a landmark moment in the price of gold as it dropped to a price of $251.70 per ounce. This occurred after central banks around the world were rumored to be reducing their gold bullion reserves and at the same time, mining companies were selling gold in forward markets.

By February 2003, outlook on gold had reversed. Many viewed gold as a safe-haven after the U.S. invasion of Iraq in 2003.

Geopolitical tensions between 2003 and 2008 continued to elevate the price of gold. And in 2008, the global economic crisis increased the price of gold even further. After reaching a high of over $1,900 per ounce in 2011, gold has fallen to between $1,200 to $1,400 in recent years.

As of 2014, no countries in the world use a gold standard. In other words, no currency in the world is backed by gold.

The last major currency to use a gold standard was the Swiss Franc, which used a 40% gold reserve until the year 2000.

Of course, that doesn’t mean that countries have sold all their gold, or that their currencies are based on nothing. Most countries in the world maintain large gold reserves in order to defend their currency against possible future emergencies.

America’s gold reserves are famously held at Fort Knox, Kentucky. The heavily-defended location holds an unknown amount of gold, as the amount is officially classified by the United States government. However, it’s widely accepted that the United States holds more gold bullion than any other country in the world (approximately 1.3 times as much gold as the next leading country, Germany).

As with anything labeled “classified” in the United States, there are plenty of conspiracy theorists who argue that Fort Knox is actually empty and that the gold is held in some secret location or does not exist at all. You’ll have to figure that out on your own.

Gold has been seen as a smart investment for millennia. However, the use of gold as an investment became hugely popular after the end of the Bretton Woods system in 1971.

Since the 1970s, the price of gold has steadily increased. In 1970, gold was pegged at $35 per ounce. In August 2011, that number had risen to nearly $2000 per ounce. However, the years in between were not a smooth upward slope, and gold – like any other investment – has gone through a number of ups and downs over the past few decades.

When looking at gold investment charts, it’s important to recognize inflation. Some charts show the price of gold as virtually a straight line from the bottom left corner of the graph to the top right corner.

However, the price of gold has experienced two major spikes since the 1970s: once in 1980 and the other in 2011.

Furthermore, due to inflation, paying $35 for an ounce of gold in 1970 wasn’t the same as paying $35 for an ounce of gold today. Judging by the Purchasing Power Calculator – which looks at how Customer Price Index (CPI) has changed over the last few decades in the United States – $35 in 1970 would be worth approximately $200 today.

By carefully weighing all of this information and current trends, you can build an accurate view of the present value and future value of gold.

Some of the biggest names in finance are fighting for control of the London gold market — a $5 trillion, three-century-old trading hub that is being forced to adapt to a digital age.

As the London Bullion Market Association revamps over-the-counter trades that are the market’s major pricing benchmark, new ways of buying and selling precious metals are set to start next year from CME Group Inc., Intercontinental Exchange Inc., and the London Metal Exchange. Some big banks have stakes in the outcome, including Goldman Sachs Group Inc., HSBC Holdings Plc, and JPMorgan Chase and Co.

“There are four weddings, and we have to dance at all of them, because we don’t know which marriage will last,” said Adrien Biondi, the global head of precious metals at Commerzbank AG in Luxembourg. “Only one will win.”

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Almost half the world’s known gold trading occurs in London. OTC transactions are sealed by virtual handshakes, leaving default risk with buyers and sellers rather than relying on clearinghouses, which use collateral to manage and offset risk. But since the financial crisis, all markets have been reevaluating how they do business and manage risk as regulators step up scrutiny. That’s particularly true for major price-setting exchanges, after it was discovered in 2012 that banks were manipulating a key benchmark for global interest rates.

A push for fewer risks and more disclosure has forced the LBMA to seek changes that would make it more transparent and secure for customers. The association, which counts HSBC and JPMorgan among its members, will introduce trade reporting for its members and a new trading platform in the first half of next year. That’s also when competitors plan to unveil new precious-metals derivatives built around the clearinghouse models.

Gold remains one of the world’s most-popular commodities and a core reserve for central banks around the world. While prices slumped for three straight years through 2015, demand has since rebounded. Data compiled by Bloomberg show holdings by exchange-traded funds are up 30 percent this year, and investors have poured a net $25.5 billion into precious metals funds.

That’s helped boost the business of buying and selling gold. In October, LBMA reported gold trading rose to a daily average of 18.6 million ounces. That’s about $23.5 billion, based on the average value of bullion for the month. Prices are up 9.4 percent this year at $1,160.30 an ounce as of Wednesday.

The LME, the world’s largest base-metals exchange, found so much promise in precious metals, it announced in August 2017 it will eventually add platinum and palladium. The exchange had the backing of a group of five banks including Goldman Sachs, ICBC Standard Bank Plc, and Societe Generale SA, as well as the World Gold Council, a group backed by the mining industry that seeks to develop markets for the metal.

ICE, which owns commodity and financial exchanges, already runs the daily London gold auction on behalf of the LBMA among 13 authorized participants who set the daily price. In October, the Atlanta-based company said it would start its own gold contract in February that would involve bullion held in London and traded on its New York exchange.

Chicago-based CME Group, owner of the Chicago Board of Trade and the world’s largest futures exchange operator, sought an even earlier entree into the London marketplace. In November during LME Week, CME said it would start London gold and silver contracts Jan. 9 that offer a spread between spot prices and benchmark U.S. futures.

“We’re going to see five years of turmoil in this market before things settle down,” Tony Dobra, an executive director at the U.K.’s biggest gold refiner, Baird & Co., said by phone from London on Dec. 6. “The good old London OTC market will keep soldiering on until we see some sort of consensus.”

Senior traders, including Biondi and Simon Grenfell, global co-head of commodities at Natixis SA, an LBMA member bank which offers trading and risk management services, said the change is both necessary and inevitable.

The development “reduces credit risk in the system and makes it easier to trade,” Grenfell said by e-mail from London. “While the overhaul to gold markets may reduce credit margins on client business, improving transparency is a welcome change.”

Opinion remains split on who will come out on top. Dobra, Biondi and founding member Raj Kumar, head of precious metals business development at ICBC Standard Bank, all said the LME offers the best solution for the market. Brad Yates, trading head for Dallas-based refiner Elemetal LLC, said the CME would best fit his business needs. And participation on ICE’s benchmark, which underlies its contract, keeps growing, with trading house INTL FCStone Inc. the latest to join the process.

“There will always be an OTC market in London, but much of what currently takes place here will shift to the exchanges,” said Kumar, who works at a unit of Industrial & Commercial Bank of China (Asia) Ltd., the world’s biggest bank. “Participating in any new contract incurs set-up costs, and so firms will need to prioritize which venues they are likely to trade.”

 

2017 Predictions

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We all know that, nobody knows what will happen in the future, unless if you are “Casandra” or “Nostradamus”. But, we can give our predictions on how the markets might be move in 2017 after analyzing some fundamentals, and all we can do is to wait till the end and to see how accurate we were.

Equity markets:

After a year of stagnation in the equity markets with a close range of trading within a few points all year round, we’ve seen an extraordinary rally beginning of November and continuing in December 2016. There are many doubts about such a rallies in equity markets and the possibilities of a massive correction it will be unavoidable in 2017.

Despite the shock of the savings and loans crisis, two more crises took place before the 1989 Act. The most memorable was the 1987 stock market crash. On what became known as Black Monday, global stock markets crashed, including in the US, where the Dow Jones index lost 508 points or 23% of its value. The causes are still debated. Much blame has been placed on the growth of programed trading, where computers were executing a high number of trades in rapid fashion. Many were programmed to sell as prices dropped, creating something of a self-inflicted crash.

Markets would yet again forget the lessons of the past in the dotcom bubble and subsequent crash in 2000. As in most crises, it was preceded by a bull rush into one sector. In this case it was technology and internet-related stocks. Individuals became millionaires overnight through companies such as eBay and Amazon. The hysteria reached such a pitch that the inconvenient fact that few of these companies made any money scarcely mattered. By 2000, however, the game was up. The economy had slowed and interest rate hikes had diluted the easy money that was propping up these companies. Many dotcoms went bust and were liquidated.

It was only a few years later that an even nastier crisis would hit the entire world’s financial markets in 2008. In many ways it has still has not ended, with the billions in losses and slowing global economy manifesting themselves in the current European sovereign debt crisis. It resulted in the collapse of a number of large financial institutions and is considered by many economists to be the worst crisis since the Great Depression. While the causes are numerous, the main trigger is considered to be the crash of the US housing market.

Although 3 times in the history of financial markets after such a rally, global financial market entered into recession and they collapse, in 2017 this might not be the reason behind the coming Drop. Simply as that, this time the drop will be completely reflect the supply and demand. As we all know when investors are buying a stock, they buy it for only one reason, to sell it in a higher price and cash out profits. This will happen in early January 2017, we will see an extraordinary sell off and profit taking out of the U.S. markets as investors will focus more on the strengthening dollar and the possibilities in buying into European stocks, that are cheaper than the U.S. ones and the exchange rate will bring them back extra profit. So with much more selling position and less buy the result will be a correction of 10-20% from where we are now. DOW will pull back to 18500 and recover during 2017 from 18500 – 20000

GBP

The global populist uprising evident in the Brexit referendum, Donald Trump victory and Italian referendum disciplines the EU leadership into a new, more cooperative stance, both internally and towards the UK.

As the negotiations drag on, the EU realizes that it is stronger with the UK under its umbrella than without, and indicates a willingness to make a key concession or two on immigration and the UK’s financial services under its existing special status within the EU. By the time the Article 50 invocation vote is put before Parliament, it is turned down in favor of the new deal that goes far beyond former prime minister David Cameron’s original treaty change requests.

The much anticipated Brexit thus yields to a “Bremain” as the UK is kept within the EU’s orbit. The sigh of relief from huge foreign holders of capital in the UK worried about its future sees a massive lifting of sterling hedges and strong reweighting by financial services firms back into the pound.

The Bank of England hikes rates back to 0.50% to play a bit of catch-up with the US Federal Reserve and EURGBP to be trading between 0.7200-0.7400 and 1.2800-1.3200 with its counterpart U.S. DOLLAR.

EURO

ECB gave a mixed or miss-understood signal on their last meeting. They prolonged the timing of QE but on the same time they reduce the amount from 80 billions to 60 billions per month. Its very obvious that the program runs out of steam as ECB is running out of bonds to buy. On the other hand QE did not helped at all the inflation pick up as it was originally expected and did not boost either the economy. As we will surf through 2017 we will see a tapper of QE and a possible normalization in interest rates which will be translated into a stronger EURO. Inflation expectations will be shifted together with the increase in oil prices and the recovery in Chinese PPI as that was the main reason behind the drop of European inflation. China has been the main driver in the reduction in global inflation, but it has now moved into positive for the first time in six years. Taking into account that euro’s bigger counterpart, the U.S. Dollar will also become stronger through 2017 due to FED policy in increasing interest rates at least twice, we are expecting the EUR/USD exchange rate to remain between 1.08-1.15 for the coming year.

OIL

Oil prices were on the main stage last year as we’ve seen them drop as low as 30$/barrel. We all know the reason behind the drop was political, targeting Russia and I.S. in Syria. But, the drop in oil prices did not actually affect only those 2, it also create turbulence and financial instability with big deficits in the budget of Saudi Arabia and other OPEC members. Finally an agreement reach between OPEC and non-OPEC members to reduce the oil production and boost the oil prices back to 55$/barrel. Oil prices will continue to raise in 2017 and may reach 80$/barrel as this price is consider to be a profitable for producers and acceptable from buyers. Saudi Arabia on their last statement said that, is willing to cut production farther. With the election of Donald Trump in the U.S. and the socialist winning ground in Europe relation with Russian will be more tied and the suction may be lifted finally. I.S. in Syria is losing ground and the war may end finally so it will be no more political reason in pushing the oil prices down. We see oil prices to be trade between 60-80$ barrel in 2017.

GOLD

Gold prices are under pressure and they will continue to be through 2017 as the gold price is directly depends on U.S. Dollar value. As interest rates will be hike during 2017 we will face more downside pressure in the value of gold.

We need to take into account that there is a bottom for gold price believe it or not. The cost of extraction of gold varies from 900-1100$/oz. This will be a physical and real, not technical, bottom of the price of gold, because below 1100$/oz. many gold mining companies are entering into default and they are unable to pay their debts to their liquidity providers who are the world’s biggest banks. And nobody wants the banks to default because of that. So we are expecting the gold price to be trade between 1100-1320$/oz. during 2017.

Beware of the formation of a new cartel which will soon control the gold market. Almost half the world’s known gold trading occurs in London. OTC transactions are sealed by virtual handshakes, leaving default risk with buyers and sellers rather than relying on clearinghouses, which use collateral to manage and offset risk. But since the financial crisis, all markets have been reevaluating how they do business and manage risk as regulators step up scrutiny. That’s particularly true for major price-setting exchanges, after it was discovered in 2012 that banks were manipulating a key benchmark for global interest rates.

A push for fewer risks and more disclosure has forced the LBMA to seek changes that would make it more transparent and secure for customers. The association, which counts HSBC and JPMorgan among its members, will introduce trade reporting for its members and a new trading platform in the first half of next year. That’s also when competitors plan to unveil new precious-metals derivatives built around the clearinghouse models.

Parity Bets Back In Force

 

A happy smiling young male sitting on a balance scale with a mon

Long time now we are hearing scenarios of the parity of exchange rate between euro and dollar. Since the introduction of QE back in 2014 and the Greek default in the same year, the introduction of austerity measures upon many European countries, the refinancing of their problematic banking system, today’s central bank’s divergence in their monetary policy path and the European political instability. All those factors are pushing the Euro into parity with the US Dollar. For 2 years now the pair manage to recover every time it was hitting the trading bottom of 1.05, a bottom that is formed the last 2 years of trading (1.05 – 1.14).

Euro is facing 2 new threats before the end of 2016. The FED’s rate hike in December and the Italian referendum on December 4th.

Although a Fed rate hike is already priced in, the pair might need to face some front winds upon the fed’s statement which most probably we give a future path of rates normalization for 2017.

With the victory of President-elect Donald Trump rejuvenating the so-called divergence trade, calls for the euro to sink to parity versus the U.S. dollar are swelling. While the strength of the greenback fueled by hopes of fiscal stimulus spurring faster growth and a swifter path higher for interest rates has been the main story in foreign exchange markets since the election, “it is the threat of political tail risk and splintering of Europe” that could push the euro to reach parity against the dollar for the first time since 2002.

Italian Referendum

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A defeat for Renzi, who proposed the vote and initially pledged to resign if the result didn’t go his way, could lead to early elections and a rise in support for the populist Five Star Movement. This party has pledged to carry out a referendum on whether Italy should stay in the euro area. Some investors are already predicting the end of the European Union, let alone the single currency. The Eurosceptic party has been actively campaigning for a referendum on exiting the single currency. Five Star’s Luigi Di Maio, vice-president of the lower house, said that if the party achieves power, it would push for an advisory referendum on euro membership. Di Maio hasn’t been clear about what he would want to replace it, saying in an interview with Repubblica that he favors “a euro at two speeds or a national currency.”

In my point of view I do not believe this will happen. Politics influence the markets up to a certain point. We’ve seen this before 2 years when it was the elections in Greece, as soon as Mr. Tsipras was elected euro dropped to 1.045 and then recover back to 1.10 within the next 20 days. U.K referendum markets react instantly with a drop of 10% and recover back within 2 days. US elections markets react instantly with a drop of 5% and recover back within few hours. As for the December 4th referendum markets will react the same, euro will react the same way, if voting will be against Mr. Renzi.

HOW THE NEW ZEALAND DOLLAR BECOME THE WORLD’S 10TH MOST TRADED CURRENCY

qiwi

 

The New Zealand dollar (NZD, $) is the official currency of New Zealand which includes New Zealand, the territories of Niue, Ross Dependency, Tokelau and Cook Islands, as well as the British Overseas Territory, Pitcairn Islands. Using NZ$ to distinguish this currency from other dollar denominated currencies is quite common, as is referring to it as the ‘Kiwi’.

The New Zealand dollar was the 10th most traded currency by value in the world in April 2013, accounting for around two percent of the global exchange market turnover at that time. The contribution of this currency to the international foreign exchange market remains considerably more than its relative share of GDP or population.

There has been no link between the New Zealand dollar and gold or a precious metal backed currency for long, so its value essentially depends on the amount in circulation. Besides, this has contributed to the country’s large and long term rates of inflation.

The establishment of the Reserve Bank of New Zealand to function as the country’s central bank took place in August 1934. Until this time, setting of New Zealand’s monetary policy happened in the UK, and private banks issued the New Zealand pound. In July 1967, the New Zealand dollar replaced the New Zealand pound, at a rate of two dollars to the pound. The country printed around 27 million new banknotes, and minted around 165 million new coins.

The New Zealand dollar initially pegged to the US dollar, when one New Zealand dollar valued at USD1.43. In November 1967, after the British pound’s devaluation, one New Zealand dollar traded at USD1.12. In 1971, the US decided to devalue its currency in relation to gold, and by December of that year the New Zealand dollar pegged at USD1.216, with a fluctuation range of 4.5%.

In between July 1973 to March 1985, a trade-weighted basket of currencies called the trade weighted index (TWI) determined the value of the New Zealand dollar. In September 1974, Australia decided to peg its currency against the TWI to try and minimize fluctuations that arose because of its peg to the US dollar. In November 1976, the peg to the TWI changed to a moving peg, which led to periodical adjustments in the peg’s actual value.

In March 1985, the New Zealand dollar switched to the floating exchange rate system, and one New Zealand dollar initially traded at USD0.444. Financial markets, since then, have determined this currency’s value, and its value against the US dollar has fluctuated in between around USD0.40 to USD0.88. Towards the end of the 1990s, the US dollar started to lose its overall influence over the value of the New Zealand dollar and the Australian dollar against other currencies.

In November 2000, the New Zealand dollar’s post-float minimum average daily value stood USD0.3922, and it increased to USD0.8666 by July 2011. Interest rate differences could well be the main reason behind this medium-term variation in exchange rates.

Currency trading tends to affect the value of the New Zealand dollar significantly. In June 2007, the Reserve Bank of New Zealand ended up selling an undisclosed amount of New Zealand dollars for nine billion US dollars with the aim of decreasing the New Zealand dollar’s value. This was the first time the bank intervened in the exchange markets since it joined the floating system.

After joining the float regime, the New Zealand dollar got to its record high in early 2008. The global economic downturn then got its value to plummet through much of 2008’s second half as well as the first few months of 2009. In March 2009, the New Zealand dollar bottomed out, trading at USD0.50.

It witnessed a revival of sorts soon after, and by November 2009 it got to the USD0.75 mark. Towards the latter part of 2012, the New Zealand dollar valued at over USD0.80, even getting to USD0.85 at times.

 

 

Where To Invest $1 Million?

where

Unless you are a daily Forex trader or a daily stock trader who makes 30% per year, then you may need to invest this amount into a more safe and stable market. Our studies identified  the  2 most attractive investments opportunities for 2017.

As you have noticed the dollar appreciated a lot against EURO and GB pound in the last 2 years. The reasons of its appreciation is obvious the divergence between the central banks, FED want to increase interest rates on the other hand ECB reduce interest rates in U.K. the shock of Brexit is done and the depreciation of GBP is over.

Taking into consideration the exchange rate by changing now your $1.000.000 into EURO or GBP the return over the next few years will be at least 15% without doubts, but this is not enough to secure your profits from there you need to move forward and buy a house in the U.K.  or North Amsterdam.

A pronounced housing shortage in the UK is expected to keep house prices rising despite the uncertainty created by Brexit and economic headwinds that could result from a Trump presidency.

Housing minister Gavin Barwell told Sky News the government “is set to fail to meet its target to build one million homes by 2020”.

Even that target, which was set last year and equates to 200,000 new homes a year, is below the 250,000 to 300,000 new starts each year that most analysts reckon the UK needs to keep up with demand.

Royal Institute of Chartered Surveyors said house prices rose at the fastest rate in seven months in October and would continue to rise over the next three months as a result of a “dire” shortage of homes for sale.

According to its report, transaction volumes are down as buyer demand is far outstripping the number of new sales instructions, which is currently at an all-time low.

Barwell said the government is currently building about 170,000 homes every year, which he claimed represented an improvement on the rates it inherited in 2010, which were “their lowest since the 1920s,” he said, before adding: “We clearly need to do better.”

Housing market is booming and it will not stop and apart from that the monthly rent in U.K. is one of the highest.

Supposing that you change your $1.000.000 dollar today in GBP you will have 800.000GBP to invest in 2 new built houses giving you a rent of 1500 per month.

The predicted return for a 2 year period will be as follow:

Rent receivable: 72000GBP

house appreciation on a year basis is 7% : 112000GBP

predicted exchange rate of USD/GBP after 2 years 1.45

In 2 years changing back your U.K. investment into USD will be $1.426.000

where-2

Why North Amsterdam? This is the question everybody is asking.

In a market where almost half of properties are owned by non-profit corporations, mainly for social housing, there’s just not enough coming on to the market to satisfy buyers. After falling about 14 percent in five years, prices have rebounded recently and are now above pre-crisis levels.

The supply shortage is a hangover from the financial crisis, which restrained new building and led to more families choosing to remain in the city, as it was harder to sell properties at a profit. In the first quarter of 2016, all houses that came on the market were sold, nearly half for more than the asking price. The asking price for an average house rose 5 percent from a month ago in May while it was up 26 percent from a year earlier, the Dutch bureau of statistics said.

Another reason prices continue to skyrocket is that the Netherlands is relatively unique in still allowing buyers to borrow more than the value of the house — no down payment necessary. That means as prices rise, buyers have less of a barrier to entry than in other markets, like London, where the size of a cash down payment is increasingly pushing first-time buyers out of the market.

Add in historically low interest rates, and the convergence of those factors makes Amsterdam not just the hottest market in the Netherlands, but also one of the fastest-growing ones in Europe.

The last 20 years North Amsterdam was less developed that the south Amsterdam. Where almost all businesses, great companies, big banks, clubs and tourist are located. But this is not the real reason of the slowest developing in North Amsterdam than the south. The tow parts of the city are separated by a huge River  “AMSTEL” a very well known name for beer lovers.

Because of Amstel river there was no metro to connect north with south, so the people living on the north had to cross the river through a boat traveling back and forward every 15 minutes. This was somehow isolated the people living there and many preferred to buy house on the south than the north. Amsterdam major decide to start building metro connecting north with south and this is why is better to invest now, buying a house in north Amsterdam. Is predicted that the next 2-3 years prices in north Amsterdam will be increase by 30% compare to the 20% increase on the south of the city.

Supposing that you change today $1.000.000 into EURO you will have 926.000 to invest into 2 apartments.

Predicted profit for your north Amsterdam  investment in 3 years will be as follow:

rent receivable 144.000euro

appreciation of housing market 278.000

predicted exchange rate of EUR/USD in 3 years 1.20

in 3 years changing back your north Amsterdam investment will be $1.617.000

Is Trump the U.S. Savior?

trumpWe heard lots of rumors before the elections, many analyzers forecasts and ideas, we’ve heard before that if Donald trump will be elected markets will collapse and U.S. Dollar will devalue. It’s all mistake and over presentation of the mass media, it’s all about panic.

Many times before we faced such a situation (political situation) any reaction in the markets is temporary. Recently we have seen this in the British referendum markets drop 10% and recover back and erasing all losses within a day. We have seen this yesterday market dropped by 5% and recover back and erased all losses within 2 hours.

Even though many economist believe that politics can affect markets in my point of view is that they cannot politics are affecting markets indirect and psychological but by the end of the day is the economy on it’s own that drives markets and not the politics.

Many times we’ve seen protesters outside wall street protesting against the politics staying away from markets.

The reason behind the yesterday roller coaster was the preposition of the big traders like banks and hedge funds and many other retail traders that follow the big owns. They were all position for a Clinton victory. As the result came out they closed their initial positions and turn into trump victory. A few hours later after the speech of Trump markets digest the negative sentiment they had about Trump and turn back to positive.

Stocks focused on the positives of Donald Trump’s policies but ignored its fears that he could ignite a global trade war. The dollar jumped, and the Mexican peso continued under pressure, losing another 8 percent to record lows.

For the first time, U.S. have the possibility of fiscal policy being implemented in such a way that it has the possibility of changing the deflation. Near-term impacts on the economy from any potential market turbulence will likely be mitigated by a more accommodative Fed.

Trump has also proposed a lower corporate tax rate and a one-time tax holiday that would mean U.S. companies could bring back the billions they have stashed overseas.

Banks benefit from higher inflation and higher interest rates and the bond market Wednesday was in a steep sell-off, which sent yields higher.

Trump’s fiscal policy is a combination of reforming the corporate tax code and government spending on big projects that will pump money into the economy and create new jobs. With Republicans now in control of the White House and both houses of Congress, the years-long standoff may be broken.

But, we must not forget that Trump cannot act by his own, there are decisions need to be pass for voting by congress and decisions need to be approved by high court.

For now, we can only wish him good luck and we need to focus on our trading based on economic events and not on politics.