Home
Is The BIS Setting Up The World For Another Meltdown?
July 09, 2016
On the heels of another wild trading week, is the Bank for International Settlements (BIS) setting up the world for another meltdown?
(King World News) Stephen Leeb: “In 2013, the Bank of International Settlements (BIS), one of the most powerful institutions you may never have heard of – blew it. It snubbed gold. I’ll explain how in a moment – contributing to gold sinking from $1,800 an ounce in October 2012 to below $1,200 by the end of June 2013, a massive 35 percent plunge in a mere eight months. The downtrend continued until the end of last year when gold briefly traded below $1,050…
Continue reading the Stephen Leeb interview below…
Stephen Leeb continues: “Forget about the impact on gold investors. The real tragedy is that the BIS’s disdain of gold paved the way for today’s utterly untenable global economic mess. The ironic upshot is that today the world desperately needs gold to assume a more prominent monetary role. If central banks don’t act accordingly, the world is likely to descend into chaos in which gold will seize such a role anyway. Either way, gold will win.
The Tower Of Basel (BIS) – The Central Bank That Really Runs The World
Let’s return to the BIS, known as the central bank of central banks. In 2013 the BIS, in the aftermath of the financial crisis, had the job of refining the rules that would make sure banks would have enough of a liquidity buffer to ensure there would be no repetition of the 2008 financial meltdown. During the worst of the crisis banks were left so high and dry that GE nearly missed a payroll because it did not have access to enough liquidity. The goal was a buffer large enough to cover net bank withdrawals over an extremely stressful 30-day period.
It was widely assumed that the BIS would include gold as a financial asset banks could use as part of their liquidity. But, amazingly, when the BIS issued its so-called Basel III recommendations, gold was nowhere to be found. Instead, the BIS listed sovereign debt, common stocks, and BBB+ bonds as among acceptable forms of liquidity — some with a haircut, i.e., at less than full face value.
Omitting gold was extraordinary given gold’s outstanding performance. Between September 30, 2007 (when the Great Recession started) through March 6, 2009, when the market bottomed, gold’s 26 percent gain left every other asset in the dust. Only long-dated U.S. Treasuries came close. Germany’s 30-year note lost about 20 percent, while Britain’s 20-year bond lost about 40 percent. The S&P 500 lost over 55 percent. Furthermore, only U.S. bonds were less volatile than gold.
In other words, by most objective measures gold would have been far and away the most suitable liquidity buffer. Yet the BIS shunned gold in favor of common stocks and mediocre bonds. Let’s note in passing that the pound, which had been designated as a no-haircut liquidity buffer, is the currency of a country on the verge of cutting its ties to Europe while owing foreigners nearly six times its GDP. Also striking is that the assets the BIS favored were mostly those that could be created at will – a.k.a money printing.
BIS’s Real Motive As The West Is Headed For Another Meltdown
You have to figure that the BIS was either wanting another crisis or, more likely, had some ulterior motive. The problem is that the only plausible ulterior motive was one that virtually guaranteed another crisis down the road – which is exactly how things have played out.
The BIS, in my view, was intent on preventing gold from being viewed as a currency on par with the dollar. Its fear was that if gold – the only financial asset that can’t be created at will – were treated as a currency, it would quickly grab status as the premier financial asset, the de facto reserve currency of choice. The dollar would play second fiddle, with very uncertain consequences for America.
Flash forward three years. The BIS and Western central bankers in general may feel satisfied that they achieved one goal: the dollar remains the world’s most important reserve currency. But insofar as another goal was to protect the West from another meltdown, they should be a lot less pleased with themselves.
BIS Warns Global Economy Highly Exposed
In its most recent report, released June 30, BIS acknowledged the worsening outlook, writing: “One could speak of a ‘risky trinity’: productivity growth that is unusually low…..global debt levels that are historically high, raising financial stability risks…….and a (sic) room for policy maneuver that is remarkably narrow, leaving the global economy highly exposed.”
But based on what the BIS had sought in 2013, it should be jumping for joy. After all, high-quality debt is a form of liquidity, and it’s more than abundant, with no end in sight to how much more will be created. Debt creation is a vicious circle: the more debt, the more debt transactions, and the more debt needed for a buffer.
Unfortunately, when you consider the unlimited ability to create debt along with $8 trillion of sovereign debt sporting rates that have been negative for a record amount of time and top it off with a vicious circle that nearly assures ever more debt creation, you have to conclude the West is all dressed up with no place to go. In the West the kinds of investments – in desperately needed infrastructure – that would spur productivity and employ many of those languishing in the bottom 50 percent are viewed as too risky by the private sector and too burdensome for the public sector.
Imagine how different things would look today if the BIS had granted gold its rightful role as a liquidity buffer. Its price would have soared, but those gains would have meant less need for money printing. There would be little prospect for the kind of vicious circle that prevails today, since gold would rise as new debt was created. There would be no need to backstop debt with more debt, and private and public investors would be far more willing to invest in infrastructure and other productivity-enhancing projects with long-term payoffs.
Gold And China Are Getting The Last Laugh
But gold is getting the last laugh, along with China. It will be the only currency left standing when the house of cards falls. The BIS can at least partially rectify its mistake now either by adding gold as a liquidity buffer with no haircut or, perhaps, in concert with the IMF, including gold as part of the basket of SDR currencies. But it may already be too late to save a major role for the dollar. Why? Because of all the gold that China has been amassing.
Counting its sovereign wealth fund, China has approximately $4 trillion in reserves, of which only a little over $1 trillion is in U.S. Treasury securities. How the other $3 trillion is invested is a state secret. But can anyone seriously think that Li and Xi aren’t aware of the travails of Britain, Europe, and Japan, the other IMF-designated reserves currencies? And we know that China loves gold. We also know that it wants to control currency creation, as evidenced by its leadership in cyber money, which is made possible by the country’s remarkable surge to No. 1 in the supercomputer arena. China’s extraordinary success in supercomputers is just one more proof of how much China can do in a short time.
The 30,000 tonnes of gold held by central banks has a value of about $1.2 trillion. The value of gold held for investment is valued at about $1.4 trillion. Our point is that China has the wherewithal to have bought nearly all the gold that is readily for sale (this excludes the nearly half of the world’s gold that’s in the form of jewelry). Don’t misunderstand us: I am in no way implying that China has done so, or that it owns anything like 60 thousand tonnes of gold. But it’s a near certainty that it owns far more gold than the paltry 1,800 tonnes that it most recently reported owning, as well as more than the 8,000 tonnes the U.S. is supposed to own.
China Will Dictate The New Monetary Order
Our bet is that China owns at least enough gold to let it dictate the shape of a new monetary order. The reality is that economic power has been shifting to the East, and it’s probably too late to forestall this momentous reordering.
It is not, however, too late for investors to benefit by buying precious metals. We are likely facing one of the greatest, if not the greatest, bull markets of all time. Investors should buy gold – and especially gold miners – and buy silver – especially silver miners: miners will offer the greatest leverage to gains in the underlying metals. And be sure to put those BIS decision makers on your Christmas card list as you watch your gains pile up.”
http://kingworldnews.com/is-the-bis-setting-up-the-world-for-another-meltdown/
July 09, 2016
On the heels of another wild trading week, is the Bank for International Settlements (BIS) setting up the world for another meltdown?
(King World News) Stephen Leeb: “In 2013, the Bank of International Settlements (BIS), one of the most powerful institutions you may never have heard of – blew it. It snubbed gold. I’ll explain how in a moment – contributing to gold sinking from $1,800 an ounce in October 2012 to below $1,200 by the end of June 2013, a massive 35 percent plunge in a mere eight months. The downtrend continued until the end of last year when gold briefly traded below $1,050…
Continue reading the Stephen Leeb interview below…
Advertisement
To hear which company investors & institutions around the globe are flocking to
that has one of the best gold & silver purchase & storage platforms
in the world click on the logo:
that has one of the best gold & silver purchase & storage platforms
in the world click on the logo:
Stephen Leeb continues: “Forget about the impact on gold investors. The real tragedy is that the BIS’s disdain of gold paved the way for today’s utterly untenable global economic mess. The ironic upshot is that today the world desperately needs gold to assume a more prominent monetary role. If central banks don’t act accordingly, the world is likely to descend into chaos in which gold will seize such a role anyway. Either way, gold will win.
The Tower Of Basel (BIS) – The Central Bank That Really Runs The WorldLet’s return to the BIS, known as the central bank of central banks. In 2013 the BIS, in the aftermath of the financial crisis, had the job of refining the rules that would make sure banks would have enough of a liquidity buffer to ensure there would be no repetition of the 2008 financial meltdown. During the worst of the crisis banks were left so high and dry that GE nearly missed a payroll because it did not have access to enough liquidity. The goal was a buffer large enough to cover net bank withdrawals over an extremely stressful 30-day period.
It was widely assumed that the BIS would include gold as a financial asset banks could use as part of their liquidity. But, amazingly, when the BIS issued its so-called Basel III recommendations, gold was nowhere to be found. Instead, the BIS listed sovereign debt, common stocks, and BBB+ bonds as among acceptable forms of liquidity — some with a haircut, i.e., at less than full face value.
Omitting gold was extraordinary given gold’s outstanding performance. Between September 30, 2007 (when the Great Recession started) through March 6, 2009, when the market bottomed, gold’s 26 percent gain left every other asset in the dust. Only long-dated U.S. Treasuries came close. Germany’s 30-year note lost about 20 percent, while Britain’s 20-year bond lost about 40 percent. The S&P 500 lost over 55 percent. Furthermore, only U.S. bonds were less volatile than gold.
In other words, by most objective measures gold would have been far and away the most suitable liquidity buffer. Yet the BIS shunned gold in favor of common stocks and mediocre bonds. Let’s note in passing that the pound, which had been designated as a no-haircut liquidity buffer, is the currency of a country on the verge of cutting its ties to Europe while owing foreigners nearly six times its GDP. Also striking is that the assets the BIS favored were mostly those that could be created at will – a.k.a money printing.
BIS’s Real Motive As The West Is Headed For Another MeltdownYou have to figure that the BIS was either wanting another crisis or, more likely, had some ulterior motive. The problem is that the only plausible ulterior motive was one that virtually guaranteed another crisis down the road – which is exactly how things have played out.
The BIS, in my view, was intent on preventing gold from being viewed as a currency on par with the dollar. Its fear was that if gold – the only financial asset that can’t be created at will – were treated as a currency, it would quickly grab status as the premier financial asset, the de facto reserve currency of choice. The dollar would play second fiddle, with very uncertain consequences for America.
Flash forward three years. The BIS and Western central bankers in general may feel satisfied that they achieved one goal: the dollar remains the world’s most important reserve currency. But insofar as another goal was to protect the West from another meltdown, they should be a lot less pleased with themselves.
BIS Warns Global Economy Highly ExposedIn its most recent report, released June 30, BIS acknowledged the worsening outlook, writing: “One could speak of a ‘risky trinity’: productivity growth that is unusually low…..global debt levels that are historically high, raising financial stability risks…….and a (sic) room for policy maneuver that is remarkably narrow, leaving the global economy highly exposed.”
But based on what the BIS had sought in 2013, it should be jumping for joy. After all, high-quality debt is a form of liquidity, and it’s more than abundant, with no end in sight to how much more will be created. Debt creation is a vicious circle: the more debt, the more debt transactions, and the more debt needed for a buffer.
Unfortunately, when you consider the unlimited ability to create debt along with $8 trillion of sovereign debt sporting rates that have been negative for a record amount of time and top it off with a vicious circle that nearly assures ever more debt creation, you have to conclude the West is all dressed up with no place to go. In the West the kinds of investments – in desperately needed infrastructure – that would spur productivity and employ many of those languishing in the bottom 50 percent are viewed as too risky by the private sector and too burdensome for the public sector.
Imagine how different things would look today if the BIS had granted gold its rightful role as a liquidity buffer. Its price would have soared, but those gains would have meant less need for money printing. There would be little prospect for the kind of vicious circle that prevails today, since gold would rise as new debt was created. There would be no need to backstop debt with more debt, and private and public investors would be far more willing to invest in infrastructure and other productivity-enhancing projects with long-term payoffs.
Gold And China Are Getting The Last LaughBut gold is getting the last laugh, along with China. It will be the only currency left standing when the house of cards falls. The BIS can at least partially rectify its mistake now either by adding gold as a liquidity buffer with no haircut or, perhaps, in concert with the IMF, including gold as part of the basket of SDR currencies. But it may already be too late to save a major role for the dollar. Why? Because of all the gold that China has been amassing.
Counting its sovereign wealth fund, China has approximately $4 trillion in reserves, of which only a little over $1 trillion is in U.S. Treasury securities. How the other $3 trillion is invested is a state secret. But can anyone seriously think that Li and Xi aren’t aware of the travails of Britain, Europe, and Japan, the other IMF-designated reserves currencies? And we know that China loves gold. We also know that it wants to control currency creation, as evidenced by its leadership in cyber money, which is made possible by the country’s remarkable surge to No. 1 in the supercomputer arena. China’s extraordinary success in supercomputers is just one more proof of how much China can do in a short time.
The 30,000 tonnes of gold held by central banks has a value of about $1.2 trillion. The value of gold held for investment is valued at about $1.4 trillion. Our point is that China has the wherewithal to have bought nearly all the gold that is readily for sale (this excludes the nearly half of the world’s gold that’s in the form of jewelry). Don’t misunderstand us: I am in no way implying that China has done so, or that it owns anything like 60 thousand tonnes of gold. But it’s a near certainty that it owns far more gold than the paltry 1,800 tonnes that it most recently reported owning, as well as more than the 8,000 tonnes the U.S. is supposed to own.
China Will Dictate The New Monetary OrderOur bet is that China owns at least enough gold to let it dictate the shape of a new monetary order. The reality is that economic power has been shifting to the East, and it’s probably too late to forestall this momentous reordering.
It is not, however, too late for investors to benefit by buying precious metals. We are likely facing one of the greatest, if not the greatest, bull markets of all time. Investors should buy gold – and especially gold miners – and buy silver – especially silver miners: miners will offer the greatest leverage to gains in the underlying metals. And be sure to put those BIS decision makers on your Christmas card list as you watch your gains pile up.”
http://kingworldnews.com/is-the-bis-setting-up-the-world-for-another-meltdown/
» utube MM&C 4/16/24 IQD Update - Iraq Dinar - America - Activate - Massive Economic Deals -
» utube MM&c 4/19/24 Iraqi Dinar - Private Sector - Economic Stability - Financial Reform - Al Sudan
» Iraq officially signs the “Singapore” agreement to resolve trade disputes
» Parliament Finance advises raising exchange rates again... What about oil revenues?
» Al-Sudani: Iraq is in the process of recovery and has taken its leading position that attracts work
» Al-Araji: Iraq is prepared to deal with all circumstances and seeks partnership with the United Stat
» Sudanese from Michigan: The government represents all components and is keen to take care of the aff
» Democratic Party: The "new generation" is the most corrupt and has dozens of cases in court
» What is the benefit of Iraq establishing a petrochemical plant in Egypt?!.. An oil expert explains
» A judicial delegation participates in the Permanent International Forum for Commercial Courts in Qat
» Al-Sudani: The government follows a balanced policy that makes Iraq a station for security
» Deduction of 160 million dinars from the salaries of MPs absent from Parliament sessions
» Central Bank: Washington praised Iraq's measures to resolve 80% of the financial transfer file
» Voices of Resilience: Al-Sudani’s frankness embarrasses the White House
» Al-Alaq confirms the formation of a committee between Baghdad and Washington regarding sanctions on
» Former MP: The Democrat will not hand over power after the regional elections
» Document/allocation of 20% of the lands of Al-Jawahiri Complex to employees of the Ministry of Defen
» Al-Hakim: Al-Sudani’s visit to Washington was a protocol and missed the two most important files
» Parliamentary Security: The National Security Service law will be voted on by Parliament soon
» Reconstruction and Housing: Zarbatieh residential project completed by 82%
» Al-Sudani reveals an intention to establish Al-Faw refinery with a capacity of 300 thousand barrels
» Government readiness to move the Doura refinery to an alternative location.. What are the conditions
» Al-Sudani’s visit to Washington.. Implications and results
» Association of Iraqi Private Banks: The suspension of some electronic payment services yesterday was
» Parliamentary memorandum.. Two solutions were before the Federal Court instead of removing the compo
» Blue fuel... Iraqi steps towards inexhaustible wealth for a century
» For fear of being "upset"... MPs "evade" signing to host Al-Sudani in Parliament
» Al-Sudani’s statement to convert 40% of Iraq’s exports into derivatives.. What does it have to do wi
» An Iraqi-American partnership to benefit from oil field gas
» The Minister of Commerce announces the distribution of the first payments of farmers’ dues for the 2
» Sudanese to members of the Iraqi community in the American city of Houston: Iraq has regained its he
» Romanski announces loans worth $50 million to support the Iraqi private sector
» Prime Minister: We plan to invest production capacities for export
» “Something happened” in Iran and no one is talking about Iraq and Syria. This is what we have so far
» Al-Sudani asks the American Baker Institute for assistance in preparing studies related to the oil m
» The Interior Ministry denies the occurrence of explosions inside Iraqi territory and diagnoses “the
» Tensions between Najaf and Baghdad over the airport... the rule of law over “military force” and the
» Al-Sudani from Washington: We agreed with Abu Dhabi on joint management of Al-Faw Port
» "Al-Party" talks about the region's elections and reveals the reason for refusing to pay salaries di
» Russia's oil is taking more of the Middle East's shares in the Indian market.. How much has Iraq los
» Early next month.. Traffic confirms that the electronic payment system is working only
» The Service Council accuses state departments of refraining from disbursing bonuses because of the m
» Electricity: The Baghdad street lighting campaign will be completed before the middle of this year
» Oil poses two conditions for moving the Doura refinery to an alternative location
» The Foreign Minister reveals the truth about his resignation and the reason for his departure to Erb
» Progress: Al-Halbousi’s acquittal has become conclusive, and his return to the presidency of Parliam
» Disagreements strike Al-Maliki's coalition over choosing the governor of Diyala
» The Union accuses Türkiye of exploiting the political situation for a ground incursion into Iraq
» The Democratic Party: Barzani is eagerly awaiting the results of Al-Sudani’s visit to Washington
» Frame: Al-Halbousi in the news and his return has become a pipe dream
» A parliamentary request to capitalize on Erdogan’s visit to Baghdad to end the water crisis
» Al-Sudani urges the US corporation Honeywell to help finish the Basra refinery
» Al-Sudani Meets with Representatives of Western Media Outlets in Washington
» Chairman of the Investment Authority signs the United Nations Convention on International Mediation
» PM: We will sign a contract to establish the Al-Faw refinery with a Chinese company
» PM arrives in Houston as part of his visit to USA
» Militia Man & Crew 4/18/24 Bush signed it and all presidents implemented it. Iraq’s funds have been
» Iraq is close to launching the electronic signature
» The Basra government discusses with an international oil company the implementation of social benefi
» The Prime Minister confirms to an American company: Gas projects in Iraq are a priority for the gove
» The Minister of Planning discusses with the World Bank mechanisms for scheduling external loans
» Oil sets the twenty-seventh of this month as the date for opening contracts for the fifth complement
» “Electronic begging”...professionalism and fabrication of stories” generates millions of dinars dail
» Al-Sudani calls on the American company Hanwell to contribute to the completion of the Basra refiner
» An American company expresses its willingness to establish LED lighting production lines in Iraq
» Including Iraq.. Iran announces the possibility of exporting 300 megawatts of “renewable electricity
» Political forces present two options to find an alternative to Al-Halbousi
» Parliament is awaiting the arrival of the budget schedules and the government is studying higher spe
» The International Monetary Fund adjusts its expectations for the development of the world’s economie
» A representative talks about the difficulty of finalizing the file of “electing the Speaker of Parli
» Work on preparing a law for diplomatic passports
» A female representative accuses the Ministry of Immigration of corruption
» Minister: Solving the Kurdistan salaries problem is the beginning of addressing other disputes betwe
» About 270 million dollars were sold by the Central Bank of Iraq in the currency auction
» The volume of trade exchange between Jordan and Iraq will exceed 800 million dinars in 2023
» Iraq signs memorandums of understanding with American companies in the fields of electricity, oil an
» The American company that manufactures the F16 expresses its readiness to implement the terms of con
» The volume of expected Qatari investments for the Iraq Fund for Development exceeds $3.5 billion
» Decrease in dollar prices in Baghdad and Erbil
» The President of the Region brings together the Kurdish parties to resolve the election file
» Al-Sudani receives in Washington the Chairman of JPMorgan
» Transport is starting to transform its ports into smart ones
» Sudanese reveals the volume of exchange with America
» "Al-Eqtisad News" publishes the memorandums of understanding signed between the Iraqi delegation and
» Al-Sudani urges an American company to contribute to establishing a chemical materials factory
» Iraq stresses the importance of Lockheed Martin's commitment to opening military aircraft maintenanc
» Iraq is on the verge of a “water disaster” by 2035
» Great satisfaction and optimism with the results of Sudanese’s visit to Washington
» Transport is beginning to adopt a plan to transform its ports into smart ones
» Completed 8,000 loan transactions at the Housing Bank
» Prime Minister: We plan to invest production capacities for export
» Transformation and partnership...a new horizon in Iraqi-American relations
» What is new in the economic dimension of the Washington visit?
» Two letters to the future
» National interests first
» Iraqi-American rapprochement...a national necessity
» Al-Sudani’s visit to Washington and the course of Iraqi-American relations
» Sudanese carries security, economic and development files to Washington