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Tue, 17th January 2017

Anirudh Sethi Report

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Archives of “Euro” Tag

How to Become a Trillionaire and Other Thoughts

Grab one of these:

zimbabwe_jan7

Careful what you wish for central bankers and fiscal policy makers.  Though we don’t see signs of “rollover risk” in any of the G5 or G20, it’s all about confidence and you know what Joe said about confidence:

Confidence is a very fragile thing.  – Joe Montana

.The World Economic Forum reports this about Zimbabwe’s ghost of hyperinflation past,

Zimbabwe was once so gripped by hyperinflation that the central bank could no longer afford paper on which to print practically worthless trillion-dollar notes. 

The government reported in July 2008 that Zimbabwe was experiencing inflation of 231 million percent (231,000,000%). However, the Libertarian think tank, the Cato Institute, believes that the real inflation rate was 89.7 sextillion percent or 89,700,000,000,000,000,000,000%.

It is interesting to note that the country is now grappling with the opposite problem.

Like Britain, Japan, the US and other nations dealing with the consequences of weak demand and cheap oil, Zimbabwe is threatened more by the prospect of falling prices. But that doesn’t mean its people are ready to trust that hyperinflation won’t happen again.

Overnight US Market :Dow closed -43 points.

Stocks ended mixed Thursday as retailers dominated the news with Macy’s and Kohl’s both plunging following weak holiday-season reports that led the chains to cut their profit forecasts.

Still, the Nasdaq composite’s modest gain of 11 points, or 0.2%, was enough to notch a new all-time high. Settling at at 5487.94, it topped the old record by half a point.

The Dow Jones industrial average finished down 43 points, a 0.2% decline to 19,899.29. Losing 0.1% was the S&P 500, which settled at 2269 even.

nvestors were also focusing on upcoming U.S. jobs data following the publication of the minutes to the Federal Reserve’s last board meeting.

Private U.S. companies added 153,000 jobs in December, according to payroll processor ADP. That total was a bit lower than analysts expected and slightly slower than the pace of hiring for the rest of 2016. The government will issue its own hiring report on Friday.

ECB tells Monte dei Paschi it needs to raise 8.8 billion euros

A Christmas message from the European Central Bank to Monte dei Paschi

  • Needs to plug a capital shortfall of 8.8 billion euros
(Was previously 5 bn euro gap)
  • ECB said the lender was solvent
  • But the liquidity position had rapidly deteriorated between the end of November and December 21

ECB: Crisis knocked 10% off household wealth amid evidence of higher inequality

A collapse in house prices during the eurozone’s sovereign debt crisis delivered a substantial knock to household wealth, hinting at rising inequality in the continent, according to new figures from the European Central Bank.

It its latest survey of 84,000 households across the single currency area, the ECB found average net wealth in the eurozone fell 10 per cent from 2010 to 2014 compared to the pre-crisis years, while inequality between the richest and poorest also edged up on some measures.

Amid concerns that growing inequality has emboldened populist and eurosceptic forces, the ECB said the overall distribution of wealth in the eurozone was “skewed” towards the richest.

Declining asset prices – led by property crashes in the likes of Spain and Ireland but spread across the continent from 2010 to 2012 – imposed the biggest hit to wealth in the period. Euro-area citizens are particularly exposed to changes in house prices, as over 80 per cent of household wealth is in “real assets” such as property.

Evidence of higher inequality following the financial crisis has been mixed. Global central banks have however been criticised for stimulus measures that have driven up the price of stocks and bonds through their quantitative easing measures.

One widely-cited measure of wealth inequality, the Gini coefficient, crept up to 68.5 per cent from 68 per cent in the eurozone, “within the margin of measurement error”said the ECB. It also found that the share of wealth concentrated among the top 5 per cent of rich households increased to 37.8 per cent from 37.2 per cent.

The life of EURUSD in 2017 by Danske Bank

The jolly chaps and chapesses at Danske Bank have the euro all mapped out for next year

Danske see EURUSD bottoming at 1.0200 in their 1 month forecast.

“In the short term, on the one hand there will be downward pressure on the US monetary base from the higher federal funds target and from the impact of new banking regulation with US banks set to be required to have an LCR of 100% by 1 January 2017. On the other hand, deposits on the US treasury account may fall at the beginning of next year after a resuspension of the debt ceiling, which will tend to increase the monetary base. Overall, this is likely to be marginally positive for USD and weigh on USD FX forward points vis- à-vis EUR and the Scandinavian currencies on top of the impact of the repricing of the path of Federal Reserve rate hikes, e.g. keeping the 3M EUR/USD basis spread around the present 70-80bp, and thus maintaining a significant negative carry on short USD positions.”

In 12m they see the euro at 1.1200.

New RBI guidelines on cash deposits of demonetised notes add to confusion

Fresh guidelines issued by the Reserve Bank of India on Monday on limiting cash deposits of demonetised bank notes have added to the confusion. The central bank issued guidelines where it said that individuals will only be able to deposit demonetised bank notes above ₹5,000 only once till the remainder of the deposit deadline i.e. December 30, 2016.

On the surface, the guideline appears to be one that will hit the remaining black money hoarders in a single blow. However, the government hasn’t been able to plug laundering and cash leaks at banks. Therefore, the common person, who would’ve planned to deposit the money at a later stage, for various reasons like possibly to beat the early queues, would be hit unnecessarily.

Since the time demonetisation was announced, RBI has played a less than stellar role in managing the currency exchange and currency distribution process. Regular guidelines coming at regular intervals put the country in a state of confusion as to what will follow next and the damage control seems to be never-ending.

Bitcoin trade volume hits record in November

A record 174.7 million bitcoins changed hands, so to speak, in November, a 50% or so increase from the previous month’s trade volume, according to Bitcoinity.org.

The spike came as Chinese jumped into the digital currency as a way to shift their assets into dollars.

 The previous monthly record, which came in March, was 148.6 million bitcoins.

The November trading volume was worth $137 billion.

The yuan has been weakening against the U.S. currency since Donald Trump’s victory in the presidential election on Nov. 8.

Many Chinese evade restrictions on directly buying dollars by taking a detour into bitcoins. This is what they were doing last month.

Cash withdrawal limits to be reviewed after 30 Dec: Finance Secretary

The current limits on cash withdrawal will be reviewed after 30 December, the last day to deposit old Rs500 and Rs1,000 currency notes, says finance secretary Ashok Lavasa.

“The cap on cash withdrawal to be reviewed after 30 December, which is the last day to deposit old Rs 500/1,000 notes,” PTI quoted Lavasa as saying.

The use of the old Rs500 currency note as legal tender stopped from Thursday midnight. The Narendra Modi government had let people use them for paying utility bills or buying medicines till 15 December, but decided to not extend the deadline any further.

Now the old Rs 500 note can only be deposited in bank accounts or exchanged at the Reserve Bank of India (RBI). The government had earlier scrapped the use of old Rs1,000 note for utility bill payments and petrol pumps.

The government is considering easing rules on cash withdrawals, starting with cooperative banks, once 80% of the new currency is introduced into the system, a top official said on Thursday.

War On Cash Escalates: Australia Proposes Ban On $100 Bill; No Cash Within 10 Years?

Global financial repression has picked up steam. Australian citizens are likely the next victim.

au-100-note

AU News reports Government Floats $100 Note Removal. 

SAY goodbye to the $100 note.

Australia looks set to follow in the footsteps of Venezuela and India by abolishing the country’s highest-denomination banknote in a bid to crack down on the “black economy”.

Speaking to ABC radio on Wednesday, Revenue and Financial Services Minister Kelly O’Dwyer flagged a review of the $100 note and cash payments over certain limits as the government looks to recoup billions in unpaid tax.

“The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes,” she said. Despite the broad use of electronic forms of payment, Ms O’Dwyer warned there are three times as many $100 notes in circulation than $5 notes.

“It does beg the question, ‘Why?’” she said.

There are currently 300 million $100 notes in circulation, and 92 per cent of all currency by value is in $50 and $100 notes.

A report by UBS recommended Australia scrap the $100 note. According to UBS, benefits may include “reduced crime (difficult to monetise), increased tax revenue (fewer cash transactions) and reduced welfare fraud (claiming welfare while earning or hoarding cash)”.

“From the banks’ perspective there would likely be a spike in deposits — if all the $100 notes were deposited into banks (ignoring hoarded $50 notes), household deposits would rise around four per cent,” the report said.

Why?

‘Reveal who attended RBI’s Nov 8 meet’ -P Chidambram

Former finance minister P Chidambram on Tuesday demanded the Reserve Bank of India should make public minutes of its November 8 meeting whose outcome empowered government to scrap specified notes of Rs 500 and Rs 1,000 denominations.

On November 8, the Narendra Modi government in a televised address announced it was abolishing the legal tender status of Rs 1,000 and Rs 5,00 currency notes.

These high value notes comprised a huge 86 per cent of total currency in circulation and the decision has led to severe cash crunch in country causing inconvenience to the citizens.

“RBI should publish the minutes of meeting on Nov 8, let country know who were the directors who attended the meeting,” Chidambaram demands.

The government had banned these specified notes through an executive order instead of passing a legislation in parliament as part of its drive to curb black money and prevent recurrence of fake currency incidents.

According to the RBI Act, 1934, the Central Board of the apex bank takes a call on legal tender, its validity or invaldity, in circulation in country and proposes government accordingly.