SUZI Q'S ESTATE FINDS
Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.
In February 1931, Gates McGarrah, the [BIS’s] American president, wrote to H. C. F. Finlayson, in Athens, asking about the Bank of Greece’s gold. Finlayson, a former British financial attaché in Berlin, was now an adviser to the Bank of Greece. Some of the Greek bank’s gold may have gone missing. Rather like nowadays, it seemed the accounting at the Bank of Greece left something to be desired. “What has ever happened to the gold of the Bank of Greece, some of which you thought might be left in our custody in Paris or elsewhere?” inquired McGarrah, who, as the president of the BIS might have been expected to know what it held and where. It might, McGarrah suggested, be a good time to find the Greek gold and place it with the BIS.The BIS, wrote McGarrah, could give the Bank of Greece “all sorts of facilities, rather greater than those of a local Central Bank.” For example, if the Bank of Greece held gold at the Bank of France and wanted to buy another currency, it first had to buy francs from the Bank of France. The Bank of Greece then converted the francs to the second currency, with all the usual losses of exchange rates and commissions. However, if the Bank of Greece held gold at the Bank of France in the name of the BIS, the BIS could “give the Bank of Greece any currency it desires at any time and can fix an agreed rate without going through the actual exchange operation.” And, the BIS did not charge any commission.
At the time, sterling was pegged to bullion. This meant that the pound was worth a fixed amount compared to other currencies and gold itself. In order to ensure that sterling retained its value, the Bank of England was obligated to exchange gold for pounds at the specified rate.However, as political turmoil engulfed the UK, the country’s first national government – a coalition between Labour and the Conservatives – presided over a budget crisis that triggered a run on the pound.Minutes from the Bank’s court in 1931, published on Wednesday, detailed how foreign exchange reserves were being drained to such an extent that the gold standard had to be abandoned.Up to that point, the gold standard had been preserved by loans from the Federal Reserve and the French central bank, with the Bank’s bullion reserves used as collateral. But Threadneedle Street decided in September that its reserves would run dry if New York and Paris withdrew support. Ernest Harvey, the Bank’s deputy governor at the time, wrote to Ramsay MacDonald, the prime minister, and Philip Snowden, the chancellor, on September 19, 1931, saying that reserves worth more than £100m were close to running out.Mr Harvey wrote: “I am directed to state that the credits for $125,000,000 and Fcs 3,100,000,000 arranged by the Bank of England in New York and Paris respectively, are exhausted, and that the credit for $200,000,000 arranged in New York by His Majesty’s Government, together with credits for a total of Fcs 5 milliards [5bn] negotiated in Paris, are practically exhausted also." “The heavy demands for exchange on New York and Paris still continue. In addition the Bank are being subjected to a drain of gold for Holland.“Under these circumstances, the Bank consider that, having regard to the above commitments and to contingencies that may arise, it would be impossible for them to meet the demands for gold with which they would be faced on withdrawal of support from the New York and Paris exchanges.“The Bank therefore feel it their duty to represent that, in their opinion, it is expedient in the national interest that they should be relieved of their obligation to sell gold under the provisions of [the Gold Standard Act 1925].”
He indicated that if he were to answer in the affirmative that ministers were working on a Plan B -- what to do when Greece runs out of money and cannot pay back its debt -- he could trigger panic.To explain his position, he drew a parallel with the secrecy that was necessary during the initial stage of planning for German reunification in 1989."If back then a minister in charge -- I was one of them -- would have said beforehand, we have a plan for reunification, then the whole world probably would have said: 'The Germans have gone completely crazy.'"
"As you know I have doubts about the provision of this emergency liquidity, because the banks are not doing all they can to improve their liquidity position, which I would expect from banks that avail of this assistance.""Instead, they are extending their loans -- so-called T-bills -- to the Greek state, which is each time a new credit decision. As these T-bills aren’t liquid, this means that in comparision with the alternatives, this is a deterioration of the liquidity situation which I find unacceptable."“The haircuts are designed according to the quality of the collateral -- which in this case is mostly government debt securities -- and that depends on the outlook for debt sustainability which is connected to a successful conclusion of the aid program.”“From my point of view it is clear: time is running out, the solution cannot come from the central banks, we have a clearly limited task, a clearly limited mandate, and must abide by our rules.”
Some things never change — there will be another crisis, and its impact will be felt by the financial market.The trigger to the next crisis will not be the same as the trigger to the last one – but there will be another crisis. Triggering events could be geopolitical (the 1973 Middle East crisis), a recession where the Fed rapidly increases interest rates (the 1980-1982 recession), a commodities price collapse (oil in the late 1980s), the commercial real estate crisis (in the early 1990s), the Asian crisis (in 1997), so-called “bubbles” (the 2000 Internet bubble and the 2008 mortgage/housing bubble), etc. While the past crises had different roots (you could spend a lot of time arguing the degree to which geopolitical, economic or purely financial factors caused each crisis), they generally had a strong effect across the financial markets
They’re baaaaack. Yes, “old faithful” is back at it again!Of course, they never really left silver, and have been rigging it non-stop in the futures market, but for awhile there, there were at least no admissions of newly-stacked silver being made in their Comex warehousing facilities.Yet, after a 16 month period of “dormancy” within their Comex warehouse vaults, these guys have returned with a vengeance.In fact, our old buddies at JP Morgan Chase, not only see value in silver here, but they’re currently standing for delivery in their own house account in such strong numbers, that it commands our attention. Let me show you what I mean.Here’s a breakdown of the Comex’s most recent silver deliveries to JP Morgan:April 7th: 1,110,000 ouncesApril 8th: 1,280,000 ouncesApril 9th: 893,037 ouncesApril 10th: 1,200,224 ouncesApril 14th: 1,073,000 ouncesApril 15th: 1,191,275 ouncesApril 16th: 1,183,777.295 ouncesThis is a huge bout of deliveries in such a short space of time. In fact, within the realm of Comex world, it’s such an exceptionally large amount, that it even creates quite a spike on the long-term chart of JP Morgan’s vault stockpile:All in all, JP Morgan has added over 8.3 million ounces of additional silver in just the past 2 weeks alone.
What is a surprise is how little notice the rollout of Chase’s new policy has received. As of March, Chase began restricting the use of cash in selected markets, including Greater Cleveland. The new policy restricts borrowers from using cash to make payments on credit cards, mortgages, equity lines, and auto loans. Chase even goes as far as to prohibit the storage of cash in its safe deposit boxes . In a letter to its customers dated April 1, 2015 pertaining to its “Updated Safe Deposit Box Lease Agreement,” one of the highlighted items reads: “You agree not to store any cash or coins other than those found to have a collectible value.” Whether or not this pertains to gold and silver coins with no numismatic value is not explained.
Carinthia provided debt guarantees for years to fuel Hypo's rapid expansion before the practice was stopped in 2007, but the last ones do not expire until around 2017.With an annual budget of 2.2 billion euros ($2.36 billion), Carinthian officials have said the province cannot honour nearly 11 billion euros of backing for Hypo debt that creditors facing a "haircut" could demand.Adding to the province's woes, ratings agency Moody's downgraded Carinthia last month to one notch above junk grade, making it more difficult to borrow in the open markets.
The spokeswoman said Carinthia would run out of money in June without help, confirming local media reports. No Austrian province has ever gone bankrupt and there is no legislation on how to handle such an event.
Puerto Rico's top finance officials said the government of the U.S. territory will likely shutdown in three months because of a looming liquidity crisis and warned of a devastating impact on the island's economy.In a letter to leading lawmakers, including Governor Alejandro Padilla, the officials said a financing deal that could potentially salvage the government's finances currently looked unlikely to succeed. It warned of laying off government employees and reducing public services"A government shutdown is very probable in the next three months due to the absence of liquidity to operate," the officials said. "The likelihood of completing a market transaction to finance the government's operations and keep the government open is currently remote."The letter, dated April 21, was also sent to the heads of Puerto Rico's Senate and House as well as the governor. It was signed by the government's fiscal team, including the head of the Government Development Bank and the Treasury Secretary.Puerto Rico, which has a total debt of more than $70 billion, is trying to raise $2.95 billion in financing, while pushing through unpopular tax reforms such as a higher value-added tax and increasing a levy on crude oil to help pay for it.
Even with tax-free yields now just shy of 10 per cent, the Mom-and-Pop savers who bought most of Puerto Rico’s now junk-rated debt, will no longer touch new issues. Instead, the government is reduced to negotiating ever-stricter terms for one-off deals with syndicates of hedge funds.The commonwealth’s financing arm, the Government Development Bank, is on track to run out of cash by the autumn unless it is able to sell a proposed $2.9bn bond that will be supported by a new tax on crude oil imports. The legislature is holding hearings on the tax, which the governor and investment establishment hope will be enacted by next month.
