People’s Bank of China Freaks Out, Vows to “Severely Punish” Capital Flight - See more at: http://thedailycoin.org/?p=39726#sthash.difunrvP.dpuf

Everything has started to go wrong in the Chinese economy despite its mind-bending growth rate of 7%. Exports plunged and imports too. Sales in the world’s largest auto market suddenly are shrinking just when overcapacity is ballooning. The property market is quaking. Electricity consumption, producer prices, and other indicators are deteriorating. Capital is fleeing. The hard landing is getting rougher by the day. But Tuesday morning, the People’s Bank of China pulled the ripcord.
In a big way.

It lowered the yuan’s daily reference rate by a record 1.9%. The yuan plunged instantly, and after a brief bounce, continued to plunge. Now, as I’m writing this, it is trading in Shanghai at 6.322 to the dollar, down 1.8% from before the announcement. A record one-day drop.
The PBOC had kept the yuan stable against the dollar. As the dollar has risen against other major currencies, the yuan followed in lockstep. Over the past week, the Yuan’s closing levels in Shanghai were limited to vacillating between 6.2096 and 6.2097 against the dollar. Over the past month, daily moves were limited to a maximum 0.01%. The PBOC controls its currency with an iron fist.
Hence the shock to the currency war system.

- See more at: http://thedailycoin.org/?p=39726#sthash.difunrvP.dpuf

8/18/2015

https://www.youtube.com/watch?v=sTvczO4Bo60

Published on Aug 25, 2015
Jeff Berwick is interviewed by Kerry Lutz for the Financial Survival Network Podcast, topics include: the recent market crash and the Shemitah cycles, comparisons with previous market collapses, seven year cycles, an amazing number of events occurring around the 15th of September, the United Nations, jade helm, the explosions in China and US ammo dump in Japan, market turmoil, front running the market crash, interest rate hike, we are entering the end of the monetary system as we know it with or without the Shemitah dates so getting prepared as soon as possible is highly recommended

The Financial Survival Network website: http://financialsurvivalnetwork.com/

Kerry Lutz on Twitter: https://twitter.com/KerryLutz?ref_src…

Kerry Lutz YouTube channel: https://www.youtube.com/channel/UCGkU…

Survive Shemitah website: http://surviveshemitah.com/

Shemitah Exposed video: https://www.youtube.com/watch?v=rkELg…

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August 27, 2015 Coast Insider Audio



Geopolitics & Current Events:

In the first half of Wednesday's show, analyst of geopolitics and foreign policy Craig B. Hulet discussed the global regime of economic interdependence and how it results in conflicts all over the globe. The global elite and monied interests have been grooming Jeb Bush for the presidency, and are backing him over Hillary Clinton, he suggested. Jeb Bush can raise $3 billion for his campaign, but Trump can't really raise that kind of money, Hulet continued. Hillary is running on her record as a senator, which is weak, he opined, and as Secretary of State, she had major problems, particularly with her efforts to destroy Libya, which ended up backfiring.

The lowering of oil prices is a US plan to rein in Russia, and get them to back off on Ukraine, Syria, and the Middle East, and to capitulate on their growing military alliance with China, India, and possibly South Africa, he remarked, adding that a portion of the global elite despises the free enterprise system. Hulet warned of the increased use of drones such as by the Air Force, and local law enforcement, as well as new drone bases by Africom. "There's now becoming an international forum to discuss whether artificial intelligence and robotics should be weaponized," he cautioned. Hulet also touched on his friendship with the late JFK investigator Jim Garrison, as well as the Pope's upcoming speech on September 24th at the UN, which he believes will reflect the plan of the New World Order.

“The unraveling of the state’s monopoly of force has begun, not over centuries but over decades. The market for force’s trajectory is uncertain; it could develop into a mediated market, which is safer, or a free market, which is dangerous. The market’s future depends on what is done now.”
~ Sean McFate

By Catherine Austin Fitts

The Peace of Westphilia in 1648 is credited with establishing principles of international law operating through a systems of sovereign states. One of the ramifications of that principle was that sovereign states would maintain a monopoly on force. Thus ended the Middle Ages.

In The Modern Mercenary: Private Armies and What They Mean for World Order, Sean McFate argues that:

“The reappearance of private armies is a harbinger of a wider trend in international relations: the emergence of neomedievalism….The erosion of the taboo against mercenarism heralds a shift in this world order, from the state-centric Westphilian system back to the status quote ante of the Middle Ages. The medieval system was not dominated by states but was polycentric in nature, with authority diluted and shared among state and non-state actors alike. States were just another actor on a crowded state, an no one had a monopoly of force to enforce their will. Instead, there was a free market of force, and actors – kings, popes, princes, city-states, rich families and so on – commonly employed mercenaries to settle disputes in contract warfare.”

McFate is not just another talking head. He is currently a senior fellow at the Atlantic Council, Associate Professor at the National Defense University and also teaches national security policy at Georgetown University’s School of Foreign Service. Before joining academia, he lived and worked in Africa for DynCorp International where he helped build an army for Liberia after serving as an officer and paratrooper in the US Army’s 82nd Airborne Division. Mr. McFate has been “boots on the ground” for both public and private armies. His personal experience has fueled his ambition to understand history and to make sense of what is happening and where we are going.

The United States’ sponsorship of private intelligence, security services and armies has blossomed with extraordinary expenditures for those services in the Middle East. This has created a significant private capacity to bring force to bear and to wage war. McFate argues that, as a result, (4) significant trends are now underway:

1. The private military industry is here to stay, led and populated by a highly international employee.
2. As the conflict markets in the Middle East dry up, the private military industry is going global in search of new opportunities.
3. The private military industry is also going domestic: as the US has outsourced force, local force capacity is seeded and trained and it is turning entrepreneurial.
4. The industry is bifurcated between actors who build (versus those who employ force directly) and mercenaries who engage in contract warfare

While the next round of military automation is still young, McFate points out that drones, robotics and cyber-hacking will place significant capacity into private hands. He underscores the need for global regulation of private military companies (PMCs).

McFate is absolutely correct – the growth of private armies will significantly impact global geopolitics and economics. And that impact has just begun. Richard Maybury recently wrote that US policy appears to be specifically designed to “maximize blowback.” Perhaps the greatest source of blowback will be the previous (12) years of outsourcing force in the Middle East and around the globe.

This is a well-written and well-researched book addressing a critical topic. I recommend it.

China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.

Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales, said another person. They didn’t reveal the size of the disposals.

The People’s Bank of China has been offloading dollars and buying yuan to support the exchange rate, a policy that’s contributed to a $315 billion drop in its foreign-exchange reserves over the last 12 months. The $3.65 trillion stockpile will fall by some $40 billion a month in the remainder of 2015 because of the intervention, according to the median estimate in a Bloomberg survey.
China selling Treasuries is “not a surprise, but possibly something which people haven’t fully priced in,” said Owen Callan, a Dublin-based fixed-income strategist at Cantor Fitzgerald LP. “It would change the outlook on Treasuries quite a bit if you started to price in a fairly large liquidation of their reserves over the next six months or so as they manage the yuan to whatever level they have in mind.”
Gross’s Tweet

The PBOC and the U.S. Embassy in Beijing didn’t immediately respond to requests for comment. Bill Gross, who manages the $1.47 billion Janus Global Unconstrained Bond Fund, tweeted Wednesday “China selling long Treasuries ????”.
Two-year Treasuries erased an earlier advance, with their yield little changed at 0.67 percent as of 11 a.m. in London. It fell as much as two basis points. The 10-year yield declined three basis points to 2.15 percent, near to its average for the past month.
Chinese sales of U.S. government debt may have kept yields from falling this month as a selloff in global stocks prompted investors to favor the safest assets.

“By selling Treasuries to defend the renminbi, they’re preventing Treasury yields from going lower despite the fact that we’ve seen a sharp drop in the stock market,” David Woo, head of global rates and currencies research at Bank of America Corp., said on Bloomberg Television on Wednesday. “China has a direct impact on global markets through U.S. rates.”
China Holdings

The latest available Treasury data and estimates by strategists suggest that China controls $1.48 trillion of U.S. government debt, according to data compiled by Bloomberg. That includes about $200 billion held through Belgium, which Nomura Holdings Inc. says is home to Chinese custodial accounts.

The PBOC has sold at least $106 billion of reserve assets in the last two weeks, including Treasuries, according to an estimate from Societe Generale SA. The figure was based on the bank’s calculation of how much liquidity will be added to China’s financial system through Tuesday’s reduction of interest rates and lenders’ reserve-requirement ratios. The assumption is that the central bank aims to replenish the funds it drained when it bought yuan to stabilize the currency.

The yuan rose 0.08 percent to 6.4053 per dollar on Thursday in Shanghai, trimming this month’s decline to 3.1 percent. Daily fluctuations have averaged less than 0.1 percent in the past two weeks as the PBOC intervened to bring stability following the Aug. 11 devaluation. The nation’s Treasury holdings will stop falling once the intervention stops and the currency is freely floating, said Steve Wang, chief China economist at Reorient Financial Markets Ltd. in Hong Kong.

“Strategically, it probably has been China’s intention to find the right time to lighten up its excessive accumulation of U.S. Treasuries,” he said.

-----



China is sliding into recession and the leadership will not act quickly enough to avoid a major slowdown by implementing large-scale fiscal policies to stimulate demand, Citigroup Inc.’s top economist Willem Buiter said.

The only thing to stop a Chinese recession, which the former external member of the Bank of England defines as 4 percent growth on “the mendacious official data” for a year, is a consumption-oriented fiscal stimulus program funded by the central government and monetized by the People’s Bank of China, Buiter said.

“Despite the economy crying out for it, the Chinese leadership is not ready for this,” Buiter, chief economist at Citigroup, said in a media call hosted Thursday by the Council on Foreign Relations in New York. “It’s an economy that’s sliding into recession.”
Premier Li Keqiang is seeking to defend a 7 percent economic growth goal at a time when concern over slowing demand in China is fueling volatility in global markets. The true rate of expansion “is probably something closer to 4.5 percent or less,” Buiter said.
Li has repeatedly pledged to avoid stimulus similar to the one following the global financial crisis in 2008 that led to a surge in debt for local governments and corporations.

Data Accuracy

Some economists and investors have long questioned the accuracy of China’s official growth data. When Li was party secretary of Liaoning province in 2007, he said that figures for gross domestic product were “man-made” and therefore unreliable, according to a diplomatic cable published by WikiLeaks in 2010. The median estimate of 11 economists surveyed by Bloomberg earlier this month put China’s first-half GDP growth rate at 6.3 percent, compared with the official figure of 7 percent.

“They will respond but they will respond too late to avoid a recession, which is likely to drag the global economy with it down to a global growth rate below 2 percent -- which is in my definition a global recession,” said Buiter.

The global economy will expand by 3 percent this year, while China’s is forecast to grow 6.9 percent, the slowest pace in a quarter century, according to economists surveyed by Bloomberg.

The boom and bust in the Shanghai Composite Index, which more than doubled in about a year before a selloff erased $5 trillion in market value in two months, is raising questions about “the competence of the Chinese authorities as managers of the macro economy,” Buiter said.

The authorities first cheered the stock market rally “because quite a few of the local pundits believed that this was a great of deleveraging way without paying for the corporate sector to have a stock market bubble,” he said. “And then of course the rather panic and incompetent reaction ensued in response,” Buiter added in reference to the unprecedented government intervention to support share prices.

Well this is a bit depressing.

Good read on market activity today.




Last Friday, when the market was down only 2%, we presented readers with a note which promptly became the most read piece across Wall Street trading desks, which was written by JPM's head quant Marko Kolanovic, who correctly calculated the option gamma hedging imbalance into the close, and just as correctly predicted the closing dump on Friday which according to many catalyzed Monday's "limit down" open.

Recall:

Given that the market is already down ~2%, we expect the market selloff to accelerate after 3:30PM into the close with peak hedging pressure ~3:45PM. The magnitude of the negative price impact could be ~30-60bps in the absence of any other fundamental buying or selling pressure into the close.

We bring it up because Kolanovic is out with another note, one which may be even more unpleasant for bulls who, looking at nothing but price action, were convinced that after the biggest two day market jump in history, the worst is behind us.

In the just released note, the head JPM quant warns that a large pool of assets controlled by price-insensitive managers including derivatives hedgers, Trend Following strategies (CTAs), Risk Parity portfolios and Volatility Managed strategies, which is programmatically trading equities regardless of underlying fundamentals, is about to start selling equities, "and will negatively affect market in coming days and weeks." For good measure, he casually tosses the word "crash" in the note as well.

By way of reference, JPM notes that a good example of how price-insensitive sellers can cause market a disruption/crash is the price action on the US Monday open. It says that technical selling related to various hedging programs, in an environment of low (pre-market) liquidity indeed caused a ‘flash crash’ on Monday’s open. S&P 500 futures hit a 5% limit down preopen, and then a 7% limit low at 9:31 and 9:33. The inability of hedgers to short futures spilled over into large cap stocks that were still trading and could be used as a proxy hedge. Had it not been for the futures limit down event, the selloff would likely have been worse as indicated by the price of the index implied by individual stocks. The figure below shows the S&P 500 futures, SPY ETF and S&P 500 replicated from
the largest stocks that were trading near the market open.

Kolanovic correctly takes credit for his prediction and notes that "in our Friday note we forecasted end-of-the-day selling pressure due to option gamma hedging. We saw similar price impacts on Thursday, Friday, and Monday (pushing the market lower into the close) and an upside squeeze on Wednesday. Our estimate is that up to 20% of market volume was driven by hedging of various derivative exposures such as options, dynamic delta hedging programs, levered ETF stop loss orders, and other related products and strategies (note that levered ETFs have gamma exposure of only ~$1bn per 1%, i.e., much smaller than that of S&P 500 options). We estimate the cumulative selling pressure from options hedging during the market selloff to be ~$100bn. Options gamma is expected to remain substantially (in excess of $20bn) tilted towards puts while the S&P 500 is between 1850 and 2000.

The figure below shows Put-Call Gamma assuming current open interest and different spot prices. JPM expects high volatility to persist (should we stay in this price range) and cause quick intraday moves up or down, particularly towards the end of the trading day



http://www.zerohedge.com/news/2015-08-27/jpm-head-quant-warns-second-market-crash-may-be-imminent-violent-selling-could-retur

Earlier this month, the Chinese government decided to depreciate its currency on three consecutive occasions. On August 13, the price of the US dollar was trading at 6.413 — an increase of 3.3 percent against July.


The key factor behind the central bank’s lowering of the yuan is a sharp decline in the growth momentum of exports with the yearly rate of growth falling to minus 8.3 percent in July from 2.8 percent in June.


It is held that by means of currency depreciation that it is possible to strengthen the export of goods and services, thereby strengthening the gross domestic product (GDP), which currently displays a visible weakening. The yearly rate of growth of real GDP stood at 7 percent in Q2 against 7.5 percent in Q2 last year and 8.6 percent in Q1 2012.

Read more at link: http://www.zerohedge.com/news/2015-08-30/why-devaluing-yuan-wont-help-chinas-economy