Infinite Unknown

- Why Cyprus 2013 is worse than the KreditAnstalt (1931) and Argentina 2001 crises (A View from the Trenches, March 24, 2013):

The Cyprus 2013, like any other event, can be thought in political and economic terms.

Political analysis: Two dimensions

Politically, I can see two dimensions. The first dimension belongs to the geopolitical history of the region, with the addition of the recently discovered natural gas reserves. The historical relevance goes as far back as 1853, the year the Crimean War began. The Crimean War took place in the adjacent Black Sea, but the political interest was the same: To avoid the expansion of Russia into the Mediterranean. The relevance of this episode was the break-up of the balance of power established after the Napoleonic Wars, with the Congress of Vienna, in 1815. From then on, a whole new series of unexpected events would lead to a weaker France, a stronger Prussia, new alliances and a final resolution sixty years later: World War I.  It is within this same framework that I see Cyprus 2013 as a very relevant political event: Should Russia eventually obtain a bailout of Cyprus (as I write, this does not seem likely) against a pledge on the natural gas reserves or a naval base, a new balance of power will have been drafted in the region, with Israel as the biggest loser.

The second political dimension refers to a point I made exactly a year ago, precisely inspired in the KreditAnstalt event of 1931. In an article titled: “On gold, stocks, financial repression and the KreditAnstalt of 1931” I wrote: Continue reading »

Tags: Argentina, Austria, Banking, Collapse, Cyprus, ECB, Economy, EU, Europe, Germany, Global News, Government, Greece, IMF

- Over half of Austrians think the Nazis would be elected if the party was readmitted to politics (Independent, March 11, 2013):

As Austria prepares to mark the anniversary of its annexation by Nazi Germany, an opinion poll has shown that more than half of the population think it highly likely that the Nazis would be elected if they were readmitted as a party.

A further 42 per cent agreed with the view that life “wasn’t all bad under the Nazis”, and 39 per cent said they thought a recurrence of anti-Semitic persecution was likely in Austria.

The disturbing findings were contained in a poll conducted for the Vienna newspaper, “Der Standard” in advance of Tuesday’s 75th anniversary of Austria’s Nazi annexation – a date which still counts as one of the most shameful and controversial in the country’s history.

Tens of thousands of Austrians gave Adolf Hitler and his troops a rapturous welcome when they invaded the country unopposed in March 1938. Austria fought World War II as part of Nazi Germany and many Austrians helped run Nazi death camps. Yet for decades, post-war Austria frequently perpetuated the myth that it was a victim of Nazi oppression. Der Standard said its poll was designed to show how today’s Austrians judged Nazi rule.

Continue reading »

Tags: Adolf Hitler, Austria, EU, Fascism, Government, Nazi Germany, Nazis, Politics

- “China Accounts For Nearly Half Of World’s New Money Supply” (ZeroHedge, Feb 8, 2013):

When it comes to the creation of money in China, and specifically the asset side of the ledger, or loans, there is much more confusion than consensus, primarily because nobody knows who it is that is creating the money: private or public entities, SOEs, the PBOC, regional banks, shadow banks, or your next door neighbor.Another thing that is largely misreported: what the actual assets pledged as collateral to new loans are. Because while it is well-known that corporate debt in China is now greater as a percentage of GDP than in any other country, the comprehensive picture is still confusing (albeit GMO did a fantastic summary recently of what is known) as reporting standards are still non-existent, and the government flat out lies about its balance sheet.

Yet one very simple shortcut to get a sense of what is truly happening in monetary China is to peek at the liability side of the consolidated balance sheet, and one line in particular, namely deposits. Because unlike in the US, where the vibrant equity Ponzi scheme has rarely been stronger, in China it is still all about the cash and as a result the bulk of the newly created money once again return back to the banking sector in the form of a deposit. Ironically, that is what banking should be about (instead of the entire industry being a glorified hedge fund) although in China even this practice has gone on way too far, and like in Europe, has long passed the point where there is real collateral value backing up the new money created (which explains the emergence of various letters of credit collateralized by copper still not dug out of the ground which reappear every time Chinese inflation spikes above 5%).

So how do deposits look when comparing the US and China? Well, after having less than half the total US deposits back in 2005, China has pumped enough cash into the economy using various public and private conduits to make even Ben Bernanke blush: between January 2005 and January 2013, Chinese bank deposits have soared by a whopping $11 trillion, rising from $4 trillion to $15 trillion! We have no idea what the real Chinese GDP number is but this expansion alone is anywhere between 200 and 300% of the real GDP as it stands now. Continue reading »

Tags: Austria, Banking, Ben Bernanke, Central Bank, China, ECB, Economy, EU, Europe, Fed, Federal Reserve, France, GDP, Germany, Global News, Greece, Ireland, money supply, Politics, Portugal, Spain, World Bank, Yuan

- She survived Hitler and wants to warn America (Pakalert, Dec 24, 2012)

Tags: Adolf Hitler, Austria, Government, Nazi Germany, Nazis, Politics, Society

- Austrian Civil Servant Blows $440 Million In Taxpayer Funds On Risky Derivatives (ZeroHedge, Dec 11, 2012):

It is oddly ironic that on the day the US bailout of AIG is complete, and with a “profit” at that, the spin goes, even if the spin ignores that the “profit” was only purchased at the expense of trillions in sovereign debt issuance and near immediate monetization by the Fed, which has onboarded a mindbogling amount of duration risk (from under $500MM in DV01 in 2008 to over $2.5 billion currently, but nobody will discuss this issue as few if any grasp just how much risk exposure the Fed has shifted away from entities such as AIG), that we learn just how far the abuse of virtually free taxpayer funds goes. Only instead of some US government apparatchiks blowing through billions in some concrete government building in downtown D.C., we go to the birthplace of Mozart, in Salzburg, Austria to learn that a “civil servant gambled hundreds of millions of euros of taxpayers’ money on high-risk derivatives.”

While this is merely one incident in a faraway land, what it does show is that in an environment in which cheap money is handed out loosely by the government (of which the US government is most guilty) the opportunity cost for prudent, fiducariy responsibility is very low, and it is only a matter of time before the new normal moral hazard rears its ugly head, as one after another more such incidents will come to light. And just like housing could never go down in the credit bubble years, so the Fed is perceived as infallible in the current latest, greatest and luckily final, peak bubble. Just like housing, the Fed is infallible until it fails. Continue reading »

Tags: Austria, Economy, Fed, Federal Reserve, Global News, Government, Politics, Salzburg

- Austrian Parliament Hears 80% Of Austrian Gold Bullion Reserves In London (ZeroHedge, Nov 22, 2012):

…

The Austrian central bank keeps most of its 280 metric tons of gold reserves in the United Kingdom, Vice Governor Wolfgang Duchatczek was quoted as saying in the finance committee of the country’s parliament today, according to Bloomberg.

Answering lawmakers’ questions, Duchatczek said 80%, or 224.4 metric tons of the metal was stored in the U.K., 17% or 48.7 metric tons in Austria and 3% in Switzerland, according to a summary of a closed-door committee meeting provided by the parliament.

The reserve has been unchanged since 2007, Duchatczek was quoted as saying. The central bank has earned 300 million euros ($385 million) over the last ten years by lending the gold, he said.

…

Tags: Austria, Global News, Gold, Government, London, Politics

- Tales Of The Unexpected: Who Really Benefited From The Euro (Hint: NOT Germany) (ZeroHedge, Aug 18, 2012):

With austerity supposedly destroying standards of living (that no real austerity has actually been implemented is a different matter entirely) across Europe’s insolvent periphery, the only recourse said broke countries (here’s looking at you Mario Monti and Mariano Rajoy) have is to desperately attempt to shame those countries who have money such as Germany, Austria, Finland and the Netherlands, aka Europe’s AAA club, into shoveling more and more and more cash into the bottomless pit that are the PIIGS. After all, precisely this was the basis for the “hostage and extortion” strategy that Monti employed at the June 29 summit, and which has resulted in a surge in European stocks on hopes Germany will indeed bail everyone out. The reason for this is that, at least according to conventional wisdom, it was these countries that benefited the most from a decade of EUR-facilitated mercantilism, and exported inflation to their spendthrfit (and ‘debt-thrift’) southern neighbors. So it is only “fair” that these countries now give back a little (or a whole lot) back (just as it is only “fair” that Germany give a helping hand in Obama’s reelection chances, which as everyone knows would be negligible if the global capital markets were to tumble just before November if reality in Europe were to come back with a vengeance). Well, as virtually always happens, conventional wisdom is wrong, and as the following chart from UBS demonstrates, when one analyzes the only relevant metric that compares changes in standards of living across various income deciles- namely changes in real disposable household income – it is precisely the PIIGS that benefited, while countries such as Germany and Austria were left in the dust.

From UBS:

If we look across the larger and longer established Euro membership we can see these two patterns being replicated according to country type. Each country shows the cumulative real disposable household income growth for each of its income deciles. The lowest income decile is to the left of each country’s selection, and the highest to the right.

Austria looks to be alarmingly weak – what this actually represents is very little change in nominal disposable income growth, coupled with inflation. Germany, Ireland, most of Italy and the French middle class all experience a decline in their standards of living. In most of these countries, the highest income groups do relatively well. Continue reading »

Tags: Austria, Belgium, Economy, EU, Euro, Europe, Finland, France, Germany, Global News, Government, Greece, Holland, Ireland, Italy, Politics

YouTube Added: 29.07.2012

Description:

The rest of the story: Continue reading »

Tags: Austria, Banking, Barack Obama, Fed, Federal Reserve, France, Global News, Government, India, Ireland, Obama administration, Politics, Russia, Timothy Geithner, U.K., U.S.

- Austria Joins Germany In Opposing Euro Bonds (ZeroHedge, May 22, 2012):

While the euro bond song and dance is all too familiar, being a carbon copy replay of last year, we feel obliged to remind who the key actors are, but more importantly who the key decision makers are. In short: while last year, at least in the first half, it was everyone against Merkozy, demanding that the two AAA rated countries backstop Europe at their own expense, following the French downgrade, France no longer cared if there are Eurobonds and joined the peripheral push to convince Merkel to shoulder the cost of preserving the Eurozone on its own. Germany politely declined. Fast forward to this year, when we get the same, only Hollande is now more vocal than ever knowing full well that he alone will be unable to deliver the “growth”, read incremental leverage, needed to back up his campaign promises. This is, or rather was, the whole point of today’s and tomorrow’s latest European summit which, just like this weekend’s useless G-8 photosession for the world’s leaders to express their support for either Chelsea or Arsenal, will achieve absolutely nothing. Importantly, we now can add at least one more country to the list of those opposed to a AAA-backstopped rescue of the rest of the Eurozone.

From Bloomberg:

Austria’s Finance Minister Maria Fekter said she opposes joint euro-area bonds as they would cost the Alpine republic more interest. Continue reading »

Tags: Austria, Bonds, Debt, Economy, EU, Euro Bonds, Europe, Germany, Global News, Government, Politics

- Moody’s warns may cut AAA-rating for UK and France (Reuters, Feb. 14, 2012):

Rating agency Moody’s warned it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe’s debt crisis.

- Moody’s cuts ratings on Italy, Portugal and Spain (Washington Post, Feb. 14, 2012):

Tags: Austria, Bonds, Debt, Economy, EU, Europe, France, Global News, Government, Italy, Malta, Moody's, Politics, Portugal, Rating, Slovakia, Slovenia, Spain, U.K.