Wednesday, January 21, 2015

Zerohedge "De-Dollarization" Deepens: Russia Buys Most Gold In Six Months, Continues Selling US Treasuries

Tyler Durden's picture


 
The rumors of Russia selling its gold reserves, it is now clear, were greatly exaggerated as not only did Putin not sell, Russian gold reserves rose by their largest amount in six months in December to just over $46 billion (near the highest since April 2013). It appears all the "Russia is selling" chatter did was lower prices enabling them to gather non-fiat physical assets at a lower cost. On the other hand, there is another trend that continues for the Russians - that of reducing their exposure to US Treasury debt. For the 20th month in a row, Russia's holdings of US Treasury debt fell year-over-year - selling into the strength.  

Buying low...
Russia gold reserves jump the most in six months in December, near the highest since April 2013...



and selling high...


Russian holdings of US Treasuries are now at the 2nd lowest since 2008...


It would appear the greatest rotations that no one is talking about are the fiat to non-fiat and the paper to physical shifts occurring in China and Russia.
Charts: Bloomberg

Some have commented on the "unprecedented" capital flight from Russia, but as Dr. Constantin Gurdgiev explains - Western 'analysts' appear to have forgotten a few things...
Central Bank of Russia released full-year 2014 capital outflows figures, prompting cheerful chatter from the US officials and academics gleefully loading the demise of the Russian economy
 
The figures are ugly: official net outflows of capital stood at USD151.5 billion - roughly 2.5 times the rate of outflows in 2013 - USD61 billion. Q1 outflows were USD48.2 billion, Q2 outflows declined to USD22.4 billion, Q3 2014 outflows netted USD 7.7 billion and Q4 2014 outflows rose to USD72.9 billion. Thus, Q4 2014 outflows - on the face of it - were larger than full-year 2013 outflows.
 
There are, however, few caveats to these figures that Western analysts of the Russian economy tend to ignore. These are:
  • USD 19.8 billion of outflows in Q4 2014 were down to new liquidity supply measures by the CB of Russia which extended new currency credit lines to Russian banks. In other words, these are loans. One can assume the banks will default on these, or one can assume that they will repay these loans. In the former case, outflows will not be reversible, in the latter case they will be.
  • In Q1-Q3 2014 net outflows of capital that were accounted for by the banks repayment of foreign funding lines (remember the sanctions on banks came in Q2-Q3 2014) amounted to USD16.1 billion. You can call this outflow of funds or you can call it paying down debt. The former sounds ominous, the latter sounds less so - repaying debts improves balance sheets. But, hey, it would't be so apocalyptic, thus. We do not have aggregated data on this for Q4 2014 yet, but on monthly basis, same outflows for the banking sector amounted to at least USD11.8 billion. So that's USD 27.9 billion in forced banks deleveraging in 2014. Again, may be that is bad, or may be it is good. Or may be it is simply more nuanced than screaming headline numbers suggest.
  • Deleveraging - debt repayments - in non-banking sector was even bigger. In Q4 2014 alone planned debt redemptions amounted to USD 34.8 billion. Beyond that, we have no idea is there were forced (or unplanned) redemptions.
So in Q3-Q4 2014 alone, banks redemptions were scheduled to run at USD45.321 billion and corporate sector redemptions were scheduled at USD72.684 billion. In simple terms, then, USD 118 billion or 78 percent of the catastrophic capital flight out of Russia in 2014 was down to debt redemptions in banking and corporate sectors. Not 'investors fleeing' or depositors 'taking a run', but partially forced debt repayments. 
 
Let's put this into a slightly different perspective. Whatever your view of the European and US policies during the Global Financial Crisis and the subsequent Great Recession might be, one corner stone of all such policies was banks' deleveraging - aka 'pay down of debt'. Russia did not adopt such a policy on its own, but was forced to do so by the sanctions that shut off Russian banks and companies (including those not directly listed in the sanctions) from the Western credit markets. But if you think the above process is a catastrophe for the Russian economy induced by Kremlin, you really should be asking yourself a question or two about the US and European deleveraging policies at home.
 
And after you do, give another thought to the remaining USD 33 billion of outflows. These include dollarisation of Russian households' accounts (conversion of rubles into dollars and other currencies), the forex effects of holding currencies other than US dollars, the valuations changes on gold reserves etc.
 
As some might say, look at Greece… Yes, things are ugly in Russia. Yes, deleveraging is forced, and painful. Yes, capital outflows are massive. But, a bit of silver lining there: most of the capital flight that Western analysts decry goes to improve Russian balance-sheets and reduce Russian external debt. That can't be too bad, right? Because if it was so bad, then... Greece, Cyprus, Spain, Italy, Ireland, Portugal, France, and so on... spring to mind with their 'deleveraging' drives...
 
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Zerohedge:WeLCoMe To DaVoS 2015 (WoRLD PoNZiNoMiC SuMMiT)




Zerohedge is getting very strident in its polictical cartoons of late... this one is but one example. -AK

http://www.zerohedge.com/news/2015-01-21/welcome-davos-2015-world-ponzinomic-summit


WeLCoMe To DaVoS 2015 (WoRLD PoNZiNoMiC SuMMiT)

williambanzai7's picture









The Kleptos who meet to conspire

Have told us they're willing to hire

Our wounds they will suture

With jobs of the future

Like their growing demand for barbed wire

The Limerick King









Zerohedge: All Liquidity Disappears From Euro FX Market Day Ahead Of ECB Announcement



http://www.zerohedge.com/news/2015-01-21/all-liquidity-disappears-euro-fx-market-day-ahead-ecb-announcement

All Liquidity Disappears From Euro FX Market Day Ahead Of ECB Announcement

Tyler Durden's picture



In what is likely an effort to comprehend whether the market is satiated with a mere EUR 50 billion per month in printed money, this morning's leaked ECB QE announcement (due tomorrow) sparked total chaos in FX markets and, as Nanex notes, sending market liquidity to near record lows. This is a problem. With the 'real' volatility event not arriving until tomorrow, everyone has pulled out of the market already... setting the scene for a gappy Swissnado replay tomorrow morning.



Source: @NanexLLC

China and Switzerland to launch yuan trading in Zurich

Reuters / Arnd Wiegmann 
http://rt.com/business/224759-china-switzerland-offshore-deal/

​China and Switzerland to launch yuan trading in Zurich 
Published time: January 21, 2015 14:16


The central banks of China and Switzerland are planning to establish a yuan trading center in Zurich. The deal is expected to increase the number of European transactions in yuan.

The agreement will be signed during the visit of Chinese Prime Minister Li Keqiang to the World Economic Forum in Davos, Xinhua news agency reports.

“A memorandum of understanding will be signed between the central banks of the two countries during Chinese Premier Li Keqiang’s visit to Switzerland. It is an important step in the internationalization of the yuan, especially in Europe,” said a government official.

According to the agreement, Switzerland will receive a quota of about $8 billion (50 billion Yuan).

This step comes under the framework of the QFII (Qualified Foreign Institutional Investor) program that allows foreign investment in Chinese securities using foreign currencies. Similar centers already exist in Hong Kong and London.

In July 2014, the central banks of China and Switzerland signed an agreement on a $24 billion (150 billion yuan) currency swap to boost bilateral trade and economic relations.

China, the world’s second largest economy, has been pushing the yuan as a rival to the dollar in the global financial system since 2010. In November 2014, the Bank of China started to operate European yuan clearing in Frankfurt.

The Chinese yuan is traded directly against the dollar, euro, the Japanese yen and Russian ruble among other currencies. Settlement worldwide in yuan reached $485 billion (3.01 trillion yuan) in 2013 compared to $330 billion (2.06 trillion yuan) in 2012.
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