June 19, 2018

Comcast, AT&T Set To Become World's Most Indebted Companies With Over $350BN In Debt

At a time when the IMF estimates that more than 20% of the world's companies would be unable to cover their interest payments if interest rates moved sharply higher, Comcast and AT&T are poised to become the most indebted companies in the world following media megadeals that leave the two companies with little room to maneuver if profits fail to materialize, according to the Wall Street Journal.

As WSJ points out, assuming both are finalized, the deals would leave the two companies with a combined $350 billion in bonds and loans, more than one-third of a trillion dollars in debt. The number is making some bond fund managers nervous, and some are saying they won't include Comcast or AT&T debt in their portfolios - unless they bear a suitably high yield.

"It’s a very big number," said Mike Collins, a bond fund manager at PGIM Fixed Income, which manages $329 billion of corporate debt investments. "It has fixed-income investors a little nervous and rightfully so."

But rather than looking at these deals as isolated examples, WSJ reminds us that companies only arrived at this level of corporate indebtedness following a decadelong surge in corporate borrowing, as companies - including these two telecoms giants - eagerly bought back their shares to appease investors, and financed these purchases with debt. Global corporate debt, excluding financial institutions, now stands at $11 trillion. Meanwhile, the median leverage for companies with an investment grade rating has increased by 30% since the financial crisis.

Read the entire article

June 18, 2018

Deutsche: "This Is The Most Dangerous Development The Fed Wants To Avoid"

In the first week of February, in the trading session just before the February 5 VIX termination, the market tumbled as a result of a January average hourly earnings number that surged (even though as we explained at the time, the market had wildly misinterpreted the print), prompting speculation that the Fed was dangerously behind the curve and would need to accelerate its tightening, potentially hiking rates more than just 4 times in 2018, leading to an accelerating liquidation of risk assets which eventually culminated in the record VIX spike.

Since then, inflation fears moderated following several downward revisions (as expected) and more tame hourly earnings prints, with market concerns instead shifting to trader wars, the return of populism to Europe, the tech bubble, and the sustainability of record margins and net income.

But according to a recent analysis by Deutsche Bank's Aleksandar Kocic, traders are ignoring the risk of an imminent, "phase shift" spike in wages at their own risk. Specifically, Kocic looks at the current locus of the Philips curve - which many economists have left for dead due to its seeming failure to explain how the plunge in unemployment to record low levels has failed to boost wages - and notes that as the economy approaches the full employment, "wages tend to become more responsive." This, to the Deutsche Bank analyst, "is the inflection point that the Fed is monitoring."

Looking at the Phillips curve over the past 4 economic cycles, Kocic compares it to the Cheshire cat's smile from Alice in Wonderland, which is present even when the actual cat body is no longer there: "In each cycle, it falls apart, but after every annihilation, it re-composes itself and continues to play an important role."

Specifically, what Kocic highlights, is the sudden phase transitions between the end of one cycle and the start of another, in which one observes a "near vertical" spike in inflation to the smallest favorable change in underlying conditions. In the DB chart below, each cycle has a different color which implicitly marks their beginning and end.

Read the entire article

June 15, 2018

The Fed Is "Living Dangerously" - The Great Financial Crisis "Will Be Eclipsed"

Since Hayek’s time, monetary policy, particularly in America, has evolved away from targeting production and discouraging savings by suppressing interest rates, towards encouraging consumption through expanding consumer finance. American consumers are living beyond their means and have commonly depleted all their liquid savings. But given the variations in the cost of consumer finance (between 0% car loans and 20% credit card and overdraft rates), consumers are generally insensitive to changes in interest rates.

Therefore, despite the rise of consumer finance, we can still regard Hayek’s triangle as illustrating the driving force behind the credit cycle, and the unsustainable excesses of unprofitable debt created by suppressing interest rates as the reason monetary policy always leads to an economic crisis. The chart below shows we could be living dangerously close to another tipping point, whereby the rises in the Fed Funds Rate (FFR) might be about to trigger a new credit and economic crisis.

Previous peaks in the FFR coincided with the onset of economic downturns, because they exposed unsustainable business models. On the basis of simple extrapolation, the area between the two dotted lines, which roughly join these peaks, is where the current FFR cycle can be expected to peak. It is currently standing at about 2% after yesterday’s increase, and the Fed expects the FFR to average 3.1% in 2019. The chart tells us the Fed is already living dangerously with yesterday’s hike, and further rises will all but guarantee a credit crisis.

The reason successive interest rate peaks have been on a declining trend is bound up in the rising level of outstanding debt and loans, shown by the red line on the chart. Besides a temporary slowdown during the last credit crisis, debt has been increasing over every cycle. Instead of sequential credit crises eliminating malinvestments, it is clear the Fed has prevented debt liquidation for at least the last forty years. The accumulation of debt since the 1980s is behind the reason for the decline in interest rate peaks over time.

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June 14, 2018

ECB Preview: The Beginning Of The End Of QE?

With the surprisingly hawkish Fed out of the way, there's only the ECB left to round out this week's relentless barrage of news and events (the BOJ will be a big snooze). So, courtesy of RanSquawk, here is what to expect from Mario Draghi when he takes the microphone in Latvia (an odd place, considering the country's own central banker Ilmars Rimsevics has been barred over corruption charges) tomorrow at 8:30am when he may unveil the end of Europe's QE.

  • Unanimous expectations for the ECB to leave its three key rates unchanged
  • Will the ECB unveil its blueprint for winding down the PSPP or will they again ‘kick the can down the road’ to July?
  • Questions likely to be raised on the Bank’s view surrounding the latest developments in Italian politics
  • Macro projections likely to see oil prices curtail 2018 growth expectations whilst lifting inflation prospects

PREVIOUS MEETING: The Bank left their opening statement unchanged in what was a meeting ultimately void of fireworks with Draghi intent on fending off most questions from journalists by stating that the Bank did not discuss FX volatility, their June roadmap, monetary policy ‘per se’ or rising yields. On the economic front, Draghi stated that inflation remain subdued and is yet to show signs of an upward trend, whilst incoming data since the March meeting shows a moderation of growth.

ECB MINUTES: Markets were relatively unreactive to the latest ECB minutes which made little mention of discussions on the future path of monetary policy and instead focused on current economic performance. The account highlighted the views that the more pronounced weakening of demand cannot be ruled out, suggestions that the ECB was close to a sustained adjustment of inflation but most disagreed and that uncertainty over the outlook had increased.

Read the entire article

June 13, 2018

"No One's Ready For The ECB" - The Eurozone's Coming Debt Crisis

The European Central bank has signaled the end of its asset purchase program and a possible rate hike before 2019. After more than 2 trillion euro of purchases and zero interest rate policy, it is overdue.

The massive quantitative easing program has generated very significant imbalances and the risks outweigh the questionable benefits.

The balance sheet of the ECB is now more than 40% of the Eurozone GDP.

The governments of the Eurozone, however, have not prepared themselves at all for the end of stimuli.

Rather the contrary.

The Eurozone states often claim that deficits have been reduced and risks contained. However, closer scrutiny shows that the bulk of deficit reductions came from lower cost of debt. Eurozone government spending has barely fallen, despite lower unemployment and rising tax revenues. Structural deficits remain stubborn, and in some cases, unchanged from 2013 levels.

Read the entire article

June 12, 2018

War On Cryptocurrencies: Wells Fargo, J.P. Morgan Chase, Bank of America, Citigroup And Capital One Have Banned Their Customers From Buying Bitcoin With Credit Cards

A war on cryptocurrencies such as Bitcoin, Ethereum, Ripple and Litecoin has begun, and it threatens to destroy the entire cryptocurrency industry.  If you think that I am exaggerating, just keep reading.  Government agencies are cracking down hard, Bitcoin traders that don’t file the proper paperwork are being sent to prison, Facebook and other online ad platforms have banned all cryptocurrency advertising, and now major credit card companies are banning their customers from using their credit cards to buy cryptos.  What is an industry supposed to do if it can’t advertise and it can’t take credit cards?  Such moves would kill virtually any consumer-oriented industry, and right now the cryptocurrency industry is absolutely reeling.  If this war on cryptocurrencies continues to intensify, I honestly don’t know how the industry is going to survive.

On Monday, another shot was fired in the war.  Wells Fargo formally announced that their customers would no longer be permitted to purchase Bitcoin and other cryptocurrencies with Wells Fargo credit cards

Wells Fargo customers can no longer buy cryptocurrencies such as bitcoin on their credit cards, the company announced Monday. But they can still buy firearms.

The San Francisco-based bank joined some of its Wall Street peers in banning the purchase of cryptocurrencies on credit cards and said its decision is “in line with the overall industry.”

Read the entire article

June 11, 2018

Morgan Stanley Is Wrong: Goldman Warns China's Credit Impulse Collapse Will "Drag On Growth" This Year

Just over a month ago - in what seemed to be an effort to keep the dream of a global synchronous recovery narrative alive - Morgan Stanley attempted to show that the link between China's (declining) credit impulse and the global economy (which we are constantly told is ebullient) has now been severed and all is well in the world.

Their Chief Asia Economist Chetan Ahya began by confirming that "if you had been able to reliably pick the key global macro variable over 2012-16, China’s credit impulse would have been your choice" and explains why (this should be obvious to regular readers): 

The incredibly tight link between the credit impulse and China’s growth cycle, emerging markets (EMs) exports, global growth and commodity prices meant that it would have accurately predicted the direction of almost all other global macro variables that mattered, with about six months’ lead time.

He further explains the "simple" - in retrospect of course - reason behind this observation:

China’s credit impulse – or its leverage cycle – was the only game in town back then. With global aggregate demand weak as developed markets (DMs) were deleveraging and EMs were adjusting, the change in China’s credit impulse was the most significant driver of the global economy

However, in a striking claim which breaks with precedent and which, if correct suggests a historic change in the relationship between China's credit creation and its impact on global markets and economies, the Morgan Stanley economist then writes that the link between China's credit impulse and the global economy "has now been broken" and justifies his answer as follows: 

Read the entire article

June 8, 2018

Argentina Bailed Out With Biggest Ever Loan In IMF History

Just a few weeks after Argentina became ground zero for the coming Emerging Market crisis, when its currency suddenly collapsed at the end of April amid soaring inflation, exploding capital outflows and a central bank that was far behind the curve (as in "13% of rate hikes in a week" behind)...

... the IMF has officially bailed out the country - again - this time with a $50 billion, 36-month stand-by loan, and coming in about $10 billion more than rumored earlier in the week, it was the largest ever bailout loan in IMF history, meant to help restore investor confidence in a nation that, between its soaring external debt and current account deficit, prompted JPMorgan to suggest that along with Turkey, Argentina is in effect, doomed.

As the JPM chart below shows, the country’s total budget deficit, which includes interest payments on debt, was 6.5% of GDP last year, much of reflecting a debt binge of about $100 billion over the last two and a half years. The primary fiscal deficit in 2017 was 3.9%.

The loan will have a minimum interest rate of 1.96% rising as high as 4.96%.

“We are convinced that we’re on the right path, that we’ve avoided a crisis,” Finance Minister Nicolás Dujovne said at a press conference in Buenos Aires. “This is aimed at building a normal economy.”

Read the entire article

June 7, 2018

The Surprising Reason Why There Are Now More Job Openings Than Unemployed Workers

As we reported yesterday, for the first time in history, the number of job openings in the US (6.7MM) has surpassed the official number of unemployed workers (6.1MM).

And yet something about that number does not make sense.

When we reported on the jobs number back on June 1, we observed that the number of people not in the labor force has risen to nearly 96 million, and while much of this is due to demographics, and the America's "opioid" epidemic, a lot can be assigned to an increasingly inefficient labor market that lacks dynamism. Subsequent deep dives into the jobs number show us that the health of the job market may not be on a par with where it was back in 2006 , and that the job market "health" may be judging a book by its cover.

One such indicator to note is the amount of churn that occurs between jobs: churn is supposed to give an indication of how active participants in the workforce are in looking for better opportunities than the ones they currently have. In a market where there was recently more job openings than there were unemployed people to fill them, as was reported by the Wall Street Journal, one would expect churn to be at, or exceeding, levels it has previously been at during times of a "healthy" economy.

Read the entire article

June 6, 2018

China Offers $72 Billion MLF "To Ensure Banking Liquidity Remains Stable"

Just hours after we warned that it was time to start worrying about China's debt default avalanche, and shortly after the PBOC lowered its credit quality restrictions for collateral, China offered its Medium-term Lending Facility (MLF) to inject CNY463bn (~$72bn) of liquidity.

As we detailed earlier, the recent blow out in Chinese corporate bond spooked none other than the PBOC, which last last Friday announced that it will accept lower-rated corporate bonds as collateral for a major liquidity management tool in a move that analysts see as designed in part to restore confidence in the country's corporate bond market.

Specifically, the central bank said that it had decided to expand the collateral pool for the medium-term lending facility (MLF) to include corporate bonds rated AA+ or AA by domestic rating agencies.  The central bank also added as collateral financial bonds rated AA and above with proceeds to support rural development, small enterprises and green projects, as well as high-quality loans supporting green projects and small enterprises, the PBoC said in a statement posted on its website.

The PBoC said the expansion of collateral would "help alleviate the financing difficulties of small companies and to promote the healthy development of the corporate bond market."

CICC confirmed as much, writing in a note that "the expansion of collateral for MLF, to some extent, is intended to bolster confidence in lower-rated corporate bonds ... and to avoid creating an apparent net financing gap which would impact the real economy."

Translated: the PBOC is providing yet another backdoor bailout to China's latest and greatest distressed sector in hopes of avoiding an avalanche of defaults as credit conditions become increasingly tighter as the PBOC hikes tit for tat with the Fed.

Read the entire article

June 5, 2018

Central Banker Observes Sudden "Evaporation" Of Dollar Funding, Warns Of Global Turmoil

Last October, just as the Fed started shrinking its balance sheet, we published yet another article on what is arguably the biggest threat to not only risk assets, but also the global economy: "The Dollar Funding Shortage: It Never Went Away And It's Starting To Get Worse Again."

While hardly a novel problem, we first discussed the return of the dollar funding shortage in March 2015, the fact that global stocks kept rising, and that overall funding conditions remained relatively loose keeping the global economy well-lubricated, prevented said dollar funding shortage from becoming a major concern to policymakers, despite occasional recent hiccups such as the Libor-OIS spread blow out, which both we and Citi explained w as a symptom of the creeping shortage of the world's reserve currency.

Until now.

In an op-ed published overnight in the FT, a central banker writes that when it comes to the turmoil gripping the world's Emerging Markets, whether it is the acute, idiosyncratic version observed in Argentina and Turkey, which according to JPM may be doomed...

... or the more gradual selloffs observed in places like Indonesia, Malaysia, Brazil, Mexico and India, don't blame the Fed's rate hike cycle. Instead blame the "double whammy" of the Fed's shrinking balance sheet coupled with the dollar draining surge in debt issuance by the US Treasury.

Read the entire article

June 4, 2018

In The Global Trade War, America Has "All The Cards"

A Game of Cards

“From now on, we expect trading relationships to be fair and to be reciprocal,” announced President Trump, smiling, a slight blush. In his hand, a Royal Flush, his life history a gambler’s bluff.

“These tariffs are an affront to the longstanding security partnership between Canada and the US and to the thousands of Canadians who fought and died alongside their American brothers,” said young Justin Trudeau, announcing reciprocal tariffs, three Queens in his hand.  And Trump reflected on his early property developments, bluffing his way into the big game. “That was hard. This is not,” whispered The Donald.

“Mexico’s position regarding cooperation with the US on trade, migration or security will not vary because of offensive rhetoric or unilateral and unjustified measures of this kind,” said Foreign Minister Videgaray, a pair of Jacks.

“The US now leaves us with no choice but to proceed with a WTO dispute settlement case and the imposition of additional duties on a number of imports,” said EU Commission President Juncker, a Full House. But of course, the Europeans are hopeless at poker; 28 people cannot play a single hand, each attempt sparks endless argument.

“No leader on earth could play their way out of a hand with four bankruptcies. Stormy. Hollywood Access. The Paris Accord. North Korea. Or Iran’s nuclear deal,” thought Trump, enjoying the high roller table immensely.

Read the entire article

June 1, 2018

After Italy... Spain Risk Soars

Political risk in Europe was largely ignored in international markets because of the mirage of the so-called 'Macron effect', the ECB’s massive quantitative easing program, and a perception that everything was different this time in Europe added to the illusion of growth and stability.

However, a storm was brewing and the same old problems seen throughout the years in Europe were increasing.

In Italy, the shock came with an election that brought a coalition of extreme left and extreme right populists. Disillusion with the Euro was evident in Italy for years, as the economy continued to be in stagnation while debt soared. However, international bodies, mainstream analysts, and banks preferred to ignore the risk, instead continuing to announce impossible growth estimates for the following year and science-fiction banks’ profitability improvements.

Italy’s economic problems are self-inflicted, not due to the Euro. Governments of all ideologies have consistently promoted inefficient dinosaur “national champions” and state-owned semi-ministerial corporations at the expense of small and medium enterprises, competitiveness and growth, labor market rigidities created high unemployment, while banks were incentivized to lend to obsolete and indebted state-owned companies in their disastrous empire-building acquisitions, inefficient municipalities, as well as finance bloated local and national government spending. This led to the highest Non-Performing Loan figure in Europe.

Now, the new government wants to solve a problem of high government intervention with more government intervention. The measures outlined would imply an additional deficit of some €130bn by 2020 and shoot the 2020 Deficit/GDP to 8%, according to Fidentiis

Read the entire article

May 31, 2018

European Implosion Sends Panic Through Global Markets As George Soros Warns ‘We May Be Heading For Another Major Financial Crisis’

I told you to keep your eyes on Europe.  On Tuesday, widespread panic shot through European financial markets and this deeply affected U.S. markets as well.  The Dow Jones industrial average fell 391 points, and at this point the Dow and the S&P 500 have been down for three trading sessions in a row.  But the big news is what is happening over in Europe.  Tuesday’s crash represented the largest one day move for 2 year Italian bonds ever, and Italian bank stocks are now down a whopping 24 percent from their April highs.  Overall, European banks have fallen a total of 11 percent over the last four days, and it isn’t just banks in troubled countries such as Italy and Spain that are hurting.  The biggest bank in Europe, Deutsche Bank, just keeps on tumbling and is now just barely above all-time lows.  A few days ago when I wrote that the next global economic crisis “could be just around the corner”, there were some people that criticized me for making such a statement.  Well, as you will see below, now this fact has become so obvious that even George Soros is saying it.

Those that are ignoring what is going on in Italy are making a tragic mistake.  Italy is the third largest economy in the eurozone, and even the Wall Street Journal is admitting that its bond market is “in meltdown”…

Risk aversion is back. Italy is the focal point, with its bond market in meltdown, its politics in crisis after President Sergio Mattarella blocked the formation of an anti establishment government, and its credit rating under threat.

That is all now making bigger waves: Europe’s deepening troubles and disappointing global growth signals are sparking a sudden rally in haven bonds like U.S. Treasurys.

Read the entire article

May 30, 2018

Gold Production On The Cusp Of Peaking

Gold is valuable because it is a finite resource. What happens when all available gold is mined and processed? There is still abundant gold deep within the earth, but it has not yet been found. Mining companies are unable, to dig deep enough. It is difficult for them to know where to locate this deep gold. All known locations have been depleting for years.

That is the reason mining gold has become more difficult and output is expected to begin decreasing steadily. The precious metal is becoming harder to find.

Most of the world’s gold was mined before the 1848 Gold Rush era. Since 1950, 125,000 tons of gold has been processed, which is approximately two-thirds of all gold ever mined. All of the gold that could be accessed easily has been mined.

Gold cannot be manufactured or created. It can only be mined from the earth’s crust. If we want more gold, companies, and investors will need to begin allocating more capital to exploration companies.

According Eugene King of Goldman Sachs, known mineable gold reserve may be gone in 20 years. The definitive word here is “known.” Gold mining companies are gearing up for a new era of exploration deeper below the surface than ever before. This means these companies will be incurring new costs at the same time their profits are decreasing. That is the reason why so few new mines are being excavated and few new projects are being started.

The earth’s easy-to-find gold has already been found and mined. There will not be another California Gold Rush. The search for new gold becomes increasingly challenging and expensive each year. Outdated equipment and technology need to be replaced.

Read the entire article

May 29, 2018

Which Banks Are Most Exposed To Italy's Sovereign Debt? (Other The The Horribly-Exposed Italian Banks)

Risk. Exposure. Contagion. These are three words we’re likely to hear more and more in relation to Europe, as the Eurozone’s debt crisis returns.

On Friday, Italy’s 10-year risk premium - the spread between Italian ten-year bond yields and their German counterparts — surged almost 20 basis points to 212 basis points. This was the highest level since May 2017, when a number of Italy’s banks, including third biggest bank Monte dei Paschi di Siena (MPS), were on the brink of collapse and were either “resolved” or bailed out. Now, they’re all beginning to wobble again.

Shares of bailed-out and now majority-state-owned MPS, whose management the new government says it would like to change, are down 20% in the last two weeks’ trading. The shares of Unicredit and Intesa, Italy’s two biggest banks, have respectively shed 10% and 18% during the same period.

One of the big questions investors are asking themselves is which banks are most exposed to Italian debt.

A recent study by the Bank for International Settlements shows Italian government debt represents nearly 20% of Italian banks’ assets — one of the highest levels in the world. In total there are ten banks with Italian sovereign-debt holdings that represent over 100% of their tier-1 capital (which is used to measure bank solvency), according to research by Eric Dor, the director of Economic Studies at IESEG School of Management.

The list includes Italy’s two largest lenders, Unicredit and Intesa Sanpaolo, whose exposure to Italian government bonds represent the equivalent of 145% of their tier-1 capital. Also listed are Italy’s third largest bank, Banco BPM (327%), Monte dei Paschi di Siena (206%), BPER Banca (176%) and Banca Carige (151%).

Read the entire article

May 28, 2018

Why America Is Heading Straight Toward The Worst Debt Crisis In History

Today, America is nearly 70 trillion dollars in debt, and that debt is shooting higher at an exponential rate.

Usually most of the focus in on the national debt, which is now 21 trillion dollars and rising, but when you total all forms of debt in our society together it comes to a grand total just short of 70 trillion dollars.  Many people seem to believe that the debt imbalances that existed prior to the great financial crisis of 2008 have been solved, but that is not the case at all.  We are living in the terminal phase of the greatest debt bubble in history, and with each passing day that mountain of debt just keeps on getting bigger and bigger. 

It simply is not mathematically possible for debt to keep on growing at a pace that is many times greater than GDP growth, and at some point this absurd bubble will come to an abrupt end.  So those that are forecasting many years of prosperity to come are simply being delusional.  Our current standard of living is very heavily fueled by debt, and at some point we are going to hit a wall.

Let’s talk about consumer debt first.  Excluding mortgage debt, consumer debt is projected to hit the 4 trillion dollar mark by the end of the year

Americans are in a borrowing mood, and their total tab for consumer debt could reach a record $4 trillion by the end of 2018.

That’s according to LendingTree, a loan comparison website, which analyzed data from the Federal Reserve on nonmortgage debts including credit cards, and auto, personal and student loans.

Americans owe more than 26 percent of their annual income to this debt. That’s up from 22 percent in 2010. It’s also higher than debt levels during the mid-2000s when credit availability soared.

Read the entire article

May 25, 2018

Petroyuan Is Only The Beginning, Pop Goes The Metals Market

When Hong Kong Exchanges and Clearing (HKEX) bought the London Metals exchange in 2012 all the speculation was about the effects on gold trading.  The primary reason for buying the LME was to obtain its warehouses and ensure a free flow of metals to points east.

What it also did was give them control over what type and kind of futures contracts could be traded on their exchanges.  No longer would the west control this very important part of the precious and industrial metal supply chain.

Now we’re seeing the next evolution of the power of owning the exchange.   After successfully launching a yuan-denominated gold futures contract last year, the LME is now preparing to issue a range of yuan-denominated metals futures.

In other words... Boom.

First Rule: Do No Harm

When China bought the LME the usual suspects in the contrarian investing community talked about the coming apocalypse for the bullion banks.  It never happened. In fact, China was in a position to help them cap the price of gold and extend the gold bear market for the past six years while it and its strategic partners, namely Russia, accumulated vast quantities of the world’s most important metal.

The Chinese were smart. Take over the LME and, for a while, change nothing. Don’t upset the apple cart and allow markets to operate mostly normally.  Now their ownership of the LME is not an issue.

Until now.  First gold trading in Yuan. Now the rest of the metals.

Read the entire article

May 24, 2018

Is Oil About To Become Front-Page News Again?

Here’s a new indicator for you: It seems that the difference between the price of oil here and abroad is a measure of tightness in the market, with a rising spread indicating higher prices in the future, with all the inflationary pressures that that implies. From today’s Wall Street Journal:

Trans-Atlantic Oil-Price Spread Soars as Supply Glut Disappears

U.S. oil prices are lagging behind global oil prices climbing toward $80 a barrel, the latest sign of a market that has gone from glutted to exceptionally tight in the past year.

U.S. oil futures are trailing Brent, the global benchmark, by more than $7 a barrel, settling at $71.28 a barrel on Friday. The two oil benchmarks are further apart than they have been since 2015, before U.S. crude could be freely exported.

The divergence is a sign of how stretched global oil supplies have become even as U.S. output has marched higher, overtaking Saudi Arabia and rivaling Russia. That has contributed to soaring U.S. exports, which have hit a record of nearly 2.6 million barrels a day as users clamor.

“The market is screaming right now, ‘We need every barrel we can get,’ ” said Phil Flynn, an analyst at the Price Futures Group.

Both benchmarks have been on a tear lately. The Organization of the Petroleum Exporting Countries and its allies have been holding oil off the market for more than a year, and demand has surged as the global economy roared to life. Unexpected disruptions, like plunging oil output from Venezuela, have tightened supplies even further. A glut of oil that held prices down for years is essentially gone.

Read the entire article

May 23, 2018

Bank Of England Issues Working Paper On Central Bank Digital Currencies

On May 18, the Bank of England released a staff working paper, laying out various scenarios of possible risks and financial stability issues of central bank digital currencies (CBDCs).

The paper constructs three models of CBDC depending on the sectors that have access to CBDC, from a narrow CBDC where access is limited to banks and non-bank financial institutions (NBFIs), to direct and indirect access extended to households and non-financial firms.

The Financial Institutions Access model is limited to banks and NBFIs, where financial institutions can interact directly with the central bank to purchase and sell CBDC in exchange for eligible securities. Financial institutions are not supposed to provide an asset to households and firms, which are entirely backed by central bank money.

The Economy-wide Access model assumes that access to CBDCs is granted to banks and NBFIs, households and firms. In this way, a CBDC can serve as money for all agents in the economy. While only banks and NBFIs can interact directly with the central bank to buy and sell CBDCs, the report says that “households and firms must use a CBDC Exchange to buy and sell CBDC in exchange for deposits.”

Within the Financial Institutions Plus CBDC-Backed Narrow Bank Access model access is again limited to banks and NBFIs. There is at least one financial institution that acts as a ‘narrow bank,’ which provides financial assets to households and firms that are fully backed by a CBDC but that does not extend credit.

Read the entire article

May 22, 2018

77 Million Square Feet Of Retail Space And Counting – America’s Retail Apocalypse Is Spiraling Out Of Control In 2018

In 2017 we absolutely shattered the all-time record for retail store closings in a single year, and this year it looks like we are going to shatter the record once again.  In fact, there are some that are projecting that up to 9,000 retail stores could close by the time that we get to the end of this calendar year.  Already, the amount of retail space that has shut down is simply jaw-dropping.  If you total up all of the retail store closings that have been announced so far in 2018, it accounts for 77 million square feet of retail space.  Let that number sink in for a bit.  Many shopping centers and strip malls around the country already have a post-apocalyptic feel to them, and more “space available” signs are going up with each passing day.  And in case you are tempted to think that I am making this figure up, here it is straight from Bloomberg

At last count, U.S. store closures announced this year reached a staggering 77 million square feet, according to data on national and regional chains compiled by CoStar Group Inc. That means retailers are well on their way to surpassing the record 105 million square feet announced for closure in all of 2017.

In the end, we could shatter the all-time record that was established just last year by 20 or 30 million square feet.

At moments such as this, the phrase “retail apocalypse” doesn’t really seem to fit the gravity of what is actually taking place.

Read the entire article

May 21, 2018

It's Not Stagflation... It's Inflationary Impoverishment

It is a matter of personal interest that it was my uncle, Iain Macleod, who invented the term stagflation shortly before he was appointed shadow chancellor in 1965. It is no longer used in its original context. From Hansard (the official record of parliamentary debates) 17 November that year:

We now have the worst of both worlds —not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of "stagflation" situation and history in modern terms is indeed being made.

The inflation that Iain was referring to was of wages, which were averaging an increase of 6.2%, and rising, and stagnation in production, which had declined from an index of 134 to 131. It was this divergence that gave him the opportunity to invent this portmanteau word. It has now passed into more common use to describe an economy that fails to respond to the stimulus of monetary inflation.

Its use in this context is therefore different from the original. The idea that stagflation exists as an economic phenomenon is only really true for neo-Keynesians, who view inflation as economically stimulative, and its failure to stimulate perplexing. In this sense it is frequently applied to conditions today, where massive monetary stimulus does not appear, so far at least, to have brought about the economic growth that might have been expected from it.

Read the entire article

May 18, 2018

"We Won’t Make Unilateral Concessions": China Denies It Offered To Slash U.S. Trade Gap By $200BN

Overnight, experts and pundits were stumped by the biggest geopolitical news from Thursday: how could China possibly - or feasibly - agree to a $200 billion cut in the US-China trade deficit, even if merely to placate President Trump. Speaking to Bloomberg, Victor Shih, a China politics and finance professor at the University of California in San Diego said earlier that he finds an agreement to cut the U.S. deficit by $200 billion "difficult to contemplate."

"Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion," he said. "A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain."

On Friday morning we got the answer: the entire story was nothing more than the latest fake news concocted by a "US official" and then promptly spun by the US media without actual confirmation by China.

And so, the mystery of just how China would shrink its $200 billion trade deficit with the US died on Friday morning, when China gave the answer: it wouldn't, after Beijing denied it had offered the deficit-cutting package, just hours after it dropped an anti-dumping probe into U.S. sorghum imports in a conciliatory gesture as top officials meet in Washington.

“This rumor is not true. This I can confirm to you,” Chinese foreign ministry spokesman Lu Kang politely told a news briefing saying "the question is about some US officials who said China will cut the deficit. As I understand, the relevant consultations are ongoing and they are constructive,” he said, adding that he could not elaborate on the specifics of the negotiations.

Commentary posted in an article on WeChat accounts run by Xinhua News Agency and People’s Daily overseas edition was less restrained, and said that the offer to cut China's trade surplus with the U.S. is "nonexistent" and that reports that China accepted the U.S. demand to narrow the trade gap are “purely a misreading."

Read the entire article

May 17, 2018

Blowback Begins: EU To Ditch Dollar In Payments For Iranian Oil

The dollar’s collapse is nearing.  The European Union is planning to switch it’s payments to the Euro for its oil purchases from Iran, eliminating United States dollar transactions.

Just one more nail to the US dollar’s coffin.  Its collapse is all but imminent at this point. The EU has successfully found a way to scoff at potential future sanctions on Iran by openly defying the US; and as an “added bonus,” they’ve helped seal the dollar’s fate According to RT, a diplomatic source with the EU has told a news outlet of the decision. 

“I’m privy to the information that the EU is going to shift from dollar to euro to pay for crude from Iran,” said the diplomatic source. 

Brussels has been at odds with Washington over the US’s decision to withdrawal from the Iran nuclear deal, which was reached during the administration of Barack Obama. President Donald Trump has pledged to re-impose sanctions against the Islamic Republic as soon as he is able to do so. The Trump administration also has had plans to topple the current regime in Iran, according to leaked documents, and it looks like they’ve just given themselves the go-ahead:

The Washington Free Beacon has obtained a three-page white paper being circulated among National Security Council officials with drafted plans to spark regime change in Iran, following the US exit from the Obama-era nuclear deal and the re-imposition of tough sanctions aimed at toppling the Iranian regime.

The plan, authored by the Security Studies Group, or SSG, a national security think-tank that has close ties to senior White House national security officials, including – who else – National Security Adviser John Bolton, seeks to reshape longstanding American foreign policy toward Iran by emphasizing an explicit policy of regime change, something the Obama administration opposed when popular protests gripped Iran in 2009, writes the Free Beacon, which obtained a leaked copy of the circulating plans. –Zerohedge

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May 16, 2018

What's Trump's Real Trade Target: China Or Europe?

Do Trump's endless trade volleys and sanctions have a clear target? Consider the possibility it's the EU, not China.

Out of the blue, and with open rebuke form Democrats and Republicans, Trump reversed sanctions on China.

This was peculiar in and of itself, but his rationale raised more than a few eyebrows.

All of a sudden. Trump is concerned about "too many jobs lost in China"!

One can rationalize this is about Rotting Cherries, Spoiled Pork, and Car Inspections, but could it be there is more than meets the eye?

Iran Sanctions

Bloomberg reports Iran’s Door to the West Is Slamming Shut, and That Leaves China.

China is “already the winner,’’ said Dina Esfandiary, a fellow at the Centre for Science and Security Studies at King’s College in London, and co-author of the forthcoming ‘Triple Axis: Iran’s Relations With Russia and China’.

Turning East

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May 15, 2018

Orphan CDS, Manufactured Credit Events, Insufficient Deliverables: What The Hell Is Going On In The CDS Market?

Long gone are the days when the CDS market was naively seen as merely a simple hedge to long cash bond positions for vanilla investors (negative basis), or more conspiratorially, a means to naked short the bonds of distressed companies (as many alleged happened during the financial crisis) without being subject to squeezes, margin calls, or regulatory scrutiny courtesy of (what was once) a far more liquid and deep CDS market.

Of particular note in recent months has been rapid, and often confounding, propagation of manufactured credit events in which a CDS is triggered - usually after some collusion between the issuing company and one or more hedge funds - without causing an acceleration in the issuer's debt obligations, as discussed recently in the case of Hovanian, in which the CDS surges benefiting one or more hedge funds and/or the company while impairing others, or a manufactured CDS "orphaning", as was the case more recently with McClatchy, in which a CDS suddenly found itself with no reference securities and plunged to 0, in the process sparking a profit bonanza for hedge fund Chatham which had sold the CDS.

And while manufactured credit events remain niche events for a very select group of highly sophisticated investors, several recent events have prompted Barclays to write an extensive analysis looking at the details and motivations for such events, while addressing potential changes to the ISDA Definitions to reduce their likelihood, including adding a multiple holder requirement and excluding missed affiliate payments from the definition of a Failure to Pay credit event. Furthermore, in the context of the McClatchy event, Barclays' credit analysts also examined the latest, most recent development in the CDS marketplace – a potential manufactured orphaning – and how this may be more difficult to address from a definitions perspective.

Why the sudden focus among some of Wall Street's most active CDS trading desks? Because as Barclays says "we believe that failure to address these issues could lead to a loss of confidence in the CDS market, particularly as an indicator of fundamental credit and default risk, and ultimately to lower levels of trading activity."

Read the entire article

May 14, 2018

Europe Keeps Buying Iran Oil, But Banks May Hinder Trade

In the days following the U.S. withdrawal from the Iran nuclear deal, Iran’s European customers continue to buy Iranian oil and are in no immediate rush to replace volumes, but some refiners and traders have flagged financing issues as having the potential stop to crude trade with Iran.

After the U.S. walked out of the Iran deal, the U.S. will be targeting Iran’s crude oil sales, and sanctions previously lifted under the deal will be re-imposed following a 180-day wind-down period, the U.S. Treasury said.

European buyers are not in an immediate rush to replace Iranian supplies due to that wind-down period, with sanctions expected to kick in in November. All buyers report that they are complying and will comply with any sanctions imposed on Iranian trade, and some of them expect that banking issues will arise from the sanctions, such as the availability of trade finance.

Marta Llorente, a spokeswoman for Spanish oil company Cepsa, one of Iran’s customers in Europe, told Reuters:

“At this moment, our trading activity is business as usual.”

Italy’s Eni also continues to buy Iranian oil and it is buying 2 million barrels of oil per month from Iran under a deal that expires at the end of the year.

“We’re doing nothing,” said the head of trading at another European customer of Iran’s. “It’s wait and see. If we’re forced to reduce, we will. Iranian is not the only crude,” the manager told Reuters.

Read the entire article

May 11, 2018

Playing US Sanctions: China Walks A Fine Line In Iran

Chinese businessman Sheng Kuan Li didn’t worry about sanctions when he decided in 2010 to invest $200 million in a steel mill in Iran that started producing ingots and billet within months of the lifting of punitive measures against the Islamic republic as part of 2015 international nuclear agreement with Iran.

With no operations in the United States, Mr. Li was not concerned about being targeted by the US Treasury.

Mr. Li, moreover, circumvented financial restrictions on Iran by funding his investment through what he called a “private transfer,” a money swap that was based on trust and avoided regular banking channels.

In doing so, Mr. Li was following standard Chinese practice of evading the sanctions regime by using alternative routes or establishing alternative institutions that were in effect immune.

To be able to continue to purchase Iranian oil while sanctions were in place, China, for example, established the Bank of Kunlun to handle Chinese payments.

The Chinese experience in circumventing the earlier sanctions will come in handy with Beijing rejecting US President Donald J. Trump’s renewed effort to isolate Iran and force it to make further concessions on its nuclear and ballistic missiles programs as well as the Islamic republic’s regional role in the Middle East by walking away from the 2015 agreement and reintroducing punitive economic measures.

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May 10, 2018

Another Step Towards Collapse Of The Petrodollar

For the past year and half a major topic throughout the alternative press has been the new Chinese oil futures contract settled/priced in yuan. The fact that China is directly challenging the Federal Reserve Note, U.S. dollar, is quite a significant change. For those that have been paying attention this new futures oil contract is nothing more than the next step in China moving completely away from the Federal Reserve Note, and the “world reserve currency” system and towards a multi-polar world with several currencies being used for international trade.

Ken Schortgen, Jr., The Daily Economist, recently penned an article about Nigeria approving a currency swap agreement with China, stating,

It has been a little more than a month since China officially began offering oil futures contracts denominated in the Yuan currency, but early results continue to be positive for this contract to over time take more and more market share from the West and the Petrodollar.  And with Iran, Qatar, and even Venezuela having already agreed to buy and sell their oil in currencies other than the dollar, a new currency swap agreement signed on May 3 between Nigeria and China could mean that a fourth OPEC nation could also soon be leaving the Petrodollar.

The Central Bank of Nigeria (CBN) has signed a currency swap deal worth about $2.5 billion with the People’s Bank of China to provide adequate local currency liquidity for transactions between national businesses, The Punch newspaper reported on Thursday, citing a high-ranking official from the Central Bank of Nigeria (CBN). Sputnik News.

While China pursued currency swaps as far back as 1997, during the “Asian financial crisis”, none of the agreements were ever activated. That all changed with the global financial meltdown in 2008. China began actively pursuing, and instituting, direct currency swaps and even went so far as to open “Renminbi Clearing Centers” around the world including Canada, the backyard of the U.S..

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May 9, 2018

It's A Perverse World Where Stocks Rally On "The US vs The Rest Of The World"

BoE's Grand Plan, ESG and Air France calling Macron's Bluff

Its Bank of England day tomorrow and you just got to wonder if it’s all going according to Mark Carney’s Grand Plan. Since his mumble-swerve on rate hikes because of weaker economic data 3 weeks ago – which prompted lots of hair pulling, unreliable boyfriend comments, and bafflement on what the BOE can do - the pound has crashed through the floor versus the dollar and wobbled badly on the Euro. Well done Mr Carney – it’s the most effective way to keep the currency down and the UK competitive!

While the UK is already in enough trouble from the Tories ability to turn a simple goodbye Europe into a Brexit political clusterf**k of monumental proportions.. (OK, I’m being flippant, but Brexit really doesn’t matter….) what’s not to like about weaker sterling – unless you were planning a holiday abroad? In the absence of any monetary policy tools left in the box – cos you can’t cut rates when they’ve already been cut to nada (unless you are Japan or Switzerland, and the UK clearly is not) - then currency games are the only way.

So get over the “disappointment” of no hike tomorrow and get on with it.. Although, its worth wondering what it means for the UK’s place in this “Macro Aligned Synchronised Global Recovery..” Or is it another sign the global recovery is stalling…? (More than a few of my clients will call and ask “what economic recovery???”) – One day they may erect a monument to central banks and carve into it: “They created a desert and called it peace…”

Elsewhere, it’s a perverse world where stocks rally on the US versus the rest of the World re Iran. Its’ certainly bad news for the Iranians – the Yooropeens and Theresa Might can bleat about it being unfair, but no sane investor or rational business is going to risk a single penny on Iran. The ESG implications are just too painful to contemplate…

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May 8, 2018

"Creating Wealth" Through Debt Is The West's Finance-Capitalist Road

Volumes II and III of Marx’s Capital describe how debt grows exponentially, burdening the economy with carrying charges.

This overhead is subjecting today’s Western finance-capitalist economies to austerity, shrinking living standards and capital investment while increasing their cost of living and doing business.

That is the main reason why they are losing their export markets and becoming de-industrialized.

What policies are best suited for China to avoid this neo-rentier disease while raising living standards in a fair and efficient low-cost economy? The most pressing policy challenge is to keep down the cost of housing. Rising housing prices mean larger and larger debts extracting interest out of the economy. The strongest way to prevent this is to tax away the rise in land prices, collecting the rental value for the government instead of letting it be pledged to the banks as mortgage interest.

The same logic applies to public collection of natural resource and monopoly rents. Failure to tax them away will enable banks to create debt against these rents, building financial and other rentier charges into the pricing of basic needs.

U.S. and European business schools are part of the problem, not part of the solution. They teach the tactics of asset stripping and how to replace industrial engineering with financial engineering, as if financialization creates wealth faster than the debt burden. Having rapidly pulled ahead over the past three decades, China must remain free of rentier ideology that imagines wealth to be created by debt-leveraged inflation of real-estate and financial asset prices.

Read the entire article

May 7, 2018

Why One Hedge Fund Thinks Tesla Is Worth $0: The Full Presentation

With Elon Musk's public behavior becoming increasingly erratic, irrational and bizarre - just over the weekend trolling Warren Buffett that he is "super serious" about attacking Berkshire's Candy moat, just hours after he threatened Tesla shorts with "unreal carnage" in a tweet that some have alleged is a violation of securities laws - the Tesla bears have been getting increasingly more vocal.

And it's not just Jim Chanos: while the famous Enron nemesis remains certain that Elon Musk's resignation and Tesla's doom  are just a matter of time, others have been increasingly aggressive about their skepticism, so much so that Tesla is now the most shorted stock in the US market, much to Elon's volatile chagrin.

Yet while most shorts believe there is at least some value in Elon Musk's car company, Mark Spiegel of Stanphyl Capital Management is convinced that when the dust settles, Tesla will be "a zero" (whether or not Musk will be "bankwupt" is another matter). He made this clear rather early on, in fact on the front cover, of his 156 page slideshows that he delivered at the Kase Learning short selling conference.

While we present the whole powerpoint below, here is the exec summary and some of the bigger picture observations:

3 Broad Reasons Why The Equity in Tesla Is Worth “Zero”

  1. Tesla’s financials are horrible and worsening even BEFORE massive competition begins arriving later this year
  2. Tesla has no “moat” of any kind and in fact now possesses trailing technology in all facets of its business
  3. A “bet on Elon” is a bet on someone who can’t be trusted -he has a long track record of making hugely misleading statements

A snapshot of the company's current financials:

Read the entire article

May 4, 2018

US-China Trade Talks End Without A Deal After Trump Hikes Deficit Cut Demand

Moments ago, the US trade delegation led by Treasury Sec. Steven Mnuchin, and which included Commerce Sec. Wilbur Ross, US Trade Rep. Robert Lighthizer, and White House trade adviser Peter Navarro, left China after two days of U.S.-China trade discussions ended on Friday without a concrete deal, only an agreement to keep on talking.

On Friday afternoon, China’s official Xinhua News Agency reported that both sides reached a consensus on some trade issues, without providing details. More importantly, they acknowledged major disagreements on some matters and will continue communicating to work toward making more progress.

The biggest surprise, according to the FT, is that heading into the talks the US delegation asked China to cut the bilateral trade deficit by $200BN by 2020, reduce tariffs and cut subsidies for emerging industries, according to a document seen by the Financial Times.

The surprise is that the revised $200BN target is already double the $100BN amount that President Trump demanded just two months ago be wiped from last year’s $337BN US deficit in goods and services. According to the document, the US aimed to cut the deficit by $100bn in the year beginning June 1, and by a further $100bn between June 2019 and May 2020.

Some more details on the list of US demands from the WSJ:

Read the entire article

May 3, 2018

Are Russian Bonds Toxic Waste Or Golden Eggs?

One man’s toxic waste is another man’s golden goose.  A new round of economic sanctions imposed on Russia last month by the U.S. is creating havoc in investment circles.  A recent article by Ben Aris at Russia Insider describes Russian debt assets as ‘toxic waste again.’

That doesn’t mean these Russian debt assets actually are bad investments, just that those who currently hold them have to get rid of them because the rules have changed.

And they are no longer legally allowed to own them.

Because of that what were one minute the darling of the investment world instantly turned into garbage, selling if anyone can find a buyer at discounts even Crazy Eddie would blanche at.

All the previous sanctions imposed on Russian companies had only affected new securities – listings of new shares or bonds. Existing securities were unaffected.

Not now. The Specially Designated Nationals And Blocked Persons List (SDN List) released on April 6 not only sanctions those listed, it bans any investor with US exposure (European banks with US branches count) from doing any business with the sanctioned names. Investors were supposed sell all their stocks, bonds and debt within 30 days – i.e. before May 7.

This has sent the market for Russian securities into the floor.

Read the entire article

May 2, 2018

White House Pushes Beijing To Roll Back "Made In China 2025" Initiative

Just hours after the White House revealed that it had extended exemptions on aluminum and steel import tariffs from the European Union, Canada, Mexico and several other countries, Nikkei reported Tuesday evening that China has presented the Trump administration with a plan to boost imports of aircraft, semiconductors and natural gas from the US to try and reduce its massive trade surplus.

However, Chinese officials are less enthusiastic about Washington's demands that it scrap its "Made in China 2025" initiative to bolster high-tech manufacturing in several key sectors.

The report comes as Treasury Secretary Steven Mnuchin, top economic advisor Larry Kudlow, Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross and Trump advisor Peter Navarro head to Beijing later this week for the first round of face-to-face talks to try and end the trade war. They will meet with senior Chinese officials including President Xi and Vice Premier Liu He, China's de facto economy czar.

Since shortly after announcing his candidacy for office, President Trump has railed against the US-China trade deficit, declaring that it was tantamount to handing billions of dollars to the Chinese every year.

Read the entire article

May 1, 2018

“Creating Wealth” Through Debt: The West’s Finance-Capitalist Road

Volumes II and III of Marx’s Capital describe how debt grows exponentially, burdening the economy with carrying charges. This overhead is subjecting today’s Western finance-capitalist economies to austerity, shrinking living standards and capital investment while increasing their cost of living and doing business. That is the main reason why they are losing their export markets and becoming de-industrialized.

What policies are best suited for China to avoid this neo-rentier disease while raising living standards in a fair and efficient low-cost economy? The most pressing policy challenge is to keep down the cost of housing. Rising housing prices mean larger and larger debts extracting interest out of the economy. The strongest way to prevent this is to tax away the rise in land prices, collecting the rental value for the government instead of letting it be pledged to the banks as mortgage interest.

The same logic applies to public collection of natural resource and monopoly rents. Failure to tax them away will enable banks to create debt against these rents, building financial and other rentiercharges into the pricing of basic needs.

U.S. and European business schools are part of the problem, not part of the solution. They teach the tactics of asset stripping and how to replace industrial engineering with financial engineering, as if financialization creates wealth faster than the debt burden. Having rapidly pulled ahead over the past three decades, China must remain free of rentier ideology that imagines wealth to be created by debt-leveraged inflation of real-estate and financial asset prices.

Read the entire article

April 30, 2018

UBS: "The Petroyuan Will Undermine America's Dominant Role And Create A Sea Change In Global Markets"

RMB-denominated oil contracts began trading for the first time in Shanghai on March 26. We believe that in the long term this will ultimately change how oil is traded globally, create a Petroyuan currency flow, increase the role of the RMB as a global trading currency, and compel investors to up their allocations to Chinese financial assets.

Why now?

From March 26, seven oil grades will be tradeable on the Shanghai International Energy Exchange (INE), allowing Chinese buyers to buy forward in RMB. Since INE is based in Shanghai's Free Trade Zone (FTZ), foreign traders will be allowed to trade in the market.

China passed the US as the world's largest oil consumer in 2016. Accordingly, China wants to pay for its huge import bill in its own currency (RMB) rather than USD.

More importantly, however, China wants the new oil trading plan to promote RMB internationalization, i.e. forcing wider adoption of the RMB as a global trading currency, and switching to RMB payments for major imports is part of this process.

The emergence of Petroyuan - RMB-denominated revenues collected by the world's largest oil producers - is a natural development from this process

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