Will #Deutsche’s Problem Ever End?


BANG! More Bad News For Deutsche and Friends as the Take Down Intensifies
Finance

There should be no doubt in anyone’s mind that the Official Take Down of the Global Monetary System has kicked into OVERDRIVE!!

Even the government and regulators are doing their part to destroy the system!!

Deutsche Bank, Paschi, Numora Staff Charged Over False Accounts
http://www.bloomberg.com/news/articles/2016-10-01/deutsche-bank-paschi-nomura-staff-charged-over-false-accounts-itr5z2ku

“Six current and former managers of Deutsche Bank AG — including Michele Faissola, Michele Foresti and Ivor Dunbar — along with two former executives at Nomura Holdings Inc. and five at Banca Monte dei Paschi di Siena SpA were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank and manipulate the market.”


The charges deal another blow to Deutsche Bank, which is seeking to reassure investors and clients that it will be able to withstand pending U.S. penalties over the bank’s sale of mortgage-backed securities and its dealings with some Russian clients. Monte Paschi, the world’s oldest bank, restated its accounts and has been forced to tap investors twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of soured debt before a fresh stock sale. – Bloomberg


END

This couldn’t happen at a WORSE time for the world’s largest derivative holder.

And there will be more “bad news” soon.

PS – At this end of this Road is a Silver Moonshot that will be for the record books!!

May the Road you choose be the Right Road.

Bix Weir
http://www.RoadtoRoota.com

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#MH370 Cover-Up Revealed: It Should Never Have Flown


TheDailyBeast

Veteran aviation reporter Christine Negroni’s new book reveals that the airplane did not meet the airline’s own rules for being able to track where it was—one more example of an investigation that is not fit for its purpose.


By any measure the disappearance and death of 329 people is a serious event. Imagine if this were the toll of a terrorist attack in the U.S. There would be an immediate investigation into how it happened—and the results of that investigation would reveal if failures had occurred that could be fixed. The chances of covering up any of those failures would be minimal.

Yet when the tragedy involves the souls lost aboard Malaysia Airlines Flight MH370 what has followed? Two and a half years later we know virtually nothing about the investigation that is supposedly continuing. None of the responsible parties wants to talk, wants to accept any accountability, wants to respond to the continuing grief of the families who lost loved ones.

Shocking light on this scandal is shed by a veteran reporter, Christine Negroni, in a new book, The Crash Detectives, published by Penguin.

In her book Negroni writes that she was disturbed by a discovery made during her reporting that “for all the apparent effort to try to solve the mystery of MH370, authorities may not be as committed to finding out what went wrong.”

Negroni discloses the impotence of the internal auditors at Malaysia Airlines. This disclosure goes to one of the most fundamental questions: Why was Flight MH370 not equipped to report its position and condition more frequently than at half-hour intervals?

A year before the flight vanished, in April 2013, company auditors discovered that the airline was not compliant with its own rules for the frequency of essential information sent in regular bursts of data via satellite from its fleet of long-haul airliners to the airline’s headquarters in Kuala Lumpur. Moreover, the auditors pointed out that because of this lapse, by law the airplanes—including Flight MH370—should not have been cleared to fly.

According to the company rules, the airline was required to track its airplanes “throughout all phases of the flight to ensure that the flight is following its prescribed route, without unplanned deviation, diversion or delay.”

Being the dogged reporter that she is, Negroni discovered that the acting transport minister when MH370 was lost, Hishammuddin Hussein, knew about this audit but never revealed it when he was frequently questioned by reporters about the obvious gaps in tracking.

“The airline was informed by its own staff that it was unable to comply with tracking regulations,” Negroni told me. “So Malaysia knew it was deficient and did nothing. I don’t think any airline would roll the dice with that now.”

Negroni saw copies of the auditors’ reports but they did not say what the required frequency of messages had been and, she told me, neither the airline nor the Civil Aviation department responded to frequent requests from her for that information. She did discover that all the airline’s long haul flights now transmit those messages at five minute intervals.

Two days after the flight disappeared Hussein told a press conference in Kuala Lumpur “we have nothing to hide.”

All journalists who pursue cover-ups know that one of the hardest challenges is to know what is being covered up. Then there is the issue of motive—why is it being covered up, and by whom?

When it comes to aviation, Malaysia presents an illusion of governance. It has institutions that by name imply international standards of regulatory vigilance—a Ministry of Transport and a Department of Civil Aviation to supervise airlines, for example, and Malaysia Airlines itself has a Department of Quality Assurance and Regulatory Affairs (that’s who the auditors reported to). It’s when you come to question who gets appointed to these bodies and who ensures that they work as they should that it begins to look like a Potemkin charade.

Pursuing the truth in Malaysia, as Negroni did, immediately becomes ensnared in the country’s scandal-riddled politics. The prime minister, Najib Razak, has failed to explain who looted billions of dollars from a sovereign wealth fund and how nearly $700 million from that fund turned up in one of his own bank accounts. The culture that allowed this level of corruption to continue with impunity was described in an editorial in the Financial Times: “Mr Najib’s party, United Malays National Organization, has ruled the country without interruption for six decades with a mix of cash hand-outs and suppression of political opponents.”

Cronyism permeates all the national institutions, including those that for years have had oversight of commercial aviation. Inevitably, when a crisis as serious as the loss of MH370 occurs it exposes the cost of having political placemen, rather than professionals, in key positions. For example, CNN’s Richard Quest, the author of another book about MH370, interviewed Hussein more than a year after the disaster and reported: “…there is an astonishing gap in the minister’s perception of what happened and the rest of the world’s.”

Well, that’s one way of looking at it. But in a regime where corruption is endemic, ascribing the failure to manage a crisis to one man’s self-denial would seem too forgiving. To all intents and purposes the Malaysian government controls and owns the investigation into Flight MH370. Before the event that government was unused to any sustained level of public scrutiny and clearly to this day remains opposed to accepting accountability.

To begin with, the internal hierarchy of the investigation is difficult to fathom. Politically the three most involved nations, and those financing the search, are Malaysia, China (152 of the passengers were Chinese), and Australia—because the crash site is closest to Australia and because of Australia’s expertise in air crash investigations.

However, a more comprehensive tally of involved parties reveals a burgeoning bureaucracy and a forest of acronyms.

At the head is the Malaysian Ministry of Transport’s Safety Investigation Team for MH370. In addition, by November 2014, there were five international partners providing specific skills: Boeing; Rolls Royce (maker of the airplane’s engines); Thales (a European aerospace conglomerate); the U.S. National Transportation Safety Board; and Australia’s equivalent of the NTSB, the Australian Transport Safety Bureau.

Since then more groups have been listed as involved—the Australian Defence Science and Technology Group; the French equivalent of the NTSB, the Bureau d’Enquetes et d’Analyses, BEA; Great Britain’s Air Accident Investigation Branch; Inmarsat, the British satellite operator that identified the most likely search area; and Honeywell, the avionics company that provides systems to Boeing.

One part of the investigation appears to have grown into a minor industry, requiring technology that is not normally part of a crash inquiry: trying to pin exactly where over the southern Indian Ocean the flight ended. This is a wholly Australian-created gaggle of scientists led by the Search Strategy Working Group and the Flight Path Reconstruction Group, and includes a company called Global Environmental Modelling Systems, GEMS; the Australia, Commonwealth Science and Industrial Research Organization, CSIRO; Geoscience Australia; and the Australian National University.

Having so many players involved must create a nightmare of an organizational chart. Who reports to whom? Who is in charge of what? When it comes to issues of transparency the ATSB has been put in the hot seat—they issue weekly updates on the search but they are not empowered to address such basic questions as, Why has the recovery of the debris washing up on beaches in the western Indian Ocean been left to amateurs? Why has not one cent been allocated to a methodical search there while $180 million has been spent on an undersea search that is so far fruitless?

Reading between the lines of ATSB news releases it’s obvious that the Australians are constrained by guidelines issued from Kuala Lumpur, guidelines intended to deflect or ignore any light being shed on the overall credibility, integrity, and competence of the investigation. The ATSB tries its best but although it is transparent about its own investigations into Australian accidents, in this case it limits its responses to reporters to technical details of the deep sea search and analysis of the debris.

Of course, one result of an egregiously opaque regime like this one is that it allows a continuing fever of crazy speculation to thrive and multiply, ranging from alien intervention to sinister plots involving intelligence agencies.

In an attempt to counter the most lunatic theories 15 current and retired aerospace and communications professionals set up a body called the MH370 Independent Group. But having swatted away some noisome parties and issued some rather prolix technical documents they have recently gone dormant. They have probably succumbed to the kind of exhaustion that overtook those tasked to watch the Kremlin in the darkest days of the Cold War. Indeed, circling the MH370 investigation to probe it for clues is a new kind of Kremlinology, driven by a sense of duty but mostly ending in futility.

The people who suffer most from the Malaysian cover-up are the families of the passengers and crew. In September the High Court in Kuala Lumpur allowed an application for a general discovery document to go ahead, brought by 76 family members (66 Chinese, eight Indians, and two Americans). The families are asking for the release of 37 documents, including communications, correspondence, documents, notes, and investigators’ reports. The civil suit names those holding the documents as the Malaysian Airlines System, the Director General of the Department of Civil Aviation, the Royal Malaysian Air Force, and the government.

This is one of a number of occasions when the Malaysian judiciary has shown a rare independence from the political regime. (As a reprisal, the removal of judges by the government is a risk.)

The outcome of this suit remains to be seen.

The time has surely arrived when the responsibility for the investigation can no longer be left to the Malaysians. Other parties to the investigation with reputations for integrity to uphold, like the crash investigators from the U.S., Britain, France, and Australia, as well as Boeing, should end this farrago. After all this time, they cannot any longer hide behind the defense that the investigation is continuing and, calling up the lawyers, assert that as long as it is they are obligated not to comment.

It ought to be straightforward to distinguish between what is known and what remains unknown about what happened on that night in March 2014. That would be a start toward transparency. It is not a mark of failure to admit that much remains unknown or even unknowable, at least until more substantial evidence, like the flight data recorders, is discovered. And even if it is not, and in the end the mystery remains a mystery, there must still be accountability for the way the investigation has so far been handled. There surely must be no doubt now that the investigation of Flight MH370 is unfit for purpose.

 

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The Yuan Is In The Basket!


…and the beginning of the end for the Dollar?


RT

Chinese yuan becomes IMF reserve currency, first new addition since ‘99

yuan

http://on.rt.com/7qs8

The Chinese yuan has been added to the IMF reserve basket, becoming the first currency to be added to the list since the emergence of the euro in 1999.

The official entry was made Saturday, bringing to a close, at least partially, Beijing’s years-long struggle for international acceptance on the sort of level enjoyed by the US dollar. The currency now joins the big four: the US dollar, the euro, the yen, and the British pound.

The decision means the Chinese yuan will now be used as one of the International Monetary Fund’s lending currencies in times of emergency economic bailouts. This sort of internationalization is in line with China’s wish for increased legitimacy of its currency.

The move is also evidence of China’s growing role as a power to challenge the global economic dominance of the United States.

The limitations China places on its own markets, however, have themselves been to blame for this delayed outcome.

“It’s an irreversible path towards opening up, integrating into the global economy and playing the economic game by the rules,” proclaimed IMF Managing Director Christine Lagarde.

READ MORE: Putin’s gift to Xi causes Russian ice cream craze in China

Her assurance comes as critics say the move is no more than symbolic. Many of them accuse Beijing of exchange rate manipulations and cross-border capital movements.

US Treasury Secretary Jack Lew said China is still “quite a ways” away from the status of a true global reserve currency.

Nevertheless, the IMF said it recognizes the “enormous” changes made over the past decade to bring yuan out into the open.

On Friday, the IMF fixed the relative amounts of the five main currencies in its basket for five years, based on the exchange rate of each one over the last three months.

 

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Black Moon Rising Deutsche Bank Dropping…


…and its the Islamic new year on October 02

A subscriber just sent me a note stating that there is a “Black Moon” tonight which is the second new moon in a calendar month. It’s supposed to be a time of “great awakening and clarity” for those who believe in that kind of stuff (which those that pull the strings of our monetary system surely do!)
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Oooo…
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Let’s just pile that on the heap of other things changing in our world at this moment in time!
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The cat is out of the bag with Deutsche Bank. 100%. Anybody and everybody that is “in the know” is trying to get their capital OUT of DB. There are rumors that DB has shut that window for the big money as there is not enough capital left and they are waiting on a bailout this weekend.
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Given that Germany and the United States WANT the system to crash – a bailout will not happen on an official level. They may try to orchestrate an internal bailout using Private Money (think Rothschilds) but that kind of news would open the flood gates to the Public and NO BANK can withstand a Bank Run…
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Remember this???

It’s A Wonderful Life Bank Run


We are in the “End Days” for our un-backed Global Fiat Monetary System and the majority of the world has no idea what’s about to happen. The Fed Boston told us years ago what was going to happen and why.
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It’s ALL laid out in the Road to Roota documents out of the Fed’s Archives.
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This is the most important video I’ve ever made and you should pass it on and explain it to your friends and family as it will help them get their hands around the chaos that’s about to hit:
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Discovering the Road to Roota by Bix Weir
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My advise today – pull all your cash out of the bank, hang on tightly to your PHYSICAL gold, silver and Bitcoin (yes physical bitcoin!), do your Big Shopping for the weekend and buckle down.
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Note: I am not pedaling “fear porn” here. I am showing you that this is a PLANNED EVENT that was put in motion in the early 1970’s by Alan Greenspan’s first computer programs. These programs created the world’s first electronic monetary system and ensured that it could, and would, all be destroyed in the end with a click of a mouse.
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We are in for a wild ride!
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May the Road you choose be the Right Road.
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Bix Weir

 

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The Central Bank Power Shift from West to East, Game of Thrones Style


Nomi Prins

 

(This piece is a version of my article appearing in Jim Rickard’s Strategic Intelligence newsletter this month. It gives you an idea of what’s to come in Artisans of Money (abent the Game of Thrones comp.)) Enjoy.

“When you play the Game of Thrones, you win or you die.” – Cersei Lannister

I was late to Season 6 of Game of Thrones (while buried in writing my next book Artisans of Money.)  If you have never watched Game of Thrones, a) do so immediately and b) here’s the nutshell. The show, based on the book series, depicts a land in which several kingdoms are duking it out for the Iron Throne, the symbol of absolute power.  Think the board game “Risk” except with dragons, magic, an army of the dead, and lots of blood.

While I was watching, I couldn’t help noticing that its backdrop is a dead ringer for central banks’ strategy.  The Fed clings to status quo. Other central banks are vying to knock it down, or at least loosen its grip on them. But the Fed behaves as if it has no idea there are other powerful central banks that want to grab and harness its power. It carries on refusing to acknowledge that there may come a time, sooner rather than later, where its power is attacked.

The ramifications of such an attack will impact the standing of the U.S. in the world.  The Fed can carry on being oblivious, but Game of Thrones illustrates the struggles playing out right now.

In the Game of Thrones world, emerging queen, Daenerys Targaryen is biding her time and building her army. She is creating alliances in Meereen, an ancient country in the East (her awesome fire-breathing dragons in tow).  She’s playing the long game, strategically planning when to elevate the fight against the ruling queen in the West, Cersei Lannister.

The most important part of Daenerys’ story is not that she is determined to rule the seven kingdoms and take possession of the Iron Throne. It’s that she knows she can’t do it alone. So she aligns reinforcements, smaller power bases.

These smaller partners may or may not have allegiance to her based on the legitimacy of her claim to power — but they have all been wronged by the Lannister’s. This family, currently led by Cersei Lannister, is extremely wealthy and powerful, but hasn’t managed to lead the western kingdom, Westeros, to wealth and power. In fact, the people in Westeros are becoming increasingly frustrated and scared of their rulers.  (You see the similarities?)

Not only has Cersei managed to create enemies out of the smaller families that surround her, she recently massacred a large portion of the city she rules to protect her own interests. She is losing her power domestically and globally, but continues to think and act as if she will rule forever. We’ll see what happens next season.

The Fed’s State

In this situation, the Lannisters are representing the U.S. and the Fed specifically. The Fed remains in denial about the true state of the domestic and global economies. In its realm of hubris, it has no idea of the steps other central banks are taking, or want to take, to reduce their exposure and reliance on not just the U.S. dollar, but on U.S. political, monetary, financial and regulatory policy in general.

Case in point. After the Dow dropped 250 points on September 9th, on September 12th, Asian markets nose-dived on the possibility that the Fed might raise rates (though it said nothing of the sort — the “rate tease” is a manifestation of deliberate Fed obfuscation and media boredom).  This is a pattern that plays out every month, with varying degrees of intensity, or volatility.

Enter three of the Fed’s giants, led by Lael Brainnard. During her speech at the Chicago Council on Global Affairs, she backtracked on any tightening talk saying, “the case to tighten policy preemptively is less compelling.”

That calmed markets. That day. It reminded them nothing is changing any time soon. U.S. stock markets rejoiced. Bubble-baiters bought. The Dow soared 1.3%. Elsewhere in the world though, no one wants their market whipsawed by Fed speak.  Certainly not the People’s Bank of China.

The PBoC’s approach has been to send out anti-Fed policy sound-bites through elite officials. These clips are picked up by national and international media and then spread to the general public.
On September 13th, for instance, Yi Gang, a deputy governor from the PBoC, told a central banking conference in Vienna, “We’re still very cautious on this (zero-interest rate) monetary policy.” He warned, “We have to be very careful and look at the limitations and uncertainty of a zero-interest rate policy, because in China we still have a decent growth rate.” What he basically said was “the Fed’s policy is a joke and we’re not laughing.” (I’ll have more quotes like this in Artisans of Money.)

In the Game of Monetary Policy, the Fed whacked the idea of “free markets” in the face. (For the record, I don’t believe they ever existed, because the theoretical implication is full information transparency and equal access, and that’s just not been the reality – ever.) The ECB chucked an arrow in its heart. The BOJ sliced off its head. Markets are sustained artificially. The Fed has become, as you’ll read more about in my book, the chief Artisan of Money. Central banks are bankrupt of new ideas to keep the system afloat.

Or are they? While the Fed cut rates to zero, bloated its book to $4.5 trillion, and pressed the rest of the developed world to follow, global skepticism bubbled over. First the Chinese, then Latin America. Then the IMF. Then the Chinese again. Central bank elite took turns bashing Fed policy, mostly under media radar,  and calling for an alternative to the U.S. dollar associated with it. This is the equivalent of financial warfare. The U.S. and Fed struck first.  It will take time, but the blowback is in motion.

The U.S. dollar was attached to a financial crisis fueled by big bank recklessness and Fed apathy, followed by a Fed policy that devalued money itself.  Many other countries had no choice but to follow the Fed’s lead and directives, but that doesn’t mean they were happy about it. As in Game of Thrones, the smart choice is to forge strategic alliances with other houses or be slaughtered.

The IMF is one of the houses that will be a crucial player in the new power constructs.

The IMF Power Play

The IMF, created by the U.S. and Europe, has been seeking a broader role in the monetary politics wars. For all the media dissection of every word Janet Yellen utters about rates, the IMF knows the Fed is lost. Its policy hasn’t worked. The Fed ignored this and raised rates last December, despite warnings from managing director, Christine Lagarde. Market punishment was swift and the damage was global. The move caused renewed fear and anger from nations that had already suffered at the hands of the Fed and the big U.S. banks it sustains.

The U.S. has the largest voting block within the IMF, which is located blocks away from the White House, but IMF leadership understands how the winds of change are blowing. If the BRICS and a few more developed states were to act as a voting block (or increase their voting power, as they’re attempting), they could potentially dislodge the strong influence that the U.S. has within the IMF.

It was the U.S. voting block that gave Lagarde her job in 2011, and allowed Europe to maintain its 70-year stronghold on the IMF. As a result, Lagarde’s opposition, Augustin Carstens, head of the Central Bank of Mexico, lost that country’s first bid for the role.

In Game of Thrones, this is the story of Tyrion Lannister. He’s Cersei’s brother, but has been loudly critical of her leadership. Originally, he tried to guide his sister towards better practices. She didn’t listen to him. Now, he has joined forces with Daenerys and is helping her rise to power. His loyal alliance with Daenerys has led him to ascend the ranks again, from another angle. He is well-connected throughout the seven kingdoms. He is strategic. He knows the strengths and weaknesses of all the players. He is formidable despite his size (or in central bank terms, the volume of reserves).

This is the Fed and the IMF.  That entity was spawned to augment U.S. central bank and government power in the wake of WWII. Powerful, but not as powerful. Since the financial crisis, the IMF has been strategically chipping away at the Fed’s power base. Like the PBoC, the IMF has been both criticizing and warning about the impact of Fed policy on other nations. By disparaging the Fed, it is amassing its own power. Its international influence has never been higher.

Under Lagarde, the IMF is doing more than funding development projects and supplying overall currency directives to the world, as was its original mandate.  It is reconstructing new alliances amongst countries not involved in its creation. In doing so, it is building its own power by elevating their allies.

On October 1, for the first time in 43 years, the IMF will add China’s currency, the Renminbi (denominated in yuan), into its Special Drawing Rights basket (SDR).  In doing so, the IMF, at the zenith of its own power, has tipped the scales away from the U.S. and the Bretton Woods crew that created the SDR in 1969.  The expanding SDR basket is as much a political power play as it is about increasing the number of reserve currencies for central banks for financial purposes.

The SDR Factor

China’s power ambitions go well beyond the SDR. They include international diplomacy, sustainable energy dominance, and becoming a focal point for alliances through Europe,  Russia and the ASEAN states.  The ASEAN–China Free Trade Area (ACFTA) is a prime example of why the SDR for China and the region is important as China expands its influence. So are new trade and financial pacts with Russia where the yuan and ruble exchange in deals without involving U.S. dollars. In addition, Russia and China are both starting to amass gold which could return as the 6th component of the SDR someday.

When the SDR was created as a global reserve asset, it was to supplement the international supply of gold and the U.S. dollar. Once the gold standard was demolished and countries began accumulating international reserves, there was less of a need for this global reserve asset.  It lay dormant, along with the power of the IMF. But in the wake of the financial crisis, it sprang back to life as another liquidity source for member countries.  The IMF sprang back to power as well.

The SDR was initially defined relative to gold (0.888671 grams of fine gold — the equivalent of one U.S. dollar.) After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a weighted basket of four currencies — the U.S. dollar, euro, Japanese yen, and pound sterling.

In 2015, when the yuan was approved, a new weighting formula was adopted. It assigns equal shares to the currency issuer’s exports plus a composite financial indicator. That means the more prevalent the currency in the world, the bigger its weight. If more Yuan are used in the world, its position in the SDR grows. In another crisis, it could take on the U.S. dollar and Euro, and by extension the Fed.

The SDR weight of the yuan is just 10.92 percent compared to 41.73 percent for the U.S. dollar and 10.92 percent for the Euro.1  That’s not a bad opening gambit. The next official weights review is in September 30, 2021. But in a crisis, there is latitude for this to happen much sooner.

As China continues to play host to global events (Olympics, G20, etc.) it also is in pursuit of greater regional influence. With the largest economy, and now showing its capability as having a globally recognized reserve currency, China is adding another layer of strength to its position.  While the associated confidence measure will not be the death of the dollar, it indicates that the dollar is not the only option to turn to in times of panic, or increased trade or financial growth.  The intrinsic power of that position attacks not only the dollar but the overall power of the U.S.

Competing Central Bank Kingdoms and their Power Bases

Currencies reflect both political and economic clout. Even if SDR’s themselves aren’t that voluminous yet, the shift in the make-up is meaningful. The Fed has already lost ground in the process. The IMF and PBoC have gained it. In the middle, there is an increasingly shaky, EU.

The ECB was established after the creation of the Euro in 1998 to oversee other member European central banks. It has more power than any of them because it sets rates for the EU, which dictates the cost of their money and how it flows.

Former Goldman Sachs executive and former Bank of Italy Governor, Mario Draghi is the current President of the ECB. He has followed the Fed’s policy to a letter — despite grumblings from other EU power brokers (and reality) that negative interest rates have solved nothing and instead aided to the fractiousness of the EU experiment itself.  In 2012, facing an acute European debt crisis, he promised, “the ECB is ready to do whatever it takes to preserve the Euro.” The Euro has fallen precipitously since.

If Draghi’s words are weak, his actions are weaker. The ECB is offering to pay banks that borrow money from it, plus, giving them 85 billion Euro each month through its ongoing QE program to purchase their debt. From a battleground standpoint, that smacks of desperation.

The ECB just announced it would give banks three years to write off bad loans — meaning they have lots of bad loans. Deutsche Bank is just one mega example. The ECB has failed to mitigate any risk. Its alliance with the Fed hasn’t helped Draghi build his power, just retain it, and it certainly hasn’t helped the EU as a whole.

Within the wider European Area, the Bank of England, under governor Mark Carney, retains legacy power. That power has waned though, and increasingly so since the Brexit vote. If Britain leaves the EU for real, then the Bank of England’s actions are less relevant to the EU.  This elevates the power of the ECB and the Euro. But as noted, those are already weak to begin with.

If the Bank of England follows the course that Brexit has laid out, the SDR could see a further reduction of the pound weighting, and Euro weighting, which would push up the weighting of the yuan by sheer math. This shift is symbolic now, but power can start in that realm.

The Bank of Japan, before governor Haruhiko Kuroda took the helm, had run-ins with the Japanese minister of finance over its negative rate policy and bond-buying programs. The Japanese stock market lies in a constant state of tension. Because the BOJ is on the same monetary policy plane as the Fed, Japan’s markets have similarly become used to monetary adrenalin shots. Globally, this has led capital, seeking a fix in times of instability, to Japan and to the yen.

But lately Japan’s markets have also been reacting more viciously whenever the possibility of a Fed tightening hits, or lack of fresh BOJ easing measures, emerge.  The alliance of the BOJ and PBoC has not been fleshed out yet, but I believe that’s only a matter of time. Old fights might be discarded if economic or financial survival is imperiled, which is what these sharper market moves foreshadow. (There have already been new trade and lending deals emerging between the two.)

People’s Bank of China: Dragon Rising

This dragon’s about to take flight. The People’s Bank of China governor is Zhou Xiaochuan, who has held that post longer than any other G20 central bank leader. The PBoC holds more U.S. treasuries than any other central bank and is ready for battle. Zhou understands global paradigm shifts. He’s the only Chinese person on the G30 and on the board of the BIS.  He’s been the leading figure pushing the yuan into the SDR basket by slowly allowing it to float with the market, despite allegations of ongoing currency manipulation. He has a good personal relationship with Lagarde.

As China’s position has grown, so has Zhou’s voice, albeit without giving too much away, (something for which the U.S. has been critical.) Keeping some card close to his chest is a strategy. “The central bank has a clear and strong desire to improve its communication with the public and market,” he told Caixin, a major publication in China. “At the same time, it’s not easy to do a good job in communication.”

China wants to keep internal inflation down. This is why it would prefer a strong, not a weak currency. This negates the charge that China is trying to devalue or manipulate the yuan for better trade profits perpetuated by Donald Trump and Hillary Clinton. This is true to a minor extent due to economic pressures, but barely.  (It was, after all, the Ming Dynasty back in 1455 that ended the printing of paper money in order to control inflation.)

The stronger the yuan, and the more prevalent it is globally, the more the PBoC challenges the Fed and the more control the China bloc gains over the U.S. In Chinese culture and the Game of Thrones, the Dragon symbolizes life and expansion. (Side note: I confess to having a Dragon obsession.) It’s a fitting symbol for the rising power of China and the yuan.

The Current Central Bank Hierarchy

The Fed is the world’s most powerful central bank. The ECB is a close second. Third, is the Bank of Japan. Fourth, for now, is the People’s Bank of China.  That will change.

The PBoC has crafted its own techniques to support China’s economy through monetary policy. Although, at the recent G20 meeting, Xi Jianping told reporters that the age of monetary and fiscal stimulation is over and new strategies must arise, he did so by claiming the global growth mantel. As he said, “In light of the pronounced issue of lackluster global economic growth, we need to innovate our macroeconomic policies and effectively combine fiscal and monetary policies with structural reform policies.”

The Fed’s power is resting on the dollar’s dominance. That dominance, in turn, was established by political design based on military prowess following two world wars — which were financed by elite U.S. banks.

The U.S. Treasury market is the world’s largest and most liquid. Central banks holding U.S. dollars are really holding U.S. Treasuries.  They are lending the U.S. money, and we pay them for it with interest. But when rates are zero, we are paying them nothing to lend us more money. This is why growing debt is so easy under current Fed policy.

Just like Cersei Lannister, the Fed thinks it will retain its power simply because it currently has power, even though everyone is wary of her and the house she represents. In contrast, Daenerys is not so disliked. Like China, she is clever and building alliances. They are playing the long game patiently and strategically.

Bad Bad Contagion

The Fed re-assembled in Washington on September 20-21, after a mini-break. Prior to that, they were in “black out” mode. During that time, I discovered a new report while sleuthing around the Fed’s website.  It’s about 45 pages of mathematical equations, beyond which lies some scary thoughts.

In this September 2016 report, to which main stream reporters paid none to minimal attention, Fed economist, Juan M. Londono addresses the notion of “contagion.” The Fed’s own research team is ahead of its management. Bad contagion, Londono notes, is the “confluence of unexpectedly low stock returns across several international stock markets simultaneously.” His findings revealed that, “episodes of bad contagion are followed by significant and meaningful deteriorations to financial stability indicators.”

If stock markets crumble, so do economies. The elites running central banks in those economies don’t want that happening on their watch. The only way to avoid the collapse is to distance themselves from the Fed and the dollar. Even David Reifschneider, deputy director of research for the Fed, noted, “there could be circumstances in the future in which the ability of the FOMC to provide the desired degree of accommodation using these tools would be strained.” (Translation: The Fed is running out of bullets,. Or losing its power over other central banks.)

This doesn’t mean the dollar will tank like a stone immediately as some people predict — the power base that supports it won’t go down without a fight. (Nor will the Lannister’s—Season 7 will be bloody.)  But once the fight starts in earnest, it will accelerate off its own momentum.

Stock markets have reached historic highs on a steady diet of fabricated money. Contagion is real, because the associated polices are interdependent. Having gone down with the U.S. economic ship in 2008, why would any country want to endure that again?

During the past eight years, the Fed has led a global race to the bottom of responsible monetary policy while exuding bi-polar verbiage as to its effectiveness. This blind continuity of Fed policy is the clearest indication of its lack of success. The inability to articulate an exit strategy is another.

The third, is the denial that other central banks and countries want to distance themselves from the Fed. For the moment, the leader in that regard is the PBoC. The Dragon is re-entering the fight now that the stakes are highest. The swords are drawn. The battles of the East and West are on.


Nomi Prins is a best-selling author and speaker

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The Cracks in Malaysia’s Political Order Begin to Show


Stratfor

Prime Minister Najib Razak will remain in his position until the ruling coalition decides he has become too much of a political liability to do so. But his opponents are nonetheless preparing for the next election, whenever it may be. (NICKY LOH/Getty Images)


Forecast

  • Neither Malaysia’s opposition nor its upcoming mass anti-government protests will supplant Prime Minister Najib Razak before the next general election.
  • Longtime Malaysian leader Mahathir Mohamad’s new party will struggle to gain traction, but it may still tip the electoral balance.
  • Growing restlessness in Malaysia’s outlying states could expose new fault lines in the country’s long-established political order. 

Analysis

As rumors circulate that Malaysia’s next general election may be moved up to early next year, the country’s next political showdown is beginning to take shape. Over the past two years, Malaysian Prime Minister Najib Razak has been implicated in a scandal in which he allegedly looted nearly a billion dollars from state investment fund 1MDB. Najib is widely considered guilty at this point, and the scandal has sparked mass protests, purges in his ruling United Malays National Organization (UMNO) party and international scrutiny. But it has yet to seriously threaten him. Until the UMNO-led Barisan Nasional coalition sees the crisis as souring its electoral prospects, whether by alienating voters or by undermining the power of its patronage, the teflon prime minister will remain relatively secure in his position.

Still, for UMNO, which has ruled Malaysia every year since the country gained its independence, several challenges loom on the horizon. Combined with the country’s lingering economic woes and the continued 1MDB fallout, those challenges could expose new cracks in the political order and stability that have underpinned Malaysia’s rise to global prominence.

Staying Power

Despite his involvement in the 1MDB affair, Malaysia’s prime minister has managed to maintain his power over the country and the ruling party. As the scandal has unfolded, most UMNO members have closed ranks around Najib, and the party’s coalition partners have stayed put. Party members who have questioned the prime minister (including former Deputy Prime Minister Muhyiddin Yassin) or tried to investigate him (as Najib’s former attorney general did) have been purged and replaced with loyalists who absolve him of any wrongdoing. The fractured opposition, meanwhile, is simply too weak to oust him through a no-confidence vote — as it tried and failed to do a year ago. The corruption scandal has also had little effect on voters; Barisan Nasional coalition partners won each of the state and parliament by-elections held over the past year. The reason for its longevity is simple: Patronage remains the dominant tool of political power in Malaysia, and Najib’s administration controls the purse strings. A half-century of UMNO rule, moreover, has allowed the party to redraw political districts to its favor, something it is trying to do again in the electorally critical Selangor state.

Even so, if the scandal starts to hurt the ruling coalition’s electoral prospects, UMNO may be compelled to devise an exit for Najib before the next election to save him from prosecution and the party from an unprecedented defeat. The vote does not have to take place until late 2018, but over the past month, UMNO has reportedly intensified discussions on whether to call snap elections as soon as early 2017. Regardless, the possibility is accelerating realignments ahead of the next vote — among both the opposition and Barisan Nasional’s nervous coalition partners.

Enter Bersatu

The biggest complication for UMNO heading into the next election will be the newly formed Parti Pribumi Bersatu Malaysia, or Bersatu for short. Launched in August, Bersatu was established by longtime Malaysian leader and former Prime Minister Mahathir Mohamad, who also serves as the party’s chair. Muhyiddin is its president. The 91-year-old Mahathir has been trying to oust Najib, his former protege, for much of the past year, but his efforts have not gained much traction. His latest attempt to unseat UMNO is also unlikely to succeed on its own. Bersatu lacks the grassroots support and party machinery necessary to drive turnout, and Najib has been chipping away at Mahathir’s business interests, giving him less weight to throw around.

As part of an opposition alliance, however, the new party could play a decisive role in the next election. A similar opposition coalition nearly unseated Barisan Nasional in the 2013 general election and cost it the popular vote; Barisan Nasional retained a majority in parliament in that election mostly because of gerrymandering. During the week of Sept. 5, Mahathir was seen shaking hands with Anwar Ibrahim, a charismatic, reform-minded opposition leader. The incident was a boon for Bersatu, which found in Anwar an unlikely source of legitimacy — Mahathir ousted him in 1998 and then had him jailed on politically motivated charges.

By admitting only ethnic Malays into its membership, Bersatu has positioned itself as a natural landing place for Malay nationalist voters disenchanted with UMNO’s scandals but unsure of other opposition parties’ commitment to protecting their interests. UMNO’s stranglehold on the “Bumiputera” (the umbrella term for ethnic Malays and indigenous groups) vote is a perennial obstacle for the opposition. The party has long styled itself as safeguarding the interests of the Bumiputera against other ethnicities in Malaysia, stoking fears that the country’s economically powerful Chinese and Indian populations will try to do away with pro-Malay affirmative action policies. (Mahathir himself quietly sought to roll back some of the affirmative actions near the end of his term, to no avail.)

In the 2008 and 2013 general elections, opposition factions overcame their deep-seated differences and united behind ethnic Malay figures such as Anwar to appeal to Malay voters. But Anwar has since been jailed again, and the alliance has largely collapsed amid infighting and ethnic rivalries. For instance, the Pan-Malaysian Islamic Party (PAS) — the opposition Islamist party dominant in northern peninsular Malaysia — severed ties with a former ally, the Democratic Action Party (DAP) in 2015 and has yet to commit to the new coalition, possibly positioning itself as kingmaker in the next general election. But considering that the opposition won the popular vote in 2013, Bersatu theoretically would not need to peel off much support from the ruling coalition to swing the next election. Bersatu’s best bet may be to focus on splitting the ethnic Malay vote in key races rather than on winning seats for itself, allowing other opposition parties to prevail.

First, however, the opposition parties will need to find a workable marriage of convenience. Though Anwar has tentatively endorsed Bersatu, the main opposition parties do not trust Mahathir. After all, he was the main architect of the system that has made it so difficult to dislodge Najib, and his own rise was fueled by exploiting Malay and indigenous fears of, for example, “the Chinese tsunami.” And several opposition leaders — from Anwar to members of the DAP — were jailed on politically motivated charges during his tenure. Even if Barisan Nasional does not call snap elections, the opposition has less than two years to find a way to cooperate and come to terms on sticking points such as seat allocations and conflicting policies. So far, they have not made much progress. The DAP has been reluctant to follow Anwar’s lead by accepting Mahathir’s olive branch, and the PAS (which itself is facing internal splits between Islamist hard-liners and a breakaway faction that supports the opposition alliance) remains a wildcard.

A Spotlight on the Scandal

Disorganized though it may be, the opposition will still benefit from the activities of Bersih, or the Coalition for Clean Elections, an activist group that is agitating for Najib’s ouster. Next month, the group plans to launch a nationwide roadshow to spread awareness of the 1MDB scandal in Barisan Nasional-controlled areas of Malaysia — an important endeavor given the government’s censorship of news related to the case. The roadshow will culminate in mass protests in Kuala Lumpur and other cities on Nov. 19. Although Bersih is not formally aligned with any of the opposition parties and is wary of Mahathir’s legacy, its efforts will serve the needs of the opposition, especially if elections are on the horizon.

Though protest turnout promises to be high — the last Bersih protest in 2015 drew some 300,000 participants over the course of 30 hours — the demonstration itself will not be designed to overthrow Najib. Mass protests in Malaysia are not typically the go-for-broke affairs seen, for example, in Thailand, where protesters occupy urban areas for prolonged periods of time to force a confrontation and delegitimize the government. Furthermore, any attempt to lock down Kuala Lumpur would spark ethnically tinged counter-protests that would raise the risk of violence. (Last year’s UMNO-funded counter-rallies, for instance, took on a noticeable anti-Chinese bent, and police narrowly prevented party supporters from storming a prominent ethnic Chinese business district in the capital.) The opposition does not want to validate fears among ethnic Malays that UMNO’s defeat would throw off the tenuous ethnic balance that the party’s rule has helped preserve. Instead, with the upcoming elections in mind, the protest organizers will aim primarily to put the focus of the next race squarely on the 1MDB affair and turn the vote into a referendum on Najib himself. The more it succeeds, the less the opposition’s internal fractures will matter.

Cracks at the Fringes

Along with its other political concerns, Najib’s government has to contend with growing restlessness in the country’s outlying, semi-autonomous states. Lacking geographical or ethnic coherence, Malaysia’s solidarity has long relied on shrewd, inclusive policymaking and plentiful resource wealth to grease any friction. The farther from the capital one gets, the more important the flows of revenue and patronage from the government become — whether in the form of large-scale infrastructure projects, extraction licenses or cash transfers.

But over the past eight years, several outlying states have increasingly tried to take advantage of Barisan Nasional’s weaknesses to push for a greater devolution of powers from the capital. Sarawak, for example, has been pressing Kuala Lumpur for more authority and oil revenues. In addition, protests erupted in that state and neighboring Sabah — both of which were critical to Barisan Nasional’s victory in the 2013 election — in September, demanding greater autonomy and a referendum on their status in Malaysia. Meanwhile, the crown prince of wealthy Johor state has suggested that the state may consider leaving the federation — as its southern neighbor, Singapore, did in 1963 — if the central government does not honor agreements on issues such as water and land rights. And the PAS, based in the northern Kelantan state, has been flirting with supporting Barisan Nasional in exchange for considering a bill to increase the power of regional Sharia courts, a move that threatens to spark ethnic backlash on both sides of the aisle.

At this point, none of these nascent movements presages upheaval that would threaten the integrity of the Malay Federation, or even major defections away from Barisan Nasional. Johor’s secession threats are particularly hollow, and Barisan Nasional’s dominance in an April state election in Sarawak demonstrated that local issues will play as great a role in the next election as will turbulence in the capital. Still, the trend reveals the lines along which the UMNO-led political order could begin to crack in the face of prolonged political uncertainty — particularly if persistent economic problems and low oil prices pinch patronage flows — with or without Najib.

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Tick Tock…The World’s Most Dangerous Bank Is Falling To Pieces!!


Deutsche Bank Collapsing in Real Time!!

Don’t you miss those days of the “Green Shoots”?!
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As planned, almost to the day, the destruction of the Global Derivative Complex is happening as banks and hedge funds are trying to get their capital OUT of the world’s largest Derivative Holder – Deutsche Bank
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Some Deutsche Bank Clients Reduce Collateral on Trades
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“A number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender, a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank.” END

The “Run” on the derivative banks has now officially begun!

Bix Weir

http://www.RoadtoRoota.com


LATEST !

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Emergency Update: Deutsche Bank Plunges as Funds Reportedly Start Yanking $$; Get Out of Financials

Mike Larson here with an emergency update. Shares of Deutsche Bank (DB) plunged more than 6.7% after reports circulated that some funds are starting to yank money out of the German bank.

Specifically, Bloomberg reported that several hedge funds that clear derivatives with DB are pulling excess money from the bank and moving it elsewhere. They include names like Millennium Partners, Capula Investment Management, and Rokos Capital Management. – Money And Markets


Insider “Deutsche Bank COLLAPSE Tomorrow – Friday 9-30-2016” – Will Wipe out banking system worldwide!

German Bank insiders are confirming to SuperStation95 that Germany’s largest, Bank, Deutsche Bank” will “colapse” tomorrow, Friday, September 30, 2016.  The German government has no plans to bail out the bank and its demise could wipe out Banks in the US and other countries worldwide!

According to the insider:

System downfall tomorrow. A collapse of this bank is unavoidable now, and it wipes out everything immediately.
Wolfgang Gerke, President of the Bavarian Finance Centre, the German bank sees in a serious imbalance.

“This is absolutely not about Peanuts. We experience real shockwaves. The Bank is in real trouble, “Gerke said the Thursday edition of the” Passauer Neue Presse “.

This is as good as a death sentence. It is insider info (presumably from the DB itself), after the financial collapse is to take place on 30 September.

UPDATE 12:58 PM EDT —

Germans are being quietly told that ALL BANKS in Germany will close on October 1, ALL ATMS, Credit and Debit Cards are likely to be “unavailable” for unknown duration! !  !

European Central Bank Chairman  Draghi refused to talk about Deutsche Bank today, saying It is not his fault the bank appears to be in trouble.

German Insider:

There is panic in DB now. A lot of People withdraw money, close accounts. One guy says he transferred 25’000 Euro and the bank called him back if the amount and transaction is correct and true! Still has not sent the money!

This is a developing story, please check back.

Stock markets worldwide have now tuned-in to this situation and they are falling fast . . . .


Deutsche Bank – The Meltdown Crisis

Ten of the large hedge funds are withdrawing from Deutsche Bank. What must be understood here is that Deutsche Bank is the main clearing house for trades in Europe. The problem the hedge funds have is where do they move for clearing? Short-term, they can move to New York or London. With over $60 trillion derivative book at the Deutsche Bank, the government is totally incapable of even understanding how to deal with this crisis. We are looking at a major crisis in confidence.

Merkel is simply out of her mind to adhere to this insane policy of a bail-in. How can hedge funds stay with clearing at Deutsche Bank when she takes this position that would set off a catastrophic global meltdown. It still appears that Merkel will have to blink. Once people realize this is the real crisis, then the German debt market should turn down rather hard.

The pressure is clearly building based upon how my own phone is melting down. This illustration based upon IMF data, illustrates the global contagion. I “BELIEVE” that Merkel will be compelled to blink. We may see an announcement this weekend at the latest where she must address this issue. The implications of a global contagion go far beyond Germany.

Investors in Deutsche Bank are obviously looking to Merkel and whether or not she will step up to the plate here. DB shares have plummeted more than 50 percent this year. The prospect of bailing out Deutsche Bank is particularly a problem when Merkel seeking a fourth term in an election next year. Her view is to hold to what she took as a position. Hence, must the world suffer for her personal political career once again?

The EC attack on Apple has led to a backlash where the US Justice Department in retaliation wants a multibillion-dollar fine from DB. This is also contributing to the problem of DB being in the cross-hairs of US prosecutors who also seek to further their political career not unlike Merkel.

Merkel’s spokesman said the government sees “no grounds” for talk of state funding for DB. This simply cannot stand in the face of a major global contagion. The government would have to step in if Deutsche Bank was really in major trouble and hedge funds reducing exposure are abandoning the bank. You can bet by tomorrow, every bank will be trying to reduce their exposure to DB by the weekend.

John Cryan, Deutsche Bank’s chief executive officer, has come out publicly saying that raising capital “is currently not an issue,” and as far as a bailout from government, he has stated Merkel’s position that such support is “out of the question for us.” This entire crisis is actually set in motion by Merkel who championed to keep taxpayers off the hook in a crisis. She pushed for bail-ins and not bail-outs and this has made it far more difficult for governments to support banks in Europe. The Bank Recovery and Resolution Directive, which is the cornerstone of Europe’s efforts to tackle too-big-to-fail banks, takes the position that the need any such extraordinary public financial support indicates that a firm is “failing or likely to fail,” that will trigger the resolution. Now, support for banks is highly restricted and has devastated Greece, Italy, and Portugal. Consequently, if Merkel now intervenes on Deutsche Bank’s behalf, she is basically saying the law is for everyone else but Germany. That will lead to internal protests within the EU.

Internationally, if Merkel’s governing coalition does not step up to support Deutsche Bank, the political fallout globally will in itself cause a major crisis probably by November.  Clearly, the need for some sort of state intervention would outweigh calculations about the political fallout. Merkel will cause the international chaos if DB fails and it can fail if this bank run continues. DB needs to be restructured but when it is the biggest in Europe, it cannot be merged as a shotgun wedding. Its business must reduce risk for itself and the connection of other banks. The German government could assume a stock investment. The legal restrictions prevents extraordinary support as state aid that would distort competition by favoring one company over another. Under the EU law, the German government could just take an equity stake. That would not be a bailout in the classic terms that Merkel opposed. It must be carried out at current market conditions. They cannot arbitrarily supply money at some agreed upon share price that is away from the market.

Euro HangingOne loophole under EU regulation would allow Merkel bailout DB provided it is only to “remedy a serious disturbance in the economy of a member state and preserve financial stability.” This must be only a temporary measure. This would qualify and she can claim that she is following the EU law and it is not different from country to country. However, EU state-aid rules require junior creditors and shareholders to share losses. Therein lies the problem of a global contagion.

If Merkel actually tried to inject government funds into Deutsche Bank or purchase its capital instruments, it may do so only if there is a capital shortfall identified. Still, there must be no advantage to DB from a competition perspective. The interesting problem that would emerge, highlights the clearing crisis. The European Union would then NEED British banks for clearing. In the face of BREXIT, they are not likely to concede that at any time, so there is another nail in the coffin of the euro. – Armstrong Economics

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