Panama-Leak Database Makes 200,000 Shells Searchable Online

A searchable database of more than 200,000 Panamanian shell companies was released online this afternoon, as part of an international journalism group’s effort to reveal the secrets of the offshore financial world.

The database features information derived from millions of leaked documents created by the Panamanian law firm Mossack Fonseca, which specialized in setting up secret shell companies for clients ranging from corporate executives and wealthy celebrities to relatives and associates of heads of state like Russian President Vladimir Putin and British Prime Minister David Cameron.

The International Consortium of Investigative Journalists, a group which includes reporters and editors from more than 80 countries, has already published an assortment of stories based on the documents, alleging how the shell companies were used by the wealthy to conceal their fortunes and evade taxes. The 11.9 million records, which an anonymous whistle-blower leaked last year to the German newspaper Suddeutsche Zeitung, have also led to published stories alleging that secret offshore companies have been used by money launderers, art smugglers, international criminals and repressive governments like Syria.

Trade Secrets

It’s not illegal to create a shell company -- and they can be used for legitimate purposes, such as protecting trade secrets. However, because shell companies can also obscure the identities of their owners, they’re sometimes used for illegal purposes.

Mossack Fonseca has denied any wrongdoing, and said that on the few occasions it learned that clients were using shell companies for illicit activity it ended its relationship with them. The firm also issued a “cease and desist” order last week warning the ICIJ it will face legal sanctions if it released the leaked records.

By releasing a massive trove of the documents in a searchable form, the ICIJ said it hopes to increase public awareness about the ways the offshore banking system enables wealthy individuals to dodge taxes and corrupt government officials to hide their plunder.

The ICIJ, which is based in Washington D.C., said it had culled the records and omitted details that might violate the privacy of the shell companies’ owners -- information such as bank accounts and financial transactions, e-mails and other correspondence, passports and telephone numbers.

‘Public Interest’

“The selected and limited information is being published in the public interest,” the ICIJ said in a statement on its website.

The release comes as governments around the world are pushing measures that would require greater disclosure about the ownership of companies. U.S. President Barack Obama last week called for stricter reporting requirements for companies that register in states like Nevada and Delaware, which have been criticized as domestic tax havens. The UK has announced it will require names of the beneficial owners of any company registered in England or any of its territories or Crown dependencies, and this week Cameron is hosting an anti-corruption summit where offshore secrecy is expected to be a major part of the agenda.

The source of the records -- a whistle-blower identified only as “John Doe” -- issued an1,800-word statement last week, citing “income equality” as the motive behind the leak. The whistle-blower offered to assist authorities in making criminal cases in exchange for immunity from prosecution.

“Banks, financial regulators and tax authorities have failed,” John Doe wrote in the essay. “Decisions have been made that have spared the wealthy while focusing instead on reining in middle- and low-income citizens.”

http://www.bloomberg.com/news/articles/2016-05-09/panama-leak-database-makes-200-000-shells-searchable-online

Elite E Services announces the release of US Trade Hardcover Splitting Pennies for sale online

Elite E Services is the publisher of the book “Splitting Pennies – Understanding Forex.”  Forex is an electronic market, so there was no more appropriate market to sell the book than Kindle – an electronic marketplace for books and other content.  By the way, you don’t need a Kindle device to read Kindle books – Amazon provides a free online reader.  Anyway, many readers ordered print books from Lulu.  The cost of printing a high quality book is high.  But the value of having a book on your bookshelf, holding in your hand, is invaluable.

So we’ve partnered with Ingram, the world’s largest book printer, to offer Splitting Pennies in print format.  Our most popular edition, the 6×9 US Trade hardcover, is now available for purchase via our online shop, pleaseorderit.com and for bookstores, universities, corporations, and other institutions – volume discounts are available.

From a recent post, on pleaseorderit.com 

Splitting Pennies – Understanding Forex is an Amazon Bestseller.  Now, Elite E Services is launching distribution of the best edition, 6×9 US Trade Hardcover!  Ask your bookstore for Splitting Pennies ISBN 9781329992351, retail price $34.98.  It’s available through Ingram – but you can buy it here too, at pleaseorderit.com by clicking here.

To say ‘thank you’ to our corporate customers, we are offering a 35% discount for buying 10 or more Splitting Pennies – Hardcover edition.  Just use the coupon code manybooks16 when checking out.

All owners of Splitting Pennies receive Penny Splitter EA free for unlimited use!  Owners must register at www.splittingpennies.com

The Kindle edition of Splitting Pennies is only $6.11 – and you DON’T need a Kindle to read it, Amazon offers a free online reader just for registering an account.  But nothing feels better than a hardcover in your hand.  Take it to the park and sit on a bench and read.  Or have it in your hand when you walk into your next Forex business meeting.  Makes you look like a Forex genius!  And by reading Splitting Pennies – you will be a Forex genius!

Go ahead – and Please Order It !

America's Big Red Forex Button - MOST IMPORTANT FOREX FACT

We have written extensively on the topic of Forex and even published an in-depth book about key points "Splitting Pennies - Understanding Forex" - and in the process we've learnedwhat investors don't know about Forex and how it fuels market fears.  So now we'd like to elaborate on the MOST IMPORTANT FACT INVESTORS NEED TO KNOW ABOUT FOREX, and to a lesser extent the markets in general.

America has in its possession A BIG RED FOREX BUTTON that can shut down US Dollar connected payment systems with one press.  This button can halt stock markets, futures exchanges, money markets, all with one simple push.  Probably, it looks something like this:  STOP

This button will probably never be used, it was developed in case of financial emergency.  But it's there - and the fact that it exists, makes a few bank managers and government workers sleep well at night.  Such systems are developed 'just in case' - just like the missile defense system, a complete waste of taxpayer dollars, built to ensure that if nuclear missiles are launched on America, America can save 10% of cities and wipe out the majority of the attacker based on the neo-con 'mutually assured destruction' MAD policy.  This button serves the same purpose, although financial.  Pressing this button would bring all economic activity in economies that utilize the US Dollar to a complete standstill.  

Lazy government workers

To understand why and how this button was built, we must first understand a little about how the US Government works.  The US Government is the largest employer of any kind in the world.  We need to understand the differences between private employment, and government employment (because this big red button was built by government workers in collaboration with private workers).  Private employment operates on a simple market based approach - good workers are rewarded usually with higher pay, more job security, and more benefits.  If a worker for a private company makes his company a fortune, he'll be rewarded with a big bonus, big desk with accompanying window, and an office plant, maybe a fern.  If the worker in a private company is a bad worker, lazy, incompetent, or just difficult - he will be fired.  Government is the opposite.  There's a mantra in government work - what do you do with a problem employee?  Promote them!  Because then they are out of your hair, and if you fire them, well you may end up in front of a senate hearing explaining why, or you may end up being sued, or you may end up with a number of special interest groups heckling you about the rights of people with Narcolepsy.  

The government approaches work in an entirely different way than in private enterprise.  Healthcare.gov - the world's first billion dollar website, is another great example.  Now imagine the task the Department of Defense is given; protect America from external threats.  Their first step, to identify threats.  In the military, this is done by agencies such as the CIA and the NRO.  Actually if the CIA operated according to its public mission, it would be an analyst agency not much different than those seen on Wall St. - providing information to their DOD bosses who act on it.  Since 911, the potential for financial terrorism has been considered a national security issue.  It's in the laws, it's in the regulations, it's serious.  What if the Saudis flood the market with US Dollars?  What if the Chinese dump treasuries crashing the US Dollar?  What if hackers take control of the NYSE and flood the market with sell orders, causing a crash?  These are all extremely improbably events, so rare there is a higher chance of a giant meteor striking Manhatten this year.  The probability is so low it's difficult to calculate.  But just like the false threat of Russian's launching nukes, billions of dollars have been spent building a Big Red Button to press in case it happens.  

It's because government workers have one thing in mind; protect themselves.  Avoid a potential disaster.  The last thing any government worker wants is to be in charge of security on a day like 911, even if the threat is financial.  Although the debate rages about TARP and government actions during the weekend of the Bear Stearns collapse - the financial system was saved.  They pressed the button.  But this wasn't the Forex button.

Although the Federal Reserve is a private bank, the US Dollar exists because of the US Government.  Like with many government projects, they outsource.  More than 60% of CIA operations are currently outsourced.  It's good business - America has always been like that.  The only role the US Government plays in the US Dollar, is providing regulations & oversight with the OCC (Office of the Comptroller of the Currency), and printing physical currency with the US Mint.  But the US Mint is just a printing service, if you look on US bills you'll see "Federal Reserve Note."

The Big Red Forex Button

We've known for a long time about the infamous "Plunge Protection Team" designed to prop stock markets in the event of a 1987 style crash.  They even have entities in the Caymans funded by the Fed ready and waiting - they'll start with buying futures on the S&P, then options, then if that fails, they'll just go into the market directly.  Anyway, technically speaking, DTCC owns 99% of US securities being the only custodian for investors.  Why should it be surprising that the Fed operates a Cayman based hedge fund specifically designed to prop the markets in the event of a crash?

And you know it's really ironic, it's PEAK HYPOCRISY - on the one hand, these right wing flag waving jingoists love the idea that we have a system in place to prevent a market crash by 100%, but on the other hand, they love to talk about how America has 'freedom' and 'free markets' and markets are not manipulated!  Well we can't have our protection and free markets together.  But probably, stock investors would agree, in the event of a big market crash it's probably best to have such systems in place, like we do for the military, and other critical infrastructure.  

Does the PPT intervene in the markets on a daily, or regular basis?  That's another question, probably, they do.. but we can say for sure they are there to soften the blow of a deep fall.  Maybe they've done it more than once in the last 10 years, which is why the market is continually at nose bleed levels even though the real economy is in the toilet.

The Big Red Forex Button is more simple than the PPT, and similar organizations.  That's because ALL US DOLLARS IN THE WORLD are created and processed by the Federal Reserve Bank!  Except if you withdraw and deal with physical cash, the Fed has electronic tags and knows where each US Dollar in the world is.  That's just how the system is setup, by design, by coincidence, it's just like that.  The reason for the war on cash, it's really the only part of the US Dollar system that isn't 100% completely controlled and manipulated.  But at the end of the day, with less than $1 Trillion in physical US Dollars in the world, it's not really significant.  The Fed processes wire payments, ACH payments, clears checks, and provides US Dollars to central banks in the form of swaps.  The Fed can press the Big Red Forex Button and halt all US Dollar transactions - period.  So with a halt on all US Dollar transactions, how would China destroy the value of the US Dollar, as some have proposed?  How would US Dollar debt holders repay their debt, without access to US Dollars?  Everyone would default?  The financial system would implode?  No, they would just wait, for a Fed action.  The Fed controls 100% of US Dollar transactions, globally.  There's no where on this small planet Earth to 'hide' US Dollars.  

The US Treasury has a similar tool, the US Treasury has a big red tbill button.  They can immediately recall or issue trillions of US debt in one click.  As far as the external threat supposedly posed by foreign holders of US debt, if this really was a threat, the treasury can call their friends at the Fed, and in one click - the Fed can pay off all US debt.  The Fed would be happy to do so, thus gaining free interest from US taxpayers (which is a HUGE percent of the Federal Budget) and it wouldn't cost the Fed anything to create the $100 Trillion or whatever necessary to do it.  

Practically, there is no competition for America, and there will not likely be any in the forseeable future.  Just imagine if 10% of US Dollar assets were sold, and transferred to another currency, or another system.  What would that currency be?  It is a real problem.  In order to entertain real scenarios of a 'US Dollar Collapse' we would need to see an alternative system, one which operates globally and completely without the US Dollar and it's institutions, such as the BIS, IMF, the Fed, ECB, SWIFT, such as Bitcoin.  

But just to keep the size of the US Dollar in perspective, let's look at a real alternative - the New Zealand Dollar.  Anyone with a Forex account can trade NZD/USD (when you trade a Forex pair, you're really betting on a rate change, not sending money to New Zealand, so trading Forex is a derivative).  The GDP of New Zealand is about $185 Billion.  There simply aren't enough investment options in New Zealand NZD based assets to facilitate any significant move into NZD from USD.  In fact, NZD has been inflated by US and Chinese interests in the last 10 years, to the point that their GDP has nearly quadrupled since 2000.  

Also remember that most currencies are backed by the US Dollar, so the only 'real' alternative to the US Dollar is not other currencies, but alternative systems such as Bitcoin.

One last correction about China - recently China has implemented a Gold fix denominated in Yuan.  Also Hungary has issued $154 Million in Yuan bonds.  These are both wonderful baby steps toward realizing the final goal of being a modern, dynamic, free market based economy.  The Yuan IS NOT BACKED BY GOLD.  China implemented a YUAN BASED GOLD MARKET, copied and pasted from the Rothschild-London dominated system for the last hundreds of years.  The Gold price is set in Yuan, as it used to be in Great British Pounds.  Separately, China is hoarding physical gold.  These 3 facts do not mean that the Yuan is backed by Gold.  Capital Controls are in place, the Yuan is manipulated by the central bank.  It's not possible to do business with China via the Yuan like it is with G8 countries.  Americans can visit and do business in hundreds of countries with ease, China is not one of them.  China employs internet police, who will literally arrest you potentially for life if you are found violating their firewall policies.  This is not a country which will soon compete with America, England, Switzerland, and the rest of the G8.  India, possibly another story, but they have no plans to improve their Forex system or to be a global reserve currency.

Conclusion

The Federal Reserve controls all US Dollars created and transacted in the world, in collaboration with the US Government.  The value of the US Dollar will fluctuate as interest rates change, and real money flows around the world affect supply and demand of the USD, but within a trading range.  Forex markets are 100% controlled.  At any point, Central Banks can intervene in Forex markets.  We've never seen a collaborated intervention, but that's a possibility too.  Because they all rely on each other, it's in their interest to see boring, non-volatile markets.  They are all part of the same system, which is supported by America and the US Dollar.  

If the Fiat central bank system would be to collapse, there would have to be an alternative system for the world's business to transition to.  Currently, there is no alternative system in place.  Many alternative systems are in the works, but they are decades from being complete.  But in the meantime, there's a number of ways to profit in the Forex market, or protect yourself from market risks.  To learn more, checkout Splitting Pennies - Understanding Forex.

http://www.zerohedge.com/news/2016-05-01/americas-big-red-forex-button-most-important-forex-fact

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Bloomberg UNMASKED - The Truth about ZH from Forex perspective

We've been a Forex author for many years on Zero Hedge and many other sites.  Writing is a big part of our job as analysts, and educators.  Recently we published a book Splitting Pennies - Understanding Forex to explain this complicated market to investors.  We write by purpose - Forex is the largest market in the world and the least understood.  Because of this, it's not widely covered in the main stream media (MSM) and when it is, it is often mis-characterized.  After 15 years in this business, we don't believe there is any 'conspiracy' hiding the 'truth' about Forex- it's simply a lack of understanding.  The guys who really understand Forex are mostly working for banks or hedge funds and making a fortune, and a few, professing at universities.  

Although we'd like to see some guest author compensation - the fact that guest authors are allowed to write freely without ANY editing is INVALUABLE in a market such as Forex which is vastly misunderstood.  For example a lot of Forex information is coupled with 'conspiracy theories' and 'politics' although it should not be.  For example, with events such as 911, often a move in the Forex market will preceed the actual event by several hours.  We know that generally speaking, terrorists don't have access to huge amounts of capital or connections on Wall St. - so this is an odd phenomenon that's never properly been explored or discussed.  By stating the facts, we aren't making any conclusions, simply that 'someone' must have had foreknowledge, whether it be intelligence services, well connected investors, governments, or who knows.  Statistical analysis has shown that it's not coincidence.  Anyway, this topic is an important one for Forex but not one that is 'appropriate' for Bloomberg news.  Bloomberg is a great example of the MSM because Bloomberg has always been 'business news' - with an international focus.  Others such as CNBC are more US focused.

Exhibit 1 - 28 pages

Recently the 28 redacted pages of the 911 report to be released, have potentially significant impacts on markets - not only directly, but how markets function.  It is also an important Forex event because potentially, we can see a shift of sentiment away from the US Dollar as a global reserve currency.  But more importantly, 911 exposes how 'someone' whoever that group may be, manipulate world events in direct connection to markets and profit.  The markets are manipulated - if you think investors have a fair shot in the markets, you are due for a wake up call.  Suggested treatment - disconnect your Television and social media and read Zero Hedge for 90 days.  

An article was composed by analysts at Fortress Capital which was not published by several MSM sources, so we posted it on Zero Hedge.  The article isn't really inflammatory but discusses these topics in objective way, asking questions that some would rather not like to be asked.  It was a relief that it could be published in a timely manner before the markets opened.  

Exhibit 2 - Pro Russia

We have authored several seemingly pro-Russia articles for ZH and were never encouraged to do so.  

http://www.zerohedge.com/news/2016-03-24/forex-rigging-irony

http://www.zerohedge.com/news/2015-12-08/american-forex-delusion

http://www.zerohedge.com/news/2014-10-13/ebola-and-russia-focus

First, the mantra of analyst objective integrity is to be pro-fact, not pro- anything.  We would say we are pro-fact, not pro-Russia.  The only people in the world who are really pro-Russia are average Russians living in Russia.  If you talk to Russian intelligentsia, or Russians in America, they are critical of their country and just roll their eyes.  Practically though, Putin has done a great job leading Russia into a new market based system - which is not easy if you understand the culture and where they came from.  America was founded by commercial interests, it was a business from the beginning.  Russians have lived 80 some years under a controlled system, and those who tried to start a business were mostly killed.  The mentality is in their genes, it will take many generations for Russia to grow into a real superpower.  They need social reforms, business law reforms, regulations, human rights, immigration reform, and a number of other changes, before they can be a serious threat to other major economic powers.  But Russia has acheived a lot and they have made good use of their natural resources.  

It just so happens that because they are a 'new' economy Russia is an excellent Forex example.  Because the Ruble is still controlled by the central bank, although you can exchange in and out of Rubles freely, there are trading rules, and the rate is controlled by the central bank aggressively.  There are many interesting ironies about Russia and Forex, such as the largest retail platform in the world is a company from Russia (Meta Quotes). 

Exhibit 3 - Bloomberg 

During the period of 2007 - 2008 the most objective MSM coverage of the financial crisis was provided by Bloomberg.  Brian Sullivan was the best anchor who seemed to really present information as it should be, not as 'marketing.'  He seemed sincere with his comments, he would say "I work for you - the viewer - so let me know how I'm doing, give me your feedback!"  So we did.  The first comment was to tone down his sporty attitude, he was calling the markets like a boxing match, which seemed out of taste at the time.  This was peak of the credit crisis.  Sure enough next day - he toned down his clown like attitude, dressed in professional suit and very serious!  This guy really did his job well, so it seemed.  Weeks go on and the Fed was under pressure to do something about market events, and he made a comment about "Shouldn't the government, the Fed, do something about this situation?"  We fired away many comments about how the Federal Reserve is not part of the government.  It's no more Federal than Federal Express.  The Fed was created by an act of Congress, but it is a private bank.  The President appoints the chairman, but that's all.  There's no other connection to the government.  The next time he discussed it on air, he said, "But shouldn't the Fed, whoever owns it or if it's private or whatever, do something?"  - several days later - he no longer worked for Bloomberg! 

It is unclear what time period Mr. Sullivan would handle for Fox Business, which relies on a dual-anchor format during the day. A Fox spokeswoman did not immediately respond to a request for comment.

A Bloomberg spokeswoman confirmed on Monday that Mr. Sullivan, who joined the network in 1997, had resigned. He most recently hosted the 3 to 5 p.m. show “Final Word.”

In an interview at Bloomberg’s offices last August, Mr. Sullivan, an avid race car driver on the weekends, said he did not spend much time thinking about Fox. “If I sit there worrying about my competitor, it’s called driving-in-your-mirrors racing,” he said.

Mr. Sullivan said that anchors like him have to work harder to stand out amid the increasingly commoditized landscape of business news. “If you just cover earnings, numbers, statistics, you can get all that on the Internet,” he said. “The way to differentiate yourself is to tell the smartest story and get the best guests.”

Coincidence, maybe.  But a strange one, especially during a time when people started to question the Fed.

But let's take a step back and understand what is Bloomberg.  The Bloomberg Terminal is a trading appliance (well, it used to be a physical appliance and now it's an application).  Bloomberg News is a 'value add' service provided to Bloomberg customers, so they don't have to use a 3rd party for general market news.  Bloomberg more importantly streams economic data and other market news over the terminal, as does Dow Jones, Reuters, and other news services.  Bloomberg was always more objective than traditional news for this reason.  But like with anything, over the years, they became biased and poorly managed just like the media they replaced such as CNBC.  That's their perspective - they sell terminals, market data.  The Bloomberg Terminal has almost no competition in many markets, especially OTC derivatives such as CDS, or if you want to trade Forex with a central bank, you need the Bloomberg Terminal.

Zero Hedge has been, for recent years, one of the only online platforms for objective Forex discussion.  This situation with the rogue author is sad, but it just elaborates what a sham Bloomberg is, and encourages ZH to work closer with Guest authors and other financial professionals who still have a need for a platform such as ZH.  It shows how Bloomberg has declined and lost complete control over its editorial staff.

This is all explained in our book Splitting Pennies - Understanding Forex.  Open a Forex account (if you are a non-US citizen) and get a free robotic strategy with every purchase of the book.  

US Treasury Gives Explicit Warning To China, Germany And Japan Not To Devalue Their Currencies

While the US Treasury's semi-annual report on the foreign-exchange policies of major U.S. trading partners has traditionally been, pardon the pun, a paper tiger, as the US has not named a single country as a currency manipulator since it did so to China in 1994, and it didn't go so far as to blame any country as an outright manipulator in the just released April edition, there was a new addition to the latest report.

In an inaugural "monitoring list", the US put five economies including China, Japan and Germany (as well as South Korea and Taiwan) on a new currency watch list, saying that their foreign-exchange practices bear close monitoring to gauge if they provide an unfair trade advantage over America.

This is what it said:

In determining the appropriate factors to assess these criteria, Treasury took a thorough approach, analyzing data spanning 15 years across dozens of economies, including all economies that have had a trade surplus with the United States during that period, and which in the aggregate represent about 80 percent of global GDP. The thresholds are relatively robust in that reasonable changes to the thresholds do not materially change the Report’s conclusions. Treasury will also continue to review the factors it uses to assess these criteria to ensure that the new reporting and monitoring tools provided under the Act meet the objective of indicating where unfair currency practices may be emerging. 

Pursuant to the Act, Treasury finds that no economy currently satisfies all three criteria, however, five major trading partners of the United States met two of the three criteria for enhanced analysis. Treasury is creating a new “Monitoring List” that includes these economies: China, Japan, Korea, Taiwan, and Germany. China, Japan, Germany, and Korea are identified as a result of a material current account surplus combined with a significant bilateral trade surplus with the United States. Taiwan is identified as a result of its material current account surplus and its persistent, one-sided intervention in foreign exchange markets. Treasury will closely monitor and assess the economic trends and foreign exchange policies of these economies.

As noted above, Treasury is creating a new “Monitoring List” that cites major trading partners that have met two of the three criteria specified in the Act. In this first Report, the Monitoring List includes China, Japan, Korea, Taiwan, and Germany.

This is about as direct a threat to the 3+2 nations not to engage in major currency devaluation whether through QE, NIRP or major interest rate changes as Jack Lew could come up with, and in some ways was to be expected in the aftermath of the G-20 meeting which as we found out this week, precluded any additional QE by the BOJ.

Recall that as part of the most recent G-20 accords, which many believe is what unleashed the steep slide in the dollar, the member nations agreed to refrain from FX intervention absent "disordely markets." It also made clear what could push a country from merely the watch list to full blown manipulator status:

While no economy met all three of the criteria, this result is a reflection, in part, of the dynamics of the global economy during the past year, in which capital outflows from emerging markets have led a number of economies to engage in foreign exchange intervention to resist further depreciation of their currency (rather than appreciation). The extent of these flows was unusually high by historical standards, which underscores the possibility that more economies may trigger these thresholds going forward.

It added that "the Administration shares strongly the objective of taking aggressive and effective actions to ensure a level playing field for our workers and companies. The President has been clear that no economy should grow its exports based on a persistently undervalued exchange rate, and Treasury has been working aggressively to address exchange rate issues bilaterally, including through the U.S.-China Strategic and Economic Dialogue, and multilaterally through the G-7, G-20, and the International Monetary Fund."

And specifically referring to the G-20 meeting, the Treasury notes the following:

The United States has secured commitments from the G-20 member countries to move more rapidly to more marketdetermined exchange rates, avoid persistent exchange rate misalignments, refrain from competitive exchange rate devaluations, and not target exchange rates for competitive purposes.Through Treasury’s leadership, the G-7 member countries, including Japan, have publicly affirmed that their fiscal and monetary policies will be oriented toward domestic objectives using domestic instruments. Treasury has also pushed for stronger IMF surveillance of the exchange rate policy obligations of its members. The IMF now publishes an exchange rate assessment for 29 economies, and is improving its exchange rate analysis in its Article IV reports on member countries. And through U.S. leadership, the Trans-Pacific Partnership countries have adopted—for the first time in the context of a trade agreement—provisions that address unfair currency practices by explicitly adopting G-20 exchange rate commitments and by promoting transparency and accountability.

In other words, the next country that dares to engage in wholesale currency devaluation with the US' express prior permission gets it, although it is not quite clear what "it" is (we will have more thoughts on that tomorrow).

Finally, there was no comment by the US Treasury on the biggest FX manipulator of all, the US Treasury itself which courtesy of the Fed can move the value of the Dollar higher or lower by orders of magnitude in seconds. Why? Because for now the US "reserve currency" privilege allows it to do whatever it wants, plus as a reminder, the world remains synthetically short trillions of dollars. If the US wants to punish everyone else, all it needs to do is to increase the value of the dollar by 10-15% in a short period of time, and we will again witness the same events that led to the market swoon in late 2015 and early 2016.

http://www.zerohedge.com/news/2016-04-29/us-treasury-gives-explicit-warning-china-germany-and-japan-not-devalue-their-currenc

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China Ocean Freight Index Collapses to Record Low

Wolf Richter   wolfstreet.com

The amount it costs to ship containers from China to ports around the world, a function of the quantity of goods to be shipped and the supply of vessels to ship them, just dropped to a new historic low.

The China Containerized Freight Index (CCFI) tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. It reflects the unpolished and ugly reality of the shipping industry in an environment of deteriorating global trade.

For the latest reporting week, the index dropped 0.6% to 636.14, its lowest level ever. It has plunged 41% from the already low levels in February last year, and 36% since its inception in 1998 when it was set at 1,000. This chart shows the continuing collapse of containerized freight rates from China to the rest of the world:

The Shanghai Containerized Freight Index (SCFI), which tracks spot-market rates (not contractual rates) of shipping containers from Shanghai to 15 destinations around the world, dropped 3.6% for the latest reporting week to 472, after another failed price recovery. It’s down 58% from February last year.

Rates to Europe plunged $20 per twenty-foot equivalent unit container (TEU) to $271; to the Mediterranean, rates plunged $29 to $409 per TEU. To the US West Coast, rates plunged 9.3% or $79 to $770 per forty-foot equivalent unit (FEU).

A year ago, the spot rates to the West Coast had already fallen 10% year-over-year, and there had been a lot of hand-wringing about them. At the time, they were $1,932 per FEU. Now they’re at $770 per FEU. In one year, these spot rates have collapsed by 60%!

During the big plunge last year and earlier this year, the saving grace was the price of bunker fuel, which was plunging along with the price of oil. For example, according to Platts, bunker of the grade IFO380 in Los Angeles had hit a low of $118 per metric ton in mid-January. But it has since soared 91% to $225!

Bunker prices differ, depending on grade and location around the world, and not all made this sort of break-neck snap-back price reversal. For example, IFO380 in Rotterdam soared “only” 61% from $109/mt in mid-January to $176/mt. Other locations and grades experienced lower price increases. But all bunker prices everywhere have risen sharply.

So the ballyhooed notion that carriers, under pressure from competition, are simply passing on their fuel savings to their customers has now died an ignominious death. Instead, their margins are getting crushed.

But there are some real reasons for the collapse in freight rates from China to destinations around the world: China’s exports have plunged. For the January through March period – to iron out the monthly volatility associated with the Lunar New Year holiday – exports are down 9.6% year-over year. Specifically:

• To the US -8.8%
• To Hong Kong -6.5%
• To Japan -5.5%
• To South Korea -11.2%
• To Taiwan -3.7%
• To the countries in the ASEAN -13.7%
• To the EU -6.9%
• To South Africa -29.6% (!)
• To Brazil -47.2% (!!)
• To Australia -1.9%
• To New Zealand -12.4%.

Exports ticked up just a tiny bit to only two major countries: India (+0.2%) and Russia (+0.2%).

So demand for transporting containers from China to other parts of the world has withered, just when the supply of container ships has reached catastrophic levels of overcapacity.

Last year, what had already been an overcapacity problem turned into a self-inflicted nightmare for carriers. They’d assumed ever since the bouts of QE and zero-interest-rate policies started that central banks had their back. They’d smelled the lure of cheap money. And they’d fallen for the central-bank propaganda that “bold” monetary policies could actually stimulate the real economy, the goods-consuming economy. And so, imagining years of big-fat growth, they ordered ships, including the newest mega-sized container ships. And as these new ships were delivered over the past couple of years, carriers embarked on a fight for market share by cutting prices.

This culminated in 2015 with the delivery of new ships that added a record 1.7 million TEU of capacity to the global fleet, just when growth in global trade was grinding down. At the same time, according to Drewry, the amount of capacity scrapped in the year plunged by nearly half, with only 195,000 TEU of global capacity taken out.

Why? “Because demolition prices were less attractive….”

Like so many things in this world where free money created overcapacity, the rates paid for ships to be scrapped has plunged from around $475 per ldt (light displacement tonnage, the weight of the vessel including hull, machinery, and equipment) in 2012 to around $290/ldt recently.

So far this year, scrapping activity has picked up. And everyone is hoping that this will alleviate the problem. But it’s not going to help much, according to Drewry:

As we have highlighted before scrapping alone does very little to redress the supply-demand imbalance – last year’s scrapping total was equivalent to just 1% of the cellular fleet….

Now carriers are hoping that the huge general rate increases they announced for May 1 – in some cases more than doubling current rates – will stick. But they tried that last spring, when overcapacity wasn’t nearly as bad, and it didn’t work. So will they have more luck this year? The Journal of Commerce put it this way: “Conditions are hardly optimal for raising rates.”

The Chinese have among the highest savings rates in the world. But 75% of their wealth is in real estate. They’ve overinvested in one illiquid and bubbly asset that they wrongly believe can only go higher. But when prices break down, it will devastate consumer demand and reverberate around the world. Read… This Will Be Largest Evaporation of Wealth in Modern History

http://www.zerohedge.com/news/2016-04-18/china-ocean-freight-index-collapses-record-low

The Real Test Of The Petro Dollar System

Currently the US Dollar, traded on the stock market as (UUP), and (USDU); is the world's reserve currency. Although there is talk of the fall of the US Dollar as the world reserve currency, it's all talk and there's no signs that this will happen any time soon. Hungary recently issued sovereign bonds in Yuan - but so what? It's just a drop in the bucket. The practical fact is there is no real threat to the US Dollar's status as a reserve currency. However, there may be one. When Richard Nixon essentially created the modern Forex system by defaulting on the previous Breton Woods agreement, he cleverly supported the US Dollar with the one commodity the world needs most: Oil. By making an agreement with Saudi Arabia and then other Oil producing nations, it created natural support of the US Dollar. Nixon told them the following: Sell Oil in US Dollars, and we'll provide you with military technology, security, and other benefits. We'll do business, you'll invest in our markets, and recycle those dollars you get from our partners. It all works like a well oiled machine (pun intended) for 40+ years. There's only one thing that could disrupt it - Saudi Arabia chooses to end it. And they've threatened to do so, if the US releases classified documents about 911 which implicate Saudi Arabia.

How it could impact the markets

Under the Petro Dollar agreement, Saudis' re-invest their US Dollars in US markets, most notably, the treasury market - but also US Stocks. ETFs for US Treasuries include (GOVT) and (SCHO). Large selling of US Treasuries, the US Dollar, and US stocks, could cause the market to go down. Some worry that it could cause others to panic sell because of momentum. These fears are unfounded. It can cause temporary volatility, but nothing systemic. As the Fed says in a 19 page letter, if something is going to cause the US financial system to melt down, it's likely going to be JP Morgan (JPM).

About 911

911 was the event of our lifetime, that changed Wall St., and changed America. Although the 911 Commission 'investigated' the event, many questions remain unanswered. Families of victims want those questions answered, and have taken measures into their own hands. They want more information made public, such as 28 pages that have been classified. A lawsuit filed in New York by the victims families, headed by attorneys Jim Kreindler and Sean Carter:

A federal lawsuit moving forward in Manhattan could open the floodgates to tightly held government secrets about foreign connections to the 9/11 attacks.While the Obama administration refuses to make public the censored 28 pages of the congressional intelligence report implicating the Saudi government in the terror strike -defying bipartisan requests from lawmakers - the two investigators who authored the long-secret section will more than likely be called to testify in the lawsuit brought against the kingdom of Saudi Arabia.

Former FBI investigator Michael Jacobson and former Justice Department attorney Dana Lesemann ran down FBI leads tying Saudi officials to some of the Saudi hijackers and documented their findings in the report.Jacobson and Lesemann went on to work for the independent 9/11 Commission, where they uncovered more evidence and connected new dots to the Saudi Embassy in Washington and the Saudi Consulate in Los Angeles.During a July 30 court hearing, lawyers for 9/11 victims' families and insurers revealed that the staffers' most serious allegations against the Saudis were stricken from the final draft of the 9/11 Commission report as well."They were removed at the 11th hour by the senior staff," plaintiffs' attorney Sean Carter of Cozen O'Connor said, explaining that the decision was a "political matter."

These removed 28 pages can have huge implications not only for the lawsuit, but for the markets in general. Saudi Arabia has said that they will sell up to $750B in treasuries, should Congress pass a bill allowing the lawsuit against the Kingdom to take place, as reported here on SA:

Saudi Arabia has told the Obama administration that it willsell up to $750B in treasuries and other American assets if Congress passes a bill that would allow the Kingdom to be held responsible in U.S. courts for any role in 9/11.

What's inside these 28 pages is likely only the tip of the iceberg. Many information has come to light since the 911 commission which leaves more and more questions unanswered. One such information is the large amounts of Tritium found at Ground Zero.

Senator Bob Graham believes that 911 could only have been carried out with sophisticated logistic support from within the United States,as reported in his recent 60 minutes interview:

Bob Graham: I think it is implausible to believe that 19 people, most of whom didn't speak English, most of whom had never been in the United States before, many of whom didn't have a high school education-- could've carried out such a complicated task without some support from within the United States.

Petro Dollar system

The US Dollar enjoys global supremacy for a number of reasons, one of them being the Oil for US Dollars Petro Dollar system. Oil producing nations have agreed to sell Oil in US Dollars thus providing a natural demand for US Dollars. This is explained in detail in Splitting Pennies:

The American Forex system is a global financial Monopoly. The best example is the "Petro Dollar" trade. By pricing and selling crude oil in US Dollars, it guarantees a constant supply of buy orders for USD. This is a triple slam dunk for the global USD financial Monopoly:

Oil producing nations who want to participate in the Petro Dollar system buy USD naturally and invest much of those USD in US markets, US Treasuries, and other US denominated instruments. There could be no greater mechanism to support a currency, if one was to be constructed. ...

Remember that these are intra-country business deals, that take generations to come to fruition. Sons and Grandsons who inherit these relationships, aren't fully aware of the importance of them or the mechanics of their global operations. For example, when this de facto Forex system was created by Nixon in 1971, there was no electronic trading. This was a different market. What would happen in today's environment, if the Kingdom of Saudi Arabia decided to in one moment sell all of its US Treasury holdings?

Analysts agree however, this strategy isn't feasible, as the Kingdom has internal financial problems. Cutting off it's biggest economic and political ally in the West would be a disaster for them. On the other hand, you never know what 'event' may trigger drastic moves.

But although Saudi Arabia is a significant market player, it is dwarfed by its competition. There are other places in the world that have oil (anyway - most of the Oil from SA is not the Oil we need). Saudi Arabia's significance declines over time as their Oil fields are depleted and the rest of the world develops alternative energies. In fact, it is pressure from US Oil companies that keeps many alternative energies on the shelf. There are literally hundreds of alternatives that in 1 year could replace Oil, but are not politically feasible. The most powerful of these alternatives at the moment is Thorium Nuclear Reactors, a more potent and safe alternative to current Uranium reactors. They don't melt down, Thorium is abundant in nature, and they can even consume Nuclear waste! Why this technology isn't being used? Because Chevron (CVX) and Exxon (XOM) are making too much money. And they pay taxes (interestingly, Oil companies famously avoid offshore tax havens and pay the maximum possible tax to Uncle Sam). Suffice to say - energy is big business, and big business for Washington. So if you're worried about a Saudi fire sale and how it will impact the markets - don't. With electronic markets, there is a concern that any big orders can cause a market panic, but it would likely be very temporary. As far as the fundamental concern that Saudis' selling debt or stocks could cause a market crash, it's not possible.

Stock Investors

The Saudis' invest big in US stocks. The most notable investment was from Prince Alwaleed Bin Talal's Citigroup investment:

In the early 1990s it was almost unthinkable that a Saudi Arabian, and a Royal at that, would burst onto the global banking investment scene from seemingly nowhere - but in 1991 that is exactly what happened. Effecting a significant coup that would catapult him into the global spotlight, HRH invested heavily in Citibank (subsequently Citigroup) stocks in a bold move that surprised many. That surprise rapidly turned into admiration as the Prince's guidance helped restore the banking giant to full health, returning it to its place as the world's leading financial institution. Prince Alwaleed's investment in Citigroup has since delivered an extraordinary level of return, and represents the largest proportion of HRH's personal wealth.

The Saudis' have unknown investments in USA but they are substantial. The central bank doesn't disclose it's holdings, billionaire princes and other 'charities' controlled by the Kingdom may only disclose their holdings when it is suitable for them, politically.

It was noticed in January of this year that the Saudis started unloading US Treasuries by Bloomberg:

SAMA's own figures show reserve assets held in foreign securities have fallen by a record $108 billion in 2015. The Saudi central bank, which doesn't disclose separate figures for Treasuries, owned $423 billion in overseas securities as of November. "I come down on the side of thinking there should be more transparency," said Jeff Caughron, chief operating officer at Baker Group, which advises community banks with more than $45 billion in investments. But at the same time, "the Treasury is constrained by political sensitivities and that comes into conflict with market participants that crave more transparency. It's an understandable conflict."

So although we do not know the extent to which they are invested in US markets, we know that it's substantial, and we know they have an incentive for doing so.

If there's any take-away from this scenario, it might be a time to go long US based energy companies with an established track record of dealing with the US government, such as Chevron and Exxon . Or maybe that's part of the reason they've been seeing a rally recently, as pointed out by an SA author:

The latest rally in the energy firms is very curious. A stock like Chevron (NYSE:CVX) now trades at the highs going back for nearly a year while oil is only creeping above year-end lows.

Alternative energy stocks, which still haven't proven themselves in this tricky political environment, should be individually researched carefully. Here's a few:

• Pattern Energy (PEGI)
• Green Plains Partners, LP (GPP)
• Enviva Partners, LP (EVA)
• Terraform Global (NASD: GLBL)

If you're concerned about how the release of classified 911 information will impact the markets - consider going long energy. Don't worry about the selling of US debt. If there really was a fire sale of US Treasuries, the Fed can easily print money and buy them. As the Fed has unlimited supply of US Dollars, there's no chance in this universe or multi-verse that the US can default on its debt obligations.

Maybe it's time the "Petro Dollar" system be replaced with "Nuclear Dollar" system. It's outdated, things have changed. Since 1971, the population of the Planet Earth has more than doubled. Advances in technology are immense. Maybe it's about time we started using them.

We talk about this in our book "Splitting Pennies - Understanding Forex" 

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It is my goal that people understand Forex – which is key to understanding the financial system.  If you need money, or have financial problems, or financial success, or you are a wealth manager, Splitting Pennies is for you!  I mean, even a bum living under a bridge has a reason to read Splitting Pennies – as it impacts all of us, whether you have money, or not, or you are in the money business.  At the end of the day - 'Forex' is a metaphor for "Matrix" called life.

In my book I put for readers the holy grail of financial intelligence, which will open your mind to new ways of thinking about life.  So my goal is that many people read this book, because if a critical mass of people understand key concepts, it can change something for the better in our society.  

Joseph Gelet, author

Learn more at www.splittingpennies.com