Wednesday, June 8, 2016

The Bilderberg 2016 Agenda: Trump, Riots, Migrants, Brexit

Every year, the world's richest and most powerful business executives, bankers, media heads and politicians sit down in some luxurious and heavily guarded venue, and discuss how to shape the world in a way that maximizes profits for all involved, while perpetuating a status quo that has been highly beneficial for a select few, even if it means the ongoing destruction of the middle class. We are talking, of course, about the annual, and always secretive, Bilderberg meeting.
And, as the Guardian notes, "you know Bilderberg’s about to begin when you start seeing the guns."

Workers erect a barricade outside the Taschenbergpalais hotel in Dresden
The Taschenbergpalais hotel in Dresden - the venue of "Bilderberg 2016" which starts tomorrow and continues until June 12 - is filling up with pistol-packing plainclothes security as the last guests are ushered out. The frowning gunslingers head up and down the corridors with their hotel maps, trying door handles and checking the lay of the land while, down in the hotel lobby, corporate goons gather in muttering huddles.
A glimpse at what is about to unfold: according to the local newspaper DNN, at least 400 police officers will be surrounding the venue for the three days of the talksThere’s already a ring of concrete blocks around the entrance.

Is that not enough? What are they expecting? The charge of the light brigade?

The hotel is being trussed up tighter than Reid Hoffman’s trousers. No one gets in or out without the right lanyard. As Ed Balls remembers only too well, from that awkward business in Copenhagen. Inside the security cordon, the final nervy tweaks are being made by conference staff. They’ve got to make sure Henry Kissinger’s curtains don’t let any light in. A single ray could be fatal.
Year after year, a sizeable number of extremely rich and powerful workaholics seem to think it’s worth strapping on their Bilderberg lanyard. But why? What’s getting the head of Google, two prime ministers, a vice-president of the European commission and the chairman of HSBC together in the same hotel basement for the same three days in June?  On its official website, Bilderberg attempts an answer. It describes itself as “a forum for informal discussions” that are “designed to foster dialogue between Europe and North America”. Dialogue which is designed to foster dialogue. Talk for talk’s sake.
Of course, as Charlie Skelton notes, that’s nonsense. And yet Bilderberg insists “there is no desired outcome”. That’s like a Club 18-30 rep saying there’s no desired outcome of his tequila groin-slurping contest. Someone’s getting something out of the event. Even if that something is chlamydia.

Taschenbergpalais hotel in Dresden
What is really discussed is how to take the existing trends in the world, some favorable, some undesired, and mold them in such a way as to create even more wealth for the world's 0.01%, while perpetutating the existing system, one which even the IMF agrees is no longer working.
This time, as Paul Joseph Watson infers, the secretive Bilderberg Group whose Steering Committee Advisory Group consists of one David Rockefeller, will discuss how to prevent Donald Trump from becoming president, the possibility of mass riots as a result of wealth inequality, the migrant crisis, as well as the United Kingdom’s vote on leaving the European Union.
As noted above, the official list of "key topics" to be discussed is both broad quite vague and includes:
  1. Current events
  2. China
  3. Europe: migration, growth, reform, vision, unity
  4. Middle East
  5. Russia
  6. US political landscape, economy: growth, debt, reform
  7. Cyber security
  8. Geo-politics of energy and commodity prices
  9. Precariat and middle class
  10. Technological innovation
That's just for public consumption. After all, who needs massive concrete blocks and 400 police officers for protection to discuss "technological innovation" - better yet, just open up the session to the press and public.
Of course, that won't happen, because the real agenda must remain under wraps. However one can infer from the agenda and some of the names on the participant list what the group will be discussing in more detail. As PJW writes, the attendance of anti-Trump Senator Lindsey Graham is an obvious sign that Donald Trump will be a prominent topic of discussion at this year's Bilderberg meeting, with the likely focus on how to prevent Trump from defeating Bilderberg’s chosen candidate, Hillary Clinton, who has already raked in tens of millions in fees from "speaking" before numerous participants at the meeting that begins tomorrow.
In 2015, the Bilderberg elite was confident that Clinton could shake off her GOP challengers, but Trump’s self-funded campaign and his public opposition to globalism and internationalist trade deals like NAFTA has shocked the Bilderberg elitists. As a result, it will now have to spend much more time dealing with the damage control.
Brexit will be another major topic. With the British referendum vote to leave the EU taking place in just two weeks, and withDavid Cameron getting concerned, a vote to secede threatens the future of the European Union federal superstate that was the brainchild of Bilderberg in the first place.
The inclusion of “precariat and middle class” on the list also means that the powerful lobby group will be ruminating on how they can exploit and manage the inevitability of more riots and civil unrest in the west - and increasingly, the east with an emphasis on China whose government is terrified about the prospect of rising social unrest - a topic that elitists were also concerned about at the 2015 Davos Economic Summit. “Precariat” describes those who are struggling to survive in today’s economy and who have no long term wage security. Studies have shown that wealth inequality increases the likelihood of mass social disorder. Furthermore, as the Fed itself admitted recently, it is the Fed, by way of manipulating markets higher, that has been an instrumental catalyst behind record wealth inequality.
The flooding of Europe with third world migrants, a process which has driven European voters into the arms of nationalist parties that typically oppose Bilderberg’s wider agenda, will also be a key topic of discussion, as per bullet point 3.
As Watson observes, aone interesting name that pops up on this year's list is that of Richard Engel, NBC News’ chief foreign correspondent.  "Normally, a semi-secret meeting of over 100 of the most powerful people on the planet would be a monumental news scoop, but don’t expect Engel to utter a word." After all, real journalists are not allowed anywhere on the premises; Engel likely has to sign an NDA.
Indeed, Bilderberg operates under Chatham House Rules, which means that none of the participants are able to reveal any comments made during the conference. As the Guardian floridly puts it, "after the politicians drag their drained and bloodless bodies back to their respective parliaments, they don’t say a word about what happened. They act like abuse victims. “It’s just our little secret,” murmurs Kissinger as he pops the politicians back in their limos. “Chatham House rules. You remember? Yes, of course you do. Now off you go.” And he nimbly licks a heart shape on to the car window with his black tongue before it speeds off."
Although it was reported in the German media that German Chancellor Angela Merkel would attend this year’s conference, her name does not appear on the list. However, it is a common practice for Bilderberg to omit names from the official list if the individual’s attendance is politically sensitive.
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So what do the politicians and public officials get from the deal? For the more ruthless, it’s a chance to line up future employment. As the Guardian reminds us of the then head of MI6, Sir John Sawers, networking with the chairman of BP on a Copenhagen patio in 2014. A year later he was sitting on the oil firm’s board of directors.
For those who don't use the event as a glorified LinkedIn mixed for billionaires, the motive is far simpler: make even more money. In this regard the Guardian's amusing conclusion is spot on:
Tony Blair admitted he found the 1993 conference “useful”. And I’m sure it was. It’s useful to know in what direction in the world is being led by the people that own it, so you can trot along in the right direction. And if you learn to play the game, to fit in with the in crowd, then maybe, like Blair, you can end up with a cushy job with US investment bank JP Morgan.
Ultimately, what is decided will never see the light of day, or rather it won't over the next 4 days. Instead it will emerge as official policy, fiscal but mostly monetary as central bankers live to serve the Bilderberg elite, laws, regulations, and social norms. And if history is any indicator, it will only make the current global situation even worse.
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CHAIRMAN
  • Castries, Henri de (FRA), Chairman and CEO, AXA Group
  • Aboutaleb, Ahmed (NLD), Mayor, City of Rotterdam
  • Achleitner, Paul M. (DEU), Chairman of the Supervisory Board, Deutsche Bank AG
  • Agius, Marcus (GBR), Chairman, PA Consulting Group
  • Ahrenkiel, Thomas (DNK), Permanent Secretary, Ministry of Defence
  • Albuquerque, Maria Luís (PRT), Former Minister of Finance; MP, Social Democratic Party
  • Alierta, César (ESP), Executive Chairman and CEO, Telefónica
  • Altman, Roger C. (USA), Executive Chairman, Evercore
  • Altman, Sam (USA), President, Y Combinator
  • Andersson, Magdalena (SWE), Minister of Finance
  • Applebaum, Anne (USA), Columnist Washington Post; Director of the Transitions Forum, Legatum Institute
  • Apunen, Matti (FIN), Director, Finnish Business and Policy Forum EVA
  • Aydin-Düzgit, Senem (TUR), Associate Professor and Jean Monnet Chair, Istanbul Bilgi University
  • Barbizet, Patricia (FRA), CEO, Artemis
  • Barroso, José M. Durão (PRT), Former President of the European Commission
  • Baverez, Nicolas (FRA), Partner, Gibson, Dunn & Crutcher
  • Bengio, Yoshua (CAN), Professor in Computer Science and Operations Research, University of Montreal
  • Benko, René (AUT), Founder and Chairman of the Advisory Board, SIGNA Holding GmbH
  • Bernabè, Franco (ITA), Chairman, CartaSi S.p.A.
  • Beurden, Ben van (NLD), CEO, Royal Dutch Shell plc
  • Blanchard, Olivier (FRA), Fred Bergsten Senior Fellow, Peterson Institute
  • Botín, Ana P. (ESP), Executive Chairman, Banco Santander
  • Brandtzæg, Svein Richard (NOR), President and CEO, Norsk Hydro ASA
  • Breedlove, Philip M. (INT), Former Supreme Allied Commander Europe
  • Brende, Børge (NOR), Minister of Foreign Affairs
  • Burns, William J. (USA), President, Carnegie Endowment for International Peace
  • Cebrián, Juan Luis (ESP), Executive Chairman, PRISA and El País
  • Charpentier, Emmanuelle (FRA), Director, Max Planck Institute for Infection Biology
  • Coeuré, Benoît (INT), Member of the Executive Board, European Central Bank
  • Costamagna, Claudio (ITA), Chairman, Cassa Depositi e Prestiti S.p.A.
  • Cote, David M. (USA), Chairman and CEO, Honeywell
  • Cryan, John (DEU), CEO, Deutsche Bank AG
  • Dassù, Marta (ITA), Senior Director, European Affairs, Aspen Institute
  • Dijksma, Sharon A.M. (NLD), Minister for the Environment
  • Döpfner, Mathias (DEU), CEO, Axel Springer SE
  • Dyvig, Christian (DNK), Chairman, Kompan
  • Ebeling, Thomas (DEU), CEO, ProSiebenSat.1
  • Elkann, John (ITA), Chairman and CEO, EXOR; Chairman, Fiat Chrysler Automobiles
  • Enders, Thomas (DEU), CEO, Airbus Group
  • Engel, Richard (USA), Chief Foreign Correspondent, NBC News
  • Fabius, Laurent (FRA), President, Constitutional Council
  • Federspiel, Ulrik (DNK), Group Executive, Haldor Topsøe A/S
  • Ferguson, Jr., Roger W. (USA), President and CEO, TIAA
  • Ferguson, Niall (USA), Professor of History, Harvard University
  • Flint, Douglas J. (GBR), Group Chairman, HSBC Holdings plc
  • Garicano, Luis (ESP), Professor of Economics, LSE; Senior Advisor to Ciudadanos
  • Georgieva, Kristalina (INT), Vice President, European Commission
  • Gernelle, Etienne (FRA), Editorial Director, Le Point
  • Gomes da Silva, Carlos (PRT), Vice Chairman and CEO, Galp Energia
  • Goodman, Helen (GBR), MP, Labour Party
  • Goulard, Sylvie (INT), Member of the European Parliament
  • Graham, Lindsey (USA), Senator
  • Grillo, Ulrich (DEU), Chairman, Grillo-Werke AG; President, Bundesverband der Deutschen Industrie
  • Gruber, Lilli (ITA), Editor-in-Chief and Anchor “Otto e mezzo”, La7 TV
  • Hadfield, Chris (CAN), Colonel, Astronaut
  • Halberstadt, Victor (NLD), Professor of Economics, Leiden University
  • Harding, Dido (GBR), CEO, TalkTalk Telecom Group plc
  • Hassabis, Demis (GBR), Co-Founder and CEO, DeepMind
  • Hobson, Mellody (USA), President, Ariel Investment, LLC
  • Hoffman, Reid (USA), Co-Founder and Executive Chairman, LinkedIn
  • Höttges, Timotheus (DEU), CEO, Deutsche Telekom AG
  • Jacobs, Kenneth M. (USA), Chairman and CEO, Lazard
  • Jäkel, Julia (DEU), CEO, Gruner + Jahr
  • Johnson, James A. (USA), Chairman, Johnson Capital Partners
  • Jonsson, Conni (SWE), Founder and Chairman, EQT
  • Jordan, Jr., Vernon E. (USA), Senior Managing Director, Lazard Frères & Co. LLC
  • Kaeser, Joe (DEU), President and CEO, Siemens AG
  • Karp, Alex (USA), CEO, Palantir Technologies
  • Kengeter, Carsten (DEU), CEO, Deutsche Börse AG
  • Kerr, John (GBR), Deputy Chairman, Scottish Power
  • Kherbache, Yasmine (BEL), MP, Flemish Parliament
  • Kissinger, Henry A. (USA), Chairman, Kissinger Associates, Inc.
  • Kleinfeld, Klaus (USA), Chairman and CEO, Alcoa
  • Kravis, Henry R. (USA), Co-Chairman and Co-CEO, Kohlberg Kravis Roberts & Co.
  • Kravis, Marie-Josée (USA), Senior Fellow, Hudson Institute
  • Kudelski, André (CHE), Chairman and CEO, Kudelski Group
  • Lagarde, Christine (INT), Managing Director, International Monetary Fund
  • Levin, Richard (USA), CEO, Coursera
  • Leyen, Ursula von der (DEU), Minister of Defence
  • Leysen, Thomas (BEL), Chairman, KBC Group
  • Logothetis, George (GRC), Chairman and CEO, Libra Group
  • Maizière, Thomas de (DEU), Minister of the Interior, Federal Ministry of the Interior
  • Makan, Divesh (USA), CEO, ICONIQ Capital
  • Malcomson, Scott (USA), Author; President, Monere Ltd.
  • Markwalder, Christa (CHE), President of the National Council and the Federal Assembly
  • McArdle, Megan (USA), Columnist, Bloomberg View
  • Michel, Charles (BEL), Prime Minister
  • Micklethwait, John (USA), Editor-in-Chief, Bloomberg LP
  • Minton Beddoes, Zanny (GBR), Editor-in-Chief, The Economist
  • Mitsotakis, Kyriakos (GRC), President, New Democracy Party
  • Morneau, Bill (CAN), Minister of Finance
  • Mundie, Craig J. (USA), Principal, Mundie & Associates
  • Murray, Charles A. (USA), W.H. Brady Scholar, American Enterprise Institute
  • Netherlands, H.M. the King of the (NLD)
  • Noonan, Michael (IRL), Minister for Finance
  • Noonan, Peggy (USA), Author, Columnist, The Wall Street Journal
  • O'Leary, Michael (IRL), CEO, Ryanair Plc
  • Ollongren, Kajsa (NLD), Deputy Mayor of Amsterdam
  • Özel, Soli (TUR), Professor, Kadir Has University
  • Papalexopoulos, Dimitri (GRC), CEO, Titan Cement Co.
  • Petraeus, David H. (USA), Chairman, KKR Global Institute
  • Philippe, Edouard (FRA), Mayor of Le Havre
  • Pind, Søren (DNK), Minister of Justice
  • Ratti, Carlo (ITA), Director, MIT Senseable City Lab
  • Reisman, Heather M. (CAN), Chair and CEO, Indigo Books & Music Inc.
  • Rutte, Mark (NLD), Prime Minister
  • Sawers, John (GBR), Chairman and Partner, Macro Advisory Partners
  • Schäuble, Wolfgang (DEU), Minister of Finance
  • Schieder, Andreas (AUT), Chairman, Social Democratic Group
  • Schmidt, Eric E. (USA), Executive Chairman, Alphabet Inc.
  • Scholten, Rudolf (AUT), CEO, Oesterreichische Kontrollbank AG
  • Schwab, Klaus (INT), Executive Chairman, World Economic Forum
  • Sikorski, Radoslaw (POL), Senior Fellow, Harvard University; Former Minister of Foreign Affairs
  • Simsek, Mehmet (TUR), Deputy Prime Minister
  • Sinn, Hans-Werner (DEU), Professor for Economics and Public Finance, Ludwig Maximilian University of Munich
  • Skogen Lund, Kristin (NOR), Director General, The Confederation of Norwegian Enterprise
  • Standing, Guy (GBR), Co-President, BIEN; Research Professor, University of London
  • Svanberg, Carl-Henric (SWE), Chairman, BP plc and AB Volvo
  • Thiel, Peter A. (USA), President, Thiel Capital
  • Tillich, Stanislaw (DEU), Minister-President of Saxony
  • Vetterli, Martin (CHE), President, NSF
  • Wahlroos, Björn (FIN), Chairman, Sampo Group, Nordea Bank, UPM-Kymmene Corporation
  • Wallenberg, Jacob (SWE), Chairman, Investor AB
  • Weder di Mauro, Beatrice (CHE), Professor of Economics, University of Mainz
  • Wolf, Martin H. (GBR), Chief Economics Commentator, Financial Times
* * *
Finally, for those who are skeptical about the massive power and reach of the relatively small Bilderberg group, here is a recent graph which shows the members' connections to virtually every important and relevant organization, company and political entity in the world.

Saturday, June 4, 2016

Saudi Authorities Panic - Ban Speculation On Riyal Devaluation Amid Banking Crisis

With Saudi Riyal forwards plunging back above 3.81, dramatically weaker than the current pegBloomberg reports that Saudi authorities are cracking down on currency traders as speculation mounts that the world’s biggest oil exporter won’t be able to maintain the riyal’s peg to the dollar as revenue plunges.
Saudi Arabia ordered banks in the kingdom to stop selling some products that allow speculators to bet against its currency peg just days after demanding information from lenders on the offerings, according to people with knowledge of the matter.

he Saudi Arabia Monetary Agency sent a circular to banks this week saying that dollar-riyal forward structured contracts are banned with immediate effect, said the people, asking not to be identified because they are not authorized to comment publicly. Forward foreign-currency transactions backed by actual goods and services will still be allowed, the people said.

The regulator, also known as SAMA, has asked lenders for details on derivative deals dating to January, saying they hadn’t informed the central bank about some products. An e-mailed request for comment to the agency outside of normal office hours on Friday wasn’t immediately returned.
"The directive shows the continuing disconnect between the Saudi foreign-exchange policy and market expectations,"Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. "SAMA appears committed to the exchange-rate peg despite the cost to foreign-exchange reserves, large fiscal deficits and consensus forecasts that see only a very gradual rise in oil prices."
SAMA ordered banks to stop selling options contracts on riyal forwards at a meeting in Riyadh on Jan 18., people with knowledge of the matter said at the time, which explains the surge in the chart at that time, but it appears funds have found another vehicle to implement their bets.
It makes sense, since as Bawerk.net's Eugen von Bohm-Bawerk explains, the Saudis have two tough choices:
1) maintain the peg, control price inflation through continued deflation of the money supply and get a full-blown banking crisis; or

2) alternatively, reflate the money supply, increase speculation in riyal forwards, devalue and get massive price inflation through the extremely important import channel.
During the reign of the mighty petro-dollar standard, it was necessary for major oil exporters to recycle their dollar holdings back into the dollar-based financial system to maintain their self-imposed exchange rate pegs. US government bonds are the very centrepiece of this elaborate system and it is thus no surprise to see the dollar price correlate well with overall OPEC TSY holdings. In other words, when oil prices were high, oil exporters amassed a capital surplus that were channelled into, among other things, US treasury bonds. When oil prices fell, oil exporters had to liquidate TSY holdings to cover capital shortfalls.
 Oil Price vs OPEC TSY Holdings
It is interesting to note that the more money and credit issued in the US the more foreign goods could be purchased by Americans and by extension the more foreign demand for US TSYs rose. The savings glut proposed by Bernanke was, and still is, nothing more than exported dollar inflation. There were no savings glut, but rather an indirect form of QE long before QE became an official policy. Home equity withdrawal lines through commercial banks, based on phony asset appreciation promoted by an accommodative Federal Reserve policy stance, increased Americans purchasing power, which inevitably leaked into global markets. Growing financial imbalances were exacerbated by the fact that there were no functioning pricing mechanisms to correct these flows.
With dollars flowing into oil exporting countries it would be natural for the recipient exchange rate to appreciate whilst the dollar depreciate. However, many oil exporters have pegged their exchange rate to the dollar so no such effect took place. Instead, local monetary authorities bought up dollars by inflating their own local currency to maintain the pre-set price. As the chart below shows, in a fixed exchange rate system pegged to a freely floating, and thus rapidly inflating and deflating, currency the LCU will have to inflate and deflate accordingly. With no price effect to soften the impact, any change in demand will be borne by supply. Compared to a flexible exchange rate regime, the inflation and deflation of the LCU will have to be larger with a fixed price of the LCU in relation to the dollar.
    Fixed and flexible FX regime
In the boom time it is easy to adjust as the monetary authorities can inflate the LCU to buy up dollars and create the consequent phony boom in the domestic economy. Local businesses thrive, credit is plentiful and asset prices rises. Very few complain.
However, as the dollar deflation takes hold the very opposite effect must by necessity occur. To maintain the exchange rate peg monetary authorities must buy up LCU through sales of previously accumulated dollars.
The key metric to watch for dollar dependent economies with exchange rate pegs is the value of domestic money supply (at the fixed dollar price) relative to FX reserves. If domestic claim to dollars, id est money supply, exceed FX reserves it is highly likely that the monetary authorities will be forced to devalue in order to realign the two metrics. If we look at an economy like Saudi Arabia, where there have been a lot of talk about devaluation, we find that there are more than enough FX reserves to cover the outstanding money supply. Since there will be no positive effect from a devaluation, there are no immediate devaluation threat.
SA FX vs M2
However, at current trends the FX reserves will drop below M2 by late 2017 or early 2018. Current trends does not lead to very pleasant outcomes for the Saudi economy because the domestic money supply is and will continue to deflate. This will expose internal malinvestements, which will show up as increasing NPLs in the banking sector, which in turn will lead to further deflation.
It is thus tempting for the Saudi government to reflate their economy by pushing more Riyals into the system; but this runs the risk of exacerbating the possibility of devaluation as the money supply will soon exceed falling FX reserves.
As most of the rest of the world, also the Saudis have become path dependent; 1) maintain the peg, control price inflation through continued deflation of the money supply and get a full-blown banking crisis; or 2) alternatively, reflate the money supply, increase speculation in riyal forwards, devalue and get massive price inflation through the extremely important import channel.
This obviously begs the question; at what oil price can the Saudi’s mange to muddle through without ending up in either 1 nor 2.  At today’s price of around USD50 / bbl Saudi Arabia will burn through USD90bn worth of reserves per year.Change in FX reserves vs oil price
This means under a mild deflationary scenario FX reserves will fall below M2 already by early 2018; even with a 10 per cent cost reduction. At 60 dollar and only 2 per cent reduction in cost Saudi Arabia will probably not have to worry about severing the peg. FX vs M2 under different scnearios
Unless prices continue upwards, it will be interesting see what route, and which risks, the Saudi government is willing to take on.For now it appear route 1 is the preferred one, but as the banking crisis escalates we expect a gradual movement toward route 2. Unless oil prices spikes back to USD60 /bbl plus, and save the day. We doubt it!
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Finally, given the ban on FX products - and the seemingly inevitable de-pegging discussed above - one potential way to play the devaluation is via CDS...

In fact, as the FX ban comes into play, it's clear CDS is starting to become more active and more indicative of Saudi stress that forwards.