Deutsche Bank's Dire Warning On Global Trade: "The Currency War Is Futile"

“It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.”

That’s from WTO chief economist Robert Koopman, and it’s a quote we’ve used on a number of occasions. Koopman is referring to the fact that for several years in a row, the rate of growth in global trade has lagged GDP growth. That’s a problem for two reasons: 1) GDP growth is hardly robust as it is, and 2) before the recent downturn, the last time trade growth underperformed the rate of economic expansion was two decades ago.

As WSJ noted last autumn, trade growth has averaged just 3% per year. That’s half of the 1983-2008 average.

“It’s fairly obvious that we reached peak trade in 2007,” Scott Miller, trade expert at the Center for Strategic and International Studies, a Washington, D.C., think tank told the Journal.

Since then, the evidence has continued to pile up that global trade has flatlined. Freight volume in the US fell for the first time in three years in November, while monumental declines for Class 8 truck sales vividly demonstrate the extent to which commerce is simply grinding to a halt across the US economy. As for global trade, well, the Baltic Dry speaks for itself.

“It is worse than in 2008. The oil price [is low] and freight rates are lower. The external conditions are much worse,” Maersk CEO Nils Andersen said, just last month. Maersk Line - the company's golden goose and the world's largest container operator - racked up $182 million in red ink last quarter alone.

In this environment the “answer” has been competitive devaluation - i.e. a currency war. Although this is, in the end anyway, a zero sum game, until recently there was still some hope that key EMs could rely on devlaued currencies to help cushion their current accounts from the slowdown and restore some semblance of balance and competitiveness.

However, it would appear that, as outlined above, the link between output and trade growth might have been severed sometime in the post-crisis world. If that's the case, the FX wars may be largely futile and what looks like an undervalued currency might have much, much further to fall - or could simply decline in virtual perpetuity. That's a rather disconcerting proposition to say the least. Especially for EM.

Below, find excerpts from a new note out of Deutsche Bank where FX strategist Gautam Kalani believes the fundamental relationships officials all take for granted and use to justify the whole "devalue our way to propsperity" line may no longer hold. 

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From Deutsche Bank

1) Is the currency war futile? It looks increasingly so.

The fundamental currency-current account relationship is as follows: large currency undervaluation current account improvement currency appreciation. The first link describes the ‘currency war’ argument, whereby a weaker currency leads to an exports pickup and thus a boost to growth. The second link underlines how current account improvement in response to a large undervaluation is an important channel through which large undervaluations can trigger FX appreciation.

There is a concern that this competitive devaluations channel (the first link) may have broken down (to a large extent) because of the collapse in global trade. Global growth today is generating much less trade growth than in the past (chart below). As a result, currency adjustment is not enough to spur growth significantly because global trade is increasingly less important to the overall makeup of GDP. This raises the possibility that the currency war is largely futile, as currency depreciation does not give much of a boost to exports/growth, and certainly much less impetus than in the past.

2) What is the implication of a futile currency war for EM FX? Beware of going long currencies purely on the basis of fundamental undervaluation.

Focusing on EM, lingering growth concerns further increase the perceived need for currency depreciation. However, since currency depreciation does not translate easily into exports improvement, more currency adjustment is probably required than in the past to obtain the same growth/current account impetus; currencies must be more undervalued before substantially improving the current account. In sum, a significant undervaluation of an EM currency may not be sufficient to drive appreciation via the current account channel; rather, even more currency adjustment may be required for some undervalued currencies.

Current accounts, especially in LatAm but also in high-yielding EMEA, still reflect excessive domestic absorption. Improvements have been limited despite large scale FX depreciation. Further, what current account improvement has taken place has been mainly on account of import compression rather than exports – perhaps FX weakness has played some role in this as imports become more expensive with a weaker currency, but a majority of it reflects demand slowdown in EM. Therefore, for currencies running large current account deficits, more FX adjustment may be on the cards before undervaluations start providing material support.

3) Which currencies to be wary of going long purely on the basis of fundamental undervaluation? In EMEA, ZAR stands out as an example.

If global trade growth has collapsed and the currency war is futile, a currency that is heavily undervalued on a fundamental model like BEER or PPP could easily become more undervalued. In this context, the FEER model, which estimates misalignments based purely on the distance of the cyclically- adjusted current account balance from its long-term average, could provide an appropriate warning signal. That is, one should be wary about long a currency on the basis of BEER undervaluation if it is also showing FEER overvaluation, as FEER overvaluation signals that the current account balance is still below its long-term average and therefore has not adjusted by ‘enough’.

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We've said it before and we'll say it again: central banks better figure out how to print trade, and fast.

http://www.zerohedge.com/news/2016-03-25/deutsche-banks-dire-warning-global-trade-currency-war-futile

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Only Half of Companies Hedging Currency and Other Risks

Forty-eight percent of nonfinancial companies listed on U.S. stock exchanges remained exposed to volatility in foreign exchange rates, commodity prices and interest rates in 2012 because they did not hedge them, according to a new study by Chatham Financial.

The interest-rate and currency risk adviser studied a sample of 1,075 companies ranging from $500 million to $20 billion in revenue. The nearly half that did not use financial instruments to hedge their exposures demurred despite the threat the risks posed to both the balance sheets and reported earnings (see chart at bottom). “That was surprising, knowing the pressure senior management teams and treasury feel around identifying ways to reduce risk to factors within their control so business can focus on other areas,”Amol Dhargalkar, managing director for corporate advisory at Chatham, says.

Fifty-two percent of firms with exposure to global currency fluctuations hedged FX risk, the firm found. Data released in September by the Bank for International Settlements showed a continuing decline in forex transactions for nonfinancial customers. Transaction dollar volume fell to $465 billion in 2013 from $532 billion in 2010.

The failure to hedge commodity price fluctuations could be driven by many factors. Fifty-three percent of the 1,075 randomly selected companies had exposure to commodity price risk, but less than half (43%) are hedging it using financial contracts. While commodity price swings can dent earnings even more than currency volatility, companies may seem underhedged on commodities because commodity risk management is often owned by the procurement department, says Dhargalkar. Also, though, hedging commodity prices is more complex than hedging FX or interest-rate risk.Companies sometimes have seemingly logical reasons to reduce or drop hedging programs. Currencies of the major developed economies have traded in a relatively tight range much of the past two years, reducing the use of currency hedges like forward contracts, for example. But that might not last. Finance departments may become more attuned to currency fluctuations the rest of 2013 and 2014 due to currency devaluations in Japan and Latin America and high volatility in emerging-market currencies like the Indian rupee and the Russian ruble.

Most CFOs and treasurers feel comfortable with interest-rate and currency derivatives but the commodities market is much more nuanced, points out Dhargalkar. “For example,” he says, “with fuel it matters where in the country you are filling up and what kind of fuel you are using.” In the case of product production costs, if a company’s input costs are partially driven by the price of copper, gold or silver, “how do you strip out the impact of other factors from the impact of underlying commodity prices?” Dhargalkar asks.

Only 41 percent of the sample companies hedged interest-rate risk. In 2012, Chatham explained in its report, companies expected interest rates to stay consistent over a long period, and rates on bond issuances were breaking through all-time lows. Both factors gave companies less motivation to change the fixed to floating mix of their existing debt portfolios, according to Chatham, which is usually the aim of interest-rate hedges.

A “gating factor” for all hedging is hedge accounting, which can prevent a less-sophisticated finance department from hedging FX and commodity risks at all, says Dhargalkar.

“If a business doesn’t apply hedge accounting, it actually can introduce more volatility into earnings,” says Dhargalkar. “The business might enter into the right set of hedges that reduce cash-flow risk but actually increase its earnings at risk, because of the volatility of the derivative showing up in earnings per share.” That could lead to the CFO having to provide a lengthy explanation on an earnings conference call.

Chatham’s study excluded sectors of the financial services industry and used information from companies’ latest form 10-Ks.

http://ww2.cfo.com/risk-management/2013/10/half-companies-hedging-currency-risks/

The Forex Rigging Irony

While Forex banks, traders, and other institutions are being blamed for market rigging, the Swiss National Bank can publish reports about its own market rigging, but instead of being a scandal, it's economic data.  That's because the vast majority don't understand how the Forex markets work.  It's not insulting - it's a fact.  Currently there are hundreds of pending litigation cases against a plethora of Forex banks, traders, and other institutions - but none against a central bank.  Of course it would be ridiculous to sue a central bank for market rigging - because it's in their mandate to manipulate the market.  Of course they don't call it manipulation, they call it 'market operations' and the Fed, sometimes known as 'market intervention' or 'stabalization efforts.'  Anyhow, it seems strange that on the one hand, central banks manipulate their own currency via 'market operations' which mostly are done through commercial Forex banks, but it is the Forex banks that receive this printed money that are sued, not the central banks.

But look from the CB perspective - what's the point of printing money if you can't use it to intervene in the market and prop your own currency?  

From Fortress Capital (source: Bloomberg):

The Swiss National Bank will probably stay on hold at its monetary policy meeting on March 17 as banks in the country are already facing pressure from negative interest rates, economists and strategists say in notes to clients.

The fact that the euro remained broadly stable against Swiss franc after the European Central Bank meeting lessens pressure on the SNB to act this week. SNB may intervene in the forex market to stem the franc’s appreciation.

The question in everyone's mind now - do these central banks really know what they are doing?  I mean, is there a coordinated international policy?  A conspiracy?  A conspiracy would imply intelligence.  Who knows.  

One perspective is to look at Forex markets from the perspective of those in power, the UHNWI, or 'them' - 'they' or 'The Elite.'  They have all the money they can possibly have - with this money they buy power, such as politicians, countries, people, etc.  They can't buy anything more.  So the only thing left is to ensure the status quo - or ensure as much as possible they maintain their position.  One way to do this which is more subtle, is to destroy the money supply.  By making currency worthless, or worth - less, any potential competition will be either wiped out or marginalized.  Would-be billionaires and up and coming entrepreneurs who are out there in the 'real world' making business, are contained.  It also affords them other opportunities, such as providing this fresh QE money to the private banks they actually own, allowing them to invest in HFT and other stat arb style investment strategies with virtually no risk, allowing them to grow their own portfolios at a level which is practically speaking, exponentially greater than the average investor.  And if their investments fail, they can always bail themselves out - or as the trend is, tax savers and bail themselves in.

Remember, our financial system is created by rules that are constantly changing.  Just as Central Bank are created they are destroyed.  Russia being one of the newest Central Bank in the game; about 30 years old:

The Central Bank of the Russian Federation (Bank of Russia) was established July 13, 1990 as a result of the transformation of the Russian Republican Bank of the State Bank of the USSR. It was accountable to theSupreme Soviet of the RSFSR. On December 2, 1990 the Supreme Soviet of the RSFSR passed the Law on the Central Bank of the Russian Federation (Bank of Russia), according to which the Bank of Russia has become a legal entity, the main bank of the RSFSR and was accountable to the Supreme Soviet of the RSFSR. In June 1991, the charter was adopted by the Bank of Russia. On December 20, 1991 the State Bank of the USSR was abolished and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of the Russian Federation (Bank of Russia), which was then renamed to the Central Bank of the Russian Federation (Bank of Russia). Since 1992, the Bank of Russia began to buy and sell foreign currency on the foreign exchange market created by it, establish and publish the official exchange rates of foreign currencies against the ruble.

If Russia can establish a new Central Bank, why can't the United States of America, Australia, Canada, Germany?  How close are we to a hyperinflationary trap, as happened during the 19th century?

Wildcat banking refers to the practices of banks chartered under state law during the periods of non-federally regulated state banking between 1816 and 1863 in the United States, also known as the Free Banking Era. This era, commonly described as an example of free banking, was not a period of true free banking, as banks were free of only federal regulation; banking was regulated by the states. The actual regulation of banking during this period varied from state to state.

According to some sources, the term came from a bank in Michigan that issued private paper currency with the image of a wildcat. After the bank failed, poorly backed bank notes became known as wildcat currency, and the banks that issued them as wildcat banks.^[1]However, according to others, wildcat meant a rash speculator as early as 1812, and by 1838 had been extended to any risky business venture.^[2] A common conception of the wildcat bank in Westerns and like stories was of a bank that left its safe somewhat ajar for depositors to see, in which the banker would display a barrel full of nails, grain or flour with a thin sprinkling of cash on top, thus fooling depositors into thinking it was a successful bank.  The traditional view of wildcat banks describes them as distributing nearly worthless currency backed by questionable security (such as mortgages and bonds). These actions ended when note circulation by state banks was stopped after the passage of the National Bank Act of 1863. Mark Twain, in his autobiography, refers to the use of such currency in 1853, "The firm paid my wages in wildcat money at its face value".

Certainly, our current system is better that which was used during the "Free Banking Era" because the fiat money today is NOT "worthless currency" - but Central Banks such as the SNB (Swiss National Bank) certainly are trying hard to make it such!

Forex isn't just a money market, it's the underpinning of all other markets (i.e. you sell your stocks for US Dollars).  Learn more about Forex with Splitting Pennies - Understanding Forex - the book.

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

Swiss National Bank Admits It Spent $470 Billion On Currency Manipulation Since 2010

By now it is common knowledge that when it comes to massive, taxpayer-backed hedge funds, few are quite as big as the Swiss National Bank, whose roughly $100 billion in equity holdings have been extensively profiled on these pages, including its woefully investments in Valeant and the spike in its buying of AAPL stock at its all time high.

But while the SNB's stock holdings are updated every quarter courtesy of its informative SEC-filed 13F (we wish the Fed would also disclose the equities it holds courtesy of its Citadel proxy), getting a gllimpse of the flow is more problematic, and involves waiting for the hedge fund's, pardon central bank's annual report.

Earlier today patience was rewarded when the SNB filed its 108th annual report, in which it disclosed that it spent CHF 86.1 billion or $88 billion, on current interventions last year, a measure of its efforts to shield the economy from deflation.

As Bloomberg reports, SNB President Thomas Jordan and his colleagues have repeatedly pledged to step in to prevent the franc from strengthening. They’ve done so even since they gave up a minimum exchange rate of 1.20 per euro in January 2015 on the grounds the interventions required to sustain it were out of proportion to the economic benefit. 

This is how the SNB explained its intervention:

In order to fulfil its monetary policy mandate, the SNB may purchase and sell foreign currency against Swiss francs on the financial markets. Foreign exchange transactions can be conducted with a wide range of domestic and foreign counterparties. The SNB accepts well over 100 banks from around the world as counterparties. With this network of contacts, it covers the relevant interbank foreign exchange market. The Singapore branch office facilitates round-the-clock foreign exchange market operations, if necessary.  

In 2015, the SNB purchased a total of CHF 86.1 billion of foreign currency, with the vast majority of foreign currency purchases being made in January. During the remainder of the year, the SNB also remained active in the foreign exchange market in order to influence exchange rate developments, where necessary.

This announcement was an odd departure from SNB protocol: Swiss policy makers rarely state outright that they’ve intervened, and analysts use data on sight deposits and foreign currency reserves to gauge the scope of the central bank’s actions. Breaking with the usual protocol, Jordan said in June the SNB had acted to stabilize the franc amid the Greek debt crisis.

The 2015 figure compares with 25.8 billion francs spent on interventions in 2014 and 188 billion francs in 2012. The SNB made no foreign-currency purchases in 2013.

In other words, as shown in the chart below, the SNB has spent a total of $471 billion to intervene in currency markets since 2010, amounting to two thirds of the country's GDP, and in the end failed after the drain simply became too big.

And yet somehow "analysts" think that where Switzerland failed, China will be able successful in maintaining its closed capital account.

http://www.zerohedge.com/news/2016-03-24/swiss-national-bank-admits-it-spent-470-billion-currency-manipulation-2010

Copying Japan: The Big Banks Confess

Back at the end of 2008, Western central banks (led by the Federal Reserve) embarked upon the most radical, extreme, and simply insane monetary policies ever contemplated in our modern economic era as a supposed response to the Crash of ‘08. Zero-percent interest rates. “Quantitative easing.” Hyper-inflationary levels of money printing.

Many readers may not fully comprehend the level of insanity (and fraud) inherent in such extreme monetary policies, so further explanation will be provided. First of all, there is no such thing as “a 0% loan” (and thus a 0% interest rate). But don’t accept the word of this writer.

Just try engaging in some “0% loans” in your own financial affairs, and then see what happens when you report such transactions to the Tax Man. You will quickly be informed that your supposed “0% loans” are legally deemed to be sham transactions. The Tax Man would then immediately add that these supposed loans would legally be deemed to be what they actually are: gifts – and you would be taxed (and perhaps prosecuted) accordingly.

So-called “0% interest rates” and any “loans” made at that non-existent rate of interest are prima facie fraud. Thus we start from the standpoint that at the end of 2008, the Federal Reserve knowingly and willingly embarked upon a massive campaign of (fraudulent) sham transactions, which continued until near the end of 2015 and totalled in the many trillions of dollars.

The Federal Reserve, instead of lending out these trillions of its new funny-money (at a real/legitimate rate of interest), has simply been handing it all to Wall Street, for free, via a long series of sham transactions. That’s a lot of fraud.

“Quantitative easing” is even more overt fraud. It is literally a euphemism of a euphemism. What is quantitative easing (apart from being an absolutely meaningless phrase)? It is “monetizing debt.” What is monetizing debt? It is another euphemism, which is thus also absolutely meaningless. But what does itreally mean?

“Monetizing debt” is when a government is so close to bankruptcy that it can no longer even borrow enough money to (temporarily) pay its bills. Thus the regime simply conjures more “money” – completely out of thin air -- and then uses this worthless funny-money to pretend to “pay its bills.”

Officially, we were told by our governments that this so-called quantitative easing was to “stimulate our economies.” Yes, it is undoubtedly more “stimulative” for an economy to continue to pretend to pay its bills than to declare bankruptcy. The entire Corporate media parroted this absurdity, proving yet again that this (illegal) oligopoly is anything but “a free press.”

Then we have the actual rate of money printing itself. At the risk of boring regular readers, this must once again be reviewed for the benefit of newer readers. Below is the last legitimate representation of the U.S. monetary base (and the rate of money printing that has been occurring).

Subsequent to this, the chart, and now even the data itself, have been falsified, rendering newer versions of this chart deceptive at best. What this chart shows is the hyperinflation of a currency (the U.S. dollar), past tense.

This is a picture of a classic, parabolic exponential curve. In simpler terms, it is the mathematical representation of the phrase “out of control.” Directly implied by that phrase, and a basic principal of any such extreme, exponential function, is that “control” can never be regained. What is the result when any nation has lost control (past tense) of its money printing – in the form of an upward spiral? Hyperinflation.

The U.S. dollar is fundamentally worthless. Indeed, it is fundamentally worthless based upon several, separate metrics. Other Western currencies, which are now mere derivatives of the USD, are equally worthless. The day that “quantitative easing” began was the day that Western governments began feigning solvency via overt fraud.

However, we got more than just (extreme) actions by our central banks and the puppet governmentsbeneath them. We also got promises – big promises. Originally, the central bankers acknowledged the fact that their “policies” were the most extreme monetary voodoo ever perpetrated by any central bank.

In acknowledgment of that fact, we were given firm and solemn promises from all the central banks (and all their crooked foot-soldiers) that an “Exit Strategy” would commence immediately, in early 2009. Interest rates would quickly be “normalized.” The money printing would quickly be curtailed, before the hyperinflationary spiral in the previous chart could ever materialize.

But we got more than that. Even more emphatically, the central bankers and puppet politicians all puffed out their chests and proclaimed that they would never, ever “copy Japan.”

All that they were waiting for were “signs of economic stability”, so that (supposedly) it would then be safe to disconnect this economic defibrillator from the hearts of all Western economies. Did we see such signs? Supposedly.

In early 2009, the U.S. government, the Federal Reserve, all the charlatan economists , and the Corporate media proudly crowed in unison that the United States had begun its Recovery. Since then, this same flock has continued to chirp regularly about the “strengthening Recovery.” Yes, the U.S. economy has kept recovering, and recovering, and recovering some more.

Did we get the Exit Strategy? No.

The United States kept its interest rate at a (fraudulent) “0%”. Understand the significance here. As B.S. Bernanke was perpetrating his infamous “helicopter drop” of funny-money, to a hyperinflationary degree, every last penny of this unimaginable mountain of funny-money was being handed to the Wall Street crime syndicate for free.

If we took every lottery in human history, added them all together, and then multiplied that by 100, it would still be far less than the “lottery prize” which B.S. Bernanke handed to Wall Street, tax-free. But it gets worse. In our era of ultra-fraudulent “fractional-reserve banking,” each member of the Big Bank crime syndicate is allowed to “leverage” all of its free $trillions in funny-money by a ratio (i.e. multiple) of greater than 30:1.

This represents an orgy of monetary fraud of virtually infinite size, and we were promised (in 2008, and repeatedly after that) that it would never, and could never, happen, because we would never “copy Japan.” Indeed, the Western central bank cabal did not (merely) “copy Japan”, but went literally orders of magnitude beyond Japan in its monetary debauchery and fraud.

Leap forward to March of 2016 and the amusing quasi-confession from one of the members of this Big Bank crime syndicate: HSBC. Of course, readers still need to pull out their translation gear, since even this quasi-confession is twisted almost beyond recognition by the propagandists of CNBC, starting with the headline.

World copying Japan’s slow-puncture economy: HSBC

Machiavellian. What is another way of characterizing an economy, other than as a tire that will soon run out of air? In a death-spiral. Copying Japan’s economic/monetary death-spiral. The “world” is copying Japan’s death-spiral. Wrong.

Does the “world” all have their interest rates at near-zero, or lower? No, just the Corrupt West. Is the “world” all engaged in quantitative easing? No, just the corrupt West. Has the “world” all hyperinflated their currencies to worthlessness? No, just the Corrupt West. The Corrupt West is copying Japan’s death-spiral – after these regimes (and their central bankers) promised us again and again that this would never, and could never, happen.

The propaganda continues:

The global economy appears to be trapped in Japan-style stagnation, HSBC’s high-profile senior economic advisor said on Tuesday, adding his voice to the chorus of economist warnings.

What is the only non-Machiavellian aspect of that statement? That, once again, we are dealing with “a chorus,” i.e. a propaganda machine. Since we have already established that it is (laughably) inaccurate to lump together the Corrupt West and the Rest of the World, let’s deal with these two groups separately and then reconsider the propaganda above.

Is the Corrupt West “trapped”? Yes, if you dig a great, big hole in the ground, and then you jump into that hole, you will be trapped. What is missing from this Revisionist version of events from HSBC and CNBC is that the West’s “trap” was both voluntary and self-created. If you deliberately choose to copy a 25-yearfailed economic experiment, it doesn’t take a renowned psychic to “predict” the result. Even an economist should be able to do so.

Doing what Japan did, except to a much greater (and much more fraudulent) degree didn’t change the probability of the outcome at all. It merely reduced the time it would take the Corrupt West to duplicate Japan’s economic suicide, and reduced that time rapidly. It’s now taken Japan more than 30 years to get to where it is today. It took the Corrupt West (and their psychopathic central banks) less than 1/3 rd that amount of time to do twice as much damage to their own economies. And now we get a partial confession.

What about the Rest of the World? Is it “trapped”? Yes, but the trap is of an entirely different nature, beginning with the fact that the “trap” which has ensnared these other nations was not self-inflicted. Rather, the nations of the Rest of the World are victims of the Big Bank crime syndicate.

How does (how did) the bankers make the hollowed-out, bankrupt, fraud-saturated economies of the Corrupt West look slightly less putrid and cancerous? A Reverse-Beauty Contest. This crime syndicate has devoted much of its energies over the previous five years systematically sabotaging virtually every othereconomy on Earth.

The primary weapon of the One Bank crime syndicate as it has engaged in this economic terrorism is currency manipulation. This is not a “conspiracy theory.” It is a conspiracy fact, as these terrorist Big Bank tentacles were recently convicted of serially manipulating all of the world’s currencies, with this particular Big Bank crime-conspiracy documented dating back to at least 2008. Does that year ring a bell?

During that interval, India experienced a “currency crisis.” Russia experienced a “currency crisis.” Brazil experienced a “currency crisis.” South Africa experienced a “currency crisis.” Now even China is experiencing a “currency crisis.”

These convicted currency-manipulators have created a “currency crisis” in 100% of the “BRICS” economies, which are supposedly the world’s strongest and most powerful economies outside of the Corrupt West. Imagine how easy it was for these economic terrorists to create “currency crises” in lesser economies all around the world.

Have we gotten a “confession” to all of that? No. That would be far too much truth to ever emanate from either the Corporate media or the Big Bank crime syndicate. For today, all we have gotten is a partial confession that all of the West’s central bankers and all of their puppet politicians have done what they promised that they would never, ever do: copy Japan.

 http://www.zerohedge.com/news/2016-03-21/copying-japan-big-banks-confess 

Former Goldman Employee Avoids Prison, Gets $5,000 Fine For Stealing Secret NY Fed Documents

One week ago we were stunned to learn, and report, that as part of the "sentencing" of former NY Fed employee Jason Gross who had admitted to stealing confidential Federal Reserve information and passing it on to his former boss Rohit Bansal, then employed at Goldman Sachs, in hopes of generating goodwill and a comfortable post-Fed job at 200 West, he somehow managed to avoid any jail time and instead was slapped with a draconian penalty: a $2,000 fine.... oh and some community service.

Jason Gross

The sentencing judge, U.S. Magistrate Judge Gabriel Gorenstein, explained his ludicrous decision by saying his treatment of Gross sent "a powerful message to others." Right - a message that if you steal from the Fed and hand over the information to a potential future employer, you will never go to prison but instead will pay a token fine and dig some trenches. And that's if you get caught.

While we were disgusted with the lack of justice for Gross, we knew we would be even more disgusted once his co-conspirator, former NY Fed and Goldman employee, Rohit Bansal, was sentenced earlier today. We said that "as for Bansal, who also pleaded guilty in November to theft of government property, he is scheduled to be sentenced on Tuesday. We expect he too will avoid prison time."

This, too, turned out to be 100% correct.

As we predicted one week ago, and as Bloomberg reported moments ago, Rohit Bansal avoided prison time, and instead was sentenced to two years’ probation after pleading guilty to a misdemeanor. U.S. District Judge Gabriel Gorenstein at a sentencing hearing in Manhattan also ordered Bansal to perform 300 hours of community service and pay a $5,000 fine.

Rohit Bansal, who prosecutors said should get as long as a year in prison, pleaded guilty last year to obtaining about 35 documents on about 20 occasions from his friend Jason Gross, who was employed at the New York Fed, according to a settlement last year between New York-based Goldman Sachs and the New York Department of Financial Services.

How did both former NY Fed employees avoid spending even one day in prison between them? "Bansal asked that he be sentenced to no prison saying he’d made "significant" efforts to make up for his misconduct by agreeing to help regulators and the government when first approached by authorities. He also said he continued to cooperate with the Board of Governors of the Federal Reserve system in its related independent investigation."

So... he settled, just as his NY Fed leaker Jason Gross did, and the outcome was... no prison time for both of them! Just how is this considered equitable justice, or a quid-pro-quoby the US government is not clear, because ultimately the only "punishment" for both of them was some pocket change and hanging out in the open air, planting trees.

As a reminder, Bansal worked at Goldman Sachs from July 2014 until October 2014 where he provided advice on regulatory issues to bank clients, including banks supervised by the New York Fed. Prior to joining Goldman, Bansal worked at the Fed from about August 2007 to March 2014. 

As for Goldman, it itself agreed to pay a $50 million fine and accepted a three-year ban on some advisory work in New York as part of a settlement with the state regulator. The bank admitted it failed to properly supervise the employee. What it really admitted to was knowing full well it was receiving stolen NY Fed information and thus enriching itself illegally. Which, for the biggest hedge fund incubator of central bankers is nothing new.

As is nothing new the final tally of corrupt, criminal bankers who are going to prison as a result of this grotesque crime: zero.

http://www.zerohedge.com/news/2016-03-22/former-goldman-employee-avoids-prison-gets-5000-fine-stealing-secret-ny-fed-document

NFA orders Plantation, Florida retail foreign exchange dealer and swap dealer IBFX to permanently withdraw from NFA membership

NFA orders Plantation, Florida retail foreign exchange dealer and swap dealer IBFX to permanently withdraw from NFA membership

March 15, Chicago—National Futures Association (NFA) has ordered IBFX, Inc. (IBFX), an NFA Member registered retail foreign exchange dealer and provisionally registered swap dealer (SD) located in Plantation, Florida, to permanently withdraw from NFA membership and from acting as a principal of an NFA Member.

The Decision, issued by NFA's Business Conduct Committee (BCC), is based on a Complaint authorized by the BCC on November 2, 2015, and a settlement offer submitted by IBFX. The Complaint alleged that IBFX failed to comply with Chief Compliance Officer requirements as a provisionally registered SD and failed to implement an adequate risk management program. In addition, the Complaint alleged that IBFX failed to maintain the required minimum adjusted net capital, failed to notify NFA of the firm's capital deficiencies, failed to maintain complete and accurate books and records, and failed to adequately supervise the firm's operations.

The complete text of the Complaint and Decision can be viewed on NFA's website.

https://www.nfa.futures.org/news/newsRel.asp?ArticleID=4707

Goldman FX Head: "No Central Bank Conspiracy" To Crush The Dollar, "We Are Right, The Market Is Wrong"

Anyone having listened, and traded according to the recommendations of Goldman chief FX strategist Robin Brooks in the past 4 months, is most likely broke.  First it was his call to govery short the EURUSD ahead of the December ECB meeting, which however led to the biggest EURUSD surge since the announcement of QE1.  Then, two weeks ago, ahead of the ECB meeting he "doubled down" on calls to short the EUR ahead of the ECB, the result again was a EUR super surge, the biggest since December. And then, as we previously reported, ahead of the FOMC's uber-dovish meeting, Brooks released a note titled the "The Dollar Rally Is Far From Over" in which he said the following: "today brings the latest FOMC meeting. We expect the Fed to signal that it wants to continue normalizing policy, which means three hikes this year and four in 2017, with the statement referring to the risks as “nearly balanced,” reverting to phraseology used in October, just before December lift-off. Overall, our sense is that the outcome will be more hawkish than market pricing, in particular given that the FOMC may leave open the option of tightening at the April meeting."

He couldn't have been more wrong, and the result was the biigest two-day crash in the US Dollar.

In sum, just his latest three calls have resulted in nearly 1000 pips worth of losses. Add 50x leverage and...well, we know why hedge funds are getting obliterated.

One thing we didn't know is  whether after being spectacularly wrong for three consecutive times, Brooks would finally thrown in the towel and stop crucifying muppets. We got the answer this morning, when not only has Goldman's chief FX strategist quadrupled down on his wrong-way bets, saying it's not Goldman that is wrong, but the central banks (as he puts it, "an unfortunate series of misfires from central banks, most notably the ECB"), and perhaps more importantly, quashes speculation that there is a central bank conspiracy to move the dollar lower, to wit. "we see no conspiracy to stabilize exchange rates", which is all the confirmation we needed that the Shanghai G-20 summit was indeed just a mini Plaza Accord "conspiracy" (in Goldman's words) to force the dollar lower, if only for the time being until the impact of the soaring Yen and Euro slams Japanese and European stocks low enough, and we go back to square one at which point Goldman will finally be right, and the USD will soar 15% higher in very short notice.

Here is Brooks' full note:

Going up is hard to do

Over the past year, the Fed has repeatedly arrested the Dollar rise (Exhibit 1) and this week’s FOMC, with the shift in rhetoric towards caution over external risks, marked another iteration. We have sympathy for the Fed’s dilemma. After all, BoJ and ECB easing led the Dollar to rise sharply in H2 2014, before US monetary policy normalization could even begin. For the Fed, this is a major headache because – if our expectation for Fed hikes is correct – USD could rise another 15 percent (Exhibit 2), i.e. underlying appreciation pressure is large. This might be why the Fed is modulating its message, for fear that sounding upbeat could trigger another sharp rise in the Dollar. In this FX Views, we make three points: (i) dovish shifts from the Fed over the past year have only been able to put the Dollar into a holding pattern, they have not reversed the 2014 rise; (ii) data will ultimately force the Fed’s hand, which is why our US economists have stuck with their call for three hikes this year; and (iii) the underlying case for the divergence trade is stronger, not weaker, given that a dovish Fed will spur US outperformance versus the Euro zone and Japan. Going up is hard to do, but the Dollar will go up.

There is no doubt that Wednesday’s FOMC was a dovish surprise. But it is important to distinguish between what this week may signal (delayed tightening) and what it does not (a return to easing). This distinction matters because – as we have learned over the past year – delay only arrests Dollar strength, it does not reverse it. In the big picture, our first commandment for 2016 FX still stands, which is that – following the large rise of the Dollar in H2 2014 – the growth and inflation picture looks robust, which means that underlying momentum in the US is stronger than it appears. This is one reason why our US team has stuck to its call for three hikes in 2016 and why we believe data will ultimately force the Fed’s hand. In the interim, there are obviously questions around the Fed’s reaction function. The one thing that stands out to us is that recent Fed statements have become more volatile: dovish in September over global risks, hawkish in October with the signal for imminent lift-off, dovish in January with the suspended risks balance, and dovish again this past week (Exhibit 3). This argues against taking this latest surprise too seriously. If we are right about data, the Fed could quickly reverse course, in line with our US team’s call.

There is mounting concern – after the recent run of unhelpful central bank meetings – that the divergence trade is over. But from a fundamental perspective, this week’s dovish shift from the Fed will only spur US outperformance versus the G10, which is pronounced even with the Dollar substantially stronger over the last two years (Exhibit 4). For the US in such a setting to loosen its financial conditions at the expense of its G10 peers makes no sense (Exhibit 5), something that has only been compounded by the ECB’s pivot to credit easing (Exhibit 6), given that Euro strength in the wake of that decision has been undoing some of the positives from tighter credit spreads. Overall, the fundamental case for the divergence trade is stronger, not weaker, after the latest Fed meeting.

Pessimism over the divergence trade is compounded by worries that the February G20 meeting may have seen a behind-the-scenes agreement for the ECB and BoJ to desist from policies that could push the Dollar stronger. Comparing the February communique with that from September, there are two notable changes. First, the February communique contains language that countries should refrain from “disorderly moves” in their exchange rates, a reference to China and in line with our view that a large, one-off devaluation of the RMB is unlikely. Second, the September communique contained language that “monetary policy tightening is more likely in some advanced countries,” a reference to US monetary policy normalization. That language is missing from the February communique, which we think reflects US officials’ concern over market moves at the time. With the rebound in risk since then, we think that omission is dated, much as the past week’s dovish shift from the FOMC may turn out to be. We see no conspiracy to stabilize exchange rates, just an unfortunate string of misfires from central banks (most notably the ECB), which will ultimately reinforce the divergence theme.

Goldman's determination to see the USD higher probably means that the dollar has quite a bit downside left. Recall from our post yesterday, that the best trade to take advantage of this is to sell the USD during US hours offset by a dollar long during the rest of the trading day.

Only once Brooks is Gartmaned, will it be safe to go long the USD again, a move which will also unleash the next leg lower in crude, and thanks to China's promptly response, global stock markets too.

http://www.zerohedge.com/news/2016-03-20/goldman-fx-head-no-central-bank-conspiracy-crush-dollar