Wednesday, December 14, 2016

So Who Gets to Pay for Italy’s Banking Crisis? The Answers Are Beginning To Take Shape.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.
“There is not and there will not be a banking crisis in Italy, nor will there be a European financial crisis coming from Italy.” Those were the emphatic words of EU Economics Commissioner Pierre Moscovici over the weekend. “We have the capacity to deal with the situation and it will be dealt with from both Italy and at the European level” he told France Info radio.
Clearly, quixotic delusions are as rampant as ever at the loftiest heights of Brussels’ ivory towers. Either that, or things are now so serious that lying is the only tactic left available.
The markets also appear to be in a state of eerie complacence. Since rumors of yet another publicly funded bailout emerged early last week, bank shares have taken off, not only in Italy but across most European markets. Shares of Unicredit, Italy’s only “systemically important financial institution,” has surged 20%, while Italy’s second largest bank, Intesa Sanpaolo, is up 10%.
Once again, just the slightest hint of future government and/or central bank intervention is enough to steady the nerves of today’s welfare-addled investors. For now.
Monte dei Paschi di Siena (MPS), which has already raised capital twice, will have one last chance this week to raise the capital it needs (min: $5 billion) from private investors. Given its abject failure to raise more than €1 billion of new capital over the last six months, despite the assistance of one of the world’s biggest, best connected mega-banks, JP Morgan Chase, it’s a mighty big call. If it does fall short, it will have one last lifeline at its disposal, Plan Z: a full-blown taxpayer-funded bailout, potentially including a bail-in of subordinated bondholders.
The idea of bailing in subordinated bondholders is a touchy subject in Italy, since they include thousands of retail investors to whom the banks “mis-sold” complex financial instruments as safe investments during the lean years of Europe’s sovereign debt crisis. The last time subordinated bondholders were bailed in at a handful of regional banks at the tail end of last year, one retired investor took his own life after losing all his life savings. However, as Reuters’ financial editor, George Hay, points out, the political impact may be overstated:
Over 85% of Italian bail-in instruments are held by the wealthiest 10% of domestic households, according to the Centre for European Policy Studies. If bonds were mis-sold, compensation could be added as needed – as happened in the case of Spanish lender Bankia.
Alas, since Bankia’s taxpayer funded rescue in 2012, the Spanish government, with the funds of Spanish taxpayers, has refunded not only the bank’s retail bondholders but also many of its duped shareholders.

There’s also the prospect of a much broader bailout of Italy’s banking system, which according to “official sources” could total €15 billion. Given that as many as seven mid-sized Italian banks are as, if not more insolvent, as MPS, according to Italy’s Finance Minister, Pier Carlo Padoan, this is the more likely outcome.

However, €15 billion may not be enough. According to Philippe Bodereau, global head of financial research at PIMCO, as much as €40 billion may be needed. It’s an amount that Bodereau believes is both perfectly “manageable” and “not a large number in the context of Italy’s economy.”

It’s worth pointing out he is hardly an impartial bystander in all this. PIMCO almost certainly has some level of exposure to Italian bonds, which would lose a lot of value in the event of a full-blown Italian banking crisis. And it just took control of a fund holding close to €10 billion of impaired assets belonging to Italy’s biggest bank, Unicredit, which today announced plans to raise €13 billion of new capital by the end of March next year.
If successful, it would be one of the biggest capital expansions in Italian history. As CEO Jean-Paul Mustier admits, Unicredit’s ambitious plan would not be helped by a disorderly resolution of MPS. “We are highly confident that the Monte dei Paschi situation will be solved by the end of the year and will not impact our plans,” he said.
PIMCO’s Bordereau points out that the €40 billion bailout he envisions would represent a mere 2% of Italy’s GDP. By contrast, Spain needed a bailout of close to 10% of its GDP to rescue its banks. What Bodereau conveniently fails to mention is that Italy is Europe’s second most indebted government, after Greece. When Spain’s still beleaguered financial sector was “comprehensively” bailed out in 2011-12, the government had total public debt equivalent to 69% of GDP. In the five years since, that figure has mushroomed to just over 100% of GDP.
In Italy, the debt-to-GDP ratio is already 132%, among the highest on the planet. Yet thanks to the reality-distorting effects of the European Central Bank’s monetary alchemy, that same government is still able to pay historically low yields on the debt it issues.
But the pressure is rising. Italy’s debt is already near the bottom of investment grade, according to the three big US rating agencies, Moody’s, Fitch’s and S&P and Canadian-based DBRS. If Italy’s credit rating falls into “junk” territory with the four ratings agencies, the ECB would be barred from buying its bonds. This would drive up Italy’s borrowing costs.
In other words, a government that is buckling under the sheer weight of its own debt exposure and whose 2017 budget is already at risk of breaching EU fiscal rules due to excessive spending could be on the verge of bailing out banks that, according to some estimates, have more than €350 billion of toxic debt festering on their balance sheets. And the cost of funding for those banks could be about to explode, begging the ultimate question: How is Italy’s government going to save its banks without pushing itself over the edge?
Turns out, as Reuters reported in an article titled “European Commission Hints at Leeway for Aid on Italy Banks,” European Commission Vice President Valdis Dombrovskis is alleged to have said that any state support for banks was likely to be treated as a “one-off expense”, which would not affect Italy’s official structural deficit measures. In other words, no problem. By Don Quijones, Raging Bull-Shit.

IBM boss promises 25,000 new American workers during Trump's first term on eve of summit with tech bosses at Tower

  • IBM boss Ginni Rometty has penned an op-ed ahead of a tech summit with Donald Trump
  • She says her firm will hire 25,000 people in four years and spent $1 billion on training
  • Execs from Google, Facebook, Apple, Amazon and other tech companies have been invited to join the parade of visitors to Trump Tower
  • Trump to be represented by venture capitalist Peter Thiel, one of the industry's few high-level Trump backers; he's on the board of Facebook
  • Apple's Tim Cook plans to come, and Amazon's Jeff Bezos is coming, too
  • Cook hosted a million-dollar fundraiser for Hillary Clinton in Los Angeles last August; Bezos owns the Washington Post and has tussled with Trump  
  • Trump said he held post-election phone calls with execs from Apple and Microsoft 

The head of IBM is getting in good with President-elect Donald Trump with a pledge to hire 25,000 Americans during his administration in advance of a tech summit at Trump Tower on Monday.
'At IBM alone, we have thousands of open positions at any given moment, and we intend to hire about 25,000 professionals in the next four years in the United States, 6,000 of those in 2017,' write CEO Ginni Rometty in USA Today.
'IBM will also invest $1 billion in training and development of our U.S. employees in the next four years.'
She made a pitch for 'new collar' jobs, adding, 'We are hiring because the nature of work is evolving – and that is also why so many of these jobs remain hard to fill.'
'As industries from manufacturing to agriculture are reshaped by data science and cloud computing, jobs are being created that demand new skills – which in turn requires new approaches to education, training and recruiting.'
IBM CEO Ginni Rommetty is promising to hire 25,000 people over four years, as she prepares to attend a tech summit at Trump Tower
IBM CEO Ginni Rommetty is promising to hire 25,000 people over four years, as she prepares to attend a tech summit at Trump Tower
Her hiring push also sets up a contrast with Apple, a firm Trump has goaded for its production of key products in China and other locales. She called for investments in technical education and other education reforms. 
After Trump's election, Rometty wrote a letter pledging to 'achieve the aspiration you articulated and that can advance a national agenda in a time of profound change,' Politico noted. 
Trump also added Rometty to his advisory group that he calls his Strategic and Policy Forum.
IBM also has been cutting jobs in recent years, as Fortune noted in one report. 
'As part of the Technology CEO Council of which I am a member, we will prepare an updated set of recommendations for how you could use technology and fraud analytics to save the government more than $1 trillion,' she wrote in her post-election letter.
Trump has already drawn controversy for his efforts to push employers to keep jobs here, including his effort to save about 700 jobs at a Carrier plant in Indiana, a move that provided a big PR boost but also is expected to cost about $7 million in incentives. 
Trump has also done battle with Boeing over Twitter over the $4.2 billion price tag for a replacement for Air Force One. 
Tech giants are headed to New York for a pow-wow on Wednesday with Donald Trump's transition team.
Jason Miller, a spokesman for Trump, said Monday 'some very big-league names' are coming to the president-elect's summit for industry leaders at Trump Tower.
Amazon's Jeff Bezos and Apple's Tim Cook will join the pilgrimage to Trump's New York City headquarters, Yahoo News reports. 
So will Facebook's Sheryl Sandberg, Google co-founder Larry Page and Erick Schmidt, chairman of Google's parent company, Alphabet. Oracle co-CEO Safra Catz and Cisco CEO Chuck Robbins have confirmed their participation. 
Cook hosted a million-dollar fundraiser for Hillary Clinton in Los Angeles last August. Bezos owns the Washington Post and has tussled with Trump.

War on cash continues: Australia seeks to remove $100 note from circulation

Australia looks set to follow in the footsteps of Venezuela and India by abolishing the country’s highest-denomination banknote in a bid to crack down on the “black economy”.
Speaking to ABC radio on Wednesday, Revenue and Financial Services Minister Kelly O’Dwyer flagged a review of the $100 note and cash payments over certain limits as the government looks to recoup billions in unpaid tax.
Monday’s midyear budget update will include the appointment of former KPMG global chairman Michael Andrew to oversee a black economy taskforce. The black economy accounts for 1.5 per cent of GDP, given many cash payments are untaxed.
Ms O’Dwyer told the ABC not only is the lost revenue owed to the Australian people for schools and hospitals, but it’s also critical for those who do the right thing and pay tax.
“The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes,” she said. Despite the broad use of electronic forms of payment, Ms O’Dwyer warned there are three times as many $100 notes in circulation than $5 notes.
“It does beg the question, ‘Why?’” she said.
There are currently 300 million $100 notes in circulation, and 92 per cent of all currency by value is in $50 and $100 notes.
Australian 100 dollar note war on cash
Australian 100 dollar note war on cash
The minister would not rule out the removal of the $100 note, saying it was up to the expert panel to provide recommendations. “There’s nothing wrong with cash per se, the issue is when people don’t declare it and when they don’t pay tax on it,” she said.

The taskforce will draw on the experience of countries like France, where the government banned cash payments of more than 1000 euros. “I’m not going to put a limit on what the taskforce will look at,” Ms O’Dwyer said.
Liberal Democratic Senator David Leyonhjelm hit out at the proposal, saying “the only people who are distressed by the cash economy are the government and the public servants who want to spend taxes”.
“The incentives for a cash economy would be a lot reduced if taxes were a lot lower,” he told “It’s a reaction to the level of taxes we pay.”
Mr Leyonhjelm said Australia was joining a global push to make it harder to engage in the cash economy. “Whether it will succeed or not is a moot point. Carrying two $50 notes instead of a $100 note doesn’t seem to be much of a disincentive,” he said.
“But with my libertarian hat on, I think the solution is to lower taxes so the incentives to avoid paying taxes are lower.”
It comes after a report by UBS recommended Australia scrap the $100 note. According to UBS, benefits may include “reduced crime (difficult to monetise), increased tax revenue (fewer cash transactions) and reduced welfare fraud (claiming welfare while earning or hoarding cash)”.
“From the banks’ perspective there would likely be a spike in deposits — if all the $100 notes were deposited into banks (ignoring hoarded $50 notes), household deposits would rise around four per cent,” the report said.
“This would likely fill the banks’ Net Stable Funding Ratio (NSFR) gap and reduce reliance on offshore funding.”
India last month demonetised the country’s two highest-denomination banknotes in a bid to crack down on “black money”, sparking chaotic scenes.
Prime Minister Narendra Modi sent shockwaves through the country by announcing on November 8 all 500 rupee ($10) and 1000 rupee ($20) notes — some 85 per cent of all bills in circulation — would cease to be legal tender within hours.
In a scathing editorial in The Hindu newspaper, former Indian Prime Minister Manmohan Singh said the decision had “shattered the faith and confidence that hundreds of millions of Indians” had placed in their government.

“The vast majority of Indians earn in cash, transact in cash and save in cash, all legitimately,” he wrote. “Their daily subsistence depends on their cash being accepted as a medium of valid currency.
“They save their money in cash which, as it grows, is stored in denominations of 500 rupee and 1000 rupee notes. To tarnish these as ‘black money’ and throw the lives of these hundreds of millions of poor people in disarray is a mammoth tragedy.
“It is the fundamental duty of a democratically elected government in any sovereign nation to protect the rights and livelihood of its citizens. The recent decision by the Prime Minister is a travesty of this fundamental duty.”
This week, Venezuela joined suit, with Venezuelans rushing to trade in their 100-bolivar bills after President Nicolas Maduro said he was eliminating the nation’s highest currency denomination in an attempt to fight speculation and currency hoarding.
Earlier this year, Prime Minister Malcolm Turnbull said he was open to scrapping the 5c coin, after Treasurer Scott Morrison was grilled by’s Malcolm Farr.

Hammond: Delay Brexit For Risks To Financial Stability

British Chancellor Philip Hammond has called for a delay to completing the Brexit process, saying it might otherwise pose “risks to financial stability.
Hammond said Monday that “an emerging view among businesses, among regulators and among thoughtful politicians” necessitated a transitional deal after Brexit. 
A slower process “would tend towards a smoother transition and would run less risks of disruption, including – crucially – risks to financial stability, which must be a very real concern,” he noted.
The issue must be discussed at the start of Brexit negotiations next spring, he told MPs on the Treasury committee in the firmest statement in support of a transitional deal.
“Collectively, I think transitional arrangements would be beneficial to us,” he stated.
Hammond also warned that it would be necessary to hire and train “large numbers of people” to deal with a five-fold increase in border checks, which would cost “hundreds…


Photo by seatont2002 on Flickr.

Today, Prudential Financial announced it would suspend the distribution of a low-cost life insurance policy through Wells Fargo. The low-cost life insurance policy, called MyTerm, had been promoted by Wells Fargo since 2014 throughout its large number of retail banking outlets.
The suspension comes shortly after a wrongful termination lawsuit was filed by three former Prudential employees, which alleged that Wells Fargo employees signed up customers for MyTerm life insurance policies without the customer’s knowledge to hit sales goals. The plaintiffs, who worked at Prudential’s corporate investigations division, claim their reports of the fraud led to their termination because Prudential management did not want to take any action that could damage its business with Wells Fargo.
If true, those allegations would fit an already established pattern of Wells Fargo employees creating fake customer checking, saving, and credit card accounts. The resulting scandal from those revelations led to Wells Fargo being fined $185 million and the resignation of the CEO, John Stumpf.
Wells Fargo is already facing a new investigation by the SEC concerning whether the bank made proper disclosures to investors. It’s not clear if the company disclosed the nature of the Commodity Futures Trading Commission investigation and others that led to $185 million in fines, or whether the company knowingly transmitted false sales numbers based on the gains from fake accounts.
Though it is hard to quantify, Wells Fargo’s name, reputation, and brand have been undeniably damaged. After the publicity of the congressional hearings, it is likely that many potential customers will not use the bank’s services. Customers whose names were used to open fake accounts will probably never bank with Wells Fargo again. In fact, some of them are suing.
That’s all before whatever further damage is done by the more recent accusations about the fake life insurance accounts from Prudential.
Hopefully not lost in all this is that the initial plan by Wells Fargo executives was to scapegoat low-level employees for this entire scandal. Despite creating the “cross-selling” program, which forced employees to aggressively try to open new accounts and even firing those that did not or complained about it, Wells Fargo upper management initially took no responsibility for the fake account scandal.
In all, over 5,000 low-level employees have been terminated and are likely never going to work in banking again, while the CEO and the executive responsible for managing the program, Carrie Tolstedt, will walk away with millions upon millions of dollars.
With those incentives in place, the real strategy for corporate criminals is going to be, if you want to break the law, make sure you get promoted first.

Italy's banking crisis: Unicredit AXES 14,000 jobs and begs investors for cash to survive

ITALIAN banking giant UniCredit is to slash 14,000 jobs, as part of desperate plans to raise billions of euros and avoid a collapse that could destroy the eurozone.

The lender is launching Italy's biggest ever share issue in the hope of adding €13billion (£11bn) euros to its balance sheet, as the country's banking crisis reaches boiling point. 

Unicredit has lost more than half of its market value this year amid fears of bad loans and profitability worries. 

It's the fourth time the bank has begged investors for more cash since the financial crisis. 

Now the lender is set lose more than 10 per cent of staff by 2019 and embark on an ambitious cash call at the start of 2017.
The money will go towards shifting around €17.7bn (£15bn) of so-called noon-performing loans from the balance sheet of Italy's third largest bank.
It comes as troubled competitor Monte dei Pasche di Siena teeters on the brink of total meltdown after failing to raise investor cash through a similar rescue plan. 

But Unicredit's systematic importance mean the consequences of a failure would be a huge threat to the European banking system. 

Talking about the plans to shore up the bank, chief Executive Jean Pierre Mustie said: "We are taking decisive actions."

Italy has been thrown into political turmoil after the resignation of Prime Minister Matteo Renzi.
Now investors are far more wary of risking money in the country's crisis-hit economy and banks.
However, Unicredit has tried to reassure investors that its radical plan and jobs cuts mean it will be able to make dividend payments by 2019.

Snouts in the Trough, Hooves in the Till: Why You Shouldn't Donate to a Police Charity

To understand why the public cannot confide in government-employed police to protect private property, it is useful to consider how frequently police steal from each other – and members of the public who ingenuously donate to police-operated charities. This isn’t because police officers are underpaid; it is because their occupation cultivates a sense of privilege and contempt for other people’s property.
The median annual household income in Idaho is roughly $49,000. Mark Furniss, 46, was making almost $20,000 a year in excess of that figure when he resigned from his job as a Boise Police Officer on October 20, the same day that he and his wife Sara filed for Chapter 7 bankruptcy. At the time, Sara was employed as a “safe schools assistant” in the recently created West Ada School District.
Together, Mark and Sara Furniss easily cleared $100,000 a year in salary and benefits, which is more than enough for their family of four to enjoy a very comfortable lifestyle in Boise. Yet Mark and Sara allegedly used their positions as president and office manager, respectively, with Treasure Valley Lodge #11 of the Fraternal Order of Police to embezzle $73,000 over a five-year period.
The couple’s pilferage from the FOP’s accounts was noticed no later than February, which is when he was confronted by the organization’s president over his use of a union credit card to buy tickets to a Pittsburgh Pirates game and make more than $500 in personal purchases at a department store. A forensic audit was conducted, which quickly discovered that Mrs. Furniss had been systematically overpaying herself (she drew a salary from the FOP), misusing a lodge credit card, and had caused hundreds of dollars in overdraft fees. She later disclosed to investigators that she had set up an automatic withdrawal from a FOP account to pay the family’s cable television bill.
Detective Gary Marang of the Nampa Police Department, which has investigated the matter to avoid a conflict of interest, recalled in an affidavit that the couple also used FOP funds to make a $2,700 down payment on a travel trailer. They most likely intended to make use of that trailer to flee the jurisdiction: After filing for bankruptcy on October 20 (listing the FOP as among the “creditors” who would be stiffed by them), Mr. and Mrs. Furniss reportedly planned to head north to Alaska in search of a “fresh start.”
Like countless others, the Mark and Sara rode the housing bubble and fell hard in 2008 when it burst. Their financial disclosure form lists a total of $572,992 in assets, including a Meridian home valued at $230,000. Their estimated liabilities are $384,095, which includes “more than a dozen credit cards and five charge accounts,” observes the Idaho Statesman. They had also purchased two expensive late-model SUVs. Despite the fact that they both drew very generous tax-subsidized salaries, they listed their monthly income at $869, with $5,742 in monthly expenses. Perhaps the most shocking line item in the form was the disclosure that the total value of the family’s checking accounts was $864.
In the two weeks prior to the couple’s November 25 arrest, their FOP chapter had collected more than $73,000 through a GoFundMe account to raise money for three officers – two humans and a “K9 officer” – who were wounded in a shootout with a fugitive. It would have been useful for the public to know that the people in charge of the lodge’s finances had embezzled nearly an identical amount.
Mark and Sara have two very young children, a fact that will be taken into account when they are given the customary Blue Privilege discount at sentencing time. Former Richfield, Ohio police officer Michael Simmons benefited from official leniency when his own longstanding embezzlement from the local FOP was discovered.
Simmons has confessed to stealing more than $26,000 the FOP’s “Shop with a Cop” program, which is used to buy Christmas gifts for poor children.
One might expect to see exemplary punishment imposed on someone who committed a Dickensian offense of that kind. One would be wrong to do so, when the offender is a member of the state’s enforcement caste.
As was the case with Mark and Sara Furniss, Simmons squandered  money raised for charitable purposes on personal expenses and luxuries, including electronics, clothing, tools, and tickets to sporting events. Rather than being sent to prison for felony theft, the 42-year-old Simmons was given an 18-month suspended jail sentence, two years of probation, and 500 hours of community service. He will also be required to pay back only $15,000 of the money he stole, so full restitution – which is the only legitimate punishment for a crime against property – will not be required.
According to Richfield, Ohio Police Chief Keith Morgan, one reason Simmons won’t be required to pay back the full amount is because “the program’s lax bookkeeping made it difficult to pin down exactly how much was stolen and how much went to legitimate purchases,” reports the Akron Beacon Journal.
Simmons’s attorney, Mark Guidetti, says that the judge’s very generous terms will allow Simmons to move on with his life and get another job. Now that he is tagged with a fourth-degree felony, it’s likely that he won’t find another gig involving a gun, badge, and qualified immunity.
Embezzlement from FOP lodges is stunningly commonplace. One would expect that law enforcement officers, zealous for the honor of their coercive fraternity, would inflict exemplary punishment on those within their ranks who steal from their comrades in the brotherhood. As with so many other offenses, however, “professional courtesy” applies even to those who can’t keep their snouts out of the FOP’s trough.
Former Hernando County, Florida Sheriff’s Deputy Michael Glatfelterwas given five years’ probation after siphoning away $14,000 from the local FOP lodge – and more than $1,000 from a special fund established to benefit the family of a colleague who had died in an on-duty traffic accident. Struthers, Ohio Patrolman Thomas Granchie was allowed to resign without facing administrative charges after he admitted to stealing nearly $5,000 from his FOP lodge in 2007.  Judge William Kobelak spoke sympathetically of  Granchie as he sentenced the thirty-year veteran officer to 90 days house arrest for what should – and would – have been felony theft if committed by a Mundane.
“I want to look at him as a person with both good and bad things in his life;” Judge Kobelak said, apparently treating Granchie’s decades of service to the murderous abstraction called the “State” as extenuation for his self-serving felonious conduct. “This black cloud hanging over his head is always going to be there.”
Actually, that black cloud dissipated very rapidly. It was Granchie’s tax victim-provided police pension that proved to be permanent; this was made possible when the court dismissed the felony count and allowed the thief to plead guilty to a single charge of misdemeanor theft.
Such conduct is to be expected wherever large pools of money are entrusted to people who are clothed in “qualified immunity.”

Goldman Sachs President To Advise Trump On Economy

US President-elect Donald Trump has hired the president of the notorious Goldman Sachs to advise him on economy.
In a news release on Monday, the future president repeated his anti-establishment economic promises, juxtaposing them with the official announcement of Goldman Sachs President Gary Cohn as the director of his National Economic Council (NEC).
“As my top economic advisor, Gary Cohn is going to put his talents as a highly successful businessman to work for the American people,” Trump said. “He will help craft economic policies that will grow wages for our workers, stop the exodus of jobs overseas and create many great new opportunities for Americans, who have been struggling.”
Trump’s appointment of billionaires, corporation CEOs as well as retired generals in his administration is drawing criticism from his opponents and supporters.

Trump Tower is seen in Manhattan  on December 9, 2016 in New York City.
The latest appointment followed…

Euro Crisis and Contagion Almost Certain In 2017 Warns McWilliams

A euro crisis and contagion is almost certain in 2017, Irish economist and writer, David McWilliams has warned:
“It is almost certain that there will be another euro crisis in 2017. The last time we had a euro crisis, the focus of attention was Greece; today the vortex is Italy.
Italy is not Greece. Italy is the third-largest economy in the Eurozone. Italy is the second-largest manufacturing nation in the EU after Germany. Italy is the largest debtor in Europe.
The third-largest Italian bank is irredeemably bankrupt. Italy has no government and the people who are likely to win the next election want to take Italy out of the euro and replace the euro with their own currency, the lira.
Gold in EUR (YTD 2016)

These are the facts.
Our Finance Minister has said there is no problem in the Eurozone. I really don’t know what planet he is living on.
Unfortunately for the EU, if Greece was a tricky issue to deal with, Italy is — in economic terms — a massive Greece …”  See article here
Despite the recent sell off in gold prices, gold remains 12% higher in euro terms in 2016 – from €974/oz to €1,092/oz.
Gold is 10% higher in U.S. dollars and 30% higher in pounds.
The bout of euro strength we have seen in recent months is unsustainable and will in time give way to the euro weakening against gold. Gold will again hedge and protect investors and savers in the EU from euro weakness as it did during the financial crisis.
The dollar has had a massive rally and looks overvalued versus most currencies and indeed gold. U.S. assets have increasingly poor fundamentals and both U.S. stocks and bonds look vulnerable to sharp corrections and new bear markets.
The panacea of massive bailouts, bail-ins and massive currency printing by the ECB as announced last Thursday, may or may not prove effective at containing the crisis in 2017. However, investors with a more long term horizon are diversifying and looking to the inflation protecting and systemic hedging  qualities of gold.
The most effective hedging instrument and safe haven asset remains gold bullion. This is only the case if investors own allocated and segregated gold and silver coins and bars in the safest vaults, in the safest jurisdictions in the world.
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