Category Archives: General

German exports slump, China is to blame

CNN Money, Oct 8, 2015

china germany

Europe’s export powerhouse is stalling.

Germany has just experienced its biggest monthly fall in exports in more than six years — and that was before the Volkswagen scandal broke last month.

Exports slumped by 5.2% in August compared to July, while imports were down 3.1%. That’s the largest drop in exports since January 2009, and a lot worse than expected. Economists predicted a slump of only 0.9%.

Researchers at the Ifo Institute for Economic Research in Munich said German exports are taking a hit from slowing demand from emerging markets, especially in China.

“Weak conditions in emerging markets are an increasing headwind for the export-oriented German economy,” noted Dominic Bryant, an economist at BNP Paribas.

The boost exporters got from a weaker euro in the first half of this year is also fading, Ifo said in its latest forecast.

The poor trade news completed a trio of bad reports from Germany this week. The country’s manufacturing output and industrial orders also showed a slump in August.

Germany is Europe’s biggest economy and any significant slowdown in its growth will hurt the region’s recovery. The International Monetary Fund expects Germany to grow by 1.5% this year — in line with growth for the eurozone as a whole — and by 1.6% in 2016.

The IMF said earlier this week Germany could do more to boost its growth, by investing in infrastructure and carrying out more reforms to its economy.


Costa Rica currency gains as others in region have plunged

CNN Money, Oct 8, 2015

costa rica national theatreThe National Theater of Costa Rica in San Jose, Costa Rica.

Latin American currencies have plunged in value this year but Costa Rica is bucking the trend.

Costa Rica’s currency, the colon, is up 1% against the dollar this year. That’s no reason for a beach party, but it’s a sign of an economy that’s proven quite resilient.

All the major Latin American economies — from Brazil and Chile to Colombia — have been hit hard this year because of falling commodity prices and China’s slowdown getting worse. It’s led their currencies to fall dramatically in value. Among the worst hit is the Brazilian real, which has plummeted 30% so far this year.

The very fact that Costa Rica’s currency has gotten stronger against the dollar this year is quite a feat.

It’s also a sign that Costa Rica is starting to shed its image as a banana republic and moving into an array of industries.

“For a small country, we have been diversified,” Costa Rica’s President Luis Guillermo Solis told CNNMoney in an interview.

A strong currency isn’t always good news. It makes exports more expensive and weak currencies in the long run can help economies.

But it is often a reflection of a healthy economy.

Costa Rica’s economy is projected to grow 3.5% this year.

That’s much better than the region: Latin America’s economy overall is expected to shrink this year, according to the IMF’s newly published projections this week. Brazil is already in recession and is weighing on much of the region’s growth.

Many Latin American economies rely on commodities — soybeans, oil, copper — to propel growth. But commodity prices have fallen plummeted this year and so has growth in these countries.

However, only 6% of Costa Rica’s economy comes from agriculture. It relies mostly on services to drive economic growth. Tourism, tech, medical equipment and shipping are the major growth industries in Costa Rica currently.

Some big U.S. employers there include Microsoft (MSFT, Tech30), Nextel and FedEx (FDX). And while China is the biggest trading partner for many other Latin American countries, Costa Rica is more closely tied with United States and Europe.

The global economic slowdown is of concern.

“We will not be able to move on to the next stage if the world economy doesn’t stabilize,” Solis said. “We can’t simply ignore what’s goes around us.”

Despite weathering headwinds this year, it’s coming off a tough year.

Once a major employer there, Bank of America (BAC) cut hundreds of jobs in Costa Rica last year. Unemployment is 9.5% and Solis admits poverty is a major issue in his country. About 20% of Costa Ricans live in poverty, he says. The currency lost value against the dollar at the beginning of 2014 and still hasn’t made back all the gains.

Still, Costa Rica has made economic and currency gains in a year when the rest of the region’s growth has come to a halt.


NEWS: Kaizen Discovery Announces Appointment of New Chief Financial Officer

Oct 8, 2015

Kaizen Discovery Inc. (TSX VENTURE:KZD) is pleased to announce the appointment of David Garratt, CPA, CA, as Chief Financial Officer (CFO) effective immediately.

Mr. Garratt brings 15 years of experience in financial roles, including eight years at Turquoise Hill Resources Ltd., an international mining company that owns a 66% interest in the Oyu Tolgoi copper-gold mine in Mongolia, where his last position was Vice President and Corporate Controller. Prior to joining Turquoise Hill Resources, he spent more than six years in Deloitte LLP’s audit practice focusing on servicing mining clients. Mr. Garratt holds a Bachelor of Applied Science in Geological Engineering from the University of British Columbia.

B. Matthew Hornor, President and Chief Executive Officer of Kaizen, said, “We are pleased that David has accepted Kaizen’s CFO role, one in which we are confident he will perform exceptionally well. David’s in-depth understanding of the mineral exploration and development industry through his experience with numerous complex transactions, uniquely qualifies him to lead the financial functions of our company. We expect that David will be a valuable addition to our executive management team as we look to further grow Kaizen.”

“I look forward to becoming part of Kaizen’s already strong team as it continues to execute on the company’s unique mineral exploration and development business model with the support of Japanese strategic partners,” said Mr. Garratt.

Mr. Garratt assumes the CFO role from Steve Vanry, who has been the company’s Interim CFO since June of this year. Mr. Vanry will remain with Kaizen as Executive Vice President, Corporate Development.

Full release

How the Chinese Will Establish a New Financial Order

By Porter Stansberry, Oct 7, 2015

For many years now, it’s been clear that China would soon be pull­ing the strings in the U.S. financial system.

In 2015, the American people owe the Chinese government nearly $1.5 trillion.

I know big numbers don’t mean much to most people, but keep in mind… this tab is now hundreds of billions of dollars more than what the U.S. government collects in ALL income taxes (both cor­porate and individual) each year. It’s basically a sum we can never, ever hope to repay – at least, not by normal means.

Of course, the Chinese aren’t stupid. They realize we are both trapped.

We are stuck with an enormous debt we can never realistically repay… And the Chinese are trapped with an outstanding loan they can neither get rid of, nor hope to collect. So the Chinese govern­ment is now taking a secret and somewhat radical approach.

China has recently put into place a covert plan to get back as much of its money as possible – by extracting colossal sums from both the United States government and ordinary citizens, like you and me.

The Chinese “State Administration of Foreign Exchange” (SAFE) is now engaged in a full-fledged currency war with the United States. The ultimate goal – as the Chinese have publicly stated – is to cre­ate a new dominant world currency, dislodge the U.S. dollar from its current reserve role, and recover as much of the $1.5 trillion the U.S. government has borrowed as possible.

Lucky for us, we know what’s going to happen. And we even have a pretty good idea of how it will all unfold. How do we know so much? Well, this isn’t the first time the U.S. has tried to stiff its foreign creditors.

Most Americans probably don’t remember this, but our last big currency war took place in the 1960s. Back then, French President Charles de Gaulle denounced the U.S. government’s policy of print­ing overvalued U.S. dollars to pay for its trade deficits… which allowed U.S. companies to buy European assets with dollars that were artificially held up in value by a gold peg that was nothing more than an accounting fiction. So de Gaulle took action…

In 1965, he took $150 million of his country’s dollar reserves and redeemed the paper currency for U.S. gold from Ft. Knox. De Gaulle even offered to send the French Navy to escort the gold back to France. Today, this gold is worth about $12 billion.

Keep in mind… this occurred during a time when foreign govern­ments could legally redeem their paper dollars for gold, but U.S. citizens could not.

And France was not the only nation to do this… Spain soon re­deemed $60 million of U.S. dollar reserves for gold, and many other nations followed suit. By March 1968, gold was flowing out of the United States at an alarming rate.

By 1950, U.S. depositories held more gold than had ever been assembled in one place in world history (roughly 702 million ounces). But to manipulate our currency, the U.S. government was willing to give away more than half of the country’s gold.

It’s estimated that during the 1950s and early 1970s, we essentially gave away about two-thirds of our nation’s gold reserves… around 400 million ounces… all because the U.S. government was trying to defend the U.S. dollar at a fixed rate of $35 per ounce of gold.

In short, we gave away 400 million ounces of gold and got $14 billion in exchange. Today, that same gold would be worth $620 billion… a 4,330% difference.

Incredibly stupid, wouldn’t you agree? This blunder cost the U.S. much of its gold hoard.

When the history books are finally written, this chapter will go down as one of our nation’s most incompetent political blunders. Of course, as is typical with politicians, they managed to make a bad situation even worse…

The root cause of the weakness in the U.S. dollar was easy to understand. Americans were consuming far more than they were producing. You could see this by looking at our government’s annual deficits, which were larger than ever and growing… thanks to the gigantic new welfare programs and the Vietnam “police ac­tion.” You could also see this by looking at our trade deficit, which continued to get bigger and bigger, forecasting a dramatic drop (eventually) in the value of the U.S. dollar.

Of course, economic realities are never foremost on the minds of politicians – especially not Richard Nixon’s. On August 15, 1971, he went on live television before the most popular show in Ameri­ca (Bonanza) and announced a new plan…

The U.S. gold window would close effective immediately – and no nation or individual anywhere in the world would be allowed to exchange U.S. dollars for gold. The president announced a 10% surtax on ALL imports!

Such tariffs never accomplish much in terms of actually altering the balance of trade, as our trading partners simply put matching charges on our exports. So what actually happens is just less trade overall, which slows the whole global economy, making the impact of inflation worse.

Of course, Nixon pitched these moves as patriotic, saying: “I am determined that the American dollar must never again be a hos­tage in the hands of international speculators.”

The “sheeple” cheered, as they always do whenever something is done to “stop the speculators.” But the joke was on them. Within two years, America was in its worst recession since WWII… with an oil crisis, skyrocketing unemployment, a 30% drop in the stock market, and soaring inflation. Instead of becoming richer, millions of Americans got a lot poorer, practically overnight.

And that brings us to today…

Roughly 40 years later, the United States is in the middle of anoth­er currency war. But this time, our main adversary is not Europe. It’s China. And this time, the situation is far more serious. Our nation and our economy are already in an extremely fragile state. In the 1960s, the American economy was growing rapidly, with decades of expansion still to come. That’s not the case today.

This new currency war with China will wreak absolute havoc on the lives of millions of ordinary Americans, much sooner than most people think. It’s critical over the next few years for you to understand exactly what the Chinese are doing, why they are doing it, and the near-certain outcome.


Porter Stansberry

(This is an adaptation of an article that was originally published in Porter’s Investment Advisory.)

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Bundesbank to Doubters: Here Is Our Gold. Every. Single. Bit of It.

Bloomberg, Oct 7, 2015

Show me the gold! Show me the gold!

Germany’s central bank has listed all of its gold.

In 2012 the Bundesbank found itself at the center of a storm when the German Federal Court of Auditors called on the central bank to physically take stock of its gold holdings outside the country as they had never been assessed. The Bundesbank opted not to accede to the auditors’ request and do a stock take on its gold, noting that there were “no doubts about the integrity, reputation and safety of these foreign depositories.”

This response proved to be ill-judged as it only served to fuel speculation over the safety of German gold and even questions about whether it exists at all.

In response to the backlash, the Bundesbank announced in January 2013 that they would begin repatriating gold from vaults in Paris and New York. A year later there was another change of heart following the federal election which resulted in the Free Democratic Party, which was in favor of full repatriation, being dropped from Angela Merkel’s government. Budget spokesman for Merkel’s CDU/CSU bloc declared “the Americans are taking good care of our gold.”

That might have been that, if not for the tenacity of campaigners such as Peter Boehringer, whose “repatriate our gold” blog continued to seek answers on how much gold there was in New York. He was particularly concerned that the Bundesbank claimed to have a full list of all its gold holdings but was refusing to publish it due to security reasons.

Well, this morning Germany’s central bank appears to have had yet another change of heart and has published on its website the full list of all its gold holdings and where they are located.

It is very detailed, listing the location, inventory number, weight and fineness of every single bar.

It is also very, very long. 2,302 pages long, to be precise.

Perhaps the Bundesbank has learned a lesson here and realized that if it had just complied with the wishes of the Federal Court of Auditors back in 2012 it could have avoided this mess. Or perhaps it has just become tired of people asking and decided to give the doubters enough data to keep them busy for a very, very long time.