The world is $152tn in the red — a record-breaking level of debt, according to the International Monetary Fund.
The figure, more than two times the size of the global economy, comes from the fund's latest Fiscal Monitor and is, officials claim, the most accurate measure of the world's debt burden ever calculated.
"Global debt is at record highs and rising," said Vitor Gaspar, director of fiscal affairs at the fund.
The figures highlight the apparent paradox between ultra-low interest rates imposed by many central banks in an attempt to encourage borrowing and boost sluggish economies, and the dangers that arise from excessive debt levels.
While the IMF did not call for rapid prepayment of debt, it warned that in some countries the unprecedented level of borrowing by companies was too high.
"Excessive private debt is a major headwind against the global recovery and a risk to financial stability," said Mr Gaspar. "The Fiscal Monitor shows that rapid increases in private debt often end up in financial crises. Financial recessions are longer and deeper than normal recessions."
Levels of borrowing have substantially outpaced global growth in recent years, rising from 200 per cent of gross domestic product in 2002 to 225 per cent last year.
While two-thirds of the debt is held by the private sector, governments' borrowing requirements have also ballooned since the global financial crisis.
Nevertheless, officials at the fund — which is holding its annual meetings with the World Bank in Washington this week — want governments to act to boost growth.
Calls for what are often dubbed "growth-friendly fiscal policies" have grown from the IMF and other multilateral institutions as concern has mounted that the world's central banks have been left with too much of the burden to lift the global economy.
Mr Gaspar emphasised that debt levels were not high everywhere. "The sharp diversity across countries is a reminder of the need to tailor policy diagnosis and prescription to the specific conditions prevailing in each country," he said.
Most of the debt is concentrated in the world's richest economies, although China has markedly increased borrowing in recent years. While low income countries have relatively low levels of debt, many have sharply increased borrowing in recent years.
The fund also said that companies would help raise growth if they shrank their balance sheets by reducing their size, although it acknowledged the process would take time.
He added that countries entering a financial recession with a weak fiscal position were likely to lose more growth than countries that manage to counter shocks by spending more.
Central banks have cut interest rates to all-time lows and engaged in mass bond buying in response to the global financial crisis. Although most economists think their actions have helped, there is also a broad consensus that the economy will remain below par unless governments do more.
The debt burden figure is based on data collected by the IMF and the Bank for International Settlements from 113 countries, which together make up more than 94 per cent of global GDP. Fund officials have worked on the project over the past year.
When the history of the decline of American power is written, the debacle of the Trans-Pacific Partnership may not deserve an entire chapter but it will definitely be more than a footnote.
The TPP is a trade agreement covering 12 countries in the Pacific with a collective population of about 800m, nearly two-thirds more than that of the EU single market, and a 40 per cent share of world trade. It has also become one of the most important tests of American leadership in Asia and the world.
Unfortunately, the two main presidential candidates are competing to see which of them hates TPP more and President Barack Obama is unable to push anything through Congress so the chances of its being ratified by the US are fading fast. If it is not ratified, this failure of American domestic politics will reverberate through Asia at a time when China is actively seeking to replace the US as the regional hegemon.
China was pointedly left out of the agreement, despite being a Pacific nation and the world's biggest goods trader. Seen from Beijing, the impending failure of TPP is a joyous, if baffling, occasion. It is the latest example — Brexit being another — of the dangers of popular democracy, proving that a country should never leave questions of national interest in the hands of the uninterested and uninformed masses. China's leaders are no doubt wondering what sort of superpower allows a minority of voters in rust-belt swing states to damage the interests of the entire nation in such an obvious way.
Part of the problem is mixed messaging from the Obama administration. While TPP has been described informally as the "anybody-but-China club" and an "economic Nato", the US has been at pains to deny in public that it has anything to do with containing Beijing.
This has forced the administration to try to sell TPP at home as just another trade deal at a time when many are suspicious of such deals. The closest Mr Obama has come to revealing the real rationale behind TPP — the one that might have a better chance of convincing the American public — was in January 2015. "China wants to write the rules for the world's fastest-growing region," he said. "That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules."
Ashton Carter, US defence secretary, went further in April last year when he said: "Passing TPP is as important to me as another aircraft carrier." Both of these statements are true, although Mr Carter probably overestimated the value of his aircraft carriers. By failing to adopt TPP, the US will in effect cede the right to set trade and economic rules in the world's fastest-growing region. In the words of a senior Japanese diplomat, this will hand Beijing a "golden opportunity to establish a trade system in Asia under Chinese leadership".
Even Japan, which considers the rise of an aggressive China to be its number one existential threat, is considering joining the China-favoured Regional Comprehensive Economic Partnership if the US fails to ratify TPP. That agreement would cover the 10 nations of the Association of Southeast Asian Nations, plus Australia, New Zealand, China, India, Japan and South Korea. Not only would that regional partnership exclude the US but it would also include worse safeguards for intellectual property, internet freedom, workers' rights, wildlife and the environment.
In these areas and from the perspective of American corporations, TPP is the "gold standard", as Hillary Clinton described it when she was a member of the Obama administration.
With its disdain for internet freedom, human rights and environmental protection, and its practice of turning a blind eye to malfeasance where it does business abroad, you can be sure Beijing will not push for such standards in any trade agreements.
Some observers in the US and Asia are optimistic that Mrs Clinton, if elected, will revive TPP under another name. But that would take a long time and by then the deal will probably be dead. In the meantime, China will push hard for alternatives that exclude the US. The best chance for America to curb the erosion of its influence and prestige in Asia is for Mr Obama and Congress to force the agreement through in the lame-duck session after the election in November and before the inauguration of the new president in January.
If this does not happen, the US will have shot itself in the foot, ceded enormous influence to China and ensured that future trade deals are much worse for American companies, for workers and for the planet.
¿Nueva guerra a la vista? Arabia Saudí cambia a EEUU por Rusia
Esto podría llevar a la construcción de nuevas relaciones entre el reino y otros países, especialmente Rusia, expresó el analista internacional Serguei Filatov en una entrevista a Izvestia.
JASTA se convirtió en ley el 28 de septiembre después de bloquear el Congreso de Estados Unidos el veto del presidente Barack Obama, que se opuso de manera categórica a su aceptación. La ley permite a los familiares de las víctimas del 9/11 demandar a Arabia Saudí por su presunta participación en los ataques terroristas de 2001.
El analista Filatov identificó seis implicaciones de esta decisión. En primer lugar, este paso puede conducir a una revisión fundamental de las relaciones políticas entre Washington y Riad, lo que no es rentable para ninguno de ellos. El politólogo llama la atención sobre la declaración hecha por el canciller de Arabia Saudí en el momento del voto.
"Llamamos al Congreso a tomar todas las medidas necesarias para evitar las consecuencias catastróficas y peligrosas de tal decisión," dice el documento. Sin embargo, el Congreso ignoró esta advertencia.
En segundo lugar, después de la votación, el Ministerio de Asuntos Exteriores de Riad dio una respuesta aún más fuerte a las posibles consecuencias de la aceptación del acto. "El detrimento de los cimientos de la soberanía del Estado que durante cientos de años han sido la base de las relaciones internacionales tendrá un efecto negativo". En su opinión, el Congreso de Estados Unidos ha socavado todos los principios y la ley va a crear un "precedente peligroso" y causará "la erosión de la soberanía nacional de todos los países, incluyendo Estados Unidos."
En tercer lugar, en medio de la guerra siria, el empeoramiento de las relaciones políticas entre los Estados Unidos y Arabia Saudí debilita de manera inmediata y drástica la posición de Estados Unidos en este conflicto y en la región.
La cuarta consecuencia consiste en que el tribunal de Estados Unidos puede fácilmente confiscar los activos de Arabia Saudí en los bancos estadounidenses que, según diversas estimaciones, ascienden a cientos de miles de millones de dólares. Como resultado, el sistema financiero de Estados Unidos pone inmediatamente bajo su manejo estas grandes sumas de dinero. No será la primera vez: los 210.000 millones de dólares que pertenecían al gobierno de Gadafi congelados en los bancos de Estados Unidos nunca han sido devueltos a las nuevas autoridades de Libia.
El quinto punto de las reflexiones del especialista indica que inmediatamente después de la publicación de la sección clasificada del informe sobre el 9/11, las autoridades saudíes amenazaron con la venta de sus valores norteamericanos adquiridos por $750 mil millones de dólares. Esta venta puede tener unas consecuencias impredecibles para el mercado financiero internacional ya frágil.
Y por último, los congresistas de EEUU demostraron que para ellos, quedarse con unos millones de dólares extra es más importante que mantener relaciones estratégicas con el aliado clave de Estados Unidos en el Medio Oriente.
"En esta situación, en un futuro próximo se espera la visita de uno de los más altos dirigentes del reino saudí a Moscú. Sobre todo ahora que la presencia militar rusa en Siria está creciendo", concluye Filatov.
The rope in the global financial tug-of-war is unraveling.
Not long ago, one of the most important members of the European Union just voted to leave the Union.
The aftermath of that departure is still boiling.
Yet, that is just the beginning.
Deutsche Bank, Germany's largest bank, has now lost nearly 50% of its value this year.
That's a dagger in the world's financial system because not only is Deutsche Bank Germany's largest bank, it's Europe's largest investment bank, and one of the world's largest lenders.
By now I am sure you've heard, watched, and read numerous explanations for why Germany's largest bank is in trouble.
Yes, we're in a period of low-interest rates, making it even harder for banks to make money.
Yes, it took on a lot of risk as a result.
And yes, the recent fine imposed on the German bank by the US Department of Justice is the straw that broke the camel's back.
But that's not the whole story – not even close.
There is much more than meets the eye. In fact, it is global political warfare at its finest.
Here goes…
Germany vs. the United States
Germany and the United States aren't friends.
Beneath the façade of friendly meetings and media gatherings, the two countries have been fighting against each other for some time.
So where do we begin?
Back in October 2012, I wrote a story on how Germany – the world's second largest gold holder – wanted its gold back from abroad.
This was during a time when gold was climbing to new highs.
Then, just a few months later in January 2013, Germany announced to the world that it would repatriate its gold that was held abroad in "safe-keeping".
Only, most of Germany's gold were in the hands of the United States.
Perhaps the Germans no longer felt that its gold was safe in the hands of the Americans.
And perhaps they were right because, for unexplained reasons, the United States wouldn't give it back.
Over the next two years, between 2013-2014, not one ounce of German gold was transferred back from the US and very little came back from France.
This forced Germany to issue a media friendly statement.
"Germany has decided its gold is safe in American hands.
Surging mistrust of the euro during Europe's debt crisis fed a campaign to bring Germany's entire $141 billion gold reserve home from New York and London.
Now, after politics shifted in Chancellor Angela Merkel's coalition, the government has concluded that stashing half its bullion abroad is prudent after all.
"The Americans are taking good care of our gold," Norbert Barthle, the budget spokesman for Merkel's Christian Democratic bloc in parliament, said in an interview. "Objectively, there's absolutely no reason for mistrust."
Now get this.
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In 2015, Germany finally ended up getting 100 tonnes of gold back from New York…after it said it would leave the gold in American hands.
Germany also received 110 tonnes back from Paris.
If Germany's gold were "safe in American hands," and that there was "absolutely no reason for mistrust," why bring any back at all?
Take a look at this chart:
As you can see in 2012, gold was trading near its all-time high.
If conspiracies theorists are right, and the US doesn't have the gold it claims it has (which is possible considering how much gold left the United States during the Bretton Woods system), could it be that the US gave away all of Germany's gold, and had to buy it back in order to pay Germany back?
Perhaps – especially considering that right after Germany said it wanted its gold back, the price of gold appeared to have been manipulated down on numerous occasions, leading to the possible theory that it was done to allow the US, and other US banks, to buy it back at a cheaper price.
Regardless, how do you think Germany felt when it told its people it would get it's gold back, only to tell them a year later that it couldn't?
It doesn't take a genius to know the Germans aren't happy.
But the gold repatriation mistrust is just one of many things.
"Over the past year, the United States has increasingly aggravated its allies…
…The U.S. just pissed off France but now it's picking on one of the world's largest economies and head of the Eurozone, Germany.
Over the past year, the U.S. has increasingly pushed the wrong German buttons.
First, as I mentioned last week, it seems that the U.S. won't be returning Germany's gold back to its rightful owner.
But then there's also spying scandal after spying scandal by the U.S. on Germany's top officials, and recently a CIA was caught directly soliciting a German double agent.
But now, the U.S. has just pushed Germany closer to the edge by punishing one of Germany's largest banks for the same kind of money laundering that BNP was allegedly engaged in.
…The recent actions by the U.S. on Germany is much more serious than it appears.
Underneath the distraction of the World Cup, Germany has asked the top US intelligence official to leave country – a signal that the Germans have had enough.
So while things appear rosy on the big screen under the guise of Germany's World Cup victory, things have actually gotten so bad between the two nations that Germany may potentially block American tech companies from implementing equipment in Germany.
To sum it up, Germany just told the world that it might sanction American companies from procuring contracts in Germany…without using the word sanction."
And my prediction was right: Things are much more serious than they appeared.
In 2015, less than a year after the above incidents, the United States goes after one of Germany's largest companies, and the world's largest automaker, Volkswagen.
A year later after that, the US is now going after Bosch, Germany's largest auto supplier.
Of course, it's not to say that the Germans, or Europeans, haven't been fighting back.
The EU just imposed a €13 billion fine on Apple for back taxes over a deal with the Irish government.
In fact, Apple CEO Tim Cook called it, "total political crap."
And yes, that's precisely what it was.
Shortly after, Germany and France told the world that they have virtually ended negotiations over the US push to establish a Transatlantic Trade and Investment Partnership (TTIP).
"The Transatlantic pact intended to unite Europe and North America in a vast free trade zone is close to collapse after France called for a complete suspension of talks, accusing the US of blocking any workable compromise."Political support in France for these negotiations no longer exists," said Matthias Fekl, the French commerce secretary.
"The Americans are offering nothing, or just crumbs. That is not how allies should negotiate. There must be a clear and definite halt to these talks, to restart them later on a proper basis," he said.
Sigmar Gabriel, the German economy minister, said over the weekend that talks were going nowhere. "The negotiations with the US have de facto failed because the Europeans would naturally not submit to American demands…"
As you can see, tensions between Germany have been brewing for quite some time…
Back to Deutsche Bank
After all of that, are you surprised that the US Department of Justice is now penalizing Germany's Deutsche bank more than 10 times the amount they asked for from any of its US peers – or other peers for that matter?
"The DoJ is asking for 10-times more from Deutsche than they asked for from any of its US peers, with no disclosure – it is extortion," said Davide Serra, founder of Algebris, which invests in the junior debt of European banks."
First, it's an attack on Germany's gold; then, it's an attack on its largest bank; then an attack on its largest company; then an attack on its largest auto supplier; and now an all-out attack on its bank once again.
Are these simply coincidences, or is there something much more brewing underneath the surface?
The Battle for the World
In order of magnitude, China, United States and Germany are the world's largest exporters.
But there's a big difference between one of them.
The United States is the only one with a growing trade deficit.
Conversely, China and Germany's trade surpluses continue to swell, year after year.
In 2010, China dethroned the United States as the world's number one manufacturer.
Everything that the United States built its economic foundation on is not only being challenged by China and Germany, but it's being cannibalized.
But why attack Germany? Why not China?
There are many reasons – China's military and nuclear power, China's large holdings of US debt, China's power in Asia – but simply put, Germany is a much easier target.
Now recall my Letter from last week where I explained what happens when a country's (Japan in this case) surplus swells.
"All of the dollars going into Japanese banks caused rapid deposit growth.
When banks hold deposits, they have to lend it out or be forced to pay interest on those deposits.
So in order to make money, the banks have to lend those deposits out – otherwise, they would lose money.
All of the dollars entering Japan caused a massive credit boom, which fueled the Japanese stock market which had stocks trading at 100-times plus PE multiples. It also sent property prices skyrocketing.
But the surplus kept getting bigger and bigger because the US didn't deflate because it didn't run out of money. The US kept on printing and Japan kept on absorbing all of those printed US dollars."
This is precisely what is happening with Germany and its Deutsche bank.
In fact, Germany may even overtake China as the country with largest trade imbalance in the world.
"(Germany) is likely to register the world's largest trade surplus this year, according to the Organisation for Economic Co-operation and Development, at $324 billion (against China's $314 billion), and will amass a record current-account surplus of 9.2% of gross domestic product."
In other words, all of the issues stemming from Deutsche Bank taking on too much risk and making too many loans, are the result of Germany's record-setting trade surplus.
Give Back, Or Else We'll Take it Back
When you sell more to the rest of the world but don't contribute back by spending more, people get angry.
"The German surplus is often viewed by New Keynesian economists such as Paul Krugman and Ben Bernanke as a detriment to aggregate demand in the rest of the world. This is increasingly difficult to eradicate through lower interest rates, which are already at the zero lower bound, or ZLB.
Put simply, Germany's net exports add to German GDP, while subtracting from GDP elsewhere.
In a world characterised by secular stagnation, this can contribute to low global growth rates."
But to make matters worse, Germany and its Chancellor Angela Merkel believe that the current situation is one of economic success and not failure, so they have been reluctant to address the issue.
Again via FT, July 2016:
"There is growing pressure from the IMF and the European Commission to take steps to reduce (Germany's) surplus but, in the main, this has fallen on deaf ears in Berlin. The consequences of ignoring this quandary could be profound."
So if Germany won't listen, then the only solution is to put them in a place where they have to.
In my view, that is precisely why Germany and its largest bank are being attacked.
"The Bundesbank's (Germany's central bank) balance sheet rose to €1.2 trillion in July from €222 billion when monetary union started in January 1999.
…the German central bank's balance sheet has expanded faster than that of the Eurosystem (the ECB and the constituent national central banks) as a whole.
The Bundesbank's balance sheet now encompasses around 37% of Eurosystem assets of €3.3 trillion (computed on a net basis that strips out individual central banks' claims and liabilities against each other under the Target-2 payments system), against 32% at the inception of EMU.
…The Bundesbank has always been skeptical about risks from undue holdings of dollars. It has now, on the external portion of its balance sheet, replaced dollar risk by assets of much greater potential concern – multiple claims on partner central banks standing behind an array of highly indebted euro zone countries.
This is because of the reemergence…of large persistent claims under the Target-2 system, now back to €660 billion at the end of July, not far from the euro-crisis peak level of €751 billion in August 2012.
The re-appearance of large Target-2 imbalances…points to strains caused by the reluctance of German creditor banks to channel funds back to peripheral euro countries, which have transferred euros to Germany to purchase goods and services or buy assets."
In other words, Germany has benefited from the Euro, but has been reluctant to "share the wealth."
Which is why, in my opinion, Germany – along with its banks and corporations – are now being aggressively attacked.
Or you could simply say that Germany is being attacked because they're resisting the emerging new world order.
Regardless, I suspect that one way to transfer and relinquish some of Germany's massive asset holdings is to force Germany into a bailout scenario – especially considering that the Bundesbank is building its assets (i.e. lending money) in direct competition with the ECB, while the central banks in countries such as Italy and Spain are building liabilities to the ECB.
We're already witnessing massive capital outflows from Deutsche Bank and if something isn't done soon, we could see the potential collapse of one of the world's largest lenders.
This will no doubt trigger a massive domino effect of financial contagion on a global scale.
Deutsche Bank is so deeply connected with other banks and financial institutions around the world that the effects of its failure would send shockwaves across the entire European financial system and abroad.
Some are even calling Deutsche Bank the next Lehman Brothers.
Of course, I don't think that Germany or the US – or anyone for that matter – will allow that to happen.
What I do foresee is that Germany's central bank will either be forced to step in, or a behind-the-scenes political negotiation will take place which will lead to the fine from the DOJ to be dropped significantly- with conditions of course.
All of which leads to yet another rush to safe haven assets, such as gold.
Whip Out the Foam
If the culmination of these events hasn't opened your eyes to everything that I have been warning you about over the past years, then I am not sure what will.
Things are frothy all around the world.
Chinese billionaire Wang Jianlin – who made his fortune in the country's real estate market – is now warning that the Chinese Real Estate market is spiraling out of control.
In fact, he told CNNMoney in an exclusive interview Wednesday that, "It's the "biggest bubble in history."
And if you read my Letter from last week, you'll know just how that bubble became so big.
Meanwhile, Joe Baratta, the top dealmaker at Steve Schwarzmann's $356 billion Blackstone Group issued a stark warning.
"Speaking at the WSJ Pro Private Equity Analyst Conference in New York, Baratta said that "for any professional investor, this is the most difficult period we've ever experienced", adding that "You have historically high multiples of cash flows, low yields. I've never seen it in my career.
It's the most treacherous moment."
Barratta wasn't the only one. Tad Rivelle, a fund manager at the $195 billion TCW Group, also issued a warning through his newsletter that, "the time has come to leave the dance floor."
Again, where do people go when they can no longer make money from the stock market or bonds?
Post-Election Outcome
Last week, I said:
"I expect that while the US dollar has been strong in anticipation of a Fed hike, the US Dollar will likely fall against the Yen, Euro, Canadian, and Aussie dollar, going into the New Year and maybe even before.
So don't be surprised to see gold climb higher as the US dollar drops in value."
But many of you asked how this would play out once the US election is over.
So here are my thoughts.
Trump Victory
If Trump wins, we're going to see a massive rise in fiscal spending and government deficit, leading to more money printing, thus digging the US into an even bigger debt hole.
Furthermore, if he imposes tariffs on China and Mexico, and does indeed bring more jobs back to the US, we're going to see inflation because it will cost more to produce goods, and those costs will be passed onto the consumer.
Perhaps that is Trump's plan in negotiating with the Fed: Indulge the Fed by borrowing more money from them through a massive onslaught of fiscal spending, while giving the Fed the ability to reach the inflation target through the higher cost of goods.
Hilary Victory
If Hilary wins, we'll still see a rise in fiscal spending, but we're also going to see a lot of free gifts for society – gifts that will cost a lot more than she proposes.
Furthermore, she'll likely force a national minimum wage target, which will also add to the costs of producing goods in the US, which will also be passed onto the consumer, leading to inflation.
However, as we have already witnessed, the wage hikes in other States have already led to a loss of jobs. Without a Trump-like regulation on imports, it would most certainly cause corporations to look elsewhere for cheaper labor.
In other words, it doesn't matter who really wins at this point because we're going to see more spending and more debt either way.
Governments are no longer looking at how much debt and money has ballooned over the last decade – they're simply looking at how much its growing relative to the year prior.
This new normal has consequences, and almost all of them lead to the devaluation of our money.
No wonder the smart money continues to pour into gold…
Next week, I going to tell you why contrary to what you're being told, we may be on the verge of a commodities bull market.
Ideada por sus consejeros "de cabecera", Luis Videgaray y Aurelio Nuño, quienes lo convencieron desde el inicio de su administración de que era "la mejor estrategia" de política comercial para el país y un "contrapeso" a la "dependencia excesiva" de la economía de Estados Unidos, la relación de Enrique Peña Nieto con China le ha traído más golpes y tropiezos que beneficios al presidente y a su gobierno.
Por razones geopolíticas y de protección de sus intereses, Washington ve con recelo y alarma el acercamiento de Peña con los chinos. Y con el argumento de la amenaza de una "guerra comercial" en la que China pudiera utilizar a México para acceder a información reservada y utilizarla en su contra, la administración Obama ha buscado torpedear, de distintas maneras, la relación entre su vecino y socio —visto para efectos estadounidenses como su "patio trasero"— y el poderoso gigante de Oriente.
El caso más gráfico del disgusto de EU por la cercanía del gobierno mexicano con China se produjo en noviembre de 2014, con la licitación del tren rápido México-Querétaro, otorgada a China Railway, abruptamente cancelada por orden directa del Presidente, ante la amenaza de denuncias de corrupción y favoritismo en foros internacionales de otras empresas participantes. Ya cancelada la licitación —que le costó a México 16 mdd de penalización— a Peña le estalló en pleno viaje, justamente hacia China, el peor escándalo de corrupción, al revelarse la Casa Blanca de 7 mdd propiedad de su esposa Angélica Rivera.
El tema ha aflorado incluso en la actual contienda presidencial estadounidense. En el reciente debate entre Hillary Clinton y Donald Trump, China salió a relucir como una amenaza para las relaciones comerciales entre Estados Unidos y sus socios comerciales, como México. Clinton se refirió al riesgo de que "información reservada" pueda ser utilizada por los chinos en una "guerra comercial" contra el vecino del norte y sus socios comerciales. "Creo que la guerra cibernética será uno de los retos más grandes que enfrentará el próximo presidente de Estados Unidos… debido a los ataques dirigidos por naciones contra organizaciones públicas y privadas de nuestro país. Ante ello, defenderemos los intereses de nuestros ciudadanos y organizaciones", advirtió la demócrata.
La política peñista de acercamiento a China se mantiene, pero a raíz de las presiones estadounidenses en México se ha intentado restringir la participación de empresas chinas en licitaciones del gobierno federal, sobre todo en áreas donde pueden tener acceso a información privilegiada sobre estrategias comerciales de Estados Unidos. Pero con todo y esas restricciones, basadas en prácticas de dumping, piratería tecnológica y malas medidas de seguridad, las empresas del gigante asiático han encontrado la forma de evadir dichas restricciones mediante alianzas amañadas e ilegales con empresas mexicanas.
Y si Clinton ve en China y su cercanía con México una amenaza, el candidato republicano Donald Trump podría utilizar el argumento de la presencia de empresas chinas en territorio mexicano en su embestida para cancelar el TLC. Ya en el primer debate Trump acusó a México de "facilitar a los chinos y a los rusos prácticas de dumping y alianzas para ganar mercados en Estados Unidos", en perjuicio de los empleos en su país.
La pregunta es si, a pesar de lo costoso que ha resultado hasta ahora el acercamiento con China, el gobierno de Peña Nieto insistirá en permitir la penetración de empresas chinas en áreas estratégicas como la Administración Tributaria, las Aduanas, Comunicaciones y Transportes y hasta Seguridad Nacional. Si lo hace —como se rumora en algunas dependencias, donde se habla de licitaciones en esas áreas que favorecen a los chinos— Peña estaría dando pie a lo que, desde el otro lado del Río Bravo, tanto demócratas como republicanos, ven como la "gran amenaza".
NOTAS INDISCRETAS… Casi tres meses le llevó al presidente del PRI, Enrique Ochoa, designar a su Comité Ejecutivo Nacional. El retraso ya era tema de cuestionamiento de priístas a su dirigente, pues nunca en la historia de ese partido tardó tanto la integración del CEN. Ayer Ochoa dio a conocer al grupo que acompañará su dirigencia. En los nombres predominan políticos del grupo mexiquense, de Hidalgo y de Emilio Gamboa. Cercanos a Luis Videgaray: Jorge Carlos Ramírez Marín y el propio Ochoa. Carolina Viggiano, cercana a Miguel Osorio. Nancy Sánchez y Yulma Rocha, cercanas a César Camacho; el control financiero del PRI sigue a cargo de Luis Vega, cercano al presidente Peña Nieto, y del grupo de Emilio Gamboa, Héctor Gómez Barraza, Blanca Alcalá, Arturo Zamora , Ivonne Alvárez y Roberto Albores. Al único que habría metido directamente Ochoa Reza es a Mauricio Ortiz, secretario adjunto… Los dados mandan Escalera doble. Buen tiro.
Central banks have turned financial markets into 'Vegas casino' – investor
World seeing 'greatest monetary policy experiment in history' - Rothschild
"Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly levered world," Gross said in his 'Doubling Down' investment outlook.
The investor oversees $1.5 billion at Janus Capital explains gold and Bitcoin are safe havens for those who want to preserve their cash.
"At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives," Gross said.
Negative or zero rates are dangerous in case of recession and also destroy the basic foundations of capitalism, Gross said.
"A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth," he said.
Gross: Global yields lowest in 500 years of recorded history. $10 trillion of neg. rate bonds. This is a supernova that will explode one day
— Janus Capital (@JanusCapital)
This isn't the first time Gross has attacked central banks' monetary policies. In June, Janus Capital estimated that global yields are the lowest in 500 years, and the total amount of negative rate bonds is $10 trillion. Gross called it a "supernova that will explode one day."
The travails for Deutsche Bank are far from over — even if John Cryan, the bank's British chief executive, is now rushing to settle the US Department of Justice's probe into alleged mis-selling of mortgage securities, the toxic products at the heart of the financial crisis.
The initial $14bn demand from the DoJ — rejected by Deutsche Bank — threatens to undermine investor and client confidence in Germany's biggest lender. Analysts think the market jitters over the fine have exposed much deeper structural weaknesses plaguing Europe's banking system: negative interest rates, weak economic growth and tightening regulation are all dragging the industry's profitability far below its cost of capital.
Europe's biggest investment bank, which has a €1.8tn balance sheet and employs 100,000 people, is teetering on the brink of an existential crisis. Here are five things to watch for what happens next at the German bank.
Best settlement scenario
Achieving a settlement with the DoJ is Mr Cryan's top priority, and he has been spending most of his time recently in the US trying to bring talks swiftly to a close. If Deutsche Bank could settle the case for close to its $3bn-$5bn target and complete the sale of its $4bn minority stake in China's Huaxia Bank, it could put a stop to swirling speculation about its weak capital position. This should trigger a rebound in its share price, which has slumped to three-decade lows, and shore up client confidence in its financial position. The bank could then present investors with a beefed up strategy to rebuild profitability and strengthen its balance sheet when it presents quarterly results in late October. Crisis over.
Dilutive capital raise
Even before the DoJ's unexpected $14bn demand landed, Deutsche Bank had been widely expected to have to raise capital, most likely through a rights issue. Its common equity tier one ratio (CET1) — the key measure of balance sheet strength — was 10.8 per cent in June, well below most rivals and its own target of 12.5 per cent. Deutsche Bank has put aside €5.5bn to cover the cost of litigation, but every $1bn of extra provisions would erode its CET1 ratio by 0.25 percentage points. Another problem is that given the share price more than halved in the past year to a level 70 per cent below its book value, an equity issue would be prohibitively dilutive. It would also make it even tougher to generate a return on equity above its cost of capital. Kian Abouhossein, analyst at JPMorgan, estimated that a rights issue at a 25 per cent discount could raise as much as €5.6bn, adding less than 1.4 percentage points to its CET1 ratio — not enough to hit its target, especially after a big fine. There are also questions over whether investors would be prepared to inject more capital only to fund a big settlement with the DoJ and without a clear idea of how Deutsche Bank can rebuild its profitability from heavy losses last year.
Further asset sales
If the DoJ keeps demanding significantly more than the $5bn settlement that Deutsche Bank seems prepared to accept, the German bank would have to consider other options to steady the ship, including more disposals. A big part of Mr Cryan's initial strategy was to deleverage the balance sheet by selling or floating Postbank, the former post office bank it acquired in 2010, but this has faltered because of a lack of obvious buyers and poor market conditions. A senior European policymaker said Deutsche Bank could benefit from an ample supply of cheap funding from the European Central Bank to tide it over while it works on disposals. Hedge funds have pushed for a sale of its asset management division, which is estimated to be worth some $8bn. But Mr Cryan has dismissed rumours that this option was back on the table after an abortive attempt to offload it a few years ago.
Crisis of clients — and confidence
Some hedge funds have been pulling collateral for derivatives trades from Deutsche Bank — raising fears of a run on Germany's biggest bank. If talks with the DoJ drag on it could cause other clients, such as large asset managers and corporate treasurers, to start reducing their exposure to the bank. Sharp drops in client revenues could prompt rating agencies to downgrade the bank — which is already hovering just above junk status — forcing more clients to jump. The regulator could step in to order the bank to wipe out its most junior debt and convert other unsecured loans into equity — rebuilding its balance sheet, but sending waves of losses through the financial system.
Government steps in
Faced with an evaporation of client confidence in Deutsche Bank, which threatens to spiral out of control, Angela Merkel's government could step in and backstop a deeply discounted capital raising. Less than a year away from a general election and already under fire over her decision to allow vast numbers of immigrants into the country, Ms Merkel would be loath to take such a step. Europe's new rules for bank rescues only allow states to inject money into ailing banks once they have imposed losses on creditors equivalent to 8 per cent of liabilities. In Deutsche Bank's case this would equate to €139bn of bondholder losses, which risks spreading contagion across the financial system. Any attempt to bypass the rules would trigger cries of foul play from countries such as Italy, which have been prevented from rescuing their own banks under pressure from Berlin. One possibility being mooted in some quarters is for the government to engineer a merger of Deutsche Bank with Commerzbank, in which Berlin already has a minority stake. While this is unpopular with officials, it may allow the government to provide support to Deutsche Bank without it being considered state aid.
