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SNB Spent $68 Billion On Currency Manipulation In 2016

While Donald Trump has repeatedly expressed his displeasure with China for manipulating its currency, he appears to have recently figured out that over the past 2 years Beijing has been spending hundreds of billions in dollar to strengthen, not weaken, the Yuan and to halt the ~$1 trillion in capital flight from China. But while everyone knows that the biggest currency manipulation in the world, and perhaps the Milky Way galaxy is Japan, which now owns 40% of all JGBs in its ongoing attempt to pressure the Yen lower and explains why Abe was trembling when he met with Trump, terrified the US president would tell him to stop, one place where Trump may want to look is Europe’s famously “neutral” country, which however continues to be quite bellicose when it comes to currency warfare. Overnight, the SNB announced that in 2016 it spent 67.1 billion Swiss francs, or $67.6 billion, to purchase foreign currencies in an effort to weaken its currency.

The amount, published in the central bank’s annual report on Thursday, was roughly CHF20 billion lower than the 2015 total of 86.1 billion francs and a record of 188 billion spent in 2012. What is notable is that in 2015, the Swiss National Bank ended its 1.20 EURCHF peg, which ended up costing the SNB tens of billions in FX losses.

As shown in the chart below, the SNB has used interventions for the better part of a decade to keep the franc, Europe’s preeminent flight to safety currency, in check and lessen the risk of deflation. After it gave up its currency cap in early 2015, the SNB has also relied on a negative deposit rate to counter appreciation pressure. It reaffirmed that two-pillar policy stance last week.

Additionally, as part of its annual report, the SNB reported that at the end of 2016, the SNB’s assets hit a record CHF 747 billion, compared to CHF 641 billion the previous year, higher than the country’s total GDP. The central bank’s assets consisted almost exclusively of currency reserves, that is gold and foreign currency investments. Currency reserves were up by CHF 89 billion year-on-year to CHF 692 billion, principally due to inflows from foreign currency purchases and valuation gains.

And since the SNB is the only central banks which admits it is an aggressive hedge fund, it also reports both the composition of its balance sheet and the return on assets, and in 2016 it generated a profit on currency reserves of 3.8%. Meanwhile, returns on gold and foreign exchange reserves were 11.1% and 3.3% respectively.

What is paradoxical is that despite gold generating the SNB’s highest return not only in 2016 (11.1%) and over the entire 2002-2016 period, at 6.5%, the central bank has been aggressively reducing the relative size of its gold-denominated assets over the past 7 years, mostly as a result of purchases of USD-denominated stocks and bonds.

In 2016, both fixed income investments and equities contributed to the SNB’s bottom line. On the other hand, the slight appreciation of the Swiss franc reduced the return.

The SNB also revealed that in 2016, the SNB held 20% of its foreign exchange reserves in the form of equity investments. Measured in Swiss francs, the average annual return on equities since their introduction in 2005 has been 2.8%; the return on bonds has averaged 0.7%.

Finally, for those confused that the SNB is so open about its purchases and holdings of mostly US stocks, this is how the central bank justifies its policy of active stock management:

The contribution of equities to preserving the value of the currency reserves and building the SNB’s equity base has thus been very substantial during this period.

We look forward to how this boilerplate language will change after the next equity market crash which will wipe out tens of billions in “value” from the SNB’s balance sheet.

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Boj Offers to Lend Y 7.0813 Trln of Jgbs on Spot Basis Through 3/27 As a Secondary Source of Jgbs (offer in the Morning)

BOJ offers to lend Y 7.0813 trln of JGBs on spot basis through 3/27 as a secondary source of JGBs (Offer in the morning)The material has been provided by InstaForex Company –

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Erdogan says Turkey will review EU ties after April referendum

Turkey will review all political and administrative ties with the European Union after an April referendum, including a deal to curb illegal migration, but will maintain economic relations with the bloc, President Tayyip Erdogan said on Thursday. In an interview with broadcaster CNN Turk, Erdogan said everything “from A to Z” in Turkey’s relations with Europe would be reviewed after the April 16 referendum on constitutional changes that would extend his powers. He also said he would meet “face to face” with the new US administration in May. The relationship between Erdogan and US President Donald Trump, both populist leaders, will be closely watched, with ties between the NATO allies deeply strained. Turkey has been incensed by US support for […]

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Sri Lanka Cenbank says Year on year Growth of Private Sector Credit decelerated Further to 20.9 Pct in Jan 2017 from 21.9


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Death & Taxes… And Debt

Nothing in this world is certain, except death and taxes… and $62,000 debt.

According to December 2016 data provided to by credit bureau Experian, 73% of consumers had outstanding debt when they were reported as dead.

Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875. Among the 73% of consumers who had debt when they died, about 68% had credit card balances.

The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%). These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.

That’s a lot of debt, and, as Fox Business reports, it doesn’t just disappear when someone dies.

For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind.


“Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt, as some people worry they might.


That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation. (For example, federal student loan debt Opens a New Window. is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.)


There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it’s the mortgage on that home or a lot of credit card debt, meaning the people who live there may have to take over the mortgage, or your family may need to sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders. Community property states, where spouses share ownership of property, also handle debts acquired during a marriage a little differently.

The bottom line – even after you’re dead, debt servitude is stil an anchor around your neck.

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A New Trend Emerges – Digital Gold “Gifting” Gains Popularity In China

Authored by Mike Krieger via Liberty Blitzkrieg blog,

I rarely write about gold these days, but the following from Reuters caught my attention.

BEIJING/SHANGHAI, March 7, China’s virtual gifting market, typically the domain of plugged-in young consumers celebrating special occasions or flirting, is luring major financial institutions keen to boost trade of another auspicious commodity: gold.


Tencent’s digital gold packets, known as “microgold”, are backed by the country’s biggest bank, Industrial and Commercial Bank of China (ICBC). They allow users to send funds that track the real-time value of gold to friends over the firm’s popular messaging platform WeChat.


It’s a financial innovation on the concept of virtual gifts, such as digital roses and chocolates, more commonly used in online communities and which have more sentimental value than any tangible economic worth.


For financial institutions, China’s booming virtual goods and smartphone-driven exchanges offer new markets to boost trading volumes in everything from banking services to gems.


ICBC, in an internal memo seen by Reuters and sent to staff on Friday, said the WeChat microgold platform had helped drive “explosive growth” in new gold accounts.


Over the recent Lunar New Year period, WeChat users sent 70,000 microgold packets worth just under 100 million yuan ($14.51 million) across the chat platform, the ICBC document said. It expects over 300,000 new gold accounts to be opened as a result of the Tencent tie-up. Neither ICBC nor Tencent were immediately available for comment.


While the volumes are relatively small, the take-up of similar virtual products on the WeChat platform suggests room for growth.


Kong Lingxin, a 20-year-old student from the northern city of Tianjin, uses her smartphone to buy, gift and hoard gold online.


Kong has spent 10,000 yuan ($1,452.88) of her savings on gold derivative products this year on Alibaba Group Holding Ltd-linked platform “Cun Jinbao” – literally “store golden treasure”.


“My family has a history of collecting gold bars, which influenced my choice of investment,” said Kong. “I chose an internet platform because it’s easy to track gold prices, see your profits and make trades.”


Gold analysts said the push by tech firms into the sector, though still at an early stage, had potential longer-term to stir up a sluggish Asian market if it caught on.


“It will become a support for gold demand and the gold price if WeChat gold packets become popular, considering the amount of traditional red envelopes users send,” said Guotai Junan gold analyst Xie Qingpeng.


Beijing has taken note of the trend. The Ministry of Industry and Information Technology (MIIT) issued a guideline last week, calling for tech to play a bigger role in gold trading.


Amid a property price spike, gold offers younger buyers a more affordable and accessible investment.


“It’s nearly impossible for young people to invest in property in first tier cities in China. Alternatively, they put small amounts into gold, as a low risk investment,” said Helen Lao, Singapore-based metals analyst at Argonaut Securities.

I think those last few lines will be a very important factor for gold demand going forward, as young Chinese with savings to protect struggle with where to put their money.

Meanwhile, gold’s been pretty boring for a while now. I think that might change soon. As I tweeted earlier today.

I feel like there’s a decent amount of negativity and apathy with gold right now.
Feels bullish.

— Michael Krieger (@LibertyBlitz) March 23, 2017

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