Trump threatens to cut China off from US capital markets.

Well, first we used our SWIFT international monetary payment settlement system as a blunt financial weapon against those who did not do our bidding.  Now it seems that Trump wants to cut off China from access to US capital markets in order to punish them for selling us stuff too cheaply and thus taking a slave labor job from China back into the US.

This is unprecedented and in fact amazing.  It's bad enough to put new Chinese IPOs like that which was recently requested by Chinese company EHang which is trying to build personal flying transport vehicles for rich people.  The most that normal class people will be able to do is worry when they fly overhead but maybe some poor class people will make a few bucks washing them on occasion.  Well, it looks like Trump might EHang them out to dry with this latest threat.

I'm not really sure what to think of this except that it is a smart political move by the Trumpster:

• US capital that is invested in Chinese companies cannot be invested in US companies.  And Trump needs to keep the stock market bubble going as long as he can else he fears he will not get re-elected.  This is why he is vilifying the fed.  Trump called the markets a big fat bubble when Obama was in charge but now he calls it a healthy economy with record breaking everything.  Of course if it wasn't a bubble it wouldn't need ever more stimulus in order to stay up.  But it does.
• US capital handed to a Chinese company during the IPO would, at the very best, be used to develop a leading edge high tech product for which there seems no US competitor.  De-funding this and other situations like it would seem to align with the new nationalism, America first, etc.
• US capital handed to a Chinese company during the IPO would, at worst, be funneled directly back to the Chinese state to repay any debt that EHang might have outstanding, and then EHang could fold.  Trump does not want US money going to China.
• Trump needs the support of Chinese businesses to help him lobby against their leadership.  This gives them something to complain about to Xi Jinping before they receive the Jack Ma treatment.
• CNN reports that Xi Jinping is near "economic exhaustion" with Hong Kong, the US trade war, etc.    This new threat just piles on top of that in a very creative way.  And when someone pulls something out of their ass like this, you have to worry what other shit they can pull out and sling at you.  For every situation there is a straw that breaks the camel's back.  While it is widely reported that Trump will lose in 2020 if the stock market crashes, I suspect that will only be true if all else remains equal.  What if the stock markets experience a strong pullback but Trump ends up breaking Xi's back, and maybe even getting him deposed and putting in a much more US-compliant head of state?  It might sound crazy but with pork prices running wild in a country that eats a lot of pork, hunger is more important than party.  The news reports that the price increases were due to mass slaughter of livestock to prevent the spread of swine fever but I call bullshit on that.  China would just kill and eat the meat and nobody would know.  That's the Chinese way.  They would not accept economic loss to avoid "maybe" something bad happening.  Chinese are gamblers.  They would roll the dice.  This made up story was made up so that there will be something to blame on price increases.  The Yuan has been slipping on the global markets because China's debt is catching up with them.  Trump is "king of debt" and he knows they are vulnerable to collapse.  So their currency is falling in value leading to higher import costs.  I bet China's pig farmers have to import a lot of stuff to run their business.  So they pay more to foreigners and when its time to export they sell for less because of the weak currency.  I bet pig farmers are thrilled about that.  Heck, maybe that's the reason for the shortage.  Low prices made them decide there was a swine flu problem so they killed the pigs and dumped them in order to reduce supply.  Don't laugh, French farmers spray their fields with cow milk they harvest when prices are too low for their liking.

By the way, the dems are at the forefront of the political tactic to crash the stock market as a weapon against Trump.  This is what the multiple ridiculously poorly executed attempts at impeaching Trump are all about - causing worry to the stock market.  I hope everyone sees how surrealistic this shit show has gotten but I warn you all, it's going to get a lot worse and it will happen at an exponential rate.  Fist fights on the floor of congress baby.  I'm gonna sell tickets!

All is not gold that Glints

GATA sent me this snippet of an article from Financial Times.  It's yet another case where assholes take your money, promise the moon and the stars for faaaar less than it actually costs to deliver them and then rely on debt "to get started".  Sounds kind of like a drug addict who needs a fix "to get started" in the day.  Folks, these dust ups happen all the time in the business world but generally you do not hear about it because the debtors find ways to get the additional roll overs they need.  But now we see a second example of a company in the UK which was allowed to suddenly go bust and abruptly cease operations for the same reason: they could not find anyone to loan them money.  Well geez Louise, that sounds a Hell of a lot like the early stages of a liquidity crisis.  First Thomas Cook was put into receivership and now Glint.

But don't worry, your gold held with them is still safe.

Or is it?

After all, whose gold is it really at this point?  If I borrow money from the bank and my company goes BK, the bank can get in line with the other creditors in BK court.  If I were the banks who Glint was defaulting on I would assume that all the assets of Glint's customers were fair game to repay the debt Glint defaulted on.

So these assholes can spew all the "guarantees" they want to but at the end of the day if they are using debt to run their businesses and they get caught up in the next liquidity crisis, which will necessarily be larger than the last one in 2008, then all their bullshit guarantees will not buy you a cup of coffee.

Putting your gold in storage anywhere except your own personally controlled premises is gambling.  Holding your own gold is saving.  What part of that is so difficult to understand?

Keep your eyes open for more of these sudden defaults happening in Europe, especially the UK since Brexit could push the marginal players over the edge.  But know this: the marginal players are a microcosm.  One day we will wake up and the banks will be closed and anyone stupid enough to leave excess cash in them will not have access.  And while they keep your money hostage it will be your problem if you need cash. So anyone reading this do yourself a favor.  Go find a mirror.  Look into your reflection deeply and repeat after me: "I was clearly warned what was going to eventually happen.  When it finally does happen, don't act like it was a surprise.  If I get caught up in it it will be because I was lazy and careless.  There is no question what the right action is - take your cash out of the banks.  Run on the banks before everyone else does." 

By Henry Samuelson
Financial Times, London
Wednesday, September 25, 2019

A U.K. startup that promised to allow people to pay for goods in gold has collapsed, dealing a blow to its backers including Conservative MP Steve Baker, who had promoted the company on Twitter.

The Glint app allowed people to load credit in various currencies, which was then used to buy a portion of a physical gold bar, stored in a vault in Switzerland. Customers could use that gold via mobile and debit card-based payments. Glint said it had attracted tens of thousands of registered users since its launch last year, and had handled transactions worth more than $50 million.

But the company's administrators said on Tuesday that Glint had blocked all customer withdrawal and payment requests, after the company's board was unable to secure funding to repay an outstanding loan. Glint did not respond to a request for comment.

"Following a dispute with the secured creditor, the board were unable to secure sufficient funding in time to repay the outstanding loan," said FRP Advisory LLP, which was appointed as Glint's joint administrator.

The company's demise comes just a few months after Glint started operations in the United States. It also raised L5 million in a private placement in June this year, led by Canadian asset manager Sprott, which is one of the largest institutional investors in precious metals with $8 billion in assets under management.

The administrators will work with the board of Glint to seek investment to rescue the company, or if that fails, look to transfer the business and assets "to an appropriately regulated entity," FRP said. ...

Glint said on its website that customers' gold was legally allocated and "held in a secure, insured, and independent" vault run by Brink's, the US-based security company, in Switzerland. "There has been no change to this arrangement as a result of the administration," it said.

"The administrators' team is also reviewing these arrangements to verify that the amount of gold held by customers per Glint's records reconciles with the physical gold at Brinks, which the directors and management of Glint assure the administrators they do," the notice said. ...

... For the remainder of the report:

https://www.ft.com/content/48ce96a8-decb-11e9-b112-9624ec9edc59

Who is this and what did he do with Trump?

I think pretty much all political speeches are bullshit but still appreciate if someone can deliver it without looking like an idiot.  And trump generally excels at talking like a stumble-bum.  But I have to give him credit for this speech.  I think it was a good summary of his positions, the challenges he sees coupled with hope for the individual, and it was delivered with any hitch.

https://www.c-span.org/video/?463700-1/president-trump-calls-global-trade-reform-un-speech&start=58

Mish mocks fed but misses something HUGE

In this post Mish mocks the notion of excess reserves and quotes really smart guy John Hussman.  Go read it if your time isn't very important to you. No, really.  If you have nothing better to do than read essentially unactionable facts, that article is for you. 

But if you really want to know something worth knowing, check out the chart below.  Until the global financial crisis kicked off, there were no excess reserves.  So they pumped the system full of liquidity in the form of excess reserves but have been trying to pull it back out of the system since 2014.  They thought they were going to be able to pull off the bandaid and find that the system has healed due to their fucking meddling in the free markets.

Well I hate to everyone but this chart is Elliott wave 101.  We had 5 perfect waves up into blue 1 and now a textbook a-b-c back down to the level of the prior 4th into blue 2.  I don't have to know anything about anything except for what this chart means, and it means that within the red circle big major major problems are going to pop up in the financial system.  I think we are seeing the cracks form right now in the form of an other liquidity crisis.  But this one will be even bigger and come upon us even more quickly than the last one.  The bay will get sucked dry and idiots will run down there to pick up shells meanwhile the tsunami of economic failures heads straight at them.

The fed will responds with more excess reserves, faster.  They have no choice.  This is the only way to kick the can down the road.  But the fed and all the other central bankers are out of gas and so I don't think they have the ability to kick the can much longer.