06-29-2016, 08:59 PM
*** 30-Jun-16 World View -- Egypt calls Qatar an 'enemy state'
This morning's key headlines from GenerationalDynamics.com
****
**** Cash stored in vaults as negative interest rates spread
****
![[Image: g160629b.jpg]](http://www.GenerationalDynamics.com/ww2010/g160629b.jpg)
Man shops for vault in which to store cash
As I wrote last week, central banks around the world are committed to
"printing money" and making it available to wealthy investors and
institutions in order to forestall forced selling following global
financial shocks following Brexit. A major tool for doing this is
quantitative easing -- purchasing corporate or sovereign bonds. But
central banks are being limited by the huge amount of debt based on
negative interest rates (yields). ( "25-Jun-16 World View -- Fallout from Brexit: Impact on geopolitics, economics, and stock markets"
)
A new report by Finch Ratings indicates that negative interest rates
are spreading rapidly. As of June 27, $11.7 trillion of sovereign
debt globally was based on the purchase of bonds and other assets with
negative yields. This is up by $1.3 trillion from the end of May.
The way that this works in "normal" times is that an investor pays $95
for a bond that will pay $100 when it expires. But in today's "new
normal," the demand for bonds is surging, and by the law of supply and
demand, the prices of these bonds are also surging. So the investor
is forced to pay $105 for the same bond that will pay only $100.
That's a negative yield.
The demand for bonds has been surging from two sources. As volatility
and uncertainty increases, investors are seeking safe havens in which
to park their money. And central banks are purchasing bonds as part
of a quantitative easing program. Japan, Germany and France
were the leaders in June of increases in sovereign debt with
negative yields.
In "normal" times, banks make money by borrowing money at low interest
rates and lending it out at high interest rates. But in today's
low and negative interest rate environment, it's impossible to
lend it out at high interest rates, except to the riskiest
borrowers, the subprime borrowers most likely to default.
For financial institutions looking for a place to park their money,
some of them are returning to the old days when banks stored
their money in vaults. Money in a vault earns no interest, but
it also doesn't lose value.
When American outlaw "Willie" Sutton was once asked why he robbed
banks, he replied, "I rob banks because that's where the money is."
Somewhere there may be a modern day Willie Sutton who's thinking the
same thing. Fitch Ratings and Bloomberg and Seeking Alpha and Bloomberg and FT Adviser
and Telegraph (London)
****
**** UK was locked out of EU summit for first time in 40 years
****
Today's meeting was "about us," according to one EU official, not
about the UK. So 27 European Union members met for an EU summit, the
first one in 40 years from which Britain was excluded.
The key phrase was "there will be no single market à la carte."
The meaning of this phrase was stated repeatedly by different EU
officials. If the UK wants access to the EU Single Market, then they
must also be willing to guarantee the EU's four freedoms: freedom of
movement for people, goods, capital and services.
In particular, this will mean that the UK would have to permit the
free movement of people, which was the major motivation for the
successful Brexit vote in the first place. That would be ironic. And
it's worth mentioning again that the opposition to free movement of
people are just as opposed to free movement of Catholic Poles and
Hungarians as they are opposed to free movement of Syrian Muslims.
Guardian (London)
****
**** Egypt calls Qatar an 'enemy state'
****
The Muslim Brotherhood (MB), and the country's that sponsor MB --
Qatar and Turkey -- have reacted furiously to the actions on June 18
by an Egyptian court to sentence former president Mohamed Morsi to 40
years in prison for conspiring to harm Egypt's national interests in
what has been called the "spying for Qatar" affair. Morsi's
co-defendants included a reporter from Qatar-based al-Jazeera.
The judge reading out the verdict said that Morsi and his
co-defendants endangered national security, which is "worse than
killing a person or opposing God’s laws." He added:
[indent]<QUOTE>"They are more dangerous than spies. Spies are usually
foreigners, but unfortunately the defendants are
Egyptian."<END QUOTE>[/indent]
Qatar denounced the verdicts, saying they set a dangerous precedent in
relations between Arab nations:
[indent]<QUOTE>"The verdict issued by the Cairo Criminal Court is
baseless and goes against justice and the realities on the ground,
because it includes a litany of misleading claims that contradicts
the policy of the State of Qatar towards all its sisterly
nations."<END QUOTE>[/indent]
Egyptian media responded harshly. According to Muhammad Amin, editor
of the Egyptian daily Al-Masri Al-Yawm:
[indent]<QUOTE>"The sentence in the case of the spying [for Qatar]
sends a message no only to the MB but also a special message
[meant] to reach the Qatari Emir. The message to the MB is that
the [Egyptian] state will not stop pursuing the movement and is
not interested in holding talks [with it] or reassessing its
attitude towards 'the state of the [MB] General Guide.' ...
I believe this affair means Qatar has become an 'enemy state' and
can no longer be a sister country, [since] siblings do not spy on
each other. I am speaking of the rash [Qatari] leadership. This
leadership managed to deceive a foolish president [Morsi] in order
to receive [from him] documents [pertaining to] national
security. He who sells out his homeland sells out his good name
and his honor."<END QUOTE>[/indent]
As long-time readers know, Generational Dynamics predicts that, in the
approaching Clash of Civilizations world war, Iran, India and Russia
will be allied with the West against China, Pakistan, and the Sunni
Arab nations. ( "15-Jul-15 World View -- Arab views of Iran nuclear deal"
)
However, that's very broad prediction. It's clear that the Sunni Arab
nations are not monolithic, and historically they've fought against
each other, as well as against Shia Iran. The 2014 Gaza war revealed
sharp fault lines among the Sunni Arabs, with Egypt, Saudi Arabia and
the West Bank Palestinians on one side, and Hamas, Qatar and
(non-Arab) Turkey on the other side. ( "3-Sep-14 World View -- Mideast realignment continues following the Gaza war"
) It would be possible through analysis and
interviews to produce a much more detailed and accurate prediction of
the expected activities of the different ethnic groups, but this would
require more resources than are available to me. However, this could
be a good project for a college student thesis. Daily News Egypt (18-Jun) and Al-Jazeera (Qatar - 18-Jun) and Memri
KEYS: Generational Dynamics, Brexit, negative yields, Finch Ratings,
Germany, France, Japan, Willie Sutton, Britain,
Egypt, Qatar, Turkey, Mohamed Morsi, Muslim Brotherhood, MB,
al-Jazeera, Muhammad Amin
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Cash stored in vaults as negative interest rates spread
- UK was locked out of EU summit for first time in 40 years
- Egypt calls Qatar an 'enemy state'
****
**** Cash stored in vaults as negative interest rates spread
****
Man shops for vault in which to store cash
As I wrote last week, central banks around the world are committed to
"printing money" and making it available to wealthy investors and
institutions in order to forestall forced selling following global
financial shocks following Brexit. A major tool for doing this is
quantitative easing -- purchasing corporate or sovereign bonds. But
central banks are being limited by the huge amount of debt based on
negative interest rates (yields). ( "25-Jun-16 World View -- Fallout from Brexit: Impact on geopolitics, economics, and stock markets"
)
A new report by Finch Ratings indicates that negative interest rates
are spreading rapidly. As of June 27, $11.7 trillion of sovereign
debt globally was based on the purchase of bonds and other assets with
negative yields. This is up by $1.3 trillion from the end of May.
The way that this works in "normal" times is that an investor pays $95
for a bond that will pay $100 when it expires. But in today's "new
normal," the demand for bonds is surging, and by the law of supply and
demand, the prices of these bonds are also surging. So the investor
is forced to pay $105 for the same bond that will pay only $100.
That's a negative yield.
The demand for bonds has been surging from two sources. As volatility
and uncertainty increases, investors are seeking safe havens in which
to park their money. And central banks are purchasing bonds as part
of a quantitative easing program. Japan, Germany and France
were the leaders in June of increases in sovereign debt with
negative yields.
In "normal" times, banks make money by borrowing money at low interest
rates and lending it out at high interest rates. But in today's
low and negative interest rate environment, it's impossible to
lend it out at high interest rates, except to the riskiest
borrowers, the subprime borrowers most likely to default.
For financial institutions looking for a place to park their money,
some of them are returning to the old days when banks stored
their money in vaults. Money in a vault earns no interest, but
it also doesn't lose value.
When American outlaw "Willie" Sutton was once asked why he robbed
banks, he replied, "I rob banks because that's where the money is."
Somewhere there may be a modern day Willie Sutton who's thinking the
same thing. Fitch Ratings and Bloomberg and Seeking Alpha and Bloomberg and FT Adviser
and Telegraph (London)
****
**** UK was locked out of EU summit for first time in 40 years
****
Today's meeting was "about us," according to one EU official, not
about the UK. So 27 European Union members met for an EU summit, the
first one in 40 years from which Britain was excluded.
The key phrase was "there will be no single market à la carte."
The meaning of this phrase was stated repeatedly by different EU
officials. If the UK wants access to the EU Single Market, then they
must also be willing to guarantee the EU's four freedoms: freedom of
movement for people, goods, capital and services.
In particular, this will mean that the UK would have to permit the
free movement of people, which was the major motivation for the
successful Brexit vote in the first place. That would be ironic. And
it's worth mentioning again that the opposition to free movement of
people are just as opposed to free movement of Catholic Poles and
Hungarians as they are opposed to free movement of Syrian Muslims.
Guardian (London)
****
**** Egypt calls Qatar an 'enemy state'
****
The Muslim Brotherhood (MB), and the country's that sponsor MB --
Qatar and Turkey -- have reacted furiously to the actions on June 18
by an Egyptian court to sentence former president Mohamed Morsi to 40
years in prison for conspiring to harm Egypt's national interests in
what has been called the "spying for Qatar" affair. Morsi's
co-defendants included a reporter from Qatar-based al-Jazeera.
The judge reading out the verdict said that Morsi and his
co-defendants endangered national security, which is "worse than
killing a person or opposing God’s laws." He added:
[indent]<QUOTE>"They are more dangerous than spies. Spies are usually
foreigners, but unfortunately the defendants are
Egyptian."<END QUOTE>[/indent]
Qatar denounced the verdicts, saying they set a dangerous precedent in
relations between Arab nations:
[indent]<QUOTE>"The verdict issued by the Cairo Criminal Court is
baseless and goes against justice and the realities on the ground,
because it includes a litany of misleading claims that contradicts
the policy of the State of Qatar towards all its sisterly
nations."<END QUOTE>[/indent]
Egyptian media responded harshly. According to Muhammad Amin, editor
of the Egyptian daily Al-Masri Al-Yawm:
[indent]<QUOTE>"The sentence in the case of the spying [for Qatar]
sends a message no only to the MB but also a special message
[meant] to reach the Qatari Emir. The message to the MB is that
the [Egyptian] state will not stop pursuing the movement and is
not interested in holding talks [with it] or reassessing its
attitude towards 'the state of the [MB] General Guide.' ...
I believe this affair means Qatar has become an 'enemy state' and
can no longer be a sister country, [since] siblings do not spy on
each other. I am speaking of the rash [Qatari] leadership. This
leadership managed to deceive a foolish president [Morsi] in order
to receive [from him] documents [pertaining to] national
security. He who sells out his homeland sells out his good name
and his honor."<END QUOTE>[/indent]
As long-time readers know, Generational Dynamics predicts that, in the
approaching Clash of Civilizations world war, Iran, India and Russia
will be allied with the West against China, Pakistan, and the Sunni
Arab nations. ( "15-Jul-15 World View -- Arab views of Iran nuclear deal"
)
However, that's very broad prediction. It's clear that the Sunni Arab
nations are not monolithic, and historically they've fought against
each other, as well as against Shia Iran. The 2014 Gaza war revealed
sharp fault lines among the Sunni Arabs, with Egypt, Saudi Arabia and
the West Bank Palestinians on one side, and Hamas, Qatar and
(non-Arab) Turkey on the other side. ( "3-Sep-14 World View -- Mideast realignment continues following the Gaza war"
) It would be possible through analysis and
interviews to produce a much more detailed and accurate prediction of
the expected activities of the different ethnic groups, but this would
require more resources than are available to me. However, this could
be a good project for a college student thesis. Daily News Egypt (18-Jun) and Al-Jazeera (Qatar - 18-Jun) and Memri
KEYS: Generational Dynamics, Brexit, negative yields, Finch Ratings,
Germany, France, Japan, Willie Sutton, Britain,
Egypt, Qatar, Turkey, Mohamed Morsi, Muslim Brotherhood, MB,
al-Jazeera, Muhammad Amin
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
