Data sharing agreement between nations, Alibaba IPO, Bitcoin boulversations, housing bubbles, black holes, and Hannah Bernard's weekly market update feature this week in world market review.
Switzerland and Singapore are the latest signatories to an OECD deal on sharing data and tax information between countries that now includes 47 nations. The deal, pushed in recent years by the G20, forces signatory nations to share a wide range of financial information including bank balances, interest income, sales proceeds and dividends.
Ostensibly a plan to crack down on tax evasion by multinationals and the global elite, it is actually part of that very elite's plan for a global governmental system based on complete transparency of every individuals' economic (and other) activities.
This is of course a key stepping-stone on the path to the implementation of a truly global tax, an idea that has already been kicked around for some years at the UN and other globalist bodies.
In the US specifically, we've been warning about Housing Bubble 2.0 and the derivative black hole for some time. Now it seems we have illustrious company: Warren Buffett. He headed his annual investors meeting for legendary Berkshire Hathaway last weekend, and this year brought some unusually sober talk of financial “discontinuity” that could result if the highly-leveraged derivatives market were to unwind and fretting about the housing market. Although this comes as news to no one who has been following the overheating property markets in Orange County, Austin, Miami, Honolulu and elsewhere, it is just another sign that the Fed's wonderful QE program for buying up toxic mortgage debt is merely inflating another housing bubble. Mission accomplished?
Speaking of housing bubbles, China's own longstanding problem with its overheated property market came under the spotlight once again this week as Nomura released a report detailing how the country's housing bubble might have already burst. As the report notes “Every property market leading indicator at the national level turned down,” and “The question is no longer ‘if’ or ‘when’ but rather ‘how much’ China’s property market will correct.” To make matters worse, the problem may be exacerbated by China's demographics. The country's birth rate peaked in 1987, meaning that new household formation peaked 25 years later, in 2012. As developers, fed by easy credit and riding the wave of new home buyers, ramp up construction, a glut of houses are going to be hitting an increasingly shrinking market. The falling prices that will inevitably result are likely to scare speculators out of the market, which has been estimated to be 15% of home sales.
The UK is facing its own housing crisis as the OECD raised its head once again this week, this time to chastise the British government for their “Help to Buy” that allows would-be homeowners to buy a newly built home for a 5% deposit, rather than the traditional 20%. Not that the BoE or the Parliament need to be told this. This week chancellor George Osborne has come under pressure by Lord Lawson, Lord Lamont, and Alistair Darling (three former chancellors themselves), as well as the LibDem and Labour parties for the program, with his political rivals accusing him of stoking a property bubble to help the Conservatives' chances at the next election. Since 2009, the percentage of high loan-to-income ratio mortgages (over 4.5) has doubled to 8%. Although the scheme is raising expectations of home prices, there have been relatively few sales under the program, meaning there's a growing market for the homes and not many people who are selling. This is leading to what many are warning could be a repeat of the US' own housing crash of last decade. The Bank of England is supposedly mulling over its own options for applying the brakes to the housing market, including raising capital requirements on banks and building societies, but it's not clear how effective that will be given the hot money that's floating around the country due to the bank's own version of quantitative easing.
Wall Street is looking forward to the IPO of Alibaba, the Chinese online giant that controls four-fifths of the country's e-commerce market. The feeding frenzy surrounding the offering have bandied about figures in the $15 to $20 billion range, meaning it could surpass Visa's $19.1 billion offering in 2008 to become the largest IPO in history. Born from the home of former school teacher Jack Ma in 1999, the company has exploded in recent years along with the rise of China's middle class, boasting a 66% increase in revenue in Q4 2013, with $5.7 billion of sales on November 11th alone last year. Many are pointing to this as yet another sign that the Chinese economy, set to surpass the US in overall size in the coming years, is already a global force to be reckoned with.
Meanwhile, beleaguered bitcoiners, no strangers to the whiplash caused by the rollercoaster fortunes of the cryptocurrency, are dealing with a particularly up and down week. In the States, the Federal Election Commission approved the use of bitcoins for political donations. The decision comes with the proviso that anonymous contributions will not be allowed and that campaign treasurers must exercise due diligence in checking the donations for “evidence of illegality.” Like the recent IRS ruling that bitcoin is property and thus subject to capital gains tax, this move is seen as another way of de-fanging the currency so it can peacefully co-exist with the Federal Reserve Notes in the bankster-controlled Fed system. On the other hand, a US Defense Department memo was unearthed this week showing that the ridiculously-named “Combating Terrorism Technical Support Office” is now engaged in a study of virtual currencies, including bitcoin, to develop “new concepts and constructs for understanding the role of virtual currencies” in financing terrorism. And if all that weren't enough, the Winklevoss twins (yes, those Winklevoss twins) have just filed with the SEC to clear the way to list their bitcoin ETF on the NASDAQ. What could go wrong?
Well, more central bank pronouncements could derail bitcoin users legal options in a number of countries, for one. Just this week, the Dutch Central Bank reiterated their former president's 2013 pronouncements that bitcoin is “unlikely to become a viable alternative for traditional currency in the foreseeable future.” In a detailed statement on the bank's website, several reasons why the Dutch should be afraid of the virtual currency are enumerated, from the size of the bitcoin economy (with less than 1000 transactions per day in Holland compared to 16 million Euro payments) to its volatility and security issues. But since none of the text brings with it any legal ramifications it is water off the bitcoin duck's back.
The People's Bank of China, on the other hand, is actually cracking down on bitcoin...kind of. China's central bank has been rumored to be engaged in a bitcoin crackdown since December of last year, and the details of its ruling on the currency are still not publicly available, but it's pretty obvious what's happening. This week saw ten Chinese banks from the Bank of China to Huaxia Bank to the China Construction Bank have been closing bank accounts that are used for trading bitcoin. The latest bank to join in on the crackdown: ICBC (the Industrial and Commercial Bank of China), the world's largest bank by assets and market cap. The PBOC's actual ruling on bitcoin is set to drop tomorrow, which also happens to coincide with the beginning of a two day Global Bitcoin Summit in Beijing attended by Roger Ver and other prominent bitcoiners. As a result of the crackdowns, the CEOs of five prominent Chinese bitcoin exchanges who were set to speak at the conference have all bowed out, promising in good Chinese democracy fashion not to participate in public bitcoin events or engage in excessive speculation. Although the crackdown has already claimed one Chinese bitcoin exchange, FXBTC, which will shutter operations today, the price of BTC in China has actually risen over the past two days.
And the bitcoin reality inversion bubble continues to inflate...