WOW! Two huge news stories within 24 hours. First, Russia decided to shut off the gas pipeline to southern Europe, next the Swiss dropped their 1.20 floor peg to the euro. The first story is absolutely huge but has been completely overshadowed by the Swiss. In my opinion, the Russian move is part of the “war” chess game, the move by the Swiss is your beginning to multiple resets leading into a complete economic and financial reset!
Let me start with Russia. They had already tightened the gas spigot to southern Europe by some 60%. This is gas which travels through the Ukraine. As of yesterday, it has been reported the flow has completely stopped. Why now you ask? Well, several “timing” reasons come to mind. First and most obvious is “it’s cold outside” as Europe is in the middle of winter. Playing the gas card now has maximum impact. Secondly and most importantly, Europe is in the process of deciding whether or not to go along with the more severe economic and financial sanctions concocted by Washington. As a side note, as if it was not very important on its own, France must decide whether or not they will deliver the 2nd Mistral warship contracted with Russia.
Shutting the gas off at this moment is Vladimir Putin telling Europe, “you are either with us or against us, make your decision and make it NOW!”. I had a very astute friend describe the situation as follows, “This move by Russia makes perfect economic sense, because Russia or anybody should NEVER reward bad behavior, and to acquiescence is always a reward. I guess that the Western government leaderships never got that memo”. He added, “the second shoe to drop will be Russia requiring payment for oil in yuan”. Also very astute but stops short of the ultimate “killer”, Mr. Putin could simply require payment in gold. This would blow the doors off of the entire Western financial system as they have already divested 100 year’s worth of gold reserves!
The second tactical nuke to hit Europe was the Swiss National Bank breaking the floor peg of 1.20 to the euro. Within minutes, the euro dropped to parity and then some. The Swiss also lowered their “negative interest rates” to -.75% from -.25% in an effort NOT to attract capital. Apparently this did not work! You can look at what the Swiss did from several angles, each one of them very negative to future world events. First, whether you like it or not, this is a very big negative vote for the Eurozone itself. The Swiss may be looking at near future current events and trying to isolate themselves. They could be looking a Mario Drahgi announcing full on monetization next week, or, they might be looking at the Greek vote and likely (in my opinion) exit from the Eurozone. In any event, their action is no vote of confidence.
Please remember, the SNB has a huge (greater than 50%) of their reserves in euros. This effectively “took a couple of toes off” as the majority of their reserves have just effectively been devalued. Their stock market opened down 15% as their foreign trade and tourism will now be damaged. The move to revalue higher will make imports much cheaper but devastate their export economy. It will actually bankrupt some exporters with skinny profit margins. Put bluntly, the Swiss can now look forward to a very steep recession if not an outright depression.
The move by the SNB viewed from a macro standpoint is also an eye opener regarding central banking and central bankers. They had previously “promised” (as recently as this past Monday) this 1.20 peg versus the euro, they have now reneged. Many European and Swiss businessmen made plans and invested money into businesses which now are untenable. Many businesses will be flat put out of business and original capital lost. “Trust” has been broken by the central bank. The obvious question is “who is next”? We here in the U.S. have been “fed” (pun intended) a continuous diet of the Fed beginning to tighten, will they retain any respect at all when another round of QE (loosening) is announced? Though this is the first instance of a central bank shocking the world, it will not be the last. These “shocks” will serve only one purpose, they will illustrate that central banks no longer are in “control”.
–As a side note and this paragraph is being inserted during my editing, Christine Lagarde of the IMF was interviewed by CNBC yesterday and admitted the Swiss move was a surprise to them. She went on to talk about the importance of “coordination and communication” between central banks. So, I guess the SNB went totally “rogue” on their decision and have acted purely out of personal preservation? I am not saying this tongue in cheek, this is exactly what the Swiss have done! This is what I have talked about all along, when the “moment” came, it would be “every man for himself” …this certainly qualifies.–
Putting these two events together, the oil shutoff and monetary shock together, I view several very obvious conclusions. Russia is “courting” Europe and “helping them” decide to abandon the U.S. and to do business eastward. The Swiss I believe are trying to insulate themselves from a breakup of the Eurozone. Standing WAY back and viewing not only the forest but all of the “forests”, this is the very public beginnings of a global reset. No matter what you want to think, the Swiss have just “reset” their entire system and currency versus the euro and thus the entire world! Yes I know, this is just one country. I am trying to tell you this may only be one country but it is the beginning reset for all countries, assets, economies and financial systems!
Before finishing, it is also important to see the reaction in the gold market. Gold has exploded $30+ higher in reaction. Gold clearly sees the Swiss action as a monetary warning sign of what is to come. What is coming is a global reset brought on by a currency and credit crisis. Gold is money. Gold is the ULTIMATE money! The Swiss franc has been seen as a “safe haven” currency. They are now “taking” more interest than they were when they first went negative. The Swiss franc is also greatly supported…by a currency which was devalued by 15% (30% at one point) overnight …which shrinks their reserve base by more than a whopping 10%! Will the world look to currencies like the Swissie or will it look to gold as a safe place to avoid the crisis and the looming reset(s)?
I think this question can be answered with another set of questions. Can the Swiss franc actually “default”? Can an ounce of gold default? Do global currencies depend on economies which may (most likely are) be leveraged too far? Switching gears with these questions, how would the Chinese answer these questions? This may be the most important question of all because the old saying “he who has the gold …makes the rules”. We know for a fact the Chinese “have the gold”. We highly suspect (via common sense evidence) that the U.S. and the West in general has offloaded much of their gold. Could China force a global reset into gold at much higher prices?
Folks, this is truly it! The Swiss have fired the opening “re set” volley! The leverage employed all throughout the West will force “sales”, and will force “purchases” of various markets, currencies, commodities, credits and “money”. Close your eyes to this at your own peril, time is now very short to secure your chair in this global game of musical chairs. Before you do sit down, make sure you are protected. Owning Precious Metals is the only sure way. Follow the major trends on the global stage and give us a call at Miles Franklin 800-822-8080 to make your seat more comfortable.
Regards, Bill Holter
Thanks Bill, as always for your commentary. There are a lot of mixed messages out there concerning Russia reducing or shutting down the oil (or is it gas?) transiting through the Ukraine pipeline. Zerohedge pulled their article from a couple of days ago where they claimed a full shutoff. RT has not come out and said there has been a shutoff. Do we really know the situation? Shutoff or not, I’m sure the Russians don’t mind the rumor mill churning out the worry.
thanks Andrew, it is gas. The article I read I believe was the Times Online link from the ZH article. The gas had been cut 60%, they claimed 100% been shut off to the Ukraine pipeline, Russia will deliver gas to Turkey and Europe can purchase from there …when they build a pipeline. I will try to find the link.
Paul Craig Roberts is now walking back the claim of gas shutoff in his article today. There would have been much more blowback if it really happened:
http://www.paulcraigroberts.org/2015/01/16/ruin-future-paul-craig-roberts/
I am still looking for the link, I know what I read and even where it was. The second sentence was very clear. I believe it was the Times Online.
Maybe the Times purged their article, same as ZH.
could be Andrew, I cannot find it now. I try to be accurate.
Here’s a link, Bill:
http://www.bloomberg.com/news/2015-01-14/russia-to-shift-ukraine-gas-transit-to-turkey-as-eu-cries-foul.html
Thanks John, this is not it, the second sentence is what said “100%” was shut off.
“…when they build a pipeline.”
Just to be clear who “they” are:
Neither a direct pipeline from Russia to Turkey such that it can bypass Ukraine
NOR
A pipeline from places in Europe e.g. Austria, Bulgaria, Romania, Hungary etc. to the Greek-Turkish border
exists yet. One of the most important items Putin signed off on during his visits to Turkey few weeks ago was the first pipeline in above list. As of today, Russia couldn’t possibly delivering natural gas directly to Turkey while bypassing Ukraine.
Whom are you referring to the “they” in above pipeline building sentence? Russia-Turkey joint venture with contract paperwork already signed? Or some “pie-in-the-sky dream” for European Union to consider about running pipeline up to Eastern Greece?
pipelines will have to be built, Russia will not stand for Ukraine skimming supply.
Great reporting job, Bill. Looks like the time allowed for each move on the “chess board” is being shortened- makes it more likely we’ll see some mistakes. Hope there’s no hitting and crying- or gunfire!
The Swiss move was huge, the reset has already begun.
Bill,
Interesting article as always.
Regarding your comment concerning how the Russians could tighten things further by requiring gold for their oil and gas, I think there is a another step that would really stick it to the West.
They could also say that they would require payment in some percentage of platinum or palladium. Now look at who the top producer for those two is….
While usually considered industrial metals, platinum has often been more prized in Japan over gold.
Asking for gold would be worse because we would have to admit we have none.
lets not get carried away with what they could ask for payment for gas how about plutonium or breast milk
I was wondering why Palladium was getting hammered the other day. Is it possible it’s being heavily shorted to stick it to another of Russias’ resources? Just a random thought.
BTW Bill, that was an awesome read, i’ll make sure to pass this along to some who have no idea what has just occurred, many thanks, Joe
no I don’t think so Joe. Palladium is strictly an industrially used metal, not money. I saw this all week and believe it shows the difference between “money versus commodity”. Platinum is still trying to make up its mind but in the end will be seen as a commodity in my opinion. Time will tell but time (5,000 years) has already told us gold and silver are money!
The Swiss have had a look at all the “forests” and came to the decision that they had better suffer some short term sharp, severe economic pain now rather than later, on their terms and time line. Not at the hands of some second or third party with an ulterior agenda.
When all is said and done, their supposed 50-100 billion dollar “loss” will come to be seen as the lessor of two evils and just the “cost” of doing business.
Meanwhile, in the west we have the economic fallout just beginning, as those who are in deep margin debt begin to drop like flies! All the while lamenting that they never seen it coming! Because they were attempting to “see” the forest, but all those damned trees were in the way!
yes, the derivatives chain is breaking. As for the Swiss, they followed the old saying “your first loss is your best loss”.
Hi Bill, Your thoughts on, What if?
What if the IMF really was aware and are not disclosing? The reason I am suggesting this is because of the timing. Normally things like this are announced on a weekend when all of the hedgers have their positions closed for the weekend. My opinion, this will be used for something and it was known in advance and was not an accident – was on purpose for something bigger. We will all look back someday on this crazy stuff and say, ah ha 🙂
this is possible but the real harm is to the Western derivatives system, the chain is breaking. The reset has already begun.
I like your line of thinking. All the CBs of the world report up to the BIS. I don’t believe in “rogue” activity at the level of central banks. The Swiss likely did what they did as part of something larger, as a coordinated action intended to reward/punish as appropriate. It would be cool to “follow the money” and see who (wink, wink) coincidentally profited by the SNB move.
Coordination doesn’t however mean Bill has anything wrong though. The results, or the outcome, is still going to hurt a whole lot of unprepared people. Don’t be one of those people.
…or, (wink, wink) who coincidentally lost money. The reset has already begun.
When I was a younger man in the 90s, I was a bit jealous of the wisdom possessed by older market participants; the old timers who were around the last time things got crazy.
Its kind of fun to think that my grandchildren might be a little jealous of me for living through such interesting times.
And thanks to the internet, those of us who care can be aware of as much as we are able to process, in real time!
Good luck to all.
I would not consider it “lucky” to live through what is coming. The reset has already begun.
Yes Bill, the reset between Money and Currency got started with a BANG in the paper markets while Gold is off and running. We can be sure Derivatives chains are breaking and 2008 on Steroids will be rhyming again by orders of magnitude greater with 2015. This is No happy set of events to start the year. By the time December roles around – We will all long for the stability and good times of today. Much suffering and pain lay in our immediate future. Prepare one and all – God bless.
yes, exactly Richard …the reset has already begun. Please see my piece for Monday.
Luck is when opportunity and preparedness meet.
Very exciting to see “All things work together for the good of the…….”
the harder I work, the luckier I get!
Tom…. I misread at first, When I was a younger man in my 90s
It sounded good until I re-read… in the 90s 🙂
Bill… great job. I concur with Andrew above re: Russia turning off the Gas. RT would have it blasting all over as Breaking News if there was more to the story. Something is missing here.
Iread it two times, maybe what was printed was wrong, cannot find it now.
It looks that the is rift is still growing with the eastern and western mindset : people just rush to buy swiss francs even with negative rates and I would not be surprised that it was caused by lots of western people.
I also did not understood why the SNB made this folly : when everybody wants your currency that you can print at zero cost : JUST BUY THE WORLD !
If I were them, I would have bought all assets I could namely in europe like millions of flats in germany, austria, or netherlands or airports on sale in France or small distressed energy companies (and even gold !).
How stupid the SNB was : monetary base inflation, debt monetization : it does not care anymore…until it does but at least there would have lots of assets for rainy days !
you are thinking short term, long term , they are too small and they do not want to destroy their currency.
Bill,
Excellent article as always.
“Lucky” it will not be. More like hell on earth.
Thanks Farrell, “lucky”? No, …the reset has already begun. Please see my piece for Monday.
Have been reading some decent POV’s that the BIS has gone past patient with the US. Sending a few across the bow is probably now past due. While we mostly paint the CB/BIS bunch as one I can buy into even the CB’s CB(BIS) thinking its time for some tough love. Beyond that yeah the effing wheels are spinning OFF!
We have gone far past “too far”.
And what does “the reset” mean exactly? I really would liek to know.
I am a new reader and was advised by a friend of mine to buy all of the silver I could afford (unfortunately I cannot afford gold) so I would like to ask if this is postive advice that I should follow but I would really like to know what you mean by “the reset”. Thank you, Joe
Welcome to reality Joe! Yes, silver is the cheaper asset on the planet, your friend gave you good advice in my opinion. “Re set” refers to the repricing of everything from currencies, interest rates, hard assets and stocks etc. Basically, real values will become apparent, the thing is this, values are WAY out of whack, some things will be cut by 90%+ and others will have a “0” added to them.
The following might be something to consider, it was copied from a O Hedge comment. “The PTB simply need a currency that can be trusted with their TRILLIONS and there is no better banking system (well they used to be) than the Swiss……..so they decided to tell the SNB save your franc and the banks “we will need them soon”… think about it…..where would you go if you had a few hundred billion in cash/gold to store? And what banking system will announce this year a return to its “secret” banking and tell the U.S. to go foch itself…….that’s right ….the Swiss… And what country is the last to get nuked or overun by ground troops? When you are worth a Trillion you just can’t put that cash in any old banking system.”
The Swiss decided they could not continue buying the euro, a currency that could possibly go “poof”.
I’m going back and forth with this. Sure, it can been seen as an opening volley in a global reset, but part of me thinks that it might be a relief valve for actual physical gold demand. Where can you safely park money? In very few places. Gold, for sure. You couldn’t safely park money in the Swiss Franc before the peg, now you can absolutely. Are there any other sound currencies? I can think of two. The Hong Kong dollar and the Norwegian Krone (which turned out not so safe after the drop in crude). The currency is going to run on them, that I can say for sure. Thanks Bill, I always enjoy your writing. KC
Why was the franc not a “safe” currency? It was being suppressed, just like gold and silver?
“Asking for gold would be worse because we would have to admit we have none.”
After the reset, the new currency will be backed by gold?
If the United States has no more gold, what in the hell happens then?
whatever “in the hell happens” won’t be good for Americans.
While being pegged to Euro, I didn’t see the Swiss franc as a viable safe haven. It was pegged to a failing and flawed currency. Before the peg, everyone was piling into the franc and the SCB smacked them all with the currency peg. Now, we are back to square one with the franc being the premier safe haven currency.
Sure, the franc was being manipulated like gold and silver, but it was out in the open. Everyone knew about the peg, they just would not describe it as outright manipulation, which it was. I don’t know where it leaves us. We know the Swiss have the highest per capita gold reserves and sound finances. Are people going to park capital in the franc because it is the next best thing to gold? Sure. Recall the night that they initially announced the peg. It was one of the most massive gold manipulation events that we’ve seen. What are the powers that be going to do when gold starts moving up with the Swiss currency? I think that managing gold is their number one priority. Maybe they needed the relief valve for capital to flow into instead of gold.
the franc was “safer” when it was 15-20% lower and being manipulated. If the franc can move like this when the rig fails, how much can gold an silver move!
Swiss has on outsizerd banking sector regarding their overall economy, their banks are too big and I guess it will be a burden fpr thje swiss franc when the reset will be done. In the long term it should be better for the franc that for much other currencies and I guess that switzerland will recover faster even than germany.
the Swiss have started the reset.
Franc smanc its still a fiat currency lol
yes, this is correct, the Swiss are trying to save their fiat by exiting Euro fiat.
Bill don’t forget the Asian crisis where Thialand unpegged their currency causing that crisis. Now we have the Swiss/Euro unpegging which seems to be causing the Euro crisis. This same Swiss/Euro peg caused gold to drop apx 100 PTs in 2011. Could it be the unpeg which will make gold become the only money of trust? What I see more is what will happen when China decides to unpeg from the dollar it has been supporting for all these years. That is the big kahuna!
yes, correct.
Good article Bill,
I also believe that “it’s every man for themselves” in this game of musical chairs.
If someone doesn’t lift the stylus then the music is coming to an end anyway, either way the music stops and there won’t be many chairs to sit on, mainly because the BRICS have bought them all!
correct Andy.
holy shit what an amazing piece wtf right up there with Chris hedges ,you should get a pulitzer prize or a nobel prize
Lets get one thing straight about the swiss losses for the fx,equites etc……wealth is never lost it is only transfered in this case probably George Soros since it was a currency play
thanks, I would prefer the peace prize.
how about an evening out talking with George soros about world events ?
I’ll pass.
Jim Willie reported a few months ago that Langley
was filling some buildings in Europe with Swiss Francs.
“filling” them?
I would not be suprised if the SNB now starts secretly
buying gold for their dollarreserves first and later for euros, with a currencywar endgame in mind, which begins to unfold.
They hold only 8% of their reserves in gold, diminished by stupid political decisions and bad IMF/central bank policies. Getting rid of masses of soon weakening dollar- and already weak euro reserves is an important step.
In the end the brave swiss will always reestablish their
independence! That’s their real national treasure.
yes, now they will buy gold after screaming “FIRE” in a crowded theatre …as they were on their way out the exit!
Russia did not shut off the flow of gas. This all started when a person misinterpreted an article. Russia said they would by-pass Ukraine and ship gas to Turkey “WHEN THE NEW SOUTHSTREAM IS FINISHED”. It would then be up to Europe to build the infrastructure if they wanted the gas after the SOUTHSTREAM is finished!
Also the (raw) materials that are used for products that are exported by the Swiss are actually imported. Since those materials became extremely “cheap”, they can lower the cost of the finished product and still have the same profit margins, of course the exemption would be Swiss cheese! No recession or depression!
I guess we will soon see.
Checkout the Goldseek article below titled “I have a theory”. In your opinion, Bill, is there enough evidence to back this guy’s “theory”? It seems plausible.
http://news.goldseek.com/GoldSeek/1421424060.php#disqus_thread
I HAVE A THEORY
excerpt:
“I believe the SNB was massively short gold and dropped the peg to cover their short. Here is why I believe it.”
it is plausible and I do mention it tomorrow in my writing.
I’ll look forward to reading about it.
One other thing, were you aware of the Rockefellers announcing that they were divesting out of oil. In October, I discovered their announcement – which was made last year on Sept. 22nd. It signalled to me that the oil market was going to take a significant downturn, at least in the interim (1 to 2 yrs.?).
Could their intentions be dubious? Or what is it they know that is enough to cause a family, who found their fortune in oil, to divest of it and ironically head for “greener” (energy) pastures? Whatever the case, I don’t believe it to be for altruistic reasons – its always about making money and maintaining power.
http://www.theguardian.com/environment/2014/sep/22/rockefeller-heirs-divest-fossil-fuels-climate-change
HEIRS TO ROCKEFELLER OIL FORTUNE DIVEST FROM FOSSIL FUELS OVER CLIMATE CHANGE
“Heirs to Standard Oil fortune join campaign that will withdraw a total of $50bn from fossil fuels, including from tar sands funds”
did you also know they have physically left NYC?
I assume this is what you are referring to, below?
Tweeted, November 24, 2014
“The famed Rockefeller family is leaving the namesake 70-story limestone tower they built in 1933. One of the country’s wealthiest families has decided to leave its 30 Rockefeller Plaza home on the 56th floor and move to 1 Rockefeller Plaza on West 49th Street next year, according to The New York Times.
The family would only say that they “got a deal” for the 19,000-square-foot space they were not at liberty to speak about. The Rockefellers sold 30 Rock and nine other landmark Rockefeller Center office buildings to Jerry Speyer and the Lester Crown family of Chicago in 2000, but remained in the building with its one-floor office.”
This sounds strange, they would only say they “got a deal”. What, a deal they “couldn’t refuse” or did they mark it to market just to get out while the getting was good? Bill, are you willing to speculate as to why they really packed up and left town …in terms of their business enterprise? Will any of them even be keeping a private residence or two in NYC?
“Will any of them even be keeping a private residence or two in NYC?” This is the real question, depending upon their answer will give you THE answer.
Do you know who wrote that article? It’s strange that it has no byline!
“A mystery writer”
Here’s my theory.
When QE4 arrives, the long speculators(both paper and physical) in the G&S market will wish they hadn’t jumped in so early.
The paper longs who are leveraged of course will have to sell.
The physical buyers of course will still own their metals which is great as far as it goes.
Technically the price advance recently is…promising, which is great as far as that goes.
I will wait till the end of the month before considering buying gold bars/coins.
Silver…forget it altogether .
living down under is making you think backwards?