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Bernie Sanders: The World Is Rejecting Globalization

Authored by Bernie Sanders, originally posted Op-Ed via The NY Times,

Surprise, surprise. Workers in Britain, many of whom have seen a decline in their standard of living while the very rich in their country have become much richer, have turned their backs on the European Union and a globalized economy that is failing them and their children.

And it’s not just the British who are suffering. That increasingly globalized economy, established and maintained by the world’s economic elite, is failing people everywhere. Incredibly, the wealthiest 62 people on this planet own as much wealth as the bottom half of the world’s population — around 3.6 billion people. The top 1 percent now owns more wealth than the whole of the bottom 99 percent. The very, very rich enjoy unimaginable luxury while billions of people endure abject poverty, unemployment, and inadequate health care, education, housing and drinking water.

Could this rejection of the current form of the global economy happen in the United States? You bet it could.

During my campaign for the Democratic presidential nomination, I’ve visited 46 states. What I saw and heard on too many occasions were painful realities that the political and media establishment fail even to recognize.

In the last 15 years, nearly 60,000 factories in this country have closed, and more than 4.8 million well-paid manufacturing jobs have disappeared. Much of this is related to disastrous trade agreements that encourage corporations to move to low-wage countries.

Despite major increases in productivity, the median male worker in America today is making $726 dollars less than he did in 1973, while the median female worker is making $1,154 less than she did in 2007, after adjusting for inflation.

Nearly 47 million Americans live in poverty. An estimated 28 million have no health insurance, while many others are underinsured. Millions of people are struggling with outrageous levels of student debt. For perhaps the first time in modern history, our younger generation will probably have a lower standard of living than their parents. Frighteningly, millions of poorly educated Americans will have a shorter life span than the previous generation as they succumb to despair, drugs and alcohol.

Meanwhile, in our country the top one-tenth of 1 percent now owns almost as much wealth as the bottom 90 percent. Fifty-eight percent of all new income is going to the top 1 percent. Wall Street and billionaires, through their “super PACs,” are able to buy elections.

On my campaign, I’ve talked to workers unable to make it on $8 or $9 an hour; retirees struggling to purchase the medicine they need on $9,000 a year of Social Security; young people unable to afford college. I also visited the American citizens of Puerto Rico, where some 58 percent of the children live in poverty and only a little more than 40 percent of the adult population has a job or is seeking one.

Let’s be clear. The global economy is not working for the majority of people in our country and the world. This is an economic model developed by the economic elite to benefit the economic elite. We need real change.

But we do not need change based on the demagogy, bigotry and anti-immigrant sentiment that punctuated so much of the Leave campaign’s rhetoric — and is central to Donald J. Trump’s message.

We need a president who will vigorously support international cooperation that brings the people of the world closer together, reduces hypernationalism and decreases the possibility of war. We also need a president who respects the democratic rights of the people, and who will fight for an economy that protects the interests of working people, not just Wall Street, the drug companies and other powerful special interests.

We need to fundamentally reject our “free trade” policies and move to fair trade. Americans should not have to compete against workers in low-wage countries who earn pennies an hour. We must defeat the Trans-Pacific Partnership. We must help poor countries develop sustainable economic models.

We need to end the international scandal in which large corporations and the wealthy avoid paying trillions of dollars in taxes to their national governments.

We need to create tens of millions of jobs worldwide by combating global climate change and by transforming the world’s energy system away from fossil fuels.

We need international efforts to cut military spending around the globe and address the causes of war: poverty, hatred, hopelessness and ignorance.

The notion that Donald Trump could benefit from the same forces that gave the Leave proponents a majority in Britain should sound an alarm for the Democratic Party in the United States. Millions of American voters, like the Leave supporters, are understandably angry and frustrated by the economic forces that are destroying the middle class.

In this pivotal moment, the Democratic Party and a new Democratic president need to make clear that we stand with those who are struggling and who have been left behind. We must create national and global economies that work for all, not just a handful of billionaires.

* * *

In other words - unless Hillary can put her special interest crony-capitalist history behind her (and impossible task against Trump's 'take no prisoners' approach) she will have to distract (to standa chance) by putting Bernie on the ticket as VP... Or Trump's gonna win.

In Gold We Trust, 2016 Edition

Submitted by Pater Tenebrarum via,

The 10th Anniversary Edition of the “In Gold We Trust” Report

As every year at the end of June, our good friends Ronald Stoeferle and Mark Valek, the managers of the Incrementum funds, have released the In Gold We Trust report, one of the most comprehensive and most widely read gold reports in the world. The report can be downloaded further below.


Gold, daily, over the past year – click to enlarge.

The report celebrates its 10th anniversary this year. As always, a wide variety of gold-related topics is discussed, providing readers with a wealth of valuable and intellectually stimulating information. This year’s report inter alia includes a detailed discussion of gold’s properties in terms of Nicholas Nassim Taleb’s “fragility/ robustness/ anti-fragility” matrix, as well as close look at the last resort of mad-cap central planners that goes by the moniker “helicopter money”.

Since falling to a new multi-year low amid growing despondency and a crescendo of bearishness late last year,  gold has celebrated a rather noteworthy comeback. As our regular readers know, we pointed to many subtle signs that indicated to us that a trend change might soon be afoot as the low approached (particularly in gold stocks, see e.g. “Gold and Gold Stocks, it Gets Even More Interesting” or “The Canary in the Gold Mine” for some color on this).

Ronald and Mark are inter alia looking into the question whether gold’s recent comeback marks the resumption of the secular bull market, and which factors are likely to drive precious metals in coming years. As they correctly argue, the increasing desperation of central bankers and their willingness to boost inflation at all cost is going to lead to a plethora of unintended consequences, all of which are likely to boost the gold price.

They also shed light on one issue that  – apart from a handful of exceptions –  is clearly not on anyone’s radar screen at the moment: namely the possibility that central banks might finally “succeed”. In other words, the possibility that gold’s recent rise is actually the harbinger of another event widely regarded as “impossible” – the return of price inflation.

In this context, we want to reproduce a chart from the report, which shows the proprietary Incrementum inflation signal vs. the gold price and a number of other inflation-sensitive assets. As can be seen, the signal has flipped rather forcefully toward inflation, after having been stuck for several years in “disinflation/ deflation” territory.

The Incrementum Inflation Signal vs. inflation-sensitive assets – click to enlarge.


This incidentally jibes with the ECRI Future Inflation Gauge, which has recently reached a new multi-year high as well. As can probably be imagined, if the message of these signals is actually borne out, central banks will be facing quite a quandary. It also has potentially far-reaching implications for investors of all stripes, which the report discusses extensively as well.


Conclusion and Download Link

We are certain that our readers will find this year’s In Gold We Trust report just as interesting and entertaining as its predecessors. In fact, we believe the anniversary report is an especially well done issue. Enjoy!

Full PDF can be downloaded here, or read below...

In Gold We Trust 2016-Extended Version

WTF Chart Of The Day: When Central Planning Fails

Things have not been going according to plan for Kuroda-san and his policy-making 'Peter-Pan's in Japan. Since The Bank of Japan unleashed NIRP on its 'saving' community - which, according to the textbooks would force money to reach for riskier investments, pumping stocks up, or flush cash into inflationary consumption - stock prices have collapsed and bond prices have exploded... In fact, in six months, bonds are outperforming stocks by a central-bank-credibility-crushing 70%!!!

Rate cuts...not working

h/t @jsblokland

And it's not just The BoJ that is struggling - since The Fed hiked rates, The S&P is down 3.5% and Treasuries are up 16%!!


2016 - The year when the central-planners were finally exposed!!

Juncker Refuses To Speak English In Address To EU Parliament

While both Angela Merkel and David Cameron, and perhaps Boris Johnson, have been doing all they can to restore some of the badly burned bridges between the UK and Europe over the past week, the European Commission president, Jean-Claude Juncker, perhaps once again under the influence, is seemingly engaged in a one-man crusade to accelerate and crush any last hope of an amicable UK departure with lingering ties to Europe.

As we reported earlier, Juncker pulled a fast one on the EU parliament when he first said that "we must respect British democracy and the way it has expressed its view," a statement that was greeted by rare applause from the UKIP members present. However, Juncker promptly turned the tables when he said "that's the last time you are applauding here... and to some extent I'm really surprised you are here. You are fighting for the exit. The British people voted in favor of the exit. Why are you here?" Juncker continued, breaking from his speech text.

Then, according to a Telegraph correspondent, Juncker added that he has imposed a Presidential Ban on all contact between EU officials and UK officials until Art 50.

But the coup de grace, to use the proper language, came when as AP reported, Juncker decided to refuse speaking in English altogether. In contrast to recent speeches on Britain's future in the European Union, European Commission President Jean-Claude Juncker didn't speak English Tuesday as he lamented the U.K.'s departure from the bloc.

Juncker's official speech to EU lawmakers was made only in French and German. He did, however, respond to hecklers among the British EU lawmakers in English.

Previously, Juncker has often used the EU's most widely spoken and written language as well, particularly when addressing issues close to British hearts.

It's unclear whether the move was a political message from one of Europe's longest serving leaders, or an act of caution due to criticism he has received for making mistakes in English in the past.

Whatever the motivation, it almost appears that Juncker is doing everything in his power to sabotage any lingering hope of some last minute mending of relations between the EU and the UK.

* * *

Meanwhile, the fate of the UK aside, the blowback inside Europe is growing and now the prime ministers of four central European countries say the European Union needs to be reformed to renew the trust of citizens in its institutions. The prime ministers of the Czech Republic, Hungary, Poland and Slovakia also said the forthcoming exit negotiations between the EU and Britain must not leave EU members and their businesses in a worse position than Britain and its companies.

They said the EU should focus on economic growth, an increase of prosperity and the development of a common security policy. The four countries form an informal bloc known as the Visegrad Group and released a joint statement ahead of a summit of EU leaders in Brussels Tuesday.

What was left unsaid is that the balance of power has now shifted dramatically, and what was once Merkel's sole domain now sees the periphery as gradually dominating all negotiations thanks to the impromtpy threat of a referendum that any one nation may invoke at a moment's notice. In the aftermath of Brexit, this is a threat that Merkel and Brussels have no choice but to do everything in their power to remedy, even if it means succumbing to every single demand.

Why Barclays Thinks The V-Shaped Recovery Is Dead: "Massive Redemptions Are Coming"

While one can speculate about the causes of today's global risk-on rally (as we did earlier today on two occasions), a more important question is whether after the recent historic rout (which as shown yesterday surpassed the volatility of the 2008 great financial crisis for various, mostly FX-linked assets), stock markets will simply brush it off, forget about all that's happened and as has been the case all too often in the past several years, surge in yet another V-shaped recovery.

According to Barclays, the answer is no.

As the firm's equity strategist, Keith Parker, writes today, active investors considerably increased risk exposures in the week leading up to the UK referendum. That trade did not play out as expected, and as a result this is where active money managers (MFs and HFs) find themselves now:

"By our measures, aggregate equity positioning by active managers is again near post-crisis highs as the market braces itself for a potential acceleration in redemptions after the equity collapse. With cash levels at equity MFs fairly low and net cyclical sector positioning near the highs, we believe managers are unprepared for outflows and lengthy risk aversion. Although there is cash on the sidelines, the current environment of heightened uncertainty gives rise to a “buyer’s strike” as investors wait for a sufficient value cushion to open up before deploying precious dry powder. Finally, short interest has considerable room to rise across cash equities, ETFs and futures."

Barclays goes on to add that it sees scope for "positioning to turn much more defensive at active managers and for equity outflows to pick up."

And the biggest wildcard, and the reason why we suggested recently BofA's "smart money" clients have pulled money in 21 of the past 22 weeks, not just existing redemption requests, but the threat of a surge in "massive redemptions" over the next few months. Here is Barclays: "Weak active manager performance YTD increases the risk of even larger redemptions in H2."


The bank's conclusion: "The positioning overhang coupled with the ‘prove it mindset’ of investors now, points to further equity downside risk as well as a prolonged market bottoming process like we saw in 2011-12, rather than the v-shaped rebounds that have characterized equity markets of late (like January)."

* * *

Finally, since this is a touchy topic for countless 17-year-old hedge fund managers whose only trading strategy during this "business cycle" has been to BTFD, here is Barclays' summary of the key points:

  • Composite equity positioning is 2std above average, at the post crisis highs. Funds increased risk exposure considerably in the week leading up to the referendum. US MFs and balanced funds are the most exposed currently, while Europe funds went from underweight to neutral.


  • Rebalance bid for equities at the end of month/quarter is unlikely to be material. Our implied US equity vs. bond allocation proxy is still well above recent lows as US equities are down just 3% in Q2. Additionally, the relative spike in equity vol vs. bond vol does not point to net equity buying by multi-asset funds. The rebalance bid may be more pronounced outside the US where the selloff was more acute.


  • Elevated equity fund betas combined with redemptions fuelled prior selloffs. US equity MF beta is 2.5std above average despite equity MF redemptions running $30-40bn a month. The selloffs in 2011 and 2012 were preceded by elevated MF beta, underperformance, and redemptions – which then helped fuel the corrections.


  • Short interest has considerable room to rise. S&P 500 short interest in single stocks is at 2.15% compared to about 2.4% at the recent highs; this implies nearly $50bn in potential selling pressure. ETF short interest is also at all-time lows and a rise to September levels would also imply about $50bn of selling pressure. Finally, S&P futures positioning is net long, compared to being net short in February.


  • Sector positioning turned much more cyclical heading into the referendum. Net cyclical minus defensive positioning by our measures has risen toward the highs, and is reversing. US equity MFs are the most cyclically positioned while global MFs and long-short equity HFs are closer to neutral.

CCTV Camera Captures Moment Of Istanbul Airport Explosion As Suicide Attacker Blows Himself Up

The following video, courtesy of Mahir Zeynalov, shows the precise moment when at least one of the two Ataturk Airport explosions took place. Viewer discretion advised.

The moment of the attack at the Istanbul airport. Horrific.

— Mahir Zeynalov (@MahirZeynalov) June 28, 2016


And a second video shows the moment the Istanbul attacker was shot and set off his suicide vest


Another security footage shows a Turkish police officer shoots down one of the three suicide bombers.

— Mahir Zeynalov (@MahirZeynalov) June 28, 2016

The Crackdown Begins: Chinese Bank Sues To Seize Vancouver Real Estate Assets

From the very beginning of Vancouver's housing boom episode courtesy of an invasion of shady Chinese hot-money laundering home buyers, which has now officially driven the average list price of Vancouver single homes above $4 million...

For the first time ever, the average list price of a single family house in the City of Vancouver is now over $4,000,000.

— Vancouver Market (@vancouvermrkt) June 25, 2016

... we have wondered how long before the Chinese government and financial institutions, if not Canada's local authorities which apparently have no problem with a soaring housing bubble in their midst, finally crack down on these flagrant violators of China's capital controls, whose children have been so openly flaunting their parent's illicit wealth as reported in "My Daddy’s Rich And My Lamborghini’s Good-Looking": Meet The Rich Chinese Kids Of Vancouver."

We now have the answer.

According to the Globe and Mail, China CITIC Bank has filed a lawsuit in Canada to try to seize the assets of a Chinese citizen the bank claims took out a $10 million loan in China then fled to Canada.

In a first of its kind attempt at intercontinental repossession, the bank is looking to seize numerous Vancouver-area homes, valued at at least $7.3-million, along with other assets, according to the lawsuit, which was filed in the Supreme Court of British Columbia in Vancouver on Friday.

This $3.5 million home in Surrey B.C. is one of four homes a Chinese bank
claims are owned by a fugitive who defaulted on a $10 million loan.

The defendant, Shibiao Yan, owns three multimillion-dollar properties in a Vancouver suburb and lives in a $3-million Vancouver home owned by his wife, according to court documents, the Globe and Mail reports.

China has been in the midst of a major corruption crackdown and has stepped up efforts to find fugitives it says are hiding stolen assets abroad. In which case it will have lots of fruitful leads in Vancouver where virtually all real-estate purchases over the past year by Chinese "figutivies." The lawsuit comes amid a debate about the role foreign money, particularly from China, has played in Vancouver’s property boom.

“The person involved left China with a large debt owed,” said Christine Duhaime, a lawyer who represents China CITIC Bank in the case, adding that she was not aware of any criminal charges against the man. Yan has not yet filed a response to the lawsuit and the claims have not been proven in court. We doubt he will appear.

Duhaime  would not comment on the proceedings, but tweeted that the case was of "global significance for China". The reason is clear: it sets a precedent for many future such lawsuits, and confiscations.

As CBC adds, last week, Justice Gregory Bowden issued a temporary Mareva injunction against Yan, freezing his assets as the bank tries to make good on an arbitration ruling it claims to have obtained in March, ordering Yan to pay RMB 50 million plus RMB 2 million interest. According to the court documents, Yan incorporated a company in B.C. called TYMY Investments in March 2014, and his 36-year-old wife paid $2.5 million for a house in Vancouver a month later.

China has been working with Canada for years to finalize a deal on the return of ill-gotten assets seized from those suspected of economic crimes. The agreement was originally announced in July 2013 and has not yet been ratified.

But, as G&M notes, it is rare for Chinese banks to use Canadian courts to pursue those who have left the country. Chinese Foreign Ministry spokesman Hong Lei said the bank was protecting its rights in accordance with the law.

“This is a normal thing to do internationally,” Hong told reporters in Beijing.

According to the lawsuit, China CITIC Bank is seeking repayment for a line of credit worth 50 million yuan, or roughly $7.5-million, taken out by a Chinese lumber company and personally guaranteed by Yan, who was the company’s majority shareholder at the time.

Just like this website, Vancouver residents have questioned the legitimacy of foreign funds invested in the city’s real estate market and have urged authorities to do more to scrutinize their origin.

So far Vancouver authorities have done a terrible job of responding to these requests, and as a result housing prices in the west coast city have jumped 30 per cent in the last year, in the process pricing out virtually all local buyers, especially since in recent weeks local banks have clamped down on the issuance of mortgages for the luxury sectory, well aware that the bubble is about to burst.

And since Canada would do nothing to hinder the parking of hot Chinese money locally, China decided to take matters into its own hands. If successful, and it will be as we doubt Mr. Yan will dare to appear in court resulting in a prompt confiscation of his assets, the action will have a chilling effect on all future purchases, and will most likely lead to a selling avalanche as the Chinese elite in Vancouver scramble to offload its domestic assets and find a new safe haven where it can park its money for the next few years.

In other words, with CITIC's lawsuit, the beginning of the end of Vancouver's housing bubble has officially begun.

Clinton's Plan For Millennials: Loan Forgiveness

If Bernie Sanders and his supporters are still waiting to see whether or not Hillary Clinton is willing to move far enough left on some issues, the release of Clinton's Tech & Innovation Agenda yesterday should make everyone a little bit less concerned.

According to the Clinton campaign website, Hillary's Tech & Innovation Agenda has five key parts, much of which Clinton has touched on in the past. However as Wired reports, there are a few new proposals as well, including deferring student loans interest free and loan forgiveness in general.

From Wired

The presumptive Democratic nominee has touched on tech issues in an ad hoc way before, urging Silicon Valley to help fight radicalization online and calling for greater protection for on-demand workers. This is the first time, however, that Clinton—or any presidential candidate for that matter—is synthesizing these ideas into a comprehensive platform.


Though many pieces of the agenda are policy prescriptions Clinton has announced in the past, including a plan to bring broadband access to every American home by 2020, the tech platform includes newer proposals as well. Her plan would, for instance, allow would-be entrepreneurs to defer their student loans interest free for up to three years as they launch their businesses. Business owners who locate in “distressed communities” or start a social enterprise also could ask the government to forgive as much as $17,500 in loans after five years in business.


The goal of this part of the plan is to encourage millennials to start businesses. Entrepreneurship among young Americans has fallen drastically, and student debt is often cited as one of the greatest obstacles to starting up.


The tech agenda also affirms Clinton’s commitment to net neutrality; her desire to make the United States Digital Service, a tech team that modernizes government processes, a permanent part of the executive branch; her plan to train 50,000 computer science teachers over the next decade; and her interest in ensuring tech companies can recruit top talent from anywhere in the world. According to the platform, Clinton “would ‘staple’ a green card to STEM masters and PhDs from accredited institutions.”


Silicon Valley will probably be most interested, however, in Clinton’s policies regarding privacy and encryption, both topics that have intersected with the country’s national security interests in the wake of the shooting in San Bernardino, California. But the newly released agenda may not satisfy. Though Clinton’s plan notes the importance of tech companies and law enforcement working together to preserve “individual privacy and security?,” it offers little in the way of specifics or new information. Clinton has repeatedly called for collaboration between Silicon Valley and the government to win the war against terrorists both online and off, but it’s never clear just how she’d convince a reluctant tech community to cooperate.

Here is the wording from the Factsheet

Defer Student Loans to Help Young Entrepreneurs:


A smaller proportion of millennials today are starting new ventures as compared to their predecessors. This is not for a lack of desire—more than half of America’s millennials say they want to start a business—but barriers like student debt and a lack of access to credit are holding young people back. Hillary is committed to breaking down barriers and leveling the playing field for entrepreneurs and innovators who are launching their own start-ups. Hillary will allow entrepreneurs to put their federal student loans into a special status while they get their new ventures off the ground.  For millions of young Americans, this would mean deferment from having to make any payments on their student loans for up to three years—zero interest and zero principal—as they work through the critical start-up phase of new enterprises. Hillary will explore a similar deferment incentive not just to founders of enterprises, but to early joiners – such as the first 10 or 20 employees.   Additionally, for young innovators who decide to launch either new businesses that operate in distressed communities, or social enterprises that provide measurable social impact and benefit, she will offer forgiveness of up to $17,500 of their student loans after five years.

* * *

So there we have it, Hillary Clinton will pull millennials out of from the basement of their parents house and into the world of business simply by allowing loan deferments that don't accumulate interest. For those that can somehow survive a new business in a stressed community for five years, the government will forgive those loans as well.

Just as long as nobody ever addresses the core issues that are driving millennials into debt with no real opportunity to repay that debt to begin with, the status quo will continue to survive, and the politicians will all be left scratching their head as to why these programs just aren't working. Once again, the Federal Reserve and its monetary polices are left intact, and the politicians won't ever be forced to make any real fiscal reforms - that would just be too difficult.

The Accusations Begin: David Cameron Blames Brexit On Merkel And EU "Immigration Failure"

The Brexit vote is history, and so is David Cameron's reign as Britain's prime minister whose gamble to allow an EU referendum backfired spectacularly. And today, in what Bloomberg earlier dubbed his "last summer" Cameron had the unpleasant task of telling his Eurocrat peers during what is hist last Brussels summit why he failed. Only he didn't and instead, as the FT writes, Cameron flipped the tables and told European leaders he lost the EU referendum because they failed to address public concerns over immigration, as tensions rose ahead of looming Brexit negotiations.

The British prime minister said at his final summit in Brussels on Tuesday that fears of mass immigration were “a driving factor” behind the vote and free movement would have to be addressed in Brexit talks. While he did not call her out by name, Cameron was effectively blaming Angela Merkel, whose overly accepting immigration policy in 2015 unleashed a historic refugee wave which ultimately ended up being the deciding factor behind the referendum outcome.

As the FT writes, Angela Merkel, the German chancellor, and other leaders "blocked British demands before the referendum for an “emergency brake” on migrant numbers and the idea remains anathema to many member states.  Cameron, who announced his ­resignation after last week’s referendum, said that he wanted Britain and the EU to retain “as close an economic relationship as possible”. But, at an emotional dinner, he warned that the UK could not continue to accept large numbers of EU migrants, even if that meant losing access to the single market."

His remarks underscored the hard task facing both sides in reaching a new accord. Addressing the German Bundestag before the Brussels summit, Ms Merkel warned the UK that there would be no “cherry picking” in its Brexit negotiations. European Commission president Jean-Claude Juncker underscored this when he said that he wants the article 50 “letter to be sent as soon as possible." Giving the UK instructions on how to proceed, Juncker said during a press conference that "if someone from the Remain camp will become British prime minister, this has to be done in two weeks after his appointment. If the next British PM is coming from the Leave campaign, it should be done the day after his appointment."

Juncker urged the UK “swiftly” to clarify its position regarding its plans to break from the EU, warning that the bloc could not be “embroiled in lasting uncertainty”. He also hit back at criticism of him in some parts of the British press, claiming he was not a “faceless bureaucrat” and “would like to be respected”.

More importantly, Cameron's resignation - not literal but figurative - suggests that any hope the Remain camp may have had for a redo of the referendum has been extinguished.

It wasn't just Cameron: even before the session began there had been signs of renewed hostility towards Downing Street. After a heated debate, which at one point degenerated into catcalls and boos for Nigel Farage, the UK Independence party leader, the European Parliament voted for a resolution calling on Britain to begin divorce proceedings immediately.

Some of Mr Cameron’s fellow EU leaders made similar testy remarks. “Married or divorced, but not something in between,” said Xavier Bettel, the Luxembourg prime minister. “We are not on Facebook, with ‘It’s complicated’ as a status.”

As explained over the weekend, the pace and nature of Britain’s exit from the EU together with the triggering of Article 50, have become the most contentious issues in both London and Brussels since last week’s vote. Most of the leaders of the UK’s Leave campaign, who are likely to form the core of a new British government, have said they want to begin Brexit negotiations before invoking Article 50 of the EU treaties, which would formally trigger two-year exit proceedings.

Merkel made it clear that she and other EU leaders have refused to engage in negotiations until Article 50 is invoked, setting up the first of what could be years of difficulties facing Cameron’s successor. Mark Rutte, the Dutch premier and formerly one of Mr Cameron’s closest allies, argued for Britain to be granted “some space”. But he was unforgiving in his reasons why, saying: “England has collapsed politically, monetarily, constitutionally and economically." Which, incidentally, is what Brussels calls a victory for Democracy.

Manuel Valls, the French prime minister, said it was not for Britain to dictate the pace of talks. “It’s not up to the British Conservative party to set the agenda,” he told the National Assembly in Paris.

What happens next?

On Wednesday, Mr Cameron will be asked to leave the summit while the remaining 27 members hold informal talks on how to approach Brexit negotiations and how to stop them from stretching out over many years.

Addressing the German Bundestag before the Brussels summit, Ms Merkel warned the UK that there would be no “cherry picking” in its Brexit negotiations, her toughest response yet to the Leave campaign’s hopes of securing access to the EU’s internal market while limiting freedom of movement.


She spelt out that the EU’s internal freedoms were indivisible: if Britain, like Norway, wanted access to the internal market then, like Norway, it would have to accept freedom of movement, she said.

Which goes back to the original point Cameron made, namely that it is Merkel's stickiness on freedom of movement that led to the victory of the Leave camp.

The winner today, however, was Nigel Farage, who stole the limelight when he was booed after he called on the EU to take a “grown-up and sensible” attitude to negotiations with the UK. He claimed the result would offer a “beacon of hope” to “democrats” across Europe and threatened that  “the UK will not be the last member state to leave the European Union.

As we showed earlier, Farage concluded: “When I came here 17 years ago and said I wanted to lead a campaign to get Britain to leave the European Union, you all laughed at me. Well, I have to say, you’re not laughing now, are you?”


Farage's moment in the spotlight aside and Cameron's apparent concession on the possibility of a second referendum, the reality is that while all EU leaders would be delighted to see Britain reverse course and choose to stay, most would be loath to offer any concessions for fear that succumbing to blackmail would encourage others.

Cited by the FT,  a senior adviser to one the eurozone’s most powerful leaders said that "this is a matter of survival for us. We cannot allow these tactics to succeed.

Countries such as France and the Netherlands that were once sympathetic to Britain’s plea for curbs on free movement of workers would now be some of the most opposed to further concessions.

As the FT adds, yielding to British pressure would be a gift to anti-EU politicians that the French and Dutch leaders are trying to defeat in elections early next year. Eastern European leaders, meanwhile, appear as implacably opposed to overturning cherished free movement rights.

Then again, as we reported last night, it is now too late, and most likely by design: sensing the Brexit crisis "opportunity", Italy is already planning how to bend Eurozone rules against the use of public funds for bank bailouts, and is strategizing how to funnel €40 billion of European cash into its insolvent banking system. Should Europe reject Italy's overture? Then Italy's PM Renzi will simply threaten with his own referendum, which considering the recent shocking wins by the Euroskeptic 5 Stars Movement in the Rome and Torino mayoral election, will be all he needs to say to get his way.

Or rather not his way, but the way of the person who is quietly covering up all his tracks: after all why are Italy's banks insolvent? Well, who was governor of the Bank of Italy from 2005 to 2011 when he blessed all of the hundreds of billions of now non-performing loans? Why former Goldman Sachs employee and current head of the ECB, Mario Draghi of course, who just may end up the biggest winner from the Brexit crisis. Because as everyone knows, one should never leave a crisis go to waste.

"Brexit Sends A Clear Message To Sick Political Elite" Marc Faber Sees "Only Good Contagion"

"We're moving into a global recession that has nothing to do with Brexit," warns Marc Faber stressing that Britain leaving the EU would not be disastrous, saying that if Switzerland can operate in a "single" market and outside of the EU so can Britain.

 "Brexit is a victory of ordinary people, common sense and people who are prepared to take responsibility for the sake of freedom against a political and financial elite that only cares if stocks go up or down and does not care about the interests of the average British citizen."


"We can only hope that more countries will opt out of the failed EU monster. I see only a good contagion."


When asked why the markets and polls got it so wrong, the editor of the Gloom, Boom & Doom Report, told CNBC, "They were conducted or paid by the elite."

As CNBC further noted, Faber agreed with presumptive Republican presidential nominee Donald Trump that a Brexit is a benefit to his campaign. He said the U.S. could also see a revolt against the political establishment with the election of Trump to the presidency,

"It is already well underway. Brexit is a huge boon for Trump and a wake-up call to Hillary that ordinary people are sick and tired of being lied to and cheated by the crony capitalistic system."

Finally, as FOX Business reports, the Swiss investor compared the current situation between the U.K. and the EU to Switzerland’s historic fight for its own freedom...

Watch the latest video at

“In the 13th century we fought the Habsburg Empire to be free and not to have foreign justice and foreign laws and not to pay taxes to foreign overlords,” he explained.


“This is precisely what the EU does with all the countries. They want to impose courts of justice, taxes, regulations, new laws and most of which inhibit economic growth. This is a victory for freedom and for people, the Brits.”

Finally, Faber also said, confirming our earlier persepctive, that the Brexit will be the “perfect excuse” for global central banks to “coordinate the monetary policies to print even more money.”

Bonds Ain't Buying It

Don't hold your breath on today's face-ripping rally...


Obamacare Accounted For 58% Of US "Growth" In The First Quarter

Remember when the Supreme Court decided that Obamcare is legal but it's a tax? Well, the nuances were irrelevant, but when it comes to the Bureau of Economic Analysis they could not have been greater: by effectively counting a tax as part of US economic growth, Obama, the Supreme Court and the US government's beancounters assured themselves of a steady stream of "economic growth" for quarters to come, and sure enough, Q1 was no different.

As regular readers know, when it comes to the one constant source of US economic growth, nothing is more reliable than Healthcare, which is merely another name for how Obamacare figured in the bean-count reports. And, we are confident, it will come as no surprise that in Q1, when real GDP grew by $44 billion in real terms, or 1.1% annualized, from $16.471 trillion to $16.515 trillion, Healthcare was responsible for $26 billion (rising from $1,896 billion to $1,929 billion annualized) or a whopping 58.4% of the total.

This was revised strongly upward from the last number, which had Healthcare rising by $15 billion less, to "only" $1,907 billion.

Putting this number in context, the Q1 increase was the third biggest quarterly increase on record, the second largest in the past decade, and as the chart below shows the surge unexpectedly comes at a curious time, just as the quarterly increases in healthcare spending were supposedly trending lower.

Case-Shiller Home Prices Rise At Slowest Pace In 8 Months As San Francisco Sales Slump

April was not a good month for home prices - despite hopeful signs from seasonally adjusted sales data. S&P Case-Shiller 20-City index rose just 0.45% MoM (well below expectations and March's 0.85% gain) - the weakest rise since Aug 2015. The broader Home Price Index hovered near unchanged for the 2nd month - the weakest since January 2012. Most worrisome, perhaps, is the 18.16% YoY plunge in San Francisco home sales... as perhaps the bubble is finally bursting.

20-City (Seasonally Adjusted) Index...


Broad (Seasonally-Adjusted) Home Price Index...

About That Historic Collapse In Sterling: It Was "Only" The 9th Biggest Drop Going Back To 1862

Over the past several days, the financial media has been preoccupied with the fascinating - and historic - drop in sterling which as this site also noted, was the biggest in history. As it turns out, that is not the case, as the data was limited by the available records on file with major service providers such as Bloomberg and Reuters. However, if one goes back in time, as DB's Jim Reid has done, it appears that Friday's sterling move was rather puny by true historical comparisons.

As Reid writes, "I'm sure you've read by now that Sterling's drop on Friday (-7.64% based on GFD data) was the largest on record against the dollar. Think again. Although it's the biggest drop since the collapse of the Bretton Woods system in the early 1970s there have been 8 bigger daily down moves since 1862.

The bigger moves (with brief reasons for those within the last century) are 1) 19 Sep 1949: (-30.41%) Pound devalued under Bretton Woods due to economic concerns; 2) 21 Sep 1931: (-23.57%) Gold Standard abandoned in the Depression; 3) 30 Sep 1869: (-18.75%); 4) 20 Nov 1967: (-13.02%) Harold Wilson's famous 'pound in your pocket' devaluation to battle the UK's economic problems; 5) 25 Mar 1863: (-10.90%); 6) 10 May 1940: (-9.79%) War related deviation from the dollar peg; 7) 25 Sep 1931: (-7.89%) A few days after the Gold Standard was abandoned, the pound continued to depreciate although it did jump by 7.14% next day. 8) 19 June 1866: (-7.76%).

So in the >38,000 business days since 1862, Friday was only the 9th worse day for Sterling. So maybe it's not all that bad...

Final Q1 GDP Rises 1.1% Despite Worst Personal Consumption In Two Years

And so the final, and largely irrelevant, estimate of Q1 GDP is in the history books. Moments ago the BEA reported that in the first quarter GDP rose a tepid 1.1%, higher than the first and second estimates of 0.5% and 0.8%, respecitvely, and also higher than consensus estimates of 1.0%.

So far so good. The only problem is that the all important personal consumption expenditures component of GDP rose a modest 2.0% annualized, missing expectations of a 2.1% print, a 1.5% sequential increase, and a contribution of just 1.02% to the bottom line GDP. This was the worst showing by the US consumer since Q1 of 2014 and confirms that the spending power of the US consumer which accounts for 70% of GDP, is getting increasingly worse.


So where were did the positive changes come from? Virtually all other components:

  • Fixed Investment was found to have subtracted only -0.06% from Q1 GDP, better than the -0.25% in the previous estimate
  • Private Inventories were largely unchanged at -0.23%
  • Exports were surprisingly revised higher from a negative 0.25% to contribution of 0.04%, which meant that net trade instead of subtracting 0.2% from the bottom line GDP print actually added 0.1%. It is curious how the US had a favorable trade balance at a time when global trade is contracting at the fastest pace since the financial crisis.
  • Government consumption was also largely unchanged at 0.23%.

The full breakdown is below.

More details from the report:

The deceleration in real GDP in the first quarter primarily reflected a deceleration in PCE, a larger decrease in nonresidential fixed investment, and a downturn in federal government spending that were partly offset by upturns in state and local government spending and exports and an acceleration in residential fixed investment.


Real gross domestic income (GDI), which measures the value of the production of goods and services in the United States as the costs incurred and the incomes earned in production, increased 2.9 percent in the first quarter, compared with an increase of 1.9 percent in the fourth. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.0 percent in the first quarter, compared with an increase of 1.7 percent in the fourth.


Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 0.9 percent in the first quarter, compared with an increase of 1.5 percent in the fourth.


The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.2 percent in the first quarter, compared with an increase of 0.4 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent, compared with an increase of 1.0 percent.

Will this change the market's take on what the Fed will do over the next few months, where odds of a rate hike are now 0% compared to rate cut odds of over 10%? Not at all.

Greenspan Warns “Early Days Of A Crisis,” Inflation Coming and Urges Return To Gold Standard

Alan Greenspan, the former Chairman of the Federal Reserve has warned that Brexit was a “terrible outcome in all respects” and that we are in the “early days of a crisis.” U.K. policy makers miscalculated and made a “terrible mistake” in holding a referendum on whether to quit the European Union, Greenspan said.

That decision led to a “terrible outcome in all respects,” Greenspan, said in an interview with Bloomberg Surveillance yesterday in Washington.

“It didn’t have to happen,” Greenspan said. He warned that it is now likely that Scotland, whose majority of voters wanted to stay in the EU, will have another referendum on its own independence. He predicted such a vote would be successful, and Northern Ireland would “probably” go the same way.

He also warned about the massive entitlements and unfunded liabilities in the U.S. and western world. The U.S. national debt is heading rapidly towards $19 trillion but the U.S. also has unfunded liabilities estimated to be between $100 trillion and $200 trillion.

“The issue is essentially that entitlements are legal issues. They have nothing to do with economics. You reach a certain age or you are ill or something of that nature and you are entitled to certain expenditures out of the budget without any reference to how it’s going to be funded. Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate. That annual growth rate of two percent is not adequate to finance the existing needs.”

“I don’t know how it’s going to resolve, but there’s going to be a crisis.”

He warns that the crisis will likely lead to inflation:

“I know if you look at human history, there are times and times again where we thought that there was no inflation and everything was just going fine. And I just basically say, wait. This is not the way this thing ordinarily comes up. I don’t know. I cannot say I see it on the horizon. In fact, commodity prices are soggy. The oil prices has had a terrific impact on global inflation. It’s not about to emerge quickly, but I would not be surprised to see the next unexpected move to be on the inflation side. You don’t have inflation now. And you don’t have it until it happens.”

Gold in GBP – 1 Year

Finally, Greenspan advocates a return to the gold standard as a way to create financial, economic and monetary stability:

“If we went back on the gold standard and we adhered to the actual structure of the gold standard as it exited prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the United States, and that was a golden period of the gold standard. I’m known as a gold bug and everyone laughs at me, but why do central banks own gold now?”

Gold Prices (LBMA AM)
28 June: USD 1,312.00, EUR 1,185.79 & GBP 985.84 per ounce
27 June: USD 1,324.60, EUR 1,200.49 & GBP 996.36 per ounce
24 June: USD 1,313.85, EUR 1,181.28 & GBP 945.58 per ounce
23 June: USD 1,265.75, EUR 1,112.22 & GBP 850.96 per ounce
22 June: USD 1,265.00, EUR 1,122.31 & GBP 862.98 per ounce
21 June: USD 1,280.80, EUR 1,129.67 & GBP 866.72 per ounce
20 June: USD 1,283.25, EUR 1,132.08 & GBP 877.49 per ounce

Silver Prices (LBMA)
28 June: USD 17.57, EUR 15.84 & GBP 13.17 per ounce
27 June: USD 17.70, EUR 16.06 & GBP 13.40 per ounce
24 June: USD 18.04, EUR 16.32 & GBP 13.18 per ounce
23 June: USD 17.29, EUR 15.16 & GBP 11.61 per ounce
22 June: USD 17.20, EUR 15.23 & GBP 11.72 per ounce
21 June: USD 17.36, EUR 15.34 & GBP 11.78 per ounce
20 June: USD 17.34, EUR 15.30 & GBP 11.85 per ounce

Gold News and Commentary
Gold rose yesterday to €1,205/oz, Climbed 10% in 2 trading days (Irish Examiner)
UK stripped of final ‘AAA’ rating and FTSE 350 surrenders £140bn in Brexit aftermath (Telegraph)
Gold holds steady as global stocks weaken after Brexit vote (Reuters)
Retail gold buyers take profits in bullion after Brexit price surge (Reuters)
Gold Holdings in Biggest One-Day Surge Since ‘12 on Brexit Vote (Bloomberg)

Greenspan Warns A Crisis Is Imminent, Urges A Return To The Gold Standard (Zero Hedge)
Greenspan Calls Brexit a ‘Terrible Outcome’ (Bloomberg Video)
Gold Continues To Shine (FX Street)
Onward Toward Bullion Bank Collapse (Gold Seek)
Gold Veteran Says Brexit May Be Start of ‘Major Bull Market’ (Bloomberg Video)
Read More Here

Brexit Is What Happens When The Pie Is Shrinking

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

This process of withdrawal into the relative safety of internally cohesive groups and group identities is intrinsically messy in globalized, multicultural societies.

A great many narratives are drifting around the Brexit pool: a return to sovereignty, class war, "controlled demolition," nothing-but-another-political-Kabuki- spectacle, end of the European Union, etc.

I think it boils down to something much simpler: the pie is shrinking, and the illusion that it's about to start growing has been shattered. For many communities in the developed world, the pie started shrinking in the 1970s, and has been shrinking (despite the narrative of "45 years of strong growth") since then.

Labor's share of the GDP has been declining for 45 years. Occasional blips higher during debt-fueled bubbles quickly fade when the bubble du jour pops, and the decline of labor's share of the economy resumes its trendline decline.

Since 2008, the only group who feels the pie is growing is the class that has benefited from the unparalleled expansion of debt and leverage, financialization, globalization and central planning--roughly 20% of the work force, with the top 5% gathering most of the gains in income and wealth, and the top .1% gathering most of the increase in wealth. (See chart below)

For seven long years, the citizenry has been told the economy is expanding and therefore they're "doing better." But this narrative is not supported by their actual lived experience. Inflation is woefully under-reported by official statistics, and the rosy "rising employment" narrative is based largely on part-time jobs in hospitality and food services (bartenders, waiters, etc.) that are highly contingent on the spending of the top 10%.

While supporters of the status quo are quick to deride supporters of Brexit, the cold reality is the economic pie is shrinking, and Brexit is a direct result of that reality.

A shrinking economic pie generates widespread insecurity that pressures every status quo arrangement as people circle the wagons in an attempt to protect their remaining slice of the pie from others' claims for a larger piece of the dwindling pie.

The general media line is that the Brexit vote arose out of anger with the status quo's inequalities and asymmetries of wealth and power. While this is largely self-evident, it isn't the most fundamental dynamic at work. I see Brexit as a reflection of our naturally-selected defensive response to insecurity and instability: circle the wagons.

By circle the wagons, I mean our tendency to withdraw into an internally cohesive group with defined membership and boundaries.

The largest such political group is the nation-state, and so it is natural for people with strong national identities to circle the wagons around their national identity.

We can also expect people to circle the wagons around ethnic, religious, localized and economic-social class identities. (Some people might feel more kinship with other fans of Manchester United than they do with any religion, ethnicity or state.)

As people identify themselves as members of the class that has not benefited from neoliberal/globalized crony capitalism, the ruling Elites become the "other," i.e. "foreigners" with whom we have little contact, people who "aren't like us"-- in effect, an "enemy class" that is inherently opposed to our self-interests.

This process of withdrawal into the relative safety of internally cohesive groups and group identities is intrinsically messy in globalized, multicultural societies. No wonder populations are dividing into camps of increasingly angry people with little interest in compromise. Our instinct is to seek clear delineations of "us" and "them" and to seek the relative comfort of "us," which in a multicultural nation, can contain quite a mixed bag of people who nonetheless feel a shared identity.

Much to the chagrin of political parties whose success is based solely on "identity politics," the emerging group identities are not conforming to the political classes' conventional fault lines. "Us" for many people includes everyone who isn't a protected insider of the status quo, and "the enemy" is any protected insider of the status quo.

That includes virtually the entire political class, the entire class of state nomenklatura/technocrats, the entire banking sector and the wealthy class that's benefited so handsomely from the globalized, debt-leverage bubbles and state / central bank support that characterize this era of neoliberal/globalized crony capitalism.

Nothing to see here--move along, folks--you're better off than ever before.

How They Hedged Brexit: Soros Was Short Deutsche Bank, Druckenmiller Was Long Gold

As we reported yesterday, one of the bigger losers from the Brexit referendum was none other than Soros, who as it turned out had put his money where his "doom and gloomy" Guardian Op-Ed was and as a spokesman said, Soros was long the pound before Britain’s vote to leave the European Union on Friday, and didn’t “speculate against sterling while he was arguing for Britain to remain.” 

Soros wasn't the only one long sterling. According to internal UBS flow data, the pound saw the strongest normalized net inflows in G-10 in the lead up to the U.K. referendum on EU membership, recording the second-strongest week of net buying in over a year and a half suggesting hedge funds bought the pound aggressively before the vote. Curiously, as UBS also notes, despite buying GBP at the highest level since 2008, outflows from the pound recorded on the Friday after the referendum outcome were only marginal despite a 17-big- figure sell off in morning trading.

But back to recently bearish Soros, who many were surprised to see have an unhedged position going into such a major event. Well, as it turns out Soros was hedged after all.

As Bloomberg reports, Soros Fund Management took a short position in Deutsche Bank AG of about 7 million shares, or a total notional of about $100 million, as turmoil from the U.K.’s decision to leave the European Union sent bank stocks lower. The position taken on Friday was equivalent to 0.51 percent of Deutsche Bank’s share capital, according to a German filing published on Monday. The document doesn’t show at which price the fund took the position.

Deutsche Bank shares fell 16% at the open on Friday and closed down 14 percent at 13.37 euros. Their highest price that day was 13.95 euros. At that level, a 0.51 percent stake would be worth about 98 million euros ($108 million). After extending losses on Monday, the shares were trading 4.5 percent higher at 10 a.m. Tuesday in Frankfurt.

In other words, Soros' Op-Ed which was subtitled "The Brexit crash will make all of you poorer – be warned", should have added that "it will also make me richer via my Deutsche Bank short."

Soros was not the only one who hedged. As Reuters reported overnight, Stanley Druckenmiller's Duquesne Family Office LLC was long gold futures ahead of last week's vote in Britain to leave the European Union, a source familiar with the matter said on Monday.

Gold soared on Friday in its best day since 2009, hitting two-year highs as uncertainty after Britain's vote to leave the European Union pushed investors to sell equities and seek safer assets. The size of the trade was not known.

In short: while Brexit's so-called "disastrous" impact on millions of common people has yet to be observed , a process which will take years, the billionaires once again won.

Previewing Today's Main Event: David Cameron Arrives In Brussels

For the first time since triggering a political earthquake that’s shaken Europe's foundations with his now massively backfired decision to hold a EU membership referendum in 2015, a decision which won him the parliamentary election battle but lost him, and Europe, the war, UK Prime Minister David Cameron is set to face his fellow - and very angry - European Union leaders at what may be Cameron's last summit (or supper as Bloomberg puts it) in Brussels, even as back in London, the race to succeed him is heating up.

Cameron arriving at the EU summit in the next half hour or so.....

— Laura Kuenssberg (@bbclaurak) June 28, 2016

As BBC puts it, David Cameron wanted to arrive in Brussels triumphant... instead he is coming as a disgraced failure.

"Cameron wanted to come back here today as the man who'd kept the UK in the EU, who'd settled the question that has plagued the UK for decades. And instead, he has to look round the table and say, "I've just taken the UK out, with all the consequences that brings". But of course, these are European leaders, it's not going to descend into any kind of bickering. I think they'll all be trying to say, "How do we move forward from here?""

As Bloomberg eloquently adds, Cameron will endure an awkward dinner with his EU cohorts Tuesday after his effort to calm the U.K.’s divided public and soothe investors failed to stop the pound and the country’s biggest banks from getting clobbered. The premier has already announced he will quit after last week’s vote, leaving him little leverage at the table.

His government has signaled it prefers a gradual exit from the EU while the region’s three largest economies are keen to set a timetable to contain the economic damage. Which is contrary to his earlier claims (made when he was confident of Remain winning) that the Article 50 process would be triggered immediately after a Leave vote.

“We don’t know how long he is going to be prime minister for, when a new government could begin to negotiate terms,” said Mark Leonard, director of the European Council on Foreign Relations. “The rest of the EU feel they bent over backwards to accommodate Cameron over the last months and he launched this reckless referendum and lost it so the other EU states are in no mood to do him any favors.”

In Brussels, Cameron will be pressed to give some indication on how he expects the U.K. to trigger Article 50 of the Lisbon Treaty - the mechanism for leaving the EU - and what he thinks Britain’s relationship with the bloc will look like after the divorce, according to diplomats in Brussels.

But the outgoing prime minister has said those details would be up to his successor to hash out, a strategy which Merkel has endorsed in hopes that as the fallout over the Brexit decision settles the UK may collectively change its mind about its depature. 

“He’s likely to talk about a number of factors that he thinks were issues in the campaign, and in the debate,” said Helen Bower, Cameron’s spokeswoman. “He will reiterate that Article 50 is a matter for the next prime minister.”

The EU gathering unfurls against a backdrop of market turmoil, with shares in Barclays Plc and Royal Bank of Scotland Group Plc crashing to their lowest level since the financial crisis. Reeling from the referendum outcome, EU leaders are split on how hard to come down on the U.K. In the meantime, Britons have lost any influence they had in the 28-nation bloc while remaining bound by its rules and membership fees for at least two years.

Another point of confusion: who will the UK be negotiating with next:

For now, the U.K. is stuck in a political impasse. Cameron’s Conservative Party said Monday a new leader should be in place by Sept. 2. Some in the EU are holding out hope that if the U.K. waits a long time to activate the exit trigger, the decision to leave might even be reversed, one European diplomat said.


A YouGov poll of Conservative voters for the Times gave Home Secretary Theresa May 31 percent support compared with 24 percent for former London Mayor Boris Johnson, a leading backer of the leave vote.


Chancellor of the Exchequer George Osborne, who was criticized by the pro-Brexit camp for scaremongering over the economy, will not be a candidate. The onetime favorite to succeed Cameron wrote in the Times that "I am not the person to provide the unity my party needs."

Meanwhile, after digesting the shocking news, the EU has calibrated its response to a U.K. departure. The knee-jerk reaction of some had been that the U.K. should trigger Article 50 as early as this week. German Chancellor Angela Merkel is among those calling for a more thoughtful approach, with two EU diplomats saying the alliance could potentially wait until the end of the year.

“We can’t afford an extended waiting game because that would be bad for the economy of both sides of the EU -- the 27 members and Britain,” Merkel said. “But I have a certain level of understanding if Britain takes some time to analyze things first.”

Merkel said the U.K. would need to give its official declaration to exit the bloc before formal negotiations on the terms of its future relationship can begin. In a joint statement with her French and Italian counterparts, she urged the EU summit to “set in motion a process based on a concrete timetable and precise commitments.” Speaking from London, U.S. Secretary of State John Kerry called on EU leaders not to take revenge on Britain and to handle the transition with care.

“While there is some uncertainty in the air, leaders have the ability and responsibility to restore certainty, to make wise choices in the days ahead and that means choices that are, in every way possible, not aimed at retribution, not aimed at anger, but ways that bring people together,” he said.

In short: anyone hoping for a resolution from today's summit will be disappointed. If anything, prepare for a long, hard slog with elevated volatility, as the market twists and turns on every unexpected political development out of the UK, and any hint that the democratic referendum wave started in Britain has spread to the continent.

This Is What Draghi Said To Spark Speculation Of Another Global Central Bank Bailout

Both Janet Yellen and Mark Carney may have previously announced they would withdraw from the ECB's Forum in Sintra, Portugal (due to pressing market stabilization issues), but it was what Mario Draghi said here that has captured the market's attention this morning. The head of the ECB avoided mentioning the U.K.’s vote to leave the European Union but instead called for greater alignment of policies globally to mitigate the spillover risks from ultra-loose monetary measures

“We can benefit from alignment of policies,” Draghi said at the ECB Forum in Sintra, Portugal. “What I mean by alignment is a shared diagnosis of the root causes of the challenges that affect us all; and a shared commitment to found our domestic policies on that diagnosis."

Global economy can benefit from policy alignment, Mario Draghi says

— Bloomberg TV (@BloombergTV) June 28, 2016

Most didn't read between the lines, and assumed that "alignment of policies" was simple code for the ECB demanding another global intervention. It immediately led to statement such as the following by John Plassard, a senior equity-sales trader in Geneva at Mirabaud Securities who told Bloomberg that “stocks are rebounding on the expectation that there will be a coordinated intervention by central banks. What central banks can do is put confidence back in the market by telling everyone that they are here and ready to act. If we don’t get that sort of support, we’ll see further declines."

Ironically, what Draghi may have been referring to is not so much a coordinated response, i.e., another global central bank intervention, as much as central banks sitting down to figure out how to move on from a world flooded by central bank intervention, one where overnight every single Japanese bond across the entire curve was yielding less than 0.1%, after the latest overnight rally in Japan pushed yields on the nation’s longest debt, the 40-year bond, to 0.065% on expectation of, you guessed it, more BOJ intervention.


As the BIS ranted over the weekend in its latest annual report, central banks’ extraordinary measures to boost inflation since the global financial crisis have depressed interest rates, stoking discontent among savers and drawing accusations that they have helped boost the support for populist parties. Draghi, who has often criticized euro-area governments for inadequate structural reforms, said there is a “common responsibility” to address the sources of low inflation, such as low productivity and an output gap.

As Bloomberg adds, Draghi didn’t explicitly refer to the latest shock to markets, the U.K.’s shock vote to exit the EU, after he said Monday that the best word to describe his sentiment in reaction to the British referendum probably was “sadness.”

ECB Executive Board members Benoit Coeure and Peter Praet are scheduled to chair panel discussions on Tuesday at the ECB Forum, a European equivalent of the U.S. Federal Reserve’s Jackson Hole symposium. A panel discussion between Draghi, Bank of England Governor Mark Carney and U.S. Federal Reserve Chair Janet Yellen that was planned for the final day on Wednesday has been canceled.

“We have to think not just about the composition of policies within our jurisdictions, but about the global composition that can maximize the effects of monetary policy so that our respective mandates can best be delivered without overburdening further monetary policy,” Draghi said. “This is not a preference or a choice. It is simply the new reality we face."

So did Draghi preview more intervention, or just the contrary, hint that the monetary status quo is no longer working? Expect to say the debate play out across markets today even if as futures indicate the early read is one of even more liquidity about to be injected.