BOOM as at 25th August 2018

GERMAN FOREIGN MINISTER SPEAKS OUT — OIL FLOWS FROM IRAN TO CHINA — A BOOST TO CHINA’S ECONOMY

GERMAN FOREIGN MINISTER SPEAKS OUT
During the week the Foreign Minister of Germany, Heiko Maas, wrote an article with the headline “Making plans for a new world order”.  The article was about the relationship between the US and the nations of Europe. In it, he made the following statements —

“….. we can no longer rely on Washington to the same extent.”
 
“….. where the USA crosses the line, we Europeans must form a counterweight.”
 
“It is therefore essential that we strengthen European autonomy by establishing payment channels independent of the US, a European monetary fund and an independent SWIFT [payments] system.”

These three statements reveal a deep disconnect between the government of Germany and the United States. To suggest a new payments system that can operate outside of US influence strikes right at the heart of financial control that America wields over nations via SWIFT and the global dominance of the US Dollar.  To understand what the German Foreign Minister was saying and that this was a moment of very great Geo-political significance, we need to look at the history of SWIFT.

SWIFT is a cooperative society under Belgian law owned by its member financial institutions with offices around the world. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.  It runs three data centers — in the Netherlands, Switzerland and the United States.  (Source: Wikipedia)

The majority of international interbank messages use the SWIFT network. As of 2015, SWIFT linked more than 11,000 financial institutions in more than 200 countries and territories, who were exchanging an average of over 15 million messages per day.

SWIFT transports financial messages in a highly secure way but does not hold accounts for its members and does not perform any form of clearing or settlement.
A series of articles published on 23 June 2006 in The New York Times, The Wall Street Journal, and the Los Angeles Times revealed a program, named the Terrorist Finance Tracking Program, which the US Treasury Department, Central Intelligence Agency (CIA), and other United States governmental agencies initiated after the 11 September attacks to gain access to the SWIFT transaction database.

After the publication of these articles, SWIFT quickly came under pressure for compromising the data privacy of its customers by allowing governments to gain access to sensitive personal information. In September 2006, the Belgian government declared that these SWIFT dealings with American governmental authorities were a breach of Belgian and European privacy laws.

In response, and to satisfy members’ concerns about privacy, SWIFT began a process of improving its architecture by implementing a distributed architecture with a two-zone model for storing messages.

On 26 February 2012 the Danish newspaper Berlingske reported that US authorities have sufficient control over SWIFT to seize money being transferred between two European Union (EU) countries (Denmark and Germany), since they succeeded in seizing around US$26,000 that was being transferred from a Danish businessman to a German bank. The transaction was automatically routed through the US, possibly because of the USD currency used in the transaction, which is how the United States was able to seize the funds. The money was a payment for a batch of Cuban cigars previously imported to Germany by a German supplier. As justification for the seizure, the U.S. Treasury stated that the Danish businessman had violated the United States embargo against Cuba.

The German publication, Der Spiegel, reported in September 2013 that the National Security Agency of the United States (NSA) widely monitors banking transactions via SWIFT, as well as credit card transactions. The NSA intercepted and retained data from the SWIFT network used by thousands of banks to securely send transaction information. The documents revealed that the NSA spied on SWIFT using a variety of methods, including reading “SWIFT printer traffic from numerous banks”.

SWIFT had disconnected all Iranian banks from its international network as a sanction against Iran. However, as of 2016 Iranian banks which are no longer on international sanctions lists, were reconnected to SWIFT. Even though in theory this enables movement of money from and to these Iranian banks, foreign banks remain wary of doing business with the country. Due to primary sanctions, transactions of U.S. banks with Iran, or transactions in U.S. dollars with Iran, remain prohibited.

Similarly, in August 2014 the UK planned to press the EU to block Russian use of SWIFT as a sanction due to Russian military intervention in Ukraine. However, SWIFT refused to do so. In their official statement they said, “SWIFT regrets the pressure, as well as the surrounding media speculation, both of which risk undermining the systemic character of the services that SWIFT provides its customers around the world”.

SWIFT has also rejected calls to boycott Israeli banks from its network.

Once you know all this history, you can appreciate the significance of the statements from the German Foreign Minister last week. They show clearly that Germany (at least some members of the German government) has lost patience with the US.

OIL FLOWS FROM IRAN TO CHINA

A BOOST TO CHINA’S ECONOMY

Last week, there were numerous reports about China’s determination to defy the United States by continuing its oil purchases from Iran. The US is openly trying to stop all exports from Iran in a bid to exert influence and force change upon the government of Iran (apparently that is not defined as meddling in another nation’s affairs). But China is a major importer of oil and clearly sees this as an excellent opportunity to acquire cheap oil from one of its major suppliers. There is very little that the US  can do about this.

In early July, BOOM predicted lower global oil prices and that is exactly what has happened since then. This move by the US to isolate Iran will have the effect of lowering the cost of oil to China dramatically because Iran is not in a position to charge high prices in this predicament. The Chinese can pretty much set their own price. So the Chinese economy will benefit enormously from the cheaper energy supplies and that is critical because China is very reliant upon energy imports. It is, in fact, the largest importer of crude oil on the planet.

So we now have an official global price for oil and an unofficial (black market) price for oil. The latter will be far lower than the official price and the global economy will benefit.

Energy drives economic performance because it is essential in providing almost all goods and services.  Credit demand and availability is essential for economic growth but without energy, nothing happens. Lower official and unofficial oil prices are a major boost to the global economic outlook.

In economics, things work until they don’t.


Until next week …………  Make your own conclusions, do your own research.

BOOM does not offer investment advice.

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PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 25th August 2018:

1. SWISS STOCKS — Changed to No Arrow Dominant

===================================================================

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 25th August 2018.  You can RIGHT CLICK a chart and OPEN in a New Tab.   Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/


NOTABLE PRICE PULSE CHANGES OVER THE LAST WEEK ENDED 25th August 2018:-

1. SWISS STOCKS — Changed to No Arrow Dominant

SWISS

================================================================

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# US HIGH GRADE CORP BONDS (LQD) — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# US LONG BOND PRICE (TLT) — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# AUSSIE ALL ORDS INDEX — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# US BIOTECHNOLOGY INDEX — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# US DOW STOCK INDEX — UP Arrow Dominant
# RUSSELL 2000 INDEX — UP Arrow Dominant
# US TRANSPORT INDEX — UP Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — UP Arrow Dominant
# NASDAQ COMP INDEX — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
# FRANCE STOCKS — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# TED SPREAD — DOWN Arrow Dominant
# GOLD PRICE (in Aus Dollars) — DOWN Arrow Dominant
# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# YUAN (AGAINST USD) ETF — DOWN Arrow Dominant
# HANG SENG — DOWN Arrow Dominant
# GOLD PRICE in USD —DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# SINGAPORE STOCKS — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRAZIL STOCK INDEX — DOWN Arrow Dominant
# ARGENTINA STOCKS — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# PALLADIUM PRICE — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant
# COMMODITIES INDEX (USCI) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# SWISS STOCKS — Changed to No Arrow Dominant
# TAIWAN STOCKS — NO Arrow Dominant
# DENMARK STOCKS — NO Arrow Dominant
# YEN (AGAINST $US) — NO Arrow Dominant
# JAPAN NIKKEI STOCKS — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
# TRIM TABS US FLOAT — NO Arrow Dominant
# COAL ETF (KOL) — NO Arrow Dominant
# FVL — VALUE LINE — NO Arrow Dominant
# US KBW BANK INDEX — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
# GERMAN DAX — NO Arrow Dominant

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