The Samson Option

[LuisP]

(INTERMISSION)

And suddenly …. as if ( ! ) I may be echoing someone else’s worries and not just venting here a feverish rant, The Swiss decided today to unpegg its Franc from the Euro.

Now,
It was pegged since 2011, a decision they took when they were facing a – sudden and lethal - overvaluation of their currency against the Dollar of more than 30 %. Which threatened their exports so direly that some were grounded to a complete halt.

Curiously, very curiously (ahem), the Swiss were then under tremendous pressure, exerted continuously since 2009, from the USofA to pay them several Billions in damages (no one really knows how many) suffered over “swiss banking collaboration in US citizen’s tax evasion schemes”.

In very simple terms (but not at all far from the Truth !) America had said to the Swiss – “You’ll pay and not only that, you’ll also give us the names of the Evaders AND the names of your Employees who acted on our soil and helped our citizens break our Laws …. either that, or you will come to find very hard to sell your chocolates, watches and knives, and not only here, in America”.

It was an arm wrestling, it was, for some time. Until America tired of it, and decided to move from threats to acts.
As Switzerland came to find.

By 2012, the Swiss caved in. No way could they sustain their currency at those levels, and hence the "disgusting" pegg to the Euro, and no way could they sustain America's squeeze.

They then started to pay. And, yes, they ratted too, breaking their sacrosanct banking secrecy and turning in to the Feds not just the names of their American clients (more than 3.000 officially, but I'm sure several times that number in reality), but also those of their own people who had assisted them (around 200 sacrificial expendables).

I was one of many who then applauded and envied America and its relentless efforts to punish the Swiss. Not that America was blameless, far from it, but neither were the Swiss and better one feeling the axe than none, I thought.

Today, the Swiss decided to let go of the Euro peg. And their currency – again – went sky high. It valued itself, at a point, 30 % against the Euro, and ended closing around a mere 14 % upshot in a single day.

So, what does all of this mean ?

[LuisP]

- It means that all the loans Swiss banks granted, for instance, to Russia, will now cost a lot more to repay.
- It means additional pressure has been brought upon Russia, since this 2015 year alone and according to “The Economist”, Russia’s firms must repay $100 billion-worth of foreign debt (http://www.economist.com/blogs/economis ... xplains-16), most of it in USDollars (of course) but surely some of it in Swiss Francs, which is a “refuge currency”, therefore used as a defense against the previous Euro-USD ongoing clash and by that fact used by many, Russia included, as “low risk financing” as far as currency risk goes.
- It means the Swiss have accepted reality – the USDollar is going up and will continue to increase its value, taking down the Euro in that process and its buying power.
- It means Switzerland has decided to jump ship while it can and let Europe go down alone in the currency war America is wagging on Russia, for when giants clash collateral damage is to be expected and accepted as long as it happens not on our house, but only on your neighbor’s.


- And it means that my fears just worsened, and that my windmills seem less and less like windmills.


(END OF INTERMISSION)

[re-rose]

The board is in play, Luis:

http://etfdailynews.com/2015/01/15/russ ... dollars/2/

Meanwhile, technology marches on:

http://cleantechnica.com/2015/01/14/deu ... rket-2017/

rose

[LuisP]

Yes Rose, the board is in play.
And something out from the distant but still well imprinted in Europe’s memory WWI fighting strategy comes to mind (at least, to mine) over the present context, in an eerie parallel.

I’m talking about 1916 Germany’s Army Chief of Staff Erich von Falkenhayn and his coldblooded way of waging war. He was the mastermind who orchestrated and initiated the Verdun battle, which came to be known as perhaps the greatest battle of the war.

Erich von Falkenhayn.jpg (6.68 KiB) Viewed 2697 times

Verdun raged and burned from February till December 1916 and when it ended, this single Battle had left to its slaughter credit a debris of close to 1 million casualties, of which more than 300.000 were men killed in action.

But I digress … (how horribly easy is to say that today)

Thing is,
Falkenhayn came to my mind because of the thinking process involved in his choice of Verdun. You see, this city was regarded by the French as a mythical stronghold, one which they would fight for and defend to the last.

So because of that he chose it to launch his attack, ominously saying to his Army Staff colleagues - “There, I’ll grab France by the belt and I’ll bleed it white”.

Understand,
He knew he too would shed blood in the process, and thousands of gallons of it, but was eager and willing to do it … as long as his enemy shed more than him.


You see, that’s exactly the principle behind what is called “The Samson Defense”.

[LuisP]

Since Samson's regarded as an "option of last resort" in these more civilized and blood shy times given its enormous cost to whoever adopts it, the question is

- Has The Game been played to a point of last resources from one of the players being now an option ?

[LuisP]

A cornered animal lashes out, whatever the odds. He will charge, even if to its death.

That is why intelligent hunters never corner an animal.

It will make it think of resorting to last options.

[LuisP]

It keeps going ....

Since I started to write this,
(a) Oil has continued its southwards course and now sells at or below $45 per barrel,
(b) USDollar has continued its northwards course and now trades against the Euro at levels not seen for a decade.
(c) Gold has kept a steady pace also northward.
(d) The Swiss unpegged its currency from the Euro
(e) Neither America, the Sunni/Saudis or the Russians are willing to lose market share and have therefore kept Oil production at unchanged levels.

The charts I put up previously show to enough clarity a “hidden hand” for no market behaves – normally and without interference – with these very specific correlations and trends. I might be getting neurotic, but I don’t think so.

That is why, in a nutshell and as I see it, this is a remake of what America, with the help of the Saudis, did to the Russians in 1988 and which helped (enormously) to break up the Soviet monolith.

Problem is that back then the Soviets played along, for they had no foreign reserves and clumsily sold their Gold to finance a crumbling Ruble, but today the Russians have more than 400 billion in reserves are doing the exact opposite, using the rise of the USDollar to convert some of it to Rubles and most of it to buy Gold, and buy it in huge amounts (it is estimated that a third of all the Gold bought by central banks in 2014 was bought by Russia ( http://www.ft.com/cms/s/0/13b55dd6-a7b6 ... z3QcJWsXgJ )keeping up a pace that now encompasses an astounding – and never seen ! - 15 consecutive quarter of net purchases. Some see this as a rev up towards economic war (http://www.telegraph.co.uk/finance/comm ... c-war.html) and maybe they’re right.

This problem dramatically increases in complexity and worry, when War is being waged on its main route of revenue from Gas and its prospective Oil route has been smashed to near future unrecoverable bits, laying waste to ongoing plans and stressing alliances with very nervous and trigger happy countries who themselves may be itching for a showdown.

And this problem reaches alarming proportions when we all know that Fiat Money is worthless since it has nothing to back it up but we all still maintain the illusion that it isn’t so .... until someone makes us see things for what they are. Like, for instance, steadily draining Gold from one of the Issuers or Currency Holders. And that is what some say Russia is now doing (http://investmentwatchblog.com/russia-w ... -the-west/) and then asking “What will happen to the US petrodollar after the West runs out of physical gold to pay for Russian oil, gas and uranium, as well as to pay for Chinese goods?”

In sum,

What does all of this signal … I don’t know, and it seems no one in the West does. But it IS an enormous difference in former behaviour. And only those who will not want to see, will believe it is meaningless.


So much so,
That America is now starting to feel the pressure. For Oil price has crumbled to a point that its own production (or that of its close supplier Canada) is now under grave danger of bankruptcy, for it is now much cheaper to buy a barrel of Saudi or Iraqi Oil than one of shale or sands origins !

That the Saudis too are now starting to feel the pressure, for by now some of its lesser partners are undercutting and outpricing them, and word is out that some countries (I won’t mention which, but it doesn’t take a brainic to figure out who) are making deals on $30 per barrel and even below !

So, who will keep this longer, and who will finally trump out the other ?
That’s the question.

That’s what a “Samson Defence” is about - To absorb the pain and inflict it on your enemy even if it brings you to death, but as long as the other one may die too.

Hopefully, all of this will be seen through without anyone resorting to “last resorts” for, wishfully, every one of them will know that all would lose.


But I simply fear that, this time, we might be in for a different outcome than the one seen 30 years ago, for one of the players, this time, is playing differently.

Very differently.



That’s it. And that’s a lot.

[Mikado14]

Luis,

I am reminded by you description of the "Samsom Defence" of the Greek King Pyrrhus of Epirus.

Mikado

[LuisP]

Yes, curious …. very.
David S. Cohen

The Man.png (80.83 KiB) Viewed 2690 times

In his back record, David’s curriculum shows a seven year service on a Law firm where his practice “focused on … sanctions compliance advice for a broad range of financial institutions including banks, broker-dealers, insurance companies, mutual funds and hedge funds.” (http://www.treasury.gov/about/organizat ... hen-e.aspx)
Since 2011, this man has served as the Department of Treasury’s Under Secretary for Terrorism and Financial Intelligence.
The Under Secretary for Terrorism and Financial Intelligence “is a position within the United States Department of the Treasury responsible for directing the Treasury's efforts to” among other targets, “cut the lines of financial support and enforce economic sanctions against rogue nations” (http://en.wikipedia.org/wiki/Under_Secr ... telligence)



This month, David S. Cohen was designated to be the new CIA Deputy Director. (http://groundreport.com/cohen-appointed ... t-the-cia/)

[LuisP]

Chess board pieces keep moving … threateningly. And not just, as above, in America.
I’m just keeping track.

If you ever used a bank to make money transfer to another bank, especially internationally , you will have used the SWIFT system. Or, rather, you bank did.
Trying not to get too complicated, SWIFT is an acronym for the “Society for the Worldwide Interbank Financial Telecommunication” and is, in practice, a kind of a “messaging service” privy to an estimated more than 10.000 financial institutions spread around 210 countries. Each one of those institutions have a specific and unique code that identifies it anywhere in the financial world, just like your Social Security number does in America, facilitating communication and interface. My bank, for instance, is BCOM PTPL. Bank of America in New York, for another instance, is BOFAUS3N. And so on and so forth.

Daily, millions of money transfers amounting to estimated 6 trillion dollars – per day ! - move around the globe using this system.

That said,
Last month, “pressure” was set in motion for the SWIFT organization to exclude Russian banks .
So much so that Russia’s Prime- minister Medvedev last January 27 formally announced (http://tass.ru/en/russia/773628) that “"We’ll watch developments and if such decisions are made, I want to note that our economic reaction and generally any other reaction will be without limits".

Russian Prime Minister Dmitry Medvedev

He didn’t just say that.
He also did something.
Which is dangerous.


See what, on my next post.