Under the Sign of the Double Cross

Nowadays every time I hear politicians, economic leaders and economists speak, especially Western ones, it reminds me of the following  speech. Everything sounds somehow familiar but I can’t really identify what they are talking about.

Charlie Chaplin got the essence of his time right. The thing is remarkably in tune with our own time. Herr Garbitsch and Herring have modern analogs. Can you identify them?


SNB Leaves Libor Target Rate Unchanged – Sees Higher Risk of Inflation

The Swiss National Bank (SNB) today has released its monetary assessment. SNB intends to maintain the expansionary monetary policy and sees a ‘considerable uncertainty as to future developments’ despite the recent positive economics signs.
Thus the bank holds the Libor range at 0-0.75% and aims to effectively keep it at the current 0.25%. SNB will also ‘continue to provide the economy with a generous supply of liquidity  and, if necessary, to purchase Swiss franc bonds with a view to reducing risk premia on long-term debt instruments issued by private sector borrowers’. SNB will also continue to ‘act decisively to combat any appreciation of the Swiss franc against the Euro.’

The global economic outlook, according to SNB, will show positive growth rates at the end of the year in the US and Europe. However, it also sees major risks remaining to the the global economic development.

Swiss GDP is now expected to shrink less than predicted in June, now between -1.5% and -2.0% instead of -2.5% and -3%. The return to full capacity utilisation will ‘be slower and is more uncertain overall than is usually the case at the end of a recession.’

Inflation Assessment

Fig. 1: Graph June vs September 2009 Inflation Assessment

Inflation Assessment

Fig. 2: Table June vs. September 2009 Inflation Assessment

Bank of NY Agrees to Pay Russia in Money Laundering Suit

From RIA Novosti:

MOSCOW, September 16 (RIA Novosti) – The Bank of New York will pay Russia’s customs authorities at least $14 million as an out-of-court settlement of a $22.5 billion money laundering lawsuit, Finance Minister Alexei Kudrin said on Wednesday.

The Federal Customs Service had sought compensation from the bank, which it accused of helping to transfer billions of dollars in shadow imports to Russia in the late 1990s.

Kudrin, who is also deputy prime minister, said the bank’s “guilt has not been proven, and the agreement will be signed.”

He said the U.S. authorities had also failed to prove similar money laundering charges against the bank, but BNY paid them $14 million in costs acknowledging its employees’ mistakes.

“The sides have come to an amicable settlement and agreed that some costs, amounting to no less than the sum paid to the U.S. government should be paid,” Kudrin said, adding the bank would also give a loan to the Russian government.

He did not elaborate on the amount of the loan saying it would be a “gesture of goodwill” and a sign of the bank’s willingness to work with Russia.

Kudrin’s statement confirmed Tuesday’s Wall Street Journal report, citing people close to the talks with Russia’s customs service, that court costs would be paid in the case.

The U.S. paper also said the bank had agreed to resume lending and plans “a $400 million trade-finance facility” to be available to Russian state banks to help fund imports and exports, which would run for five years.

Russia’s Federal Customs Service filed the lawsuit in Moscow in May 2007 following a U.S. Justice Department investigation in which a Bank of New York vice president allegedly helped to transfer $7 billion out of Russia in the late 1990s. The bank has fired several staff responsible for the Russian money transfers.

The settlement talks have been on and off since the spring.

Russian business daily Kommersant said in March citing a Russian government source that the Russian customs authorities were ready to drop the lawsuit in exchange for an $800 million compensation settlement.

The discussions seemed to stall in the late spring and early summer, according to those close to the talks. Progress resumed after a U.S.-Russian summit in July, WSJ reported.

Kudrin and the paper would not say when the agreement could be signed.

So, what have we here? The Russian customs authorities agree to drop a case for a fee despite having no proof of any wrongdoing? Not that I have any sympathy for Bank of New York, but this sounds like a bit of blackmailing going on.
Looks like the Russians are copying the SEC. However, I am not sure whether in Russia a court could intervene and actually block such a deal – probably not.

Sochi Real Estate Market Back to Normal Level

It seems that the Sochi real estate market, which has gone through a boom because of the Winter Olympics that will be held there in 2014, have come back to normal levels due to the economic crisis. According to data provided by the mayor of Sochi, the average cost of real estate has come down in the third quarter of 2009 by 50% on a year-on-year basis.

From Ria Novosti: “Local realtors and developers are reluctant to talk about the dramatic collapse of the market, persistently calling the crisis a temporary drop in the price correction. Experts interviewed by RBK Daily disagree with the fact that all accommodation in Sochi, has fallen in price by 50%. Most affected by the crisis were business class – high paid managers- buyers from this segement suffered most. So, some newly built objects’ in the business class dropped by 40%, “- stated the paper.

The line ‘the crisis is a temporary price correction’ sounds all too familiar. One wonders how many and which Western banks have been participating in this Olympics bubble.

[Source: RIA Novosti]

Turkey to Replace Ukrajna for Transit of Natural Gas

According to Zaman, Vladmir Putin wants Turkey to replace Ukraine as the main transit route for Russian natural gas. Russia is working to diversify the export routes of its natural gas away from Ukraine.
A good step in that direction was made in August when Putin went to Ankara to close a deal for the South stream pipeline.
Zaman relies on an article in the Moscow Times, however this remark seems to have been a side remark in a larger context of a Friday dinner at the Valdai Club. The Moscow Tims article is here.

Istanbul Stock Exchange Will Extend Trading Hours

In a recent decision the Istanbul Stock Exchange (İstanbul Menkul Kıymetler Borsasında or İMKB) to extend the second (afternoon session) by 30 minutes.
Beginning October 19 the IKMB will close at 17:30 instead of 17:00 as is the case today.

The new hours will be (starting October 19, 2009:

1. Session: 09:30 – 12:30, 2. Session:14:00 – 17:30

[Source: Hürriyet]

The Ghost Fleet

From the Daily Mail:

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination – and is why your Christmas stocking may be on the light side this year.

Amazing. A huge part of the world’s commercial shipping fleet lies idle off Singapore. This is transport capacity that is no longer needed thus giving evidence of the collapse in world trade.
The Daily Mail article is a must read.  Click here.