Category Archives: STRATEGY



Extracts from Donald Tusk’s speech 13/10/1016

” The threat today is that of the disintegration of Europe, in a political and ideological sense… It is no coincidence that very often those who question liberal democracy are the same ones who call for the break-up of the European Union. It is not surprising, since the Union is not only a political organisation which restricts national egoisms and eliminates violence as a basis for relations between countries, it is also a unique territory of freedom…

…Finally, let’s move on to Brexit.

…”As for the negotiations, the situation is pretty clear. Its framework will be set out by the European Council – that is by the guidelines foreseen in the Treaty. Our task will be to protect the interests of the EU as a whole and the interests of each of the 27 member states. And also to stick unconditionally to the Treaty rules and fundamental values. By this I mean, inter alia, the conditions for access to the single market with all four freedoms. There will be no compromises in this regard.

“When it comes to the essence of Brexit, it was largely defined in the UK during the referendum campaign. We all remember the promises, which culminated in the demand to “take back control”. Namely the “liberation” from European jurisdiction, a “no” to the freedom of movement or further contributions to the EU budget. This approach has definitive consequences, both for the position of the UK government and for the whole process of negotiations.

“Regardless of magic spells, this means a de facto will to radically loosen relations with the EU, something that goes by the name of “hard Brexit”.

“This scenario will in the first instance be painful for Britons. In fact, the words uttered by one of the leading campaigners for Brexit and proponents of the “cake philosophy” was pure illusion: that one can have the EU cake and eat it too. To all who believe in it, I propose a simple experiment. Buy a cake, eat it, and see if it is still there on the plate.

“The brutal truth is that Brexit will be a loss for all of us. There will be no cakes on the table. For anyone. There will be only salt and vinegar. If you ask me if there is any alternative to this bad scenario, I would like to tell you that yes, there is. And I think it is useless to speculate about “soft Brexit” because of all the reasons I’ve mentioned. These would be purely theoretical speculations. In my opinion, the only real alternative to a “hard Brexit” is “no Brexit”. Even if today hardly anyone believes in such a possibility. We will conduct the negotiations in good faith, defend the interests of the EU 27, minimise the costs and seek the best possible deal for all. But as I have said before, I am afraid that no such outcome exists that will benefit either side. Of course it is and can only be for the UK to assess the outcome of the negotiations and determine if Brexit is really in their interest. ..


Comment from The Peterson Institute for International Economics (PIIE)

“On June 23, the United Kingdom holds a referendum on whether to walk away from the European Union.

“A look at the island nation’s tangled web of global trade relationships highlights just how damaging a potential “Brexit” could be.

“Rising from the ashes of World War II, the European Union is among the most successful efforts at sustained international cooperation in human history. It has also resulted in major economic benefits to the United Kingdom during its 43 years of membership. 

LINK TO READ THE  COMMENT FROM  Chad P. Bown (PIIE) © US News & World Report(




Note added 11th March 2016:

Jose Vinales  Director of thw IMF’s Monetary and Capital markets department supports negative interest rates introduced by some central banks “given the significant risks we see to the outlook for growth and inflation”  Link to article in IMF Direct

Why are central banks using negative policy rates?

Once policy rates are cut to what used to be known as the ‘zero lower bound’, central banks can employ unconventional monetary policy measures to provide further stimulus if real interest rates are still above the levels consistent with price stability and full employment. Negative nominal policy interest rates are the latest addition to this unconventional toolkit. Six central banks so far have introduced negative rates that apply to some amount of the cash balances commercial banks hold with the central bank (Table 1).  Negative rates aim to encourage the private sector to spend more and support price stability by further easing monetary and financial conditions. For smaller open economies, negative rates can also help discourage capital inflows and reduce exchange rate appreciation pressures.

Rev Table 1 with new Sweedish Bank Date


Reposted by John Katz from The Goldwatcher

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Are Central Banks Pushing on a string?

In the first west week of January I posted this Goldwatcher note

 “Gold is insurance against the unexpected and the unthinkable. Gold is  poised to breach the psychologically and technically important $1100 threshold…Gold pundits like to punt gold demand as coming from fear or love trades. But they ignore the more important trade trades  – i.e. the speculative punts that  can account for most the money flowing in and out of gold”

The global risk landscape this time last year was fairly tame  and I posted several comments on gold price prospects for the year that proved to be useful.  The landscape this year has been different and recent posts on gold have included  Ray Dalio on Central Banks Risk Pushing on a string 

Messages from The Goldwatcher Book:


The manuscript for The Goldwatcher was submitted to the publisher, at the end of 2007. At the time the gold price was a little over $800 – about double the where it was when I first submitted the book proposal to Wiley.

 The Goldwatcher (Page 186)    included this comment under the heading

Messages From History

.”…Pundits had been calling for the Gold Price to reach $850, the level it spiked to in 1980. That’s equivalent to about $1900 in 2007 money. However a price spike and a price average over a longer period are very different situations. “

As we all know the price  spiked to above $1900 in September 2011, fell again below $1100 in January this year and is now in sight of breaching $1300.

Motivation, Strategy & Timing

My contribution to investing in gold has been based on motivation strategy & timing. Yesterday’s dramatic responses to ECB President Draghi’s package of stimulus measures was followed by dramatic prices movements  that are settling down today  with these among  other price changes:

GOLD +0.60%,   COPPER+  0.68%

OIL + 2.27%, LEAD +1.15%,, ZINC +1.61%



Price overshoots and undershoots are par for the course in currency and commodity markets.  As it’s likely that  future  price  movements will also be driven by momentum, algorithms and animal spirits it will make sense for  investors to monitor these influences themselves or keep well informed  from a reliable information source.

The Goldwatcher. Page 187 following addresses past consequences of price overshoots.


All postings on this blog  (The Goldwatcher) will remain freely accessible in the public domain. For further Goldwatcher comments please follow Investor Literacy


 From previous Goldwatcher postings:


# 5th February :  Above  Chart added reflecting negative Govt Bond Yields  across the yield curve notified by  The Daily Shot 

## Note Added 3rd Feb 2016:  Link to Bloomberg Quick Take on negative interest rates  – Link to Goldwatcher comment on the end of the long term debt cycle and negative interest rates

The total balance of government bonds with negative yields hit $5.5 trillion after the BOJ action on Friday according  to JPMorgan (via the Financial Times) and noted in The Daily Shot letter today

I posted a comment on   yesterday on approaching the end of the debt supercycle that started with the end of WW2 over seventy years ago. The comment addresses Ray Dalio’s warning that policy makers could find themselves pushing against a string.

Monetary policy works with a lag. When central banks were fighting inflation the analogy of pulling a stone with an elastic band was a popular way of explaining  the lag – you pull and pull and nothing happens ….. then the elastic tightens and wham,  the stone rockets back!

What happens when central banks find themselves pushing against a string?   Trillions of dollars and other currencies with negative yields?






 The Fed Wants A World That Makes Sense Again

Noah Smith : Bloomberg

Years of positive economic signs led to the Fed’s decision to raise interest rates for the first time since 2008. Former Fed Vice Chairman Don Kohn explains that the focus now is on the long-term trajectory of the economy.

Don Kohn Brookings

Fed  Rate Changes over last 60 years Charts from Business Insider