Friday, July 1, 2016

Crisis Watch - July Update - Significant Willem Middelkoop Quote

Because of the significant event that happened in June (Brexit vote) I am going to replace the usual Crisis Watch Update (here is last month) with the Brexit reaction update posted here a few days ago. Until we see what the short to medium term impact of this vote will be, we need to remain on alert. So far we have seen sharp market corrections, but no evidence of a systemic crisis. Also, I got an interesting comment by email from one of my most reliable sources (prefers to remain anonymous) that he thinks that the actual Brexit (Article 50) may not happen and that the UK may instead use the vote to pressure the EU to reform. (update note 7-3-16: leading candidate for PM says not to rush into Article 50 and Bloomberg runs this article)

Below I have pasted in the Brexit vote update along with some direct comments I received by email from Willem Middelkoop (OMFIF Advisory Board). As you can see from the comments by Willem, he believes this Brexit vote is an important event that needs to be watched closely. Please note his comments in bold below regarding what he is hearing from his contacts inside China.

First, here are the comments Willem Middelkoop gave me by email with permission to publish here:


Brexit can be seen as part of a world wide revolt against the establishment, which gave us the British and American empire (together with a few dozen wars). 

People are 'Fed' up with elites and their game plans (EU being one of them). Desintegration of EU has started now. Had to happen anyway. But I am afraid of the other unintented consequences. 

Sure, insiders know this debt fueled growth model can't go on forever. Stating this in the past was a step out of the official 'party line'. But without anymore QE the whole system (house of cards) will simply start to collapse. 

I will be waiting for insiders to start calling for Debt Restructurings and moves towards creating much more SDR-liquity to know real changes are being prepared.

Until that point more of the same is to expected. But more QE and ever lower rates will increase the flight to gold, which could lead to a paper-gold-default (and silver) on the COMEX (Chicago) and/or LBMA (London) exchanges/systems.

On a side note; Russia and Chinese leaders met twice during last week and called (again) for an end to the current (dollar) system. From my contacts with Chinese insiders I know they really understand our problems well and are clearly preparing for The Next Phase (a monetary and geopolitical reset) (note: bold emphasis is mine)

Time has come to become very defensive now. A new worldwide financial and political crisis could just have been started. When Trump will be elected it's time for the real fire works. It will be the American equivalent of a Brexit. A huge shift from the political past.



Added note 7-3-16: Willem Middelkoop adds this bit of intrigue on his twitter feed today (see here and here and here). I will follow this to see what further news may be published.


Now here is the Brexit Reaction Update re-posted with a few updated links:

I think the best way I may be able to serve readers here in regards to this Brexit event is to simply list below links to articles from some of the various sources I cover on the monthly Crisis Watch update. This will give you a feel for how a variety of sources are reacting to the news and readers can form their own opinions from there. 

The only comment I would have is that this event is a clear example of why it is critical to stay alert and informed. We live in a globally interconnected financial system. There are systemic risks present in it all the time as we have thoroughly documented here from high credibility sources. It's not really fun to have to monitor this all the time, but we simply have no other choice given the world we live in today. Below are links to a variety of Brexit reactions I see out there.


Eric Sprott Audio Interview - Brexit Impact on the Gold and Silver Market

CNBC Analyst Art Cashin Interview - Brexit an "economic earthquake"

Harold James (on Project Syndicate) - The Brexit Revolt (vote of no confidence in leaders)

Jim Rickards on Gold & Brexit (taped on BNN Thursday morning (6-23-16) during the vote) - (note: in this interview Jim laid out almost perfectly how markets would react to a Brexit vote). Here is a post Brexit review by Jim in a new interview - he says markets have repriced and now you should watch for any large failures that may surface later and that the impact from Brexit will last for awhile.

Jeffrey Gundlach (on CNBC) - "we are in a bear market in confidence"

CNBC Interview - Brexit vote puts Fed in a Difficult Position

Robert Pringle Blog - Brexit Shows Need for New Rules on Globalization (note: a thank you to Robert Pringle for a link back to this blog contained in this article). Here is a another new blog article on this by Robert Pringle.

Dr. Warren Coats Thoughts on the Brexit

CNBC Interview - Alan Greenspan - Brexit may be just tip of the iceberg (note: I saw this interview live on CNBC - Greenspan was as somber as I have ever seen him and actually said we are in the worst shape he has ever seen during his time of public service)

James Turk Interview - he talks about Brexit & banking problems in the EU including DB which just failed its stress test. He gives his thoughts on both the short term and long term
outlook for a systemic crisis.

The - Central Bank and IMF Response to Brexit - Christine Lagarde states directly here that Brexit could impact global financial system stability and urges "clarity in the negotiation process in the weeks and months ahead" indicating the impact of this vote will not be just a short term blip on the radar

Christine Lagarde (IMF) - IMF Stands Ready to moderate Brexit effects

IMF Deputy Director David Lipton on Brexit - sees need for multi lateral cooperation

Update 6-26-16: The BIS has issued its Annual Report alongside new speeches by BIS officials Claudio Borio and Jaime Caruana. They repeat earlier warnings from BIS that the system is too reliant on a debt based growth model and easy monetary policy. Despite the Brexit vote (which will make it even harder to pull back on easy monetary policies) they call for a move away from reliance on monetary policy to solve the structural problems. They also call on countries to implement reforms that would be very hard to enact politically. I will cover all this new information from BIS in a full blog article soon. 

Keys to watch for:

- price of gold - will it keep moving higher, stabilize, or pull back? - also, any signs that demand for delivery of actual gold (or silver) at exchanges like the Comex exceeds available metal for physical delivery as supplies are tight and this vote has cause a surge in demand (in other words, watch for a failure to deliver). So far gold has moved up, but does not indicate a systemic crisis is underway. (update note 7am on 7-1-16 - silver has broken out above a key resistance point at $18.50 which confirms the move up in gold, this could be a signal both gold and signal are moving into a bull market phase, just continue to watch these as important signals)

- currency exchange rate volatility - remain high or settle down? (has settled down for now)

- global stock markets - continue in a free fall or stabilize? (have stabilized for now)

- any signs that one (or more) so called "too big to fail" has had a derivatives related failure (this could take days or weeks to show up). No rerports of a large derivatives failure yet but Deutsche Bank did fail its stress test. DB is a bank to keep an eye on along with other EU banks.

- signs of central bank intervention in markets, liquidity injections, emergency meetings, etc. & public statements from IMFBIS if any are issued (official statement issued 6-25-16) - see new information just released from the BIS. Clearly the system stands ready to intervene if need be.

Added notes: A thank you to Willem Middelkoop for a twitter mention of this article and Dan Popescu as well.

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