Over the last week, a variety of both new and old geopolitical uncertainties and rivalries rose to the surface. In the ongoing saga of U.S. and Chinese relations, President Donald Trump stated that if China will not help him to reign in threats against U.S. regional allies and interests, then he will take whatever action is necessary “totally” alone. China has responded by continuing its pivot towards the European Union as Chinese President Xi heads for a several day visit to Finland before coming to the much-touted America-Chinese summit later this week.
In Brexit land, the United Kingdom triggered its nine months in-the-making Article 50 exit clause to begin formal separation from the European Union after 45 long years of integration. Rivalries and conflicts between the British and Europeans erupted almost immediately, reminding how difficult the two years of negotiations will actually be.
In an unexpected blow to still-reorganizing Swiss Bank Credit Suisse, five nations conducted raids on their offices or began criminal investigations in a coordinated assault on the last of the great Swiss Private Banking institutions. Though Credit Suisse has been trying to move away from investment and secretive banking and more into above- board wealth management, they continue to be dogged by international regulators from Britain to Australia.
This past week’s news was an increasingly ever-present reminder why gold really offers insurance and protection during market turbulence. It’s time to learn how to invest in gold— the greatest hedge against geopolitical and financial uncertainty in the whole history of the world.
President Trump and Chinese President Xi Prepare to Meet With North Korea Crisis in the Background
In the wake of the upcoming United States-China Summit scheduled for April 7-8, the North Korean nuclear threat continues to overshadow the meeting. President Trump declared last week that either China is with him or against him on tackling the renegade Chinese-client state in the Korean peninsula. With or without the Chinese assistance on the issue, Trump has promised to remove the threat. U.S. Ambassador to the United Nations Nikki Haley said in a March 6th statement at the U.N. that all options are on the table.
The Chinese have not yet publicly commented on what their approach to North Korea will be. Chinese President Xi has made a dramatic statement on another key area, that of future Chinese-European Union trade relations. En route to the United States’ summit, Xi Jinping is stopping for an April 4th to 6th visit to Helsinki, Finland. The visit marks a dramatic and critical shift in diplomatic and commercial ties between China and the EU. It also proves to be the first time a Chinese president has come to Finland in over 20 years, since 1995.
This pivot to Europe is rife with symbolism. Finland and the Scandinavian countries are among the most opposed to trade protectionism in the world. Their economies, and in particular that of Finland, depend on continued global trade ties and goods exchange. It is a signal that Europe is a second core focus for China diplomatically as they increasingly prepare themselves for an anticipated shift in the global order.
Analysts have noted that China is also attempting to function as a global counterweight to the United States and President Trump’s hopes for the European Union breaking up in the wake of the Brexit decision and process. President Xi wrote in an article for the Helsinki Times:
“China is of the view that European integration is consistent with the trend of history, and a prosperous and stable Europe is conducive to world peace and development. We believe that Europe has the wisdom and capability to overcome the challenges. In this process, Europe can count on China’s support.”
Trade is where China and Europe will be most engaged. China’s main trading partner now is the European Union, not the United States. The EU’s second largest trading partner behind the U.S. is China as well. The daily trade flows between the EU and China are already significantly over a billion euros each day (or $1.1 billion).
The big news is that the European and Chinese see room for still more trade and stronger commercial ties. The two reaffirmed such a free trade commitment during the most recent G-20 summit of finance ministers. Finland is far from alone in the region with their efforts to increase trade ties with China. Norway’s Prime Minister Erna Solberg and the nation’s largest business delegation in history will be in Beijing visiting the country for their first visit in ten years.
The trend is a geopolitically shaking one. As Senior lecturer Mikael Mattlin from the University of Turku in Finland opined:
“The relative attractiveness of China as an economic partner grows” even while the United States and United Kingdom appear to abandon free trade with Europe. “We’re likely to see continued efforts to court China — not just in Nordic countries, but across Europe.”
This is a development that you need to be aware of, as it likely will have profound implications for asset values in your retirement portfolio in the future. Now is a good time to learn how to win over your financial advisor on gold in your portfolio.
Brexit Conflict Erupts Within Days of Article 50 Triggering
It only took a few days for the Brexit process to break out into verbal conflict after Prime Minister Theresa May triggered the long-awaited Article 50 of the Lisbon Treaty to withdraw from the European Union. The Prime Minister managed to joke about the floated idea over the weekend by former Conservative Party Leader Michael Howard that Britain could potentially begin a war with Spain over 300 year long British enclave Gibraltar on the tip of the Spanish peninsula.
Still it was the mere suggestion as the EU and Britain square off over Brexit that such a conflict could conceivably happen which warns how hard the Brexit divorce will be over the next two years. It is not only Spain and Britain which are likely to see old rivalries and challenges come up during the process. Since the final deal has to be approved by each and every one of the 27 remaining nations of the EU block for it to pass on the European side, Britain has to potentially address concerns from many European countries. European Politics Professor Anand Menon of Kings College London warned:
“These aren’t issues that have been forgotten, they’re issues that people are aware of but are just very difficult. Look at a country and what it specializes in, and they’ll have an issue.”
An area of real contention is already shaping up to be the so-called Brexit divorce bill in which the British are expected to pay for years in the future committed budget contributions to the block. The EU has floated a 50 billion pounds (or $62 billion) exit bill, which Britain has summarily rejected.
Yet the Guardian newspaper published a poll Monday showing that huge swaths of the British public are opposed to significantly far smaller amounts in exit payments. Over two-thirds of the British public surveyed rejected the idea of paying even 10 billion pounds or higher in settlement charges. Nearly half opposed even three billion pounds. The poll also picked up on the objection from the British to the government still obeying rulings from the European Court of Justice following Brexit in an effort to maintain free trade access to the single market.
This means that barring a dramatic change in public opinion, it will be difficult if not impossible for the prime minister to secure any deal with the European Union which the British public will accept.
Credit Suisse Again Finds Itself the Center of Tax Evasion Criminal Investigations
Credit Suisse again found itself a surprise victim of a major international probe and criminal investigations this past week. The Swiss banking giant was raided in its offices including London, Amsterdam, Paris, and Berlin. It became criminally investigated all at once by a combined joint action of the United Kingdom, the Netherlands, France, Germany, and even far away Australia. Worse for Switzerland, no one even bothered to tell the Swiss banking authorities or judicial people that the raids and investigation were imminent.
Only last week the Dutch arrested two individuals connected to the bank as clients. Dozens more are under investigation now for hiding millions in euros in Swiss bank accounts. Mainfirst Analyst Daniel Regli from Zurich opined:
“Its mainly bad for the reputation of the bank and reviving old cliches. It’s about past business practices, which Credit Suisse already should have abandoned a while ago.”
The Australian Financial Review reported that the country has broadened its own investigation into the bank after receiving information on over 1,000 different Credit Suisse bank accounts which were connected to Australian residents.
The bank and (Swiss banks in general) has suffered repeated blows from financial regulators around the globe since the United States first assaulted the bank over its assisting American citizens in avoiding their tax obligations. It paid $2.6 billion in the year 2014 to the U.S. and another 260 million euros (or $277 million) to deal with tax investigations in Germany and Italy. UBS Group also had to pay $780 million back in 2009 to resolve its tax evasion dispute with the U.S.
In a world of increasing geopolitical instability in which none of the old rules and expectations seem to apply anymore, these are all reasons why you should own gold in times of financial crisis.