James Corbett – This week on Financial Survival James and Alfred discuss how central banks manufacture our economic reality, not out of immutable laws of nature, but on the back of an agreed upon medium of exchange whose rules and conditions they set. We talk about the ramifications of these central bank manipulations on the economy as a whole and what this means for the future of the world.
Charles Hugh Smith – A funny thing happened on the way to permanently expanding global markets: unintended consequences. Borrowing cheap, abundant U.S. dollars seemed like a good idea when the dollar was declining, and few voiced any concern when $9 trillion was borrowed in USD-denominated debt around the world in the years since 2009.
Few saw the possibility of the USD rising, or that if it did appreciate against other currencies, that the blowback would destabilize the global economy.
It turns out a strengthening USD has triggered capital flight as other currencies devalue. Anyone propping up their currency to stem the flood tide faces another unintended consequence–a faltering export sector: China: Doomed If You Do, Doomed If You Don’t (September 1, 2015).
Meanwhile, the Imperial economy is suffering its own spate of unintended consequences, notably rising yields, a.k.a. quantitative tightening. As emerging markets and nations attempting to defend their currency pegs to the USD sell U.S. Treasury bonds (which have been held as foreign exchange reserves), the yields on the Treasuries rise as a matter of supply and demand.
As supply increases, sellers must offer higher yields to entice buyers to soak up the inventory.
This increase in yields reverses the primary effect of quantitative easing, i.e. declining yields/interest rates in the U.S.
This dynamic undermines both the emerging markets and the U.S. Emerging markets are not really restored to growth by selling Treasuries; the strong dollar continues to crush their currencies and dampen growth, as assets must be sold to pay back debt borrowed in USD.
Rising rates threaten the feeble U.S. “recovery” as well.
So what’s the solution to this inconvenient dynamic? QE4, of course. Why would the Federal Reserve launch QE4, if not to push rates down in the U.S.? Continue reading →
Michael Snyder – Russian President Vladimir Putin has introduced legislation that would deal a tremendous blow to the U.S. dollar. If Putin gets his way, and he almost certainly will, the U.S. dollar will be eliminated from trade between nations that belong to the Commonwealth of Independent States. In addition to Russia, that list of countries includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan and Uzbekistan. Obviously this would not mean “the death of the dollar”, but it would be a very significant step toward the end of the era of the absolute dominance of the U.S. dollar. Most people don’t realize this, but more U.S. dollars are actually used outside of the United States than are used inside this country. If the rest of the planet decides to stop accumulating dollars, using them to trade with one another, and loaning them back to us at ultra-low interest rates, we are going to be in for a world of hurt. Unfortunately for us, it is only a matter of time until that happens.
When I first read the following excerpt from a recent RT article, I was absolutely stunned…
Russian President Vladimir Putin has drafted a bill that aims to eliminate the US dollar and the euro from trade between CIS countries.
This means the creation of a single financial market between Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and other countries of the former Soviet Union.Continue reading →
Charles Hugh Smith – Correspondent Bart D. recently speculated that the U.S. stock market was now “too big to fail,” that is, that it was too integral to the global financial system and economy to be allowed to fail, i.e. decline 40+% as in previous bubble bursts.
The U.S. stock market is integral to the global financial system in two ways.Now that investment banks, pension funds, insurers and multitudes of 401K retirement plans are dependent on current equity valuations, a crash would impair virtually the entire spectrum of finance from hedge funds to banks to insurers to pension plans.
A decimation of these sectors would impact the U.S. economy and thus the global economy very negatively.
By turning the health of the economy into a reflection of the stock market, the Status Quo has made the stock market into the one bellwether that matters. In effect, the stock market is now integral to the economy as a measure of sentiment and evidence that all is well with the economy as a whole.
The stock market is now the signal everyone follows: if stocks are rising, we’re told that means the economy is healthy. Conversely, if stocks decline sharply, the implication is the economy is weak.
In other words, it’s not just valuations that make stocks integral to the economy and Status Quo–the market’s signaling is now the key to sentiment.In economist Michael Spence’s work, the information available to participants is asymmetric: roughly speaking, those on the “inside” have better information than those on the “outside.”
The stock market addresses this asymmetry by signaling what’s really going on via price: if the market sells off, that tells even those with little other information that all is not well in the economy. Continue reading →
Greg Hunter – Financial expert Craig Hemke says there is an explosion coming in the bond market–it’s just a matter of when. Hemke explains, “Yes, at some time eventually, yes, just because mathematically the debt based system is unsustainable. It’s now grown so large in the amount of continued debt that it takes to service the existing debt makes it all move exponentially against you, and it is spiraling towards an eventual failure.”
What can they do to stop the bond market from blowing up? Hemke contends, “You can’t. It’s not stoppable and it’s not sustainable. At some point, it simply collapses. As much as the pundits and money managers and talking heads on the financial TV want to convince everyone that everything is fine . . .and it’s just bliss and nirvana. Eventually, it is a mathematical certainty that the music stops. Getting back to China, we have ceded control of that to them . . . They can pull the plug on it whenever they want, and that is the most dangerous part of where we are headed.”
Hemke, who has Wall Street experience that dates back to 1990, says, “The whole thing is a charade akin to a movie set. . . . We have the illusion of markets, and that is propped up on a daily basis by the financial media who has an interest in propping it up. They parade money managers on there who have an interest in making it seem all is well because they are collecting fees. You also have the Fed pretending to be in control through their interest rate policies and trying to make it sound like the economy is doing just fine. . . .
Since Nixon took the world off the gold standard, the Federal Reserve has gone into fantasy overdrive and printed copious amounts of confetti which it has convinced the world is a tangible asset. This has worked for the benefit of those who belong to this insider club, printing themselves into wealth, to the detriment of most of the countries in the world, who have had to pay for the privilege of using pretty pieces of paper with tangible assets and depleting the own resources basically in exchange for USTreasury debt. As a result all countries now hold US debt, which as I speculated on in the above article, is about to change.
In 2014 when the Ruble was devalued, Russia sold USTreasuries and bought more gold and invested in the ruble. When the ruble recovered, they made a profit and had added to their gold reserves.
In 2015 China has retaliated to the market crash in which they lost approx. $3 trillion ( many believe this was another Soros type engineered intervention, as it has happened so many times before) by devaluing the yuan and then selling over $100 billion USTreasuries in exchange for yuan and reinvesting in their own stock market.
Even though history disproves this myth, the world has been led to believe that Gold is not a vehicle for trade and exchange in the markets, through propaganda in the media and the continuous illegal smashing of the gold price as advocated by the BIS and other banks who are members of the Corporate Fascist Vampire Squid. They have done this in order to convince investors and the population in general, that fiat currency, confetti, is the only means of exchange on the international markets and is of equal value to tangible commodities. However, what has hardly been reported is the following from Silver Doctors, as outlined below:
The ECB was the first central bank to value it’s gold reserves at market value, instead of a fixed value or weight denomination. Several countries have adopted this gold policy of marking gold reserves to market value. In 2006, Russia adopted a new strategy of buying gold and putting it on the balance sheet at the market value. This year China apparently adopted a similar policy regarding gold. By valuing gold reserves at market value, these central banks join the gradual shift from the current (dollar based) international monetary system to a new (gold based) monetary system.
Needless to say, if and when there is real price discovery, the re-hypothecation of gold in the form of GLD certificates is abolished (selling one gold bar to 100 different people in exchange for an IOU) and gold price rigging becomes an international crime, the price of gold will realign itself based on supply and demand and the ever increasing use of gold in international trade. Gold will in all likelihood increase in value dramatically compared to it’s current suppressed price and those countries who have listed gold on their balance sheets at market value will reap the benefits.
Add to this the decline in oil trade agreements using the petro dollar, as Zero Hedge puts it:
In short, the world seems to have underestimated how structurally important collapsing crude prices are to global finance. For years, producers funnelled their dollar proceeds into USD assets providing a perpetual source of liquidity, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop. That all came to an abrupt, if quiet end last year when a confluence of economic (e.g. shale production) and geopolitical (e.g. squeeze the Russians) factors led the Saudis to, as we put it, Plaxico’d themselves and the US.
The ensuing plunge in crude meant that suddenly, the flow of petrodollars was set to dry up and FX reserves across commodity producing countries were poised to come under increased pressure. For the first time in decades, exported petrodollar capital turned negative.
Collapsing oil prices aside, Iran has been trading oil in exchange for gold and wheat for a number of years, Russia now trades oil and gas in euro, rubles or gold and China trades for oil in yuan and/gold. China has NOT been buying oil from Saudi Arabia using petro dollars. Which means that Saudi Arabia instead of over priced fixed tenders controlled by the corporate fascist petro dollar and the oil cartels, has now entered the world of a free market economy where price is determined by supply and demand and healthy competition, coming from Russia and Angola. Angola has more oil than Saudi Arabia and China has major investments in oil in that country. Saudi Arabia now has a shortfall of dollars as reserve currency which up until now has kept it in the pound seats where they have been able to afford little hobbies like Isis and the Wahabbi sect.
Add to this a system that has already been put into place throughout the European Union, Russia and Asia for gold to be considered equal if not more desirable than fiat ( confetti) in trade agreements and of equal value as a means of exchange, which in reality paper is not. To date, to the best of my knowledge, nobody so far has a gold printing machine. Unlike paper currencies it does not degenerate and have to be replaced with new notes over time. Gold is not the sole preserve of the Federal Reserve Bank as dollars are, gold cannot be counterfeited and it does not decay. Neither does silver or platinum.
In retaliation against the ever growing real trade market, the central banks have embarked on yet more propaganda, similar to the “war on drugs” and the “war on terror” which have kept the cocaine and heroin industries alive laundering their profits through the banking systemand the military industrial complex alive with revolutions and wars created across the planet to feed their killing machine, all upheld with confetti, a couple of trillion that went mysteriously missing from the Pentagon a day before some buildings also mysterious disintegrated in New York. These same criminals have advocated abolishing cash altogether, and if they cannot convince people that credit card debt is a valid form of monetary exchange they will do it under duress with the help of a fascist police state, which always goes hand in hand with a corporate fascist political and economic system, as opposed to a capitalist free market economy based on supply and demand and democratic structures.
By advocating a ban on cash, which would include trade in any form be that two eggs for one pint of milk or one gold coin for a ten crates of beer, the criminal banking system hopes to keep the general population locked into a ponzi scheme of ever growing debt slavery and a debt based society controlled this time not by confetti, but by yet more illusion… numbers on a screen. Again, he who controls the screen controls the numbers in the same way that he who controlled the printing press controlled the confetti. And you can be sure that any zeros you see on your account will be the first or the second number,($0.00) while any zeros on their account will follow on from any given number from 1-9 and go on into infinity. eg: ($666,000,000,000,000,….) What they do not wipe out from your account with debt, they will wipe out through “bail-ins,”helping themselves to your money to save the banks. They will not repay this money and they certainly will not pay you any interest on the money they have basically stolen form your account.
Only one problem. More than half the world is dumping confetti and returning to real trade in real tangible goods. It would appear that Texas has joined them. While the other half is desperately hanging on to a fake, fantasy system that has managed for over a century to convince people that it is real. The man behind the curtain is about to be exposed.
For every action no matter how long it may take to play out in world history, there is an equal and opposite reaction. Hence the Biblical saying, “the sins of the father will be visited on the children. ” In other words, often future generations pay the price for the misdeeds of their ancestors. The Chinese have another saying, “What goes up must come down.” The universe will always restore balance, eventually. It would appear that the days of Jekyll Islandare drawing to a close.