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Ask the Expert – Nomi Prins – October 2019
Ask the Expert – Nomi Prins – October 2019
Bestselling author Nomi Prins is an American author, journalist, and public speaker. A former managing director at Goldman Sachs and senior managing director at Bear Stearns, her latest book is Collusion: How Central Bankers Rigged the World. Her previous book All the Presidents’ Bankers explored over a century of close relationships between 19 Presidents from Teddy Roosevelt through Barack Obama and the key bankers of their day, based on original archival documents. Prins also received recognition for her whistleblower book, It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street , for her views on the U.S. economy, for her published spending figures on federal programs and initiatives related to the 2008 bailout, and for her advocacy for the reinstatement of the Glass–Steagall Act and regulatory reform of the financial industry.
This month, Nomi answers seven of your listener-submitted questions, including:
• When will the U.S. dollar end its reign as global reserve currency?
• Should you be concerned about gold confiscation?
- Plus: If the financial system crashes, are you at risk?
The End Of Fiat In One Chart
The End Of Fiat In One Chart
For the first time in 21 years, Germany has openly bought gold into its reserve holdings.
German reserves climbed to 108.34m oz in September from 108.25m a month earlier.
With ECB mutiny and Deutsche Bank’s rapid demise, fears are rising of a looming financial crisis, and with that, Germany has shown a renewed interest in gold.
As a reminder, September’s outright purchase of the precious metal comes after Germany’s central bank, the Bundesbank, repatriated 583 tonnes, or $31 billion worth, of gold in 2017, years ahead of schedule.
Which came after Germany’s stunning announcement in January 2013 that the Bundesbank would repatriate 674 tons of gold from the NY Fed and the French Central Bank (which was initially abandoned in 2014).
Of course, while Germany is now the latest to turn to gold as a safe haven store of value in its reserves, it is not the first as the de-dollarization shift has been accelerating in recent months…
Germany’s shift comes after China’s acceleration in gold-buying as Peter Schiff recently noted this a “global gold rush on the part of central banks” in preparation for a dollar crash.
“The days that the dollar is a reserve currency are numbered and the smart central banks are trying to buy as much gold as they can before the number is up,” Schiff said.
Remember, nothing lasts forever…
And now that the always conservative Germans are back in the market buying gold, one wonders if the end of fiat is drawing closer.
Rabobank: “The US Will Simply Not Allow A New Reserve Currency Without A Fight”
Rabobank: “The US Will Simply Not Allow A New Reserve Currency Without A Fight”
“Peace for our time”
Despite the fact that the German IFO survey was ‘I-ful’, with the official word being that the outlook is “increasingly dire”, and that US core durable goods were -0.4% vs. flat expected, both of which confirm that the real economy is perhaps in real trouble, markets seemed to sigh with relief yesterday. The reason? We have the promise of “peace for our time”. After all, according to the press, US President Trump held out an olive branch to China on trade; and to Iran; and was there perhaps the suggestion of another brunch being offered from Boris Johnson to the EU?
Let’s focus on the US issue first. Nothing we saw or heard yesterday–nothing at all–changes any of the dynamic that we have seen for a long time now. Trump praised Chairman Xi to the skies, and repeated that China wants to make a deal very badly, so much so that they had already called to kick-start talks. Meanwhile, China stated it knew nothing about any such call, and the editor of the Global Times tweeted “Based on what I know, Chinese and US top negotiators didn’t hold phone talks in recent days. The two sides have been keeping contact at technical level, it doesn’t have significance that President Trump suggested. China didn’t change its position. China won’t cave to US pressure.” So very little chance of trade peace for our time. Nonetheless, as usual, the equity market fell for this while the smarter bond market largely didn’t – and neither did CNH.
…click on the above link to read the rest of the article…
“Things Will Never Be The Same Again”: Here Are 20 Questions As Central Banks Admit Defeat
“Things Will Never Be The Same Again”: Here Are 20 Questions As Central Banks Admit Defeat
Unlike prior years, there was a distinct sense of dread and powerless foreboding in this year’s Jackson Hole meeting, starting with Jerome Powell’s “boring” speech in which he blamed Trump’s trade war for the Fed’s inability to stimulate the economy, and culminating with Mark Carney unprecedented capitulation, effectively admitting that the fiat system has failed and the dollar can no longer be the world’s reserve currency (instead punting that obligation to ‘global central banker’ Mark Zuckerberg and his Libracoin).
Indeed, as even the FT concludes, “there was a sense that things will never be the same again.”
In its summary of this week’s Wyoming outing, the FT also wrote that “the developed world had experienced a “regime shift” in economic conditions, James Bullard, president of the St Louis Federal Reserve, told the Financial Times.
“Something is going on, and that’s causing I think a total rethink of central banking and all our cherished notions about what we think we’re doing,” Bullard admitted. “We just have to stop thinking that next year things are going to be normal… They’ve priced in that there’s going to be uncertainty, there are going to be tweets, there are going to be threats and counter-threats,” said the St Louis Fed president. “And that’s the way it’s going to be.”
And as the FT further admits, “interest rates are not going back up anytime soon, the role of the dollar is under scrutiny both as a haven asset and as a medium of exchange, and trade uncertainty has become a permanent feature of policymaking.”
…click on the above link to read the rest of the article…
Why Mark Carney Thinks The Dollar Can No Longer Be The World’s Reserve Currency
Why Mark Carney Thinks The Dollar Can No Longer Be The World’s Reserve Currency
While Jerome Powell’s highly anticipated Jackson Hole speech was, in the words of Brean Capital’s Russ Certo “underwhelming and anti-climatic”, one couldn’t say the same for the shocking luncheon speech by Bank of England’s outgoing governor, Mark Carney, titled “The Growing Challenges for Monetary Policy in the current International Monetary and Financial System“, where he dedicated no less than 23 pages to a stunning – for a central banker – cause: to describe why the dollar’s “destabilizing” reserve status role in the world economy has to end, and why central banks need to join together to create their own replacement reserve currency, one potentially tied to Facebook’s new “stablecoin” Libra, although in reality any “Synthetic Hegemonic Currency” as Carney defined it would do.
But first, a quick tangent: the reason we say Carney’s speech was shocking is not for what it proposes – after all, we have long argued that a world in which the dollar’s reserve currency status would be stripped away by the establishment and granted to some alternative – whether gold, or a basket of currencies like the IMF’s SDR, or a cryptocurrency like bitcoin – is coming in posts such as:
- “Game Changer” – Is Libra The Trojan Horse For An SDR-Backed Redesign Of The Global Financial System?
- Did The IMF Reveal That Cryptocurrency Is The New World Order End-Game?
- Bank Of England Boss: China’s Renminbi Will Rival The Dollar As Global Reserve Currency
The argument behind all these articles is simple and two-fold: i) in a fiat world, one can only devalue relative to some other currency, yet we have now reached a point where (as Pimco suggested two years ago when it said the Fed should buy gold to devalue the dollar against it) every currency needs to devalue relative to some hard index outside of the monetary system…
…click on the above link to read the rest of the article…
In Unprecedented, Shocking Proposal, BOE’s Mark Carney Urges Replacing Dollar With Libra-Like Reserve Currency
In Unprecedented, Shocking Proposal, BOE’s Mark Carney Urges Replacing Dollar With Libra-Like Reserve Currency
After Jerome Powell’s neutral-to-slightly-dovish-but-mostly-boring speech on Friday morning, investors could be forgiven for suspecting that this year’s Fed-sponsored gathering in Jackson Hole might be disappointingly dull (especially with all that’s going on in Trump’s twitter feed, the escalating trade war and escalating geopolitical unrest).
Then along came former Goldman banker and current (outgoing) BOE governor, Mark Carney, who in his lunchtime address laid out a shocking, radical proposal – perhaps the most stunning thing to ever be unveiled at Jackson Hole – urging to replace the US Dollar with a “Libra-like” reserve currency in a dramatic revamp of the global monetary, financial and economic order.
While it was unclear if Carney was focusing on Libra as the new reserve currency, or simply was hoping to find something against which the dollar could be devalued, the proposal was clearly shocking as it suggests that the central bank quiet acceptance of cryptocurrencies (especially in Japan) has been what many have speculated all along: a “currency” against which fiat money can be devalued in hopes of sparking fiat hyperinflation that inflates away record amounts of fiat debt.
Of course, such a new system would bring about the end of US hegemony, and effectively end the dollar-based global financial system, dramatically scaling back the US’s influence in the global economy, and making rising powers like China and Russia critical players an increasingly multipolar world…. especially if they propose a gold-backed dollar alternative to the world. That this would quickly emerge as the new reserve currency – together with whatever stablecoin/crypto central bankers deign to be the dollar’s replacement – goes without saying.
…click on the above link to read the rest of the article…
Why the Dollar Rules the World — And Why Its Reign Could End
Why the Dollar Rules the World — And Why Its Reign Could End
President Donald Trump wants a lower US dollar. He complains about the over-valuation of the American currency. Yet, is he right to accuse other countries of a “currency manipulation”? Is the position of the US dollar in the international monetary arena not a manipulation in its own right? How much has the United States benefitted from the global role of the dollar, and is this “exorbitant privilege” coming to end? In order to find an answer to these questions, we must take a look at the monetary side of the rise of the American Empire.
Trump is right. The American dollar is overvalued. According to the latest version of the Economist’s “ Big Mac Index,” for example, only three currencies rank higher than the US dollar. Yet the main reason for this is not currency manipulation but the fact that the US dollar serves as the main international reserve currency.
This is both a boon and a curse. It is a boon because the country that emits the leading international reserve currency can have trade deficits without worrying about a growing foreign debt. Because the American foreign debt is in the country’s own currency, the government can always honor its foreign obligations as it can produce any amount of money that it wants in its own currency.
Yet the international reserve status comes also with the curse that the persistent trade deficits weaken the country’s industrial base. Instead of paying for the import of foreign goods with the export of domestic production, the United States can simply export money.
American Supremacy
…click on the above link to read the rest of the article…
JPMorgan: We Believe The Dollar Could Lose Its Status As World’s Reserve Currency
JPMorgan: We Believe The Dollar Could Lose Its Status As World’s Reserve Currency
Almost eight year ago, we first presented a chart first created by JPMorgan’s Michael Cembalest, which showed very simply and vividly that reserve currencies don’t last forever, and that in the not too distant future, the US Dollar would also lose its status as the world’s most important currency, since it is never different this time.
As Cembalest put it back in January 2012, “I am reminded of the following remark from late MIT economist Rudiger Dornbusch: ‘Crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.'”
Perhaps it is not a coincidence then that in light of the growing number of mentions of MMT and various other terminal, destructive monetary policies that have been proposed to kick on the current financial system the can just a little bit longer, that the topic of longevity of reserve currency status is once again becoming all the rage, and none other than JPMorgan’s Private Bank ask in this month’s investment strategy note whether “the dollar’s “exorbitant privilege” is coming to an end?”
So why is JPM, after first creating the iconic chart above which has since spread virally across all financial corners of the internet, not only worried that the dollar’s reserve status may be coming to an end, but in fact goes so far as to state that “we believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term) due to structural reasons as well as cyclical impediments.”
Read on to learn why even the largest US bank has started to lose faith in the world’s most powerful currency.
Is the dollar’s “exorbitant privilege” coming to an end?
…click on the above link to read the rest of the article…
In Major Threat To Dollar’s Reserve Status, Russia Offers To Join European SWIFT-Bypass
In Major Threat To Dollar’s Reserve Status, Russia Offers To Join European SWIFT-Bypass
Three weeks after a meeting between the countries who singed the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), which was ditched by US, French, British and German officials said the trade mechanism which was proposed last summer – designed to circumvent both SWIFT as well as US sanctions banning trade with Iran – called Instex, is now operational.
And while we await for the White House to threaten Europe with even greater tariffs unless it ends this special purpose vehicle – it already did once back in May when it warned that anyone associated with the SPV could be barred from the U.S. financial system if it goes into effect – a response from the US is now assured, because in the biggest attack on the dollar as a reserve currency to date, on Thursday, Russia signaled its willingness to join the controversial payments channel, and has called on Brussels to expand the new mechanism to cover oil exports, the FT reported.
Moscow’s involvement in the Instex channel would mark a significant step forward in attempts by the EU and Russia to rescue a 2015 Iran nuclear deal that has been unravelling since the Trump administration abandoned it last year.
“Russia is interested in close co-ordination with the European Union on Instex,” the Russian foreign ministry told the Financial Times. “The more countries and continents involved, the more effective will the mechanism be as a whole.”
… and the more isolated the US will be as a currency union meant to evade SWIFT and bypass the dollar’s reserve currency status will soon include virtually all relevant and important countries. Only China would be left outstanding; after the rest of the world’s would promptly join.
On Thursday, the Kremlin confirmed the foreign ministry’s take:
…click on the above link to read the rest of the article…
China Tries to Muscle in on Dollar as Dominant ‘Payments Currency,’ But It’s a Thankless Slog
China Tries to Muscle in on Dollar as Dominant ‘Payments Currency,’ But It’s a Thankless Slog
Dollar Hegemony is a tough nut to crack.
China is taking another baby step in promoting the internationalization of the renminbi and nibble on the hegemony of the US dollar: It’s pushing a proposal to add a pile of yuan to the $240 billion currency swap agreement between ASEAN plus China, Japan, and South Korea, in order reduce the system’s reliance on the US dollar and to enhance its own economic clout in the region, according to the Nikkei.
On May 2, the finance ministers and central bankers of ASEAN – Singapore, Brunei, Malaysia, Thailand, Philippines, Indonesia, Vietnam, Laos, Cambodia, and Myanmar – along with those from China, Japan, and Korea will meet in Fiji to discuss modifications to the swap agreement, the Chiang Mai Initiative.
China, which co-chairs the meeting with Thailand, has added language to the draft joint statement concerning use of Asian-currency contributions to the pool – which for now is still entirely in dollars – as “one option” to enhance the swap arrangement.
“Allowing participants to access Asian currencies in an emergency could encourage their use in other contexts, including foreign exchange reserves, the thinking goes,” the Nikkei said. “The idea also anticipates a long-term rise in demand for these currencies in regional investment and trade.”
“China in particular sees it as another step on the path to internationalizing the yuan and expanding its economic influence in the region. But the proposal is likely to be complicated by U.S. alarm at the prospect of Beijing expanding its currency’s role at the dollar’s expense.”
The Chiang Mai Initiative was a response to the 1997 Asian currency crisis. It consists of a pool of US dollars, contributed by members, that members can draw on when their currencies come under attack. Since its establishment in 2000, the dollar pool has been increased to $240 billion. China is now lobbying the other members to add yuan and yen to that pool.
…click on the above link to read the rest of the article…
Dollar Dominance Under Multiple, Converging Threats
Dollar Dominance Under Multiple, Converging Threats
For years, currency analysts have looked for signs of an international monetary “reset” that would diminish the dollar’s role as the leading reserve currency and replace it with a substitute agreed upon at some Bretton Woods-style monetary conference.
That push has been accelerated by Washington’s use of the dollar as a weapon of financial warfare, including the application of sanctions. The U.S. uses the dollar strategically to reward friends and punish enemies.
The use of the dollar as a weapon is not limited to trade wars and currency wars, although the dollar is used tactically in those disputes. The dollar is much more powerful than that.
The dollar can be used for regime change by creating hyperinflation, bank runs and domestic dissent in countries targeted by the U.S. The U.S. can depose the governments of its adversaries, or at least blunt their policies without firing a shot.
But for every action, there is an equal and opposite reaction.
As the U.S. wields the dollar weapon more frequently, the rest of the world works harder to shun the dollar completely.
I’ve been warning for years about efforts of nations like Russia and China to escape what they call “dollar hegemony” and create a new financial system that does not depend on the dollar and helps them get out from under dollar-based economic sanctions.
These efforts are only increasing.
Russia has sold off almost all of its dollar-denominated U.S. Treasury securities and has reduced its dollar asset position to almost zero. It has been amassing massive quantities of gold, and has increased the gold portion of its official reserves to over 20%. Russia has almost 2,000 tonnes of gold, having more than tripled its gold reserves in the past 10 years. It has actually acquired enough gold to surpass China on the list of major holders of gold as official reserves.
…click on the above link to read the rest of the article…
The Ultimate Pivot: Saudi Betrayal of the Petrodollar
The Ultimate Pivot: Saudi Betrayal of the Petrodollar
Saudi Arabia has gone nuclear, threatening the petrodollar. Or has it?
The report from Zerohedge via Reuters that Saudi Arabia is angry with the U.S. for considering a bill exposing OPEC to U.S. antitrust law is a trial balloon.
The chances of the U.S. bill known as NOPEC coming into force are slim and Saudi Arabia would be unlikely to follow through, but the fact Riyadh is considering such a drastic step is a sign of the kingdom’s annoyance about potential U.S. legal challenges to OPEC.
If these things are so unlikely then why make the threat public? There are a number of reasons.
First, one must remember that the Saudis are hemorrhaging money. Their primary budget deficit in 2018 was around 7% of GDP. Since the 2014 crash in oil prices it has gone from almost zero sovereign debt to $180 billion in debt to finance its spending, or around 22% of GDP.
2019’s budget will be even bigger as it tries to deficit spend its way to growth. It’s needs for a higher oil price are built into their primary budget not their production costs, which are some of the lowest in the world.
Second, the Saudis finally opened up the books on Saudi-Aramco this week. And it revealed the giant is far more profitable than thought. It has is eye on acquiring stakes in some of the biggest oil and gas projects out there these past couple of years. It’s floating its first public bond to buy a stake in SABIC to get into the mid and downstream petroleum markets.
…click on the above link to read the rest of the article…
Where Is The World Headed?
Where Is The World Headed?
Since 2016 the United States has been in the Russiagate box, a hoax created by the US military/security complex to prevent President Trump from normalizing relations with Russia. Normalized relations would devalue THE RUSSIAN THREAT, an orchestration that protects the $1,000 billion annual budget of the military/security complex.
The Democratic Party, which most certainly is not democratic, supported the hoax hoping to do Trump in for their own reasons and pulled the presstitute media into the conspiracy against Trump.
Now that all the assurances from the Establishment that Trump was a traitor to America who conspired with Russian President Putin to steal the election from the killer-bitch in order that America could serve Russian interests have been exposed as lies by the Mueller report, American attention is free to take up some other nonsensical campaign. The succession of these stupidities is destroying America’s reputation.
True, some of the most crazed of the Democrats and media whores cannot let go of Russiagate. The presstitutes are saying that Trump would be impeached for his non-crime except the unworthy Democrats had rather go back to the business of spending other people’s money. A crazed professor or two have declared that Mueller was part of the “Trump coverup” and that Mueller needs to be investigated. But these claims simply underline that the United States wasted three years of its existence.
Meanwhile, other countries moved on. The Russians, for example, discovered that Washington’s sanctions had a silver lining. Russia became more self-sufficient economically and moved out of the box of being an exporter of raw materials to the West, a box into which the Americans and the American-brainwashed Russian economics profession had put the Russian government.
…click on the above link to read the rest of the article…
Fed Warns Dollar “Might Not Retain Its Dominance Forever”
Fed Warns Dollar “Might Not Retain Its Dominance Forever”
When the TBAC published the minutes to its quarterly refunding decision two weeks ago, the most interesting part of the discussion was the “unique challenges” faced by the Treasury over the medium term, especially the possibility of significant financing gap over next 10 years amounting to over $12 trillion and the potential need for more domestic investor participation if foreign reserve growth slows.
Here, among other things (which potentially include the Green New Deal, with its $6+ trillion cost) the TBAC cautioned that the Treasury’s financing needs are expected to increase significantly even without factoring in recession possibilities over the next decade. The TBAC warned that deficits to the tune of $1-$1.5trn a year, and cumulatively over $12trn, over the next decade, are coming and will have to be funded in the bond market. Meanwhile, the CBO stubbornly refuses to forecast a recession during the next decade, instead projecting a steady 1.5-2% real GDP growth over the next 10y. While the TBAC did not take a position on this laughable assumption, it warned that deficits typically rise 2-5% of GDP in recessions, which would translate to additional deficits of $0.5-1trn at current GDP levels, and warns that “these borrowing needs have to financed in the context of already high global dollar debt exposure.”
But the bigger problem is that in the context of soaring deficit funding needs, the TBAC is also increasingly worried that “foreign investors already hold significant dollar debt” which is why the US will have to increasingly rely on domestic savings to fund its future budget deficits.
And here the TBAC made a surprising, tongue-in-cheek observation, namely that reserve managers have been very gradually increasing allocation to other currencies, and that the USD share of FX reserves has steadily come down from 72% in 2000 to 62% now even though the “USD is still the dominant reserve currency.”
…click on the above link to read the rest of the article…
Goodbye to the Dollar
Goodbye to the Dollar
The inept and corrupt presidency of Donald Trump has unwittingly triggered the fatal blow to the American empire—the abandonment of the dollar as the world’s principal reserve currency. Nations around the globe, especially in Europe, have lost confidence in the United States to act rationally, much less lead, in issues of international finance, trade, diplomacy and war. These nations are quietly dismantling the seven-decade-old alliance with the United States and building alternative systems of bilateral trade. This reconfiguring of the world’s financial system will be fatal to the American empire, as the historian Alfred McCoy and the economist Michael Hudsonhave long pointed out. It will trigger an economic death spiral, including high inflation, which will necessitate a massive military contraction overseas and plunge the United States into a prolonged depression. Trump, rather than make America great again, has turned out, unwittingly, to be the empire’s most aggressive gravedigger.
The Trump administration has capriciously sabotaged the global institutions, including NATO, the European Union, the United Nations, the World Bank and the IMF, which provide cover and lend legitimacy to American imperialism and global economic hegemony. The American empire, as McCoy points out, was always a hybrid of past empires. It developed, he writes, “a distinctive form of global governance that incorporated aspects of antecedent empires, ancient and modern. This unique U.S. imperium was Athenian in its ability to forge coalitions among allies; Roman in its reliance on legions that occupied military bases across most of the known world; and British in its aspiration to merge culture, commerce, and alliances into a comprehensive system that covered the globe.”
…click on the above link to read the rest of the article…
