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The consequences of Russia and her Asian allies embracing gold backing for their currencies are poorly understood in western capital markets. This move could lead to the destruction of the global fiat currency system.

According to evidence which is widely ignored in western capital markets, a move by Russia to put a new trade settlement currency and possibly the rouble as well onto a new gold standard is becoming a certainty. As a weapon of mass fiat currency destruction, the timing is probably bound up in on-the-ground military considerations, which are already showing signs of escalating in Eastern Ukraine.

As well as using gold to undermine the western currency system, a return to a credible gold standard has significant advantages for Russia and for her allies in the Shanghai Cooperation Organisation, the Eurasian Economic Union, BRICS+, and all their commodity suppliers beyond Asia. At the same time, it would destroy the west’s fiat currencies and financial system.

This article explains how one part of the global economy can thrive while the other collapses.

Introduction

Recently, I have written about the signals emanating from Russia that President Putin is minded to re-adopt sound money by returning to some sort of gold standard. We do not yet know the details, but consider what he said at the St Petersburg International Economic Forum in June last year:

“Caught in the inflationary storm, many nations are asking, why bother exchanging goods for dollars and euros when they are losing value right before our eyes? Indeed, the economy of imaginary wealth is being inevitably replaced by the economy of real valuables and hard assets.

“According to the IMF, today’s global foreign currency reserves contain 7.1 trillion dollars and 2.5 trillion euros. And this money is depreciating at an annual rate of about 8%…

…click on the above link to read the rest…

The Fed Says, “Let Me Squeeze Your Dollars…5 Basis Points at a Time”

August 22, 2021

The Fed Says, “Let Me Squeeze Your Dollars…5 Basis Points at a Time”

I still maintain no one will mark June 16th, 2021 as the day the world changed. Watching the dollar surge into this weekend thanks to a breakdown in the euro only validates that conclusion in my mind.

Remember, on June 16th Presidents Biden and Putin met for a summit which altered the course of geopolitics forever, agreeing to disagree about Nordstream 2 and reversing the worst of U.S./Russian relations among other things.

While that was happening the FOMC met and reversed the flow of dollars globally.

I told my Patrons something was up on June 18th. Then I did 2 hours worth of podcasts on it (here, here, and here) after thinking it through. Finally, after fully digesting it I wrapped it all up in a lengthy post on July 3rd.

The Fed’s decision to pay 5 basis point on Reverse Repos was the subtlest but most effective way to taper without tapering, tighten without tightening and undermine the WEF’s Great Reset while seemingly still supporting it.

I can hear the howls from the gallery who think otherwise so I’ll address them first.

Yes, normie macro-guys, the bond market has been screaming at the Fed that inflation is soaring and they need to raise rates.

Yes, first year domestic policy students, the Fed looks like it is putting pressure on Republicans to cave to Nancy Pelosi’s hardball over the Infrastructure, Budget and Debt Ceiling deadlock, so far to no avail.

Yes, second year geopolitics students, the Fed is forcing China to respond to soaring commodity prices while simultaneously trying to defend the yuan.

Yes, these are all effects of the Fed’s move in June.

…click on the above link to read the rest of the article…

What? Default? Where? Dollar?

July 27, 2020

What? Default? Where? Dollar?

It won’t come as a surprise to anyone that the first half of 2020 has brought, among many other things, renewed calls for the demise of the US dollar. It’s been pretty much a non-stop call for over a decade now, and longer. But this time, like all previous ones, I’m thinking: I don’t see it. I guess my first question is always: please explain why the dollar would collapse before the euro does.

For one thing, the dollar would have to collapse/default against one or more “entities”. The dollar is not like one of those highrises that collapse upon themselves. It will have to default or collapse against something(s) else. Since it is the world reserve currency, that means there would have to be a replacement reserve currency. Yes, that could also be for example gold or SDR’s, or even a basket of currencies, and something like that may happen eventually, but it doesn’t appear in the cards in the short run.

There are really only two candidates for the role, and neither looks at all fit to play it. The euro may have some ambitions in that direction, but it has far too many problems still. The yuan/renminbi certainly has such ambitions, but the Communist party refuses to let it get on stage to show what it’s got. As I recently wrote:

The main sticking point for Beijing is a conundrum it cannot solve. The CCP wants to have BOTH a global currency AND total control over that currency. It will have to choose between the two, and cannot make up its mind. So it pretends it doesn’t have to choose.

…click on the above link to read the rest of the article…

Huge Protests in Germany Against Government’s Lockdowns

May 16, 2020

Huge Protests in Germany Against Government’s Lockdowns

The German Press is starting to wake up at last after a period of just saying Yes mam! They have run the story that if we acted rationally, we could quickly overcome the consequences of the corona crisis. But politics is deliberately spreading panic among the population and stirring up fear – and in this way causes a severe economic crisis.

For today, the initiative “lateral thinking 711” announced a rally with 500,000 participants in Stuttgart have registered. But there are protests rising in Munich and Berlin. The number of people may reach 1 million.

The government is trying with the aid of most press to label these people as right-wing racists because they cannot address their actions on false forecasts. Meanwhile, unknown persons have set up a replica tombstone in front of Chancellor Angela Merkel’s (CDU) constituency office in Stralsund symbolizing her reign some call of Terror between the refugees and now the virus over-reaction has destroy their lib=vlihoods and their future.

On top of that, the rising resentment against the Eurozone control from Brussels has many wanting to kill the Euro and return to national currencies. I have warned that the cultural divides are far too great and this virus is being used for a total environmental reconstruction of the economy by sheer force. The lack of a transition or any planning whatsoever has cast the livelihoods and future of the world population is tremendous jeopardy and has drastically increased the outcome of our forecasts for not just the collapse of the Euro, but the rise in civil unrest and international war.

…click on the above link to read the rest of the article…

Is Turkey “City Zero” in Global Contagion

March 30, 2019

Is Turkey “City Zero” in Global Contagion

Last year Turkey’s lira crisis quickly morphed into a Euro-zone crisis as Italian bond yields blew higher and the euro quickly reversed off a major Q1 high near $1.25.

It nearly sparked a global emerging market meltdown and subsequent melt-up in the dollar.

This week President Erdogan of Turkey banned international short-selling of the Turkish lira in response to the Federal Reserve’s complete reversal of monetary policy from its last rate hike in December.

The markets responded to the Fed with a swift and deepening of the U.S. yield curve inversion. Dollar illiquidity is unfolding right in front of our eyes.

Turkish credit spreads, CDS rates and Turkey’s foreign exchange reserves all put under massive pressure. Unprecedented moves in were seen as the need for dollars has seized up the short end of the U.S. paper market.

Martin Armstrong talked about this yesterday:

The government [Turkey] simply trapped investors and refuses to allow transactions out of the Turkish lira. Turkey’s stand-off with investors has unnerved traders globally, pushing the world ever closer to a major FINANCIAL PANIC come this May 2019.
There is a major liquidity crisis brewing that could pop in May 2019.

Martin’s timing models all point to May as a major turning point. And the most obvious thing occurring in May is the European Parliamentary elections which should see Euroskeptics take between 30% and 35% of seats, depending on whether Britain stands for EU elections or not.

That depends on Parliament and the EU agreeing to a longer extension of Brexit in the next two weeks.

Parliament has created “Schroedinger’s Brexit,” neither alive nor dead but definitely bottled up in a box no one dares open. And they want to keep it that way for as long as possible. Their hope is outlasting Leavers into accepting staying in the gods-forsaken fiscal and political black hole that is the European Union.

…click on the above link to read the rest of the article…

Capital Flows–Is a Reckoning Nigh?

March 18, 2019

CAPITAL FLOWS – IS A RECKONING NIGH?

Borrowing in Euros continues to rise even as the rate of US borrowing slows
The BIS has identified an Expansionary Lower Bound for interest rates
Developed economies might not be immune to the ELB
Demographic deflation will thwart growth for decades to come

In Macro Letter – No 108 – 18-01-2019 – A world of debt – where are the risks? I looked at the increase in debt globally, however, there has been another trend, since 2009, which is worth investigating as we consider from whence the greatest risk to global growth may hail. The BIS global liquidity indicators at end-September 2018 – released at the end of January, provides an insight: –

The annual growth rate of US dollar credit to non-bank borrowers outside the United States slowed down to 3%, compared with its most recent peak of 7% at end-2017. The outstanding stock stood at $11.5 trillion.
In contrast, euro-denominated credit to non-bank borrowers outside the euro area rose by 9% year on year, taking the outstanding stock to €3.2 trillion (equivalent to $3.7 trillion). Euro-denominated credit to non-bank borrowers located in emerging market and developing economies (EMDEs) grew even more strongly, up by 13%.

The chart below shows the slowing rate of US$ credit growth, while euro credit accelerates: –

Source: BIS global liquidity indicators

The rising demand for Euro denominated borrowing has been in train since the end of the Great Financial Recession in 2009. Lower interest rates in the Eurozone have been a part of this process; a tendency for the Japanese Yen to rise in times of economic and geopolitical concern has no doubt helped European lenders to gain market share. This trend, however, remains over-shadowed by the sheer size of the US credit markets. The US$ has remained preeminent due to structurally higher interest rates and bond yields than Europe or Japan: investors, rather than borrowers, dictate capital flows.

…click on the above link to read the rest of the article…

Super Mario Draghi’s Day of Reckoning Has Arrived

March 10, 2019

Super Mario Draghi’s Day of Reckoning Has Arrived

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” — MARIO DRAGHI JULY 26TH 2012

No quote better defines Mario Draghi’s seven-plus years as the President of the European Central Bank than that quote. Draghi has thrown literally everything at the deflationary spiral the Euro-zone is in to no avail.

What has been enough has been nothing more than a holding pattern.

And after more than six years of the market believing Draghi’s words, after all of the alphabet soup programs — ESM, LTRO, TLTRO, OMB, ZOMG, BBQSAUCE — Draghi finally made chumps out of traders yesterday.

Draghi reversed himself after December’s overly hawkish statement in grand fashion but none dare call it capitulation. For years he has patched together a flawed euro papering over cracks with enough liquidity spackle to hide the deepest cracks.

The Ponzi scheme needs to be maintained just a little while longer.

He’s not alone. In fact, all the major central banks have been working in concert since the day they broke the gold bull market back in September 2011, when the Swiss National Bank pegged the Franc to the euro which began the era of coordinated central bank policy.

And since 2013’s Taper Tantrum when then FOMC-Chair Ben Bernanke
timidly announced a future without QE the markets have consistently tore at their resolve to normalize monetary policy.

Because when you paper over reality you don’t fix the underlying problems. The losses are still there, hidden in plain sight, held at mark-to-model prices, on central bank balance sheets.

Ben retired and Janet took over. She held the fort for nearly her entire term, refusing to raise rates while Draghi sent rates negative alongside Japan’s Kuroda.

…click on the above link to read the rest of the article…

Gold Rising Because it Protects Against Government – Martin Armstrong

February 26, 2019

Gold Rising Because it Protects Against Government – Martin Armstrong

Legendary geopolitical and financial analyst Martin Armstrong continues to be bullish on America. Armstrong contends, “The U.S. economy has been the only thing holding up the world. People do not realize what is the difference between the U.S. vs. the rest of the world? China respects it, and they are starting to move in the proper direction. . . . The United States has the biggest consumer market, which is why everybody wants to sell here. China now realizes the mistake. China is going to turn inward and try and develop its own consumer market.”

Things are not looking good for the long term viability of the euro. Armstrong says, “Because Europe is a basket case, the likelihood of the euro going to completely fall apart is actually quite high. What did the euro do? It basically replaced 28 currencies. So, the diversity has been shot.”

Armstrong also points out, “Gold has been rallying right along with the U.S. stock market. This is what I said all along. Eventually, towards the end, they have to align. Why? Because at that stage of the game, it’s us against government. So, tangible assets rise.”

Armstrong says global debt is what you need to watch. Armstrong further contends, “Debt is a real problem. . . . People need to realize the problem is in government and not in the private sector. Interest rates will start to rise, and that is what we are looking for going out of the year 2020. You also have all this crazy stuff going on in Congress. . . . Real hatred has developed. It’s incredible. Before, if whoever you voted for lost, you accepted it and moved on. I mean people don’t accept it anymore. So, what is this stuff ‘Trump is not my President’?

…click on the above link to read the rest of the article…

The European Crisis of Philosophy is the Destruction of the European Union

February 11, 2019

The European Crisis of Philosophy is the Destruction of the European Union

The entire project of creating the Euro was a means to allow Northern Europe to effectively takeover Southern Europe and impose its philosophy in a totally one-sided arrangement. I have stated plenty of times that all the debts of member states should have been consolidated into the central Euro debt and thereafter each state would be on its own as is the case in the United States. But from the outset, this was like pretending to be one family, but you do not really want to associate with your drunken brother-in-law who is always asking for money. Oh yes, you have to pretend to be nice at funerals and weddings. But that is where family ends. The European Union is no different.

The crisis brewing here is monumental and it will tear the European Union apart at the seams. There is this crisis that because the Euro was NEVERdesigned properly to begin with, Brussels is trying to enforce its demands upon every member state to maintain austerity regardless of the consequences domestically in each member state. When Southern European states joined the Euro, they had to convert all past debts from their local currency to the Euro. What happened was not only their national debts DOUBLED in real terms, but ALL PRIVATE debts also DOUBLED. Suddenly, banks that had lent Italian lira were now demanding to be paid in Euro which doubled in real value. Nonperforming loans skyrocketed and every politicians blamed the bankers for their own misguided creation of the Euro.

Noe the crisis in philosophy is rising to the surface. The new Italian government wants to provide €1.5 billion to compensate savers for bank failures. Brussels is insisting that violates their bail-in rules and cannot be done.

…click on the above link to read the rest of the article…

How the Euro Enabled Europe’s Debt Bubbles

February 2, 2019

How the Euro Enabled Europe’s Debt Bubbles

It’s the twentieth anniversary of the euro’s existence, and far from being celebrated, it is being blamed for many — if not all — of the Eurozone’s ills.

However, the euro cannot be blamed for the monetary and policy failures of the ECB, national central banks and politicians. It is just a fiat currency, like all the others, only with a different provenance. All fiat currencies owe their function as a medium of exchange from the faith its users have in it. But unlike other currencies in their respective jurisdictions, the euro has become a talisman for monetary and economic failures in the European Union.

The Birth of the Euro

To swap a number of existing currencies for a wholly new currency requires the users to accept that the purchasing powers of the old will be transferred to the new. This was not going to be a certainty, and the greatest reservations would come from the people of Germany. Germans saved, and therefore risked the security of their deposits in a new money and monetary system. They were reassured by the presence of the hard-money men in the Bundesbank, who had a mission to protect the mark’s characteristics against the weaknesses that would almost certainly be transferred into the new euro from more inflationary currencies.

These anxieties were assuaged to a degree by establishing the ECB in Frankfurt, close to the watchful eye of the Bundesbank. The other nations were sold the project as bringing greater monetary stability than offered by their individual currencies and the reduction of cross-border transaction costs. Borrowers in formally inflationary currencies also relished the prospect of lower interest rates.

…click on the above link to read the rest of the article…

Governments Are Sucking in Assets like a Black Hole

January 28, 2019

Governments Are Sucking in Assets like a Black Hole

QUESTION: Hello Sir,
I am French and have been reading you for many years (I already read you while you published papers while you were very unfairly imprisoned).
I signed up for Socrates on 6th January and must thank you warmly for opening my eyes to the real state of the global economy and its cycles.
Unfortunately, I live in France and taxes weigh heavily on us. Unemployment is preponderant.

I do not think our President E.Macron knows exactly what he is doing by reforming our economy in his own way…
My question please:

You explained that the next crisis would be a debt crisis and that banks and the economy would be severely heckled.
So, I really think about quickly withdrawing my assets (about 50,000 euros) from the bank and I wonder if converting them into foreign currency and keeping them in a safe in my house would not be a good idea …

If the euro is devalued or disappears as I fear, would not it be smart to convert them as soon as possible into Swiss francs? Indeed, their economy seems stable and it is really a country apart, bordering on France. (Of course, I also thought about owning dollars and yen (although the yen inspires me less confidence)
Thanking you for everything you do for us,
Sincerely,
F.C

ANSWER: Dollars are probably the best because the USA does not cancel currency as they do in Europe. Dollars from 1860s are still legal tender today. You might want to open an account in the USA, which ironically is not part of the tax reporting schemes. Therefore, you can have an account in the USA with no problem for probably the next 3 years. Governments are becoming like a black hole. They are sucking up all the money to sustain their existence.

…click on the above link to read the rest of the article…

The Decline and Fall of the European Union

January 14, 2019

The Decline and Fall of the European Union

This exhaustion of the neocolonial-neofeudal model was inevitable, and as a result, so too is the decline and fall of the European integration/exploitation project.

That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro’s introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.

Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender of national sovereignty with renewed intensity.

The technocrat elite that holds power in the EU is attempting to marginalize critics as populists, nationalists or fascists, overlooking the untidy reality that the actual source of tyranny is arguably the unelected bureaucrats of the EU who have taken on extraordinary powers to strip the citizenry of member states of civil liberties (i.e. the right to dissent) and of meaningful political enfranchisement.

As I have patiently explained since 2012, the underlying structure of the EU is neocolonialism, specifically, neocolonial-financialization. Stripped of artifice, the financial institutions of the EU core have colonized the EU periphery via the euro and the EU and imposed a modernized system of extractive serfdom on the citizenry of the core and periphery alike.

To understand the neocolonial-financialization model, we must revisit the classic model of colonialism. In the old model of Colonialism, the colonizing power conquered or co-opted the Power Elites of the region, and proceeded to exploit the new colony’s resources and labor to enrich the core or center, i.e. the Imperial nation and its ruling elites.

…click on the above link to read the rest of the article…

The Tragedy Of The Euro

January 11, 2019

The Tragedy Of The Euro

After two decades, the euro’s minders look set to drive the Eurozone into deep trouble. December was the last month of the ECB’s monthly purchases of government debt. A softening global economy will increase government deficits unexpectedly. The consequence will be a new cycle of sharply rising bond yields for the weakest Eurozone members, and systemically destabilising losses in the bond portfolios owned by Eurozone banks

The blame-game

It’s the twentieth anniversary of the euro’s existence, and far from being celebrated it is being blamed for many, if not all of the Eurozone’s ills.

Recognise that, and we have a chance of understanding why the Eurozone has its troubles and why there are mounting risks of a new Eurozone systemic crisis. These troubles will not be resolved by replacing the euro with one of its founding components, or, indeed, a whole new fiat-money construct. It is here to stay, because it is not in the users’ interest to ditch it.

As is so often the case, the motivation for blaming the euro for some or all the Eurozone’s troubles is to shift responsibility from the real culprits, which are the institutions that created and manage it. This article briefly summarises the key points in the history of the euro project and notes how the mistakes of the past are being repeated without the safety-net of the ECB’s asset purchases.

…click on the above link to read the rest of the article…

US Dollar Status as Global Reserve Currency?

January 1, 2019

US Dollar Status as Global Reserve Currency?

So, how hot is the Chinese Renminbi? And is the euro dead yet?

The US dollar’s role as global reserve currency is defined by the amounts of US dollar-denominated assets – US Treasury securities, corporate bonds, etc. – that central banks other than the Fed are holding in their foreign exchange reserves. To diminish the dollar’s role as a global reserve currency, these central banks would have to dump the dollar.

So, let’s see. Total global foreign exchange reserves, in all currencies, came in at $11.4 trillion in the third quarter, according to the IMF’s data on “Currency Composition of Official Foreign Exchange Reserves” (COFER), released this morning. The amount of USD-denominated exchange reserves was $6.63 trillion. This amounted to 61.9% of total foreign exchanges reserves held by central banks, the lowest since 2013:

In the chart above, note the arrival of the euro. It became an accounting currency in the financial markets in 1999, replacing the European Currency Unit. Euro banknotes and coins appeared on January 1, 2002. At the end of 2001, the dollar’s share of reserve currencies was 71.5%. In 2002, it dropped to 66.5%. Now it’s down to 62.2%.

The euro replaced a gaggle of European currencies that had been held as foreign exchange reserves, on top of which was the Deutsche mark.

In Q3, the euro’s share rose to 20.5%, the highest since Q4 2014. The creation of the euro was an effort to reduce the dollar’s hegemony. At the time, the theme was that the euro would reach “parity” with the dollar. But the euro Debt Crisis ended that dream.

The other major reserve currencies don’t have a “major” share. The combined share of the dollar and the euro, at 82.4%, leaves only 17.6% for all other currencies combined. The two currencies with the largest share in that group are the Japanese yen, at 5.0%, and the UK pound sterling, at 4.5%.

…click on the above link to read the rest of the article…

2018 Chaos, 2019 Mayhem

December 19, 2018

2018 Chaos, 2019 Mayhem

Titian The rape of Europe 1560-62

It took me a while to decide which word(s) best define the past year and the next one, but I think this is pretty much it. 2018 was chaotic more than anything else, and that chaos will give rise to mayhem in 2019.

What I think is striking is that this is true across the board, in all walks of life so to speak. In finance, in politics, in energy markets, in ecological matters, and perhaps most of all in the ways all these topics are being covered by what once were trusted media.

I’m going to have to come back to all these topics separately, so it’s promising to be a very busy holiday season, but it’s also good to try and put them together in one place, if only to show how interconnected everything is. And how futile it is to look at the economy without seeing its connection to energy flows and ecosystems. And vice versa.

In finance and economics, we’ve seen an avalanche of falling numbers recently, in stock prices, bond prices, housing, across the globe, and obviously that evokes a lot of comments in the financial press. But that press, and bankers investors on their own, still talk about markets.

However, as I wrote in April 2018, if there is no price discovery, and there isn’t, there ARE NO markets, and it would be good and beneficial if many more people absorb that simple reality. Many more so-called traders and investors would be a start, but by no means enough. Lots more people who have nothing to do with the ‘markets’ should understand why there is no such thing anymore.

…click on the above link to read the rest of the article…

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