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World War III: Has It Begun?

World War III: Has It Begun?

Has World War III already begun?

That’s a serious question and deserves serious consideration by investors. A wave of analysts and commentators have warned that the war in Ukraine could spin out of control and escalate into World War III.

One variation on that theme is that the war could escalate into a nuclear war with tactical nuclear weapons deployed. Most point a finger at Russia as the party that will launch a nuclear strike out of desperation at a failing campaign in Ukraine.

Actually, the opposite is true.

The Russian campaign is not failing (it has been on hold for several months awaiting the right conditions to launch a winter offensive). You just don’t hear about it in the mainstream media, which is essentially a propaganda outlet for Ukraine.

And the party most likely to use nuclear weapons first is the U.S. in order to save face and destabilize Russia once Ukraine is on the brink of collapse.

Reality Check

Many people have a hard time believing that. They’ve been told that Putin is the devil incarnate and would probably like to destroy the world. We like to think that in modern times we’re sophisticated and above falling prey to propaganda. Unfortunately, it isn’t true.

The fact is the U.S. did wage the only nuclear war in history from Aug. 6–9, 1945 and had a successful outcome. I’m not getting into the morality of it here, one way or the other. I’m just being objective.

Either way, another nuclear war could not be contained and it would be tantamount to World War III. It amounts to the same thing.

…click on the above link to read the rest…

Welcome to 1984

I’ve been addressing the war on cash lately, and for good reason. While everyone’s attention is focused on the war in Ukraine, inflation and the Supreme Court, government plans to eliminate cash are accelerating.

For example, central bank digital currencies (CBDCs) are coming even faster than many anticipated. The digital yuan is already here; it was introduced in China last February during the Winter Olympics.

Visitors to the Olympics were required to pay for meals, hotels, transportation, etc., using QR codes on their mobile phones that linked to digital yuan accounts. Nine other countries have already launched CBDCs. Europe is not far behind and is testing the digital euro under the auspices of the European Central Bank.

The U.S. was lagging, but is catching up fast.

The Federal Reserve was studying a possible Fed CBDC at a research facility at MIT. Now the idea has moved from the research stage to preliminary development.

Fed Chair Jay Powell said, “A U.S. CBDC could… potentially help maintain the dollar’s international standing.”

But this has little to do with technology or monetary policy and everything to do with herding you into digital cattle chutes where you can be slaughtered with account freezes, seizures, etc.

NOT Crypto

First off, CBDCs are not cryptocurrencies. The CBDCs are digital in form, are recorded on a ledger (maintained by a central bank or finance ministry and the message traffic is encrypted. Still, the resemblance to cryptos ends there.

The CBDC ledgers do not use blockchain, and CBDCs definitely do not embrace the decentralized issuance model hailed by the crypto crowd. CBDCs will be highly centralized and tightly controlled by central banks.

The CBDC ledger can be maintained in encrypted form by the central bank itself without the need for bank accounts or money market funds…

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

Nowhere to Hide

Nowhere to Hide

Investors don’t need to be told about the recent stock market crashes. The Dow Jones index is down 12.5% since early January. The S&P 500 is down 16.1% in the same period. The Nasdaq Composite is down an even more spectacular 26.5% this year. It lost more ground today.

This puts the Nasdaq solidly into a bear market (down 20% or more from an interim peak) while the Dow and S&P 500 are both in correction territory (down 10% or more from an interim peak).

The Dow was up slightly today, but the S&P was down again. On current trends, the S&P 500 may break into bear market territory in a matter of days with the Dow not far behind.

This collapse coming so soon after the market crash of March 2020 may surprise some investors, although this outcome was predicted in my last book The New Great Depression, published last year.

We could get into the reasons for the recent market swoon, like the Fed’s taking away the punch bowl, but the reasons almost don’t matter at this point.

What truly is surprising is that the stock market is not alone in its recent dismal performance.

The Great Crypto Crash

U.S. Treasury bonds, foreign currencies, gold and other commodities have all declined sharply side by side with stocks. There are good reasons for this, including the prospect of a recession that could cause stocks, gold and commodities to fall in sync.

Still, the market carnage doesn’t end there. The biggest collapse among major asset classes is in Bitcoin and other cryptocurrencies.

The price of Bitcoin has fallen over 55% since last November, when Bitcoin peaked at around $69,000. As I write this article, Bitcoin is trading at $29,647.

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

Collapse Is Happening Before Our Eyes

Collapse Is Happening Before Our Eyes

Analysts and authors, myself included, have been warning about the collapse of the dollar as the global reserve currency for years. I described this prospect in my first book, Currency Wars (2011), and in several other books in the years since.

This process can take many years. For example, the decline of sterling as the leading global reserve currency played out over 30 years from 1914 (the beginning of World War I) to 1944 (the Bretton Woods conference).

Still, events today are playing out so quickly that the collapse is happening in front of our eyes.

It’s no longer a matter of a major event on the horizon; it’s occurring in real-time. Russia has just linked the ruble to gold at a rate of 5,000 rubles to one gram of gold. China is discussing with Saudi Arabia the prospect of paying for oil in yuan.

Israel is likewise considering taking yuan in exchange for its high-tech exports. China and Russia are creating new payments systems to avoid U.S. sanctions. You get the point.

Foreign Central Banks Aren’t Dumb

Central banks have been net buyers of physical gold since 2010. Countries all over the world are considering dumping dollars for fear that they will be next on the list to have their dollar assets frozen or seized the way the U.S. seized the dollar-denominated assets of the Central Bank of Russia.

That makes sense. What’s the point of holding dollars in your reserve positions if the U.S. can freeze those accounts on a whim? Americans tend to take dollar strength for granted, but that’s a mistake. It’s helpful at times like this to get a foreign perspective.

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

Rickards: Bad News, I’m Afraid

Rickards: Bad News, I’m Afraid

The breakdown of global supply chains is well-known by now. Whether it’s finding groceries in your supermarket, buying a new car or buying appliances like dishwashers and refrigerators, goods are scarce. Also, deliveries take forever and choices are limited.

Many people wonder why the problem isn’t going away. Here’s the answer:

The supply chain is a complex dynamic system. When any complex system collapses, you can look for specific causes but that’s usually a waste of time. Systems collapse internally because they are too large and too interconnected and require too many energy inputs to keep going.

Any specific cause is more likely to be a symptom than a true cause. It’s frustrating, but that’s the answer.

Most Americans’ first encounter with the supply chain meltdown was in the spring of 2020 during the first wave of the coronavirus pandemic. Shoppers noticed that items like hand sanitizer and paper goods at Costco and other big-box stores were cleaned out.

It seemed that Americans who were locked down and quarantined at the time were hoarding these products because they had no idea when they would be allowed to venture out again.

The shortages were real, but were limited to specific products. The other aisles at Costco were stocked and so were all the other stores around (at least those that were allowed to remain open).

Now It’s Everything

But it’s not just Costco this time. It’s every supermarket, convenience store and other retail outlet from coast to coast. And it’s not just cleaning products and paper goods. Your local supermarket might have bare shelves for eggs, peanut butter, milk and other staples.

It’s not a case of being stocked out of all goods all the time. Your store is like a box of Cracker Jack – you never know what’s inside.

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

Globalism’s Achilles’ Heel

Globalism’s Achilles’ Heel

Supply chain disruptions have not been resolved, and it’s not clear when they will be. You’re seeing the effects of these disruptions at the store in the forms of shortages and higher prices.

Yet the supply chain is a subject that very few are familiar with beyond a superficial acquaintance.

Most people think the supply chain is just part of the global economy. That’s not entirely true. The supply chain is the global economy.

There isn’t a single good or service of any kind that does not arrive through a supply chain. Not one.

If the global supply chain is broken, then the global economy is broken. That increasingly appears to be the case.

The supply chain difficulties will grow worse. Even more troubling is the fact that the remedies will take years and sometimes decades to implement.

The reasons for this have to do with long lead times in implementing onshoring. For example, the U.S. can cut its dependence on Asian semiconductor imports by building its own semiconductor fabrication plans (fabs).

The problem is that these plants take from three–five years to build, and the scale needed is enormous.

There are impediments to supply chain recovery that are not directly related to particular supply chains that nonetheless hurt the process of adaptation and substitution.

For example, there’s already a labor shortage in America. The causes are complicated.

There’s no literal shortage of potential workers, but many workers prefer to stay home because of some combination of government benefits, child-care responsibilities or inadequate pay offered by employers (who can’t afford to pay more themselves because they’ll go out of business).

A lot of this labor shortage centers on lower-wage jobs such as waiters, store clerks, fast-food staff and office assistants. But there will be a labor shortage coming soon in more high-skilled areas such as engineers, pilots, machinists and medical personnel.

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

“Peak Inflation Is Here”- Jim Rickards

“Peak Inflation Is Here”- Jim Rickards

Peak Inflation Is Here and Gone

Last week Stansberry Investor’s Daniela Cambone interviewed Jim Rickards and got his take on inflation. We think this is a solid interview and Jim makes some good reasonable explanations as to why inflation has done what it has. Rickards puts much of the blame squarely in two places: Supply chain problems, and Biden administration policies.

When asked: Why did used car prices go up? Rickards responded with ‘No new cars were available due to chip issues. People bought used cars.’

His explanation for energy problems is equally sensible. The push into clean energy was too fast and poorly executed. Smart energy companies took advantage of that, as did Russia’s Putin.

The thesis essentially is that money printed isn’t the cause of inflation. The sanitization of the printing via RRP and bond allocations dampen the inflationary effect. For Rickards, the supply chains and Biden Administration fiscal policies are the culprit.

The only area he did not touch upon was rents. That shoe has yet to drop fully. Will it be as easily explained? The other point he makes is the Fed may be raising rates into a recession. Enjoy.

Jim Rickards: We’ve Reached Peak Inflation; The Real Risk in 2022 and Why Cash Is Critical

“Expect inflation to come down very quickly,” due to incoming rate hikes expected from the Federal Reserve, says NYT best-selling author Jim Rickards.

You could see severe, “tightening into weakness,” with a potential of three rate hikes next year, he predicts with our Daniela Cambone during the premiere of this year’s series, Outlook 2022: The Tipping Point.

In order for gold to gain momentum and rise in price, “the dollar has to get weaker,” he says. Having money on the sidelines is vital, according to Rickards, in order to be nimble into the coming year.

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

The Great Supply Chain Collapse

The Great Supply Chain Collapse

What’s at the root of the supply chain breakdown? That’s a critical question but the answer is almost irrelevant. The supply chain is a complex dynamic system of immense scale. It is of a complexity comparable to the climate as a system.

This means that exact cause and effect cannot be computed because the processing power needed exceeds the combined processing power of every computer in the world.

Most people have some notion of how supply chains work, but few understand how extensive, complex and vulnerable they are. If you go to the store to buy a loaf of bread, you know that the bread did not mystically appear on the shelf.

It was delivered by a local bakery, put on the shelf by a clerk, you carried it home and served it with dinner. That’s a succinct description of a supply chain – from baker to store to home.

Yet that description barely scratches the surface. What about the truck driver who delivered the bread from the bakery to the store? Where did the bakery get the flour, yeast and water needed to make the bread? What about the ovens used to bake the bread? When the bread was baked, it was put in clear or paper wrappers of some sort. Where did those come from?

Even that expanded description of a supply chain is just getting started in terms of a complete chain. The flour used for baking came from wheat. That wheat was grown on a farm and harvested with heavy equipment. The farmer hires labor, uses water and fertilizer and sends his wheat out for processing and packaging before it gets to the bakery.

The manufacturer who built the oven has his own supply chain of steel, tempered glass, semiconductors, electrical circuits and other inputs needed to build the ovens…

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

Supply Chain Disruptions Will Continue

Supply Chain Disruptions Will Continue

Forty percent of all the cargo into the United States comes through the ports of Los Angeles and Long Beach. Offshore, there are thousands of containers stacked up on vessels waiting to get in. How many containers can the ports unload on a normal day?

New containers are coming in. There are daily arrivals. When will that supply chain backlog clear?

The answer is never. If there are more coming in than you can unload and you have an existing backlog that’s getting worse, it will never clear.

But let’s just say that with no new shipments coming in, it would take 30 days just to unload what’s already waiting offshore. Thirty days, by the way, puts you into December and the Christmas rush.

And getting it offloaded in California is just the beginning of the supply chain. You’ve got to put it on a train or a truck and get it to a distribution center and put it on another truck and get it to a store.

But wait, there’s also a trucking shortage. That’s a big part of the supply chain problem. If you can unload the merchandise but can’t transport it due to a trucking shortage, what good is it?

So this is not getting better. That’s probably the understatement of the year.

You may have heard about a semiconductor shortage. But you don’t need a computer, so what’s the big deal? Well, no, there are semiconductors in everything. You have semiconductors in your refrigerator, dishwasher, home entertainment system, etc.

The point is we’re highly dependent on vulnerable supply chains that are currently breaking down. Something radical is going to have to happen. We’re just going to have to stop importing goods. And China may actually oblige us, though not for these reasons…

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

Lies, Lies, Lies!

Lies, Lies, Lies!

Politicians may be morons when it comes to public policy, but they’re geniuses when it comes to inventing new ways to control your life and steal your money.

Tax increases seem old-fashioned compared with new 21st-century ways to take over the financial system to your detriment and make you pay for their pet projects. Take climate, for example…

We’re all familiar with how climate alarm has been used to dictate changes in transportation, energy generation and construction codes. Of course, these efforts have been massive failures, as witnessed by the ongoing supply chain disruptions and energy shortages.

Large parts of Europe, Japan and China may freeze in the dark this winter thanks to efforts to close down nuclear and natural gas-fired electricity generation. The U.S. will be only slightly better off. We won’t freeze in the dark, but we will face much higher prices for home heating and gas at the pump.

The irony is that the U.S. will burn 23% more coal this year because of the shutdowns in nuclear and natural gas and the inability of wind turbines and solar to make up the difference. Nice job by the climate alarmists!

Will they be held to account? Will they see the error of their ways and abandon their delusions? Don’t hold your breath for either. They’ll only dig in harder.

Climate Alarmism Influencing Financial Decisions

Now the elites have a new way to use climate alarm to their advantage. They will use their existing control of the banks to force their climate agenda by dictating how banks lend and how you are allowed to spend.

The Department of Housing and Urban Development (HUD) will be required to factor climate alarm into decisions on federally insured or guaranteed mortgages. The Labor Department will evaluate retirement plan managers, including 401(k) and IRA advisers, based on how they factor climate alarm into their investment decisions.

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

Contagion!

Contagion!

There has been a litany of bad news recently, including the U.S. August humiliation in Afghanistan, China’s aggressive actions against Taiwan and increased tensions with Iran, North Korea and Russia.

It will take the U.S. years, possibly decades, to recover from the debacle of August 2021 and the collapse of American prestige. All of these geopolitical events combine to undermine confidence in U.S. power.

When that happens, a loss of confidence in the U.S. dollar is not far behind.

And, perhaps most importantly of all recent bad news, is a market meltdown and slowing growth in China.

Greatest Ponzi Ever

I’ve long advised my readers that the Chinese wealth management product (WMP) system is the greatest Ponzi in the history of the world. Retail investors are led to believe that WMPs are like bank deposits and are backed by the bank that sells them. They’re not.

They’re actually unsecured units in blind pools that can be invested in anything the pool manager wants.

Most WMP funds have been invested in the real estate sector. This has led to asset bubbles in real estate (at best) and wasted developments that cannot cover their costs (at worst). When investors wanted their money back, the sponsor would simply sell more WMPs and use the money to pay back the redeeming investors.

That’s what gave the product its Ponzi characteristic.

The total amount invested in WMPs is now in the trillions of dollars used to finance thousands of projects sponsored by hundreds of major developers. Chinese investors are all-in with WMPs.

Now the entire edifice is collapsing as I predicted it would.

The largest property developer in China, Evergrande, is quickly headed for bankruptcy. That’s a multibillion-dollar fiasco on its own. Evergrande losses will arise in WMPs, corporate debt, unpaid contractor bills, equity markets and unfinished housing projects.

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

Tyranny

Tyranny

I’d like to stop writing about COVID, but I can’t because it has such strong economic implications, which can’t be separated. And I’m afraid policies will be enacted that will only make things worse.

We all know the Delta variant of the COVID virus (SARS-CoV-2) is spreading rapidly in the U.S. and Australia. Major outbreaks have also hit India and Brazil.

What has received less attention is the fact that the Delta variant is now also spreading in China. That’s ironic because the virus started in China at the Wuhan Institute of Virology.

While the virus spread around the world, China quickly eliminated the spread inside China itself. Now, the virus has come full circle and is back in China in a new, more virulent form.

There’s a huge difference in how China approaches the virus from a public health perspective compared to the U.S., Japan or Europe. China’s lockdowns are far more extreme.

Why China Enforces Extreme Lockdowns

China will quickly identify an outbreak and cut off all car, train and air services to the affected area. China will also quickly shut down major ports and distribution centers if even a single case appears.

China knows that the spread of the virus is a threat to the legitimacy of the Chinese Communist Party. China cares more about Party loyalty and Party survival than it does about economic growth.

China is now imposing extreme measures, including canceling many domestic flights, closing ports and restricting vacation travel. China’s economy was already slowing before this new wave of the virus. Given China’s more extreme forms of COVID control, their economy will slow even further.

That’s bad news for China – and bad news for the world. Global growth will slow noticeably in the months ahead, partly because of the extreme nature of China’s lockdown approach.

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

Biden’s Crime Against the Economy

Biden’s Crime Against the Economy

I try to keep politics out of my economic analyses, and my approach is non-partisan. But sometimes I can’t avoid it because political policies can have significant economic impacts. Today is one of those times.

One of Joe Biden’s first acts as President was to kill construction of the Keystone XL pipeline. This is a pipeline that would bring oil from the tar sands of Alberta, Canada to the Midwest United States. From there it would be moved through other pipelines or refined and distributed to gas stations and industrial users in America.

Biden’s decision was destructive for a long list of reasons.

The immediate impact was to kill about 10,000 high-paying union jobs with benefits in construction, transportation and expert services. The ripple effects were even greater. Once a pipe delivery operation is killed, the trucking company and pipe manufacturer lay off more personnel and those workers stop spending at local restaurants and so on.

But killing the pipeline accomplishes nothing from an environmental standpoint. The decision to end the pipeline is pointless because the oil still moves out of Alberta. In the absence of a pipeline, the oil moves by railroad tanker cars on rail lines owned by Warren Buffett.

Pipelines Are Better for the Environment

It’s just that the railroad uses more energy and has higher CO2 emissions than a pipeline. If you cared about the environment, you’d favor a pipeline over railroads. But opponents don’t really care about the environment, they just want to shut down the oil and gas industries completely.

Shutting the pipeline is a step in that direction. Claims about local environmental damage and crossing Native American tribal areas were just feel-good red herrings. The goal was always just to kill the pipeline. Mission accomplished. Now, the Biden administration may have done more damage than thought at first.

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

The Real Russian Threat

The Real Russian Threat

I’ve written for years about different nations’ persistent efforts to dethrone the U.S. dollar as the leading global reserve currency and the main medium of exchange.

At the same time, I’ve said that such processes don’t happen overnight;  instead, they happen slowly and incrementally over decades.

The dollar displaced sterling as the leading reserve currency in the twentieth century, but it took thirty years, from 1914 to 1944, to happen. The decline started with the outbreak of World War I and the UK’s liquidation of assets and money printing to finance the war.

It ended with the Bretton Woods agreement in 1944 that cemented the dollar’s link to gold as the new global standard.

Even after the gold link was broken in 1971, the dollar standard remained because there was no good alternative. Then the 1974 deal with Saudi Arabia (along with other OPEC cartel members) to price oil in dollars created increased global demand for the dollar.

Because of the deal, dollars would be deposited with U.S. banks, so they could be loaned to developing economies, who could then buy U.S. manufactured goods and agricultural products.

This would help the global economy and allow the U.S. to maintain price stability. The Saudis would get more customers and a stable dollar, and the U.S. would force the world to accept dollars because everyone would need dollars to buy oil.

By the way, behind this “deal” was a not so subtle threat to invade Saudi Arabia and take the oil by force.

I personally discussed these invasion plans in the White House with Henry Kissinger’s deputy, Helmut Sonnenfeldt, at the time. But the Petro-Dollar plan worked brilliantly, and the invasion never happened.

Despite all this, nearly 50 years later, the erosion of the dollar’s role has begun and is visible in many metrics.

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

Wrong… Again

Wrong… Again

The Federal Reserve met last week and voted to keep interest rates unchanged. What a shock!

The Fed also gave an upbeat forecast of economic growth, predicting that the U.S. economy will grow 6.5% this year, its highest rate in nearly 40 years. Its December 2020 forecast projected 4.2% growth.

The Fed also expects that the economy could return to full employment next year and that inflation could hit 2.4% this year before declining again.

In effect, the central bank said they were willing to let the economy run “hot” and risk higher inflation in order to capture the benefits of stronger growth.

Zero rates are essentially a given as far as the eye can see. What about that growth forecast?

The Fed has one of the worst forecasting records of any financial institution in the world. My expectation is that growth is slowing now and will get worse as the year progresses.

I believe this will be especially true as the Biden administration policies of higher taxes, more regulation, and open borders that import cheap labor take effect.

Biden has also shut down new oil and gas exploration and wants to push a Green New Deal that will guarantee higher energy prices. Higher energy prices are a burden on the economy.

Little Cause for Optimism

Where’s the evidence that growth is slower than the Fed expects?

Inflation measures remain weak. The annual core consumer price inflation rate moved down from 1.7% in September 2020 to 1.3% in February 2021.

The overall consumer price inflation rate (including food and energy) rose modestly from 1.4% in September 2020 to 1.7% in February 2021.

On a year-over-year basis, the core personal consumption expenditures rate of increase (the Fed’s preferred index) moved from 1.4% in October 2020 to 1.5% in January 2021.

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

daily reckoning, james rickards, fed, us federal reserve, inflation, price inflation, cpi, consumer price inflation,

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