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Media: Why the Fed Raised 75 bps and How to Break the Davos Crowd

Media: Why the Fed Raised 75 bps and How to Break the Davos Crowd

I sat down for a long chat with my good friend Crypto Rich over the weekend and have just found the 20 minutes to post them here. We did a series of videos, Duran-style, on a number of topics. They are all below.

With the Fed raising by 75 bps yesterday I have to believe we’ve reached a major turning point in the War Against Davos. The deflation of asset prices and, most especially the Eurodollar markets is putting many other, over-leveraged central banks on a path towards bankruptcy.

There are a ton of moving parts, a lot of factions now warring against each other. When cartels break, the former members of the cartel always turn on each other. It was always going to be this way. Davos turned on its allies in the US commercial banking sector and they fought back.

Hard.

Everything I wrote about in my last post — SOFR/LIBOR spreads, US/German 10 year Spreads, Lagarde’s incompetence — were proven correct in the response yesterday by the markets to Powell’s hawkishness.

Davos has spent so long and so much money trying to convince us to ‘abandon all hope’ but it is they who now can do nothing but ‘enter here’ into our dragon’s den of asset deflation. The adjustment will be biblical. It will be painful.

And it didn’t have to be this way, but the solipsism and arrogance of evil people who have always known power and feel entitled to wield it in perpetuity is boundless.

Enjoy the rants and the wailing and gnashing of teeth by the very worst people in the world today.

The links below are to the videos on Odysee

Part 1 of the main talk

Part 2 of the main talk

How to Break the Great Reset

Will the Global South break free from dollarized debt?

Will the Global South break free from dollarized debt?

In his latest book, economist Michael Hudson pits socialism against finance capitalism and tears apart the ‘dream civilization’ imposed by the 1 percent.
https://media.thecradle.co/wp-content/uploads/2022/06/IMG-20220609-WA0000.jpg

Michael Hudson’s new book on the world’s urgent global economic re-set is sure to ruffle some Atlanticist feathers.

Photo Credit: The Cradle

With The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism, Michael Hudson, one of the world’s leading independent economists, has given us arguably the ultimate handbook on where we’re at, who’s in charge, and whether we can bypass them.

Let’s jump straight into the fray. Hudson begins with an analysis of the “take the money and run” ethos, complete with de-industrialization, as 90 percent of US corporate revenue is “used to share buybacks and dividend payouts to support company stock prices.”

That represents the apex of “Finance Capitalism’s” political strategy: to “capture the public sector and shift monetary and banking power” to Wall Street, the City of London and other western financial centers.

The whole Global South will easily recognize the imperial modus operandi: “The strategy of US military and financial imperialism is to install client oligarchies and dictatorships, and arm-twist allies to join the fight against designated adversaries by subsidizing not only the empire’s costs of war-making (“defense”) but even the imperial nation’s domestic spending programs.” This is the antithesis of the multipolar world advocated by Russia and China.

In short, our current Cold War 2.0 “is basically being waged by US-centered finance capitalism backing rentier oligarchies against nations seeking to build up more widespread self-reliance and domestic prosperity.”

Hudson presciently reminds us of Aristotle, who would say that it is in the interest of financiers to wield their power against society at large: “The financial class historically has been the major beneficiary of empires by acting as collection agents.”

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

Running on Empty, Part II

Running on Empty, Part II

How the Petrodollar Poisoned Foreign Policy with Financial Profiteering

Welcome to Part II of Running on Empty, my three-part analysis of the Petrodollar system. Part I of this series explained what the petrodollar system is, how it came to be, and what its financial effects have been on the United States. In Part II, I’ll explain the petrodollar’s implications for foreign policy. In Part III, I’ll show how those implications paved the way for the Russo-Ukraine War, and why that’s causing the system to break down.

America’s Chief Export is the US Dollar

As explained in the previous installment, the petrodollar system is based on an agreement between the US and Saudi Arabia. Under the terms of the deal, the US guarantees the security of Saudi Arabia and in exchange, Saudi Arabia guarantees that all petroleum is sold by OPEC for US dollars, with the US dollars re-invested into America via petrodollar recycling. The result: Since everyone needs petroleum, everyone needs US dollars. Oil replaces gold as the hard backing for the dollar. 1

Since the petrodollar system was put in place, the US has enjoyed a comparative advantage in manufacturing currency that no other nation enjoys. Under conditions of free trade, a country produces and exports more of a good for which it a comparative advantage, and produces less and imports more of the goods for which it doesn’t. And that’s what has happened: Since the petrodollar system was put in place in 1973, America has produced more and more dollars and produced less and less of everything else. The dollar is today our nation’s #1 export.

How large is the circulation of US dollars? As of April 2022, the American money supply, which economists call M2, stands at $21,728 Billion Dollars. M2 includes three types of money:

…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…

China and Russia are working on homegrown alternatives to the SWIFT payment system. Here’s what they would mean for the US dollar.

China and Russia are working on homegrown alternatives to the SWIFT payment system. Here’s what they would mean for the US dollar.

Vladimir Putin and Xi Jinping
Russian President Vladimir Putin and Chinese President Xi Jinping. 
Getty Images
  • Some Russian banks have been banned from SWIFT, a cross-border messaging service for banks.
  • India was reportedly considering a Russian proposal to use the SPFS for payments in rubles.
  • Moscow is also working with Beijing to connect to the Chinese messaging system.

In the aftermath of Russia’s unprovoked invasion of Ukraine, some Russian banks were banned from SWIFT, the Belgium-based messaging service that lets banks around the world communicate about cross-border transactions. The ban has hampered cross-border transactions for Russia’s trade and financial systems, isolating the country economically.

Now, both Russia and China are looking to establish alternatives to the US dollar hegemony.

Russia is touting an alternative ruble-based payment system called the System for Transfer of Financial Messages (SPFS). The system was set up in 2014. In late April, the country’s central bank said it would start keeping the names of participants secret.

China’s Cross-Border Interbank Payment System (CIPS) — which processes payments in Chinese yuan — also has potential to replace SWIFT. The system has an expansive network of 1,280 financial institutions, said Peter Keenan, the cofounder and CEO of Apexx, a payments provider that used to work with Russia’s domestic Mir payment card. That’s compared to SPFS’ much smaller network of 400 users.

There are few alternatives to SWIFT, Keenan told Insider: “This is one of the reasons why Russia is looking to CIPS and an alternative for Asian payments specifically.”

Here’s how China and Russia’s SWIFT alternatives could cause disruptions in the global payments system and the dollar’s dominance.

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

The Dollar Dethroned: We Have Reached The End Of Monetary Policy As We All Once Knew It

The Dollar Dethroned: We Have Reached The End Of Monetary Policy As We All Once Knew It

And the world hasn’t even noticed yet.

People who speak out openly with concern about the potential death of the U.S. dollar have been written off as conspiracy theorists for the better part of the last few decades.

But looking back, unfortunately, I’m sure history is going to be kind to these people and their prognostications. They will have been the ones who sounded the alarm in a relatively short amount of time before ultimately being proven right.

I don’t say this to brag or boast in advance in any way, I say it because I truly believe we are at the “beginning of the end” of the Keynesian economic experiment.


Less than two weeks ago, I wrote an article proclaiming that Russia would back the ruble with gold as a way to fight back against Western economic sanctions. I also made similar predictions about the new digital Chinese currency last summer when I first started Fringe Finance.

To me, since I began piecing together my understanding of macroeconomics and the global economy about a decade ago, it had become painfully obvious that the fiat system the U.S. plays by, which hinges on the dollar being the global reserve currency, had its days numbered.

The catalyst that is helping hurl us toward our monetary rude awakening faster than ever has been the war in Ukraine. Actually, it hasn’t been the war so much as it has been the West’s reaction to the war. As only blindly arrogant believers in the Keynesian dog-and-pony show could do, we rushed to cut Russia off the SWIFT system, limited investing in Russia companies and sanctioned the country’s oligarchs.

To which Russia basically replied, “OK. We still have the oil.”

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

The Petrodollar Collapse is Here! Disaster for U.S.

The Petrodollar Collapse is Here! Disaster for U.S.

The evolution of credit

The evolution of credit

After fifty-one years from the end of the Bretton Woods Agreement, the system of fiat currencies appears to be moving towards a crisis point for the US dollar as the international currency. The battle over global energy, commodity, and grain supplies is the continuation of an intensifying financial war between the dollar and the renminbi and rouble.

It is becoming clear that the scale of an emerging industrial revolution in Asia is in stark contrast with Western decline, a population ratio of 87 to 13. The dollar’s role as the sole reserve currency is not suited for this reality.

Commentators speculate that the current system’s failings require a global reset. They think in terms of it being organised by governments, when the governments’ global currency system is failing. Beholden to Keynesian macroeconomics, the common understanding of money and credit is lacking as well.

This article puts money, currency, and credit, and their relationships in context. It points out that the credit in an economy is far greater than officially recorded by money supply figures and it explains how relatively small amounts of gold coin can stabilise an entire credit system.

It is the only lasting solution to the growing fiat money crisis, and it is within the power of at least some central banks to implement gold coin standards by mobilising their reserves.
Evolution or revolution?

There are big changes afoot in the world’s financial and currency system. Fiat currencies have been completely detached from gold for fifty-one years from the ending of the Bretton Woods Agreement and since then they have been loosely tied to the King Rat of currencies, the dollar. Measured by money, which is and always has been only gold, King Rat has lost over 98% of its relative purchasing power in that time…

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

US dollar’s dominance in oil markets may face challenge as Saudis reportedly eye yuan-based sales deal with China

US dollar’s dominance in oil markets may face challenge as Saudis reportedly eye yuan-based sales deal with China

HANGZHOU, CHINA - SEPTEMBER 04: Chinese President Xi Jinping (right) shakes hands with Saudi Arabian Deputy Crown Prince and Minister of Defense Mohammed bin Salman bin Abdulaziz Al Saud to the G20 Summit on September 4, 2016 in Hangzhou, China. World leaders are gathering in Hangzhou for the 11th G20 Leaders Summit from September 4 to 5. (Photo by Lintao Zhang/Getty Images)
Saudi Crown Prince Mohammed bin Salman and Chinese President Xi Jinping. 
Lintao Zhang/Getty Images
  • Saudi Arabia is in talks to sell oil to China and be paid in yuan, according to the Wall Street Journal.
  • For nearly 50 years, the world’s top oil exporter has traded crude exclusively in US dollars.
  • Relations between Saudi Arabia and the US have deteriorated under the Biden administration.

Saudi Arabia is in talks to sell oil to China and be paid in yuan instead of dollars, according to a Wall Street Journal report.

About 80% of global oil sales are done in dollars, and Saudi Arabia has conducted its deals exclusively in the greenback since 1974. So if a Saudi-yuan deal were to be made, it would bolster China’s currency at the expense of the dollar as Beijing looks to challenge US leadership in financial markets.

The likelihood of a potential deal between Saudi Arabia and China has picked up recently, according to the Journal. The longtime Mideast ally has grown unhappy with the US due to the Biden administration’s reluctance to do more in the Yemen civil war and its push to revive the Iran nuclear deal.

In 2020, Biden also promised to make Saudi Arabia a “pariah” over the murder of a journalist. And since becoming president, he has made it clear that he doesn’t consider Saudi Arabia as an ally, but rather as a partner.

What’s more, Saudi Crown Prince Mohammed bin Salam reportedly rejected a request for a call with Biden to discuss Ukraine and boost oil production amid the West’s sanctions against Russia.

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

World War III Has Already Started, and It’s an Economic War

World War III Has Already Started, and It Is an Economic War

Image © Chekov_UA. All rights reserved.

In an article I published in April of 2018, World War III Will Be An Economic War, I outlined a number of factors that portend a large scale conflict between East and West and why this war would be mainly economic in nature. I investigated how this conflict would actually benefit globalists and globalist institutions seeking to bring down multiple nations’ economies while hiding the engineered crisis behind a wall of geopolitical chaos and noise.

The goal? To convince the masses that national sovereignty was a plague that only leads to mass death, and that the “solution” is a one-world system – conveniently managed by the globalists, of course.

One issue which I used to get a lot of arguments over was the idea that countries like Russia and China would end up so closely aligned. People claimed there were too many disparities and that the countries would ultimately turn on each other in the middle of a financial crisis.

Well, it’s four years later and now we’re going to see if that is true or not. So far, it looks like I was correct.

My position has long been that certain nations have been preparing for a collapse of the U.S. dollar as the world reserve currency (the primary currency used in the majority of trade around the world). My belief is that America’s top economic position is actually an incredible weakness; the dollar’s hegemony is not a strength, but an Achilles heel. If the dollar was to lose reserve status, the whole of the U.S. economy and parts of the global economy would implode, leaving behind only those who prepared – those who saw the writing on the wall and planned ahead.

The dollar crash coalition

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

The American Empire Self-Destructs, But Nobody Thought That It Would Happen This Fast

The American Empire Self-Destructs, But Nobody Thought That It Would Happen This Fast

Photograph Source: Phil Dolby – CC BY 2.0

Empires often follow the course of a Greek tragedy, bringing about precisely the fate that they sought to avoid. That certainly is the case with the American Empire as it dismantles itself in not-so-slow motion.

The basic assumption of economic and diplomatic forecasting is that every country will act in its own self-interest. Such reasoning is of no help in today’s world. Observers across the political spectrum are using phrases like “shooting themselves in their own foot” to describe U.S. diplomatic confrontation with Russia and allies alike. But nobody thought that The American Empire would self-destruct this fast.

For more than a generation the most prominent U.S. diplomats have warned about what they thought would represent the ultimate external threat: an alliance of Russia and China dominating Eurasia. America’s economic sanctions and military confrontation have driven these two countries  together, and are driving other countries into their emerging Eurasian orbit.

American economic and financial power was expected to avert this fate. During the half-century since the United States went off gold in 1971, the world’s central banks have operated on the Dollar Standard, holding their international monetary reserves in the form of U.S. Treasury securities, U.S. bank deposits and U.S. stocks and bonds. The resulting Treasury-bill Standard has enabled America to finance its foreign military spending and investment takeover of other countries simply by creating dollar IOUs. U.S. balance-of-payments deficits end up in the central banks of payments-surplus countries as their reserves, while Global South debtors need dollars to pay their bondholders and conduct their foreign trade.

This monetary privilege – dollar seignorage – has enabled U.S. diplomacy to impose neoliberal policies on the rest of the world, without having to use much military force of its own except to grab Near Eastern oil.

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

Zoltan Pozsar Warns Russian Sanctions Threaten Dollar’s Reserve Status

Zoltan Pozsar Warns Russian Sanctions Threaten Dollar’s Reserve Status

Over the weekend, the world gasped in shock when Western powers announced that the nuclear option would be used against Russia in retaliation for its invasion of Ukraine – sanctions against the country’s central bank and targeted expulsions of key banks from SWIFT, a move which has effectively locked Russia out of the western financial system and left its vast oil export industry – a key lifeline for the Putin regime – in limbo. But the real reason for the shock is that this was the first time the global reserve currency was weaponized against a G20 economy, setting a clear precedent for how the west would and could respond to any other nation that followed in Russia’s footsteps (something which China is clearly contemplating vis-a-vis Taiwan, and is carefully studying just how the west responds to Moscow),

As a result, and following this week’s dramatic freeze of the Russian central bank overseas assets, has prompted some to question just why countries build foreign currency reserves at all and, more broadly, whether the unprecedented western response to Russia hasn’t jeopardized the dollar’s reserve status.

In what one Washington lawyer described to Reuters as the “biggest hammer in the toolshed”, the G7 and European Union governments blocked certain Russian banks’ access to the SWIFT international payment system and also went a step further than many expected by paralyzing about half the Russian central bank’s $630 billion worth of foreign currency and gold reserves. In doing so, the west has undermined Moscow’s ability to defend the ruble – which has lost up to a quarter of its value since Friday alone – and recapitalize sanctioned banks as they face nascent bank runs. In fact, as some admitted, it was the explicit intention of the west to spark bank runs and to crash the Russian financial system from within.

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

Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire

Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire

The Empire is striking back, protecting what really counts, and the Billionaire Bubble sideshow is folding its tents.

One of the most enduring conceits of the modern era is that the Federal Reserve acts to goose growth and therefore employment while keeping inflation moderate (whatever that means–the definition is adjustable). This conceit is extremely handy as PR cover: the Fed really, really cares about little old us and expanding our ballooning wealth.

Nice, except it doesn’t. The Fed’s one real job is defending the U.S. dollar, which is the foundation of America’s global hegemony a.k.a. The Empire.

One thing and one thing alone enables global dominance: being able to create “money” out of thin air and use that “money” to buy real stuff in the real world. The nations that can create “money” out of thin air and trade it for magnesium, oil, semiconductors, etc. have an unbeatable advantage over nations that must actually mine gold or make something of equal value to trade for essentials.

The trick is to maintain global confidence in one’s currency. There is no one way to manage this, as confidence in a herd animal such as human beings is always contingent. Once the herd gets skittish, all bets are off.

The herd is exquisitely sensitive to movements on the edge of the herd, where threats arise. There are various tricks one can deploy to maintain confidence: pay a higher rate of interest on bonds denominated in one’s currency, so global capital flows into your currency; treat this capital well with a transparent set of tax laws and judiciary / regulatory oversight, maintain a deep pool of liquidity so capital can enter and exit without stampeding the herd, and having at least a semi-productive, diverse economy that generates goods, services and income streams to support the currency.

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

Is Powell Again Pulling Strings From “The Shadows”?

Is Powell Again Pulling Strings From “The Shadows”?

Recently, we have seen stocks rally while the dollar falls. Some of us are wondering why the dollar is falling at the same time currency traders are busy penciling in as many as four interest rate increases. The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was down 0.1% on Thursday hitting a two-month low. This drop leaves the dollar with a loss of 1.2% since the start of the new year.A more aggressive tightening of monetary policy and “hawkish” central bank intent on slowing inflation is generally seen as supportive to a currency. Is it possible Powell dropped the dollar to kick the stock market back up? I contend this is what is happening. Such a move has been used in the past. In volatile markets, like we have today ruled at times by emotions, the fear of missing out, and a slew of traders trained to buy the dip, it doesn’t take much to turn an ugly selling streak into a buying panic.

The combination of a sudden drop in the dollar just as the Fed starts talking about tapering and raising rates is difficult to understand. With most seasoned investors allergic to risk, logic would tend to make them view the coming Fed action as a strong headwind to markets going higher. At the same time, higher interest rates and less expansion of the Fed’s balance sheet generally moves the dollar higher.

While it could be argued the falling dollar simply reflects the coming recession into which the Fed is tightening, again I point to Powell as the great enabler…

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

Central Banks Rush to Protect Themselves from Incoming Disaster

Central Banks Rush to Protect Themselves from Incoming Disaster

Image courtesy of European Central Bank

The times, they are a-changin’, as Bob Dylan tells us.

On the global economic stage, the U.S. isn’t the dominant economic superpower that it once was. This conclusion comes from the declining popularity of dollars among global central banks.

Around the world, national central banks stockpile “reserves” in order to back up the value of their own national currency. Here’s how Investopedia explains monetary reserves:

  • The currency, precious metals, and other assets held by a central bank or other monetary authority
  • Monetary reserves back up the value of national currencies by providing something of value that the currency can be exchanged or redeemed for by note holders and depositors
  • Reserves themselves can either be gold or denominated in a specific currency, such as the dollar or euro

In a sense, holding any asset as part of a nation’s monetary reserves is a vote of confidence in it (which is a big reason central banks own tons of gold bars).

Here’s the concern: according to International Monetary Fund (IMF) data, the U.S. dollar (USD) has been hobbling along at a 26-year low in terms of its share of global reserve currencies.

Wolf Richter explained the specifics: “The global share of US-dollar-denominated exchange reserves declined to 59.15% in the third quarter, from 59.23% in the second quarter.”

The world is losing faith in the dollar as a safe, stable store of value. Take a look at the history of the USD share of global reserve currencies since 1967 on the chart below.

Take special note of how high the share was in 1977 (85%) before inflation spiraled out of control. Then note how much of that share disappeared by 1991:

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

Olduvai IV: Courage
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Olduvai II: Exodus
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