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Crazy days for money

Crazy days for money

This article anticipates the end of the fiat currency regime and argues why its replacement can only be gold and silver, most likely in the form of fiat money turned into gold substitutes.

It explains why the current fashion for cryptocurrencies, led by bitcoin, are unsuited as future mediums of exchange, and why unsuppressed bitcoin has responded more immediately to the current situation than gold. Furthermore, the US authorities are likely to suppress the bitcoin movement because it is a threat to the dollar and monetary policy.

This article explains why growth in GDP represents growth in the quantity of money and is not representative of activity in the underlying economy. The authorities’ monetary response to the current economic situation is ill-informed, based on a misunderstanding of what GDP represents.

The common belief in the fund management community that rising interest rates are bad for gold exposes a lack of understanding about the consequences of monetary inflation on relative time preferences. Rising interest rates will be with us shortly, and they will burst the bond bubble with negative consequences for all financial assets and the currencies that have inflated them.

In short, we are sitting on a monetary powder-keg, the danger of which is barely understood by policy makers and which could explode at any time.

Introduction

We have entered a period the likes of which we have never seen before. The collapse of the dollar and dollar assets is growing increasingly certain by the day. The money-printing of the dollar designed to inflate assets will end up destroying the dollar. We know this thanks to the John Law precedent three hundred years ago. I last wrote about this two weeks ago, here. In 1720, it was just France and Law’s livre…

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

The U.S. Dollar Could Be Nearing Its “End Game”

From foreign countries trying to dethrone the dollar’s hegemony as global reserve currency, all the way to rising inflation weakening it… the U.S. dollar is in trouble.

Pundits like Jim Rickards said (back in 2016): “The dollar won’t lose its reserve currency status overnight” — and he was right. But a new and disturbing signal could finally be revealing the end game.

You can see the dollar’s loss of about 10% value against other currencies and its persistent downward trend since March 2020 reflected in the dollar index chart below:

dollar index chart from March 2020-February 2021

To get an even better idea of that persistent downward trend, we need to look all the way back to 2002, when the dollar index (DXY) peaked around 117. Not only is today’s dollar worth 10% less than last year’s – it’s 25% weaker than in 2002.

In fact, one forecast reported on Bloomberg in June 2020 called for a 35% decline in value by the end of 2021, which would leave the dollar index at 65. If that plays out, the index would be reporting its lowest value in at least 35 years.

In addition, a new Bloomberg report gave three reasons why the “dollar is now trading at the lowest level against its peers since 2018”:

1) Sharp widening in the U.S. current-account [trade] deficit.
2) Rise of the euro.
3) A Federal Reserve that would do little in response to any weakness in the greenback.

There is no doubt the trade deficit is a problem. According to the Bureau of Economic Analysis, the gap between imports and exports is at its widest since 2006. That won’t help the dollar recover.

The Fed’s inflation policy isn’t likely to help the dollar much because it “printed” itself into a corner with its loose monetary policy. The same Bloomberg piece further clarifies the Fed’s inflation strategy:

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

 

Canada & The Canceling of its Currency

QUESTION #1: If Canada is not a dictatorship, how can Trudeau cancel the dollar? How can he do so in secret?

RW

QUESTION #2: Why can’t Biden follow Trudeau and cancel the dollar?

EH

ANSWER: The answer lies in the difference in history.  Because the paper currency called bills-of-credit back then became worthless, the Framers of the Constitution expressly took into account currency. I have written before that when I was a market-maker in gold and one of the three largest in the country, the IRS walked in and declared me to be a bank and then I was supposed to report everyone who bought or sold gold in $10,000 amounts or more. They cited the Constitution saying that gold and silver were money thereby making me a bank because Nixon only closed the gold window, he never DEMONITIZED gold. So I was suddenly a bank in no need of such a license for the purposes of the IRS. Hence, I retired.

This raises an interesting question. Can Congress create a digital dollar constitutionally? The question of money was thus settled directly in the Constitution because each state had previously issued its own coinage and paper bills-of-credit (paper money).

Article 1 – The Legislative Branch
Section 10 – Powers Prohibited of States
<<Back | Table of Contents | Next>>

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

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

The Markets in Light of the Chaos

When we look around the world the final say in every election is always the vote of capital – which is international rather than confined to local politics. Biden has already shut down the pipeline from Alberta which will only be symbolic for whatever substitute will mere be brought in by ship and pumped into another pipeline. But politics is never about reality – it is only concerned about appearance.

When we look around the world, we must do so through the eyes of the FX markets for only then will we begin to see the real trends. The German DAX has made a new high in euros, but not in the main global currencies. In both dollars and Japanese yen, the DAX has not yet come close to making new highs.

 

Then we have the confusing trend in gold. So many have been asking for a Gold Report ASAP because nothing has made sense after all of these years touting gold is a hedge against inflation and the dollar will collapse. There is even the most bizarre analysis claiming that just a few months before Covid appeared, the Fed was busy pouring boat-loads of dollars into the US banks into the inter-lending market known as REPO to prevent bank-runs which were starting to develop. They claimed these were the same “tectonic fissures that developed prior to the 2008 crisis” when banks became so distrustful of each other’s solvency. They concluded: “If unsuppressed the lending rates would continue to rise, laying a path to bank failures and a contagion which would eventually derail the economy and undermine the dollar itself.”

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

Interest Rate Tremors May Spell Disaster for the Dollar

As the U.S. plunges further into debt beyond a staggering $27 trillionthe dollar’s time is running out. But the problem is much deeper than that.

With inflation on the rise, and long-term bond yields rising in concert with massive debt, some disturbing scenarios could develop that spell trouble for the dollar.

The most disturbing possibility on the horizon could develop in the huge bond market (about $500 trillion in size). According to the January 14 issue of One Last Thing by Three Founders Publishing, if it were to collapse, the result would be catastrophic:

“If Treasuries begin to collapse, forcing yields through the roof, it will result in crashes in stocks, real estate, corporate bonds, and municipal bonds all at the same time.”

So let’s take a closer look at what’s happening, which could bring the possibility of a Treasury market collapse or other troubling financial realities closer to the near-term.

Starting with the U.S. Dollar

The value of the U.S. dollar rose 0.55% on Monday, January 11, and that was enough for Barron’s to trumpet, “The Dollar Is Rising.”

That’s a misleading headline. The dollar’s gain vanished quickly. Furthermore, the dollar’s value has remained fairly steady since 2015. In fact, the dollar has yet to come near its most recent peak in 2002.

Barron’s explained the fall of the dollar from March until the recent uptick:

The dollar has fallen by double-digit percentages since March because economic growth is expected to rebound faster globally than in the U.S. this year, while the Federal Reserve has slashed short-term interest rates to near zero. That has reduced the appeal of dollar-denominated debt, limiting overseas investors’ need to buy greenbacks.

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

Paper Dollars in Circulation Globally Spike amid Hot Demand. But a Mexican Bank, after Run-ins with the US, Can No Longer Unload its Hoard of Paper Dollars

Paper Dollars in Circulation Globally Spike amid Hot Demand. But a Mexican Bank, after Run-ins with the US, Can No Longer Unload its Hoard of Paper Dollars

Triggering a showdown — Government of Mexico v. Central Bank — over paper dollars, with ramifications in the US and globally.

The amount of “currency in circulation” – the paper dollars wadded up in people’s pockets and purses, stuffed under mattresses, or packed into suitcases and safes overseas – jumped again in the week ended December 30 to a new record of $2.09 trillion, according to the Federal Reserve’s balance sheet, where currency in circulation is a liability, not an asset. This was up by 16%, or by $293 billion, from February before the Pandemic. The amount has doubled since 2011:

This amount of currency in circulation is a function of demand – and that demand has been red hot: US Banks have to have enough paper dollars on hand to satisfy demand at ATMs and bank branches. Foreign banks will also request paper dollars from their correspondent banks in the US, or return unneeded cash to them.

When there is demand for paper dollars, banks buy more of them from the Fed. They pay for them usually with Treasury securities they hold or with excess reserves they have on deposit at the Fed.

The surge of paper dollars is a sign of hoarding, not of increased payments. In the US, the share of paper dollars for payments has been declining for years, replaced by electronic payment methods, such as credit and debit cards, PayPal, Zelle and similar systems, all kinds of smartphone-based payment systems, the automated clearinghouse (ACH) system, and checks every now and then.

During periods of uncertainty, people load up on cash, as they have done leading up to Y2K, during the Financial Crisis, and now during the Pandemic.

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

 

US Dollar as “Global Reserve Currency” amid Fed’s QE and US Government Deficits: Dollar Hegemony in Decline

US Dollar as “Global Reserve Currency” amid Fed’s QE and US Government Deficits: Dollar Hegemony in Decline

Other options also shaky. Central banks leery of Chinese RMB, its share still irrelevant.  Euro’s share is stuck. But the yen’s share has been rising.

The US dollar’s position as the dominant global reserve currency is an immensely important factor in supporting the ballooning US government debt, the Fed’s drunken money-printing, and Corporate America’s ambition to offshore production to cheap countries, thereby creating huge and ever-growing trade deficits. They all have become dependent on the willingness of other central banks to hold large amounts of dollar-denominated paper. But from the looks of things, those central banks might be getting a little nervous.

The global share of US-dollar-denominated exchange reserves – US Treasury securities, US corporate bonds, US mortgage-backed securities, etc. held by foreign central banks – fell to 60.5% in the third quarter, according to the IMF’s COFER data release. This is the lowest since 1995. Over the past six years, the dollar’s share has been dropping at a rate of about 1 percentage point per year:

The dollar’s 20-year decline.

Dollar-denominated global foreign exchange reserves do not include the Fed’s own holdings of dollar-denominated assets that it bought as part of its QE, such as its $4.6 trillion in US Treasury securities and $2.1 trillion in US mortgage-backed securities.

The decline in the dollar’s share began 20 years ago when the euro assumed the place of the predecessor currencies, including the Deutsche mark, that used to be in the basket of foreign exchange reserves. But that 20-year 10-percentage-point decline pales compared to the near 40-point plunge in the dollar’s share from 1977 (85%) to 1991 (46%), which was followed by the 25-point surge till 2000.

For now, the motto among these central banks, jointly, seems to be: easy does it. No one wants to trigger a sudden crisis (2020 = Q3):

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

Who is Behind it Central Bankers & Can the Dollar Survive?

QUESTION: Are the central bankers really behind this digital currency? Will that end the dollar as the reserve currency?

Thank you for sharing your experience.

HV

ANSWER: No the central bankers are NOT the instigators. It was Christine Lagarde who when at the IMF was threatening counties they would be blocked from Swift if they did not give up all those who had accounts in these tax havens. Germany went as far as to violate Swiss law and paid bribes to bankers to leak the records of the firms they worked for, which not even Hitler went that far. The entire digital currency idea was pushed by Christine Lagarde while at the IMF. But look closely, she is also a board of trustee member of Schwab’s World Economic Forum along with the new head of the IMF Kristalina Georgieva. It was Schwab who got Legarde put into the IMF and then he put her in the central bank. He then had Georgieva put into the IMF.

People who always point to the central bankers really do not know what is going on behind the curtain. Schwab is in league with Bill Gates and George Soros. Gates was pushing the digital currency at the United Nations. Melinda Gates was pushing the digital currency at the G20. It was Gates directing Modi to cancel the currency in India and he did so without ever telling the central bank in advance!

All this nonsense that we are moving to this digital currency system that will dethrone the dollar is just laughable. The three main elements that are the reason why the dollar is the reserve currency has been

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

“Panicking” Central Banks to Power Gold Higher

Panicking Central Banks to Power Gold Higher

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Institutions will be the drivers of gold demand, Ray Dalio issues warning about the greenback, and silver believers could soon be rewarded.

Institutional demand will power gold prices as central banks panic

As Egon von Greyerz notes via ZeroHedge, uncertainty has been the theme across the board this year, and it is unlikely to dissipate any time soon. von Greyerz believes that the uncertainty is tied to the end of a cycle, and while the full timeline of the cycle isn’t entirely clear, its social and economic aspects are directly tied to the abolishment of the gold standard in 1971.

This accelerated the precarious path that the Federal Reserve set for the U.S. when it was created in 1913, one of perpetually expanding debt and an economy based on faith. That there is no solution to the debt issue has been painfully demonstrated by various administrations. The Clinton administration from 1998-2001 and the current Trump administration have been among the most vocal regarding the issue, yet neither has been able to prevent the U.S. national debt from roughly doubling every 8 years.

von Greyerz sees central banks as being on exceptionally shaky grounds, as the aforementioned untethering started the fall of fiat currencies. Most of them have lost around 85% against gold since 2000, and all of them have lost upwards of 97% of their value since 1971. While the U.S. dollar stands out as exceptionally long-lasting, von Greyerz sees economic factors that are beginning to threaten it.

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

China is killing the dollar

China is killing the dollar

Introduction

On 3 September, China’s state-owned Global Times, which acts as the government’s mouthpiece, ran a front-page article warning that

“China will gradually decrease its holdings of US debt to about $800billion under normal circumstances. But of course, China might sell all of its US bonds in an extreme case, like a military conflict,” Xi Junyang, a professor at the Shanghai University of Finance and Economics told the Global Times on Thursday”[i].

Do not be misled by the attribution to a seemingly independent Chinese professor: it would not have been the front page article unless it was sanctioned by the Chinese government. While China has already taken the top off its US Treasury holdings, the announcement (for that is what it amounts to) that China is prepared to escalate the financial war against America is very serious. The message should be clear: China is prepared to collapse the US Treasury market. In the past, apologists for the US Government have said that China has no one to buy its entire holding.

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

The U.S. Dollar Collapse Is Greatly Exaggerated

The U.S. Dollar Collapse Is Greatly Exaggerated

The US Dollar Index has lost 10% from its March highs and many press comments have started to speculate about the likely collapse of the US Dollar as world reserve currency due to this weakness.

These wild speculations need to be debunked.

The US Dollar year-to-date (August 2020) has strengthened relative to 96 out of 146 currencies in the Bloomberg universe. In fact, the U.S. Fed Trade-Weighted Broad Dollar Index has strengthened by 2.3% in the same period, according to data compiled by Bloomberg.

The speculation about countries abandoning the U.S. Dollar as reserve currency is easily denied. The Bank Of International Settlements reports in its June 2020 report that global US-dollar denominated debt is at a decade-high. In fact, US-dollar denominated debt issuances year-to-date from emerging markets have reached a new record.

China’s dollar-denominated debt has risen as well in 2020. Since 2015, it has increased 35% while foreign exchange reserves fell 10%.

The US Dollar Index (DXY) shows that the United States currency has only really weakened relative to the yen and the euro, and this is based on optimistic expectations of European and Japanese economic recovery. The Federal Reserve’s dovish announcements may be seen as a cause of the dollar decline, but the evidence shows that the European Central Bank (BOJ) and the Bank Of Japan (BOJ) conduct much more aggressive policies than the U.S. while economic recovery stalls. Recent purchasing manager index (PMI) declines have shown that hopes of a rapid recovery in Europe and Japan are widely exaggerated, and the Daily Activity Index published by Bloomberg confirms it. Furthermore, the balance sheet of the ECB is at the end of August more than 54% of the eurozone GDP and the BOJ´s is 123% versus the Federal Reserve’s 33%.

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

Peter Schiff: Government Tries to Replace the Economy With a Printing Press

Peter Schiff: Government Tries to Replace the Economy With a Printing Press

Peter Schiff recently spoke at the “virtual” Los Vegas Money Show and explained why we are near the endgame for the dollar.

Peter opened up his talk speculating that the Money Show could be close to the end of its run.

I think the money that most people have, or at least what they think is money isn’t going to be money much longer.”

What in the world is he talking about?

The looming dollar crisis.

The dollar is going to fall through the floor and inflation is going to ravish the United States. What’s about to happen is that the world is going to go off the dollar standard and go back to the gold standard. That is where we are headed.”

Peter warned that we’re about to see a loss of wealth on an unprecedented scale.

He reiterated that this isn’t about COVID-19. We were already on the cusp of a crisis. The coronavirus simply made it worse.

It’s one of many problems,  but it’s not why we’re about to go through this massive economic collapse. But it is the monetary and fiscal policy response to COVID-19. The government’s cure is what’s going to kill the economy.”

In fact, the problems started long before the pandemic. As Peter reminds us, interest rate cuts and QE were already ongoing before the government shutdowns started last March. In fact, it goes back much further than that.

Everything the US government did in the aftermath of the 2008 financial crisis was a mistake. All the monetary policy was wrong. All the fiscal policy was wrong. As a consequence, we never actually recovered from that crisis.

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

Dollar’s Purchasing Power Drops to Lowest Ever. Inflation Heats Up, as Fed Wants, After Simultaneous Supply & Demand Shocks

Dollar’s Purchasing Power Drops to Lowest Ever. Inflation Heats Up, as Fed Wants, After Simultaneous Supply & Demand Shocks

“We’re not even thinking about thinking about” slowing the decline of the dollar’s purchasing power — and thereby labor’s purchasing power.

A supply shock and a demand shock came together during the Pandemic, and it produced chaos in the pricing environment. There was a sudden collapse in demand in some segments of the economy – restaurants, gasoline, jet fuel, for example – and a surge in demand in other segments, such as eating at home, and anything to do with ecommerce, including transportation services focused on it.

These shifts came together with supply-chain interruptions and supply chains that were unprepared for the big shifts, leading to shortages in some parts of the economy – the supply shock. There were empty shelves in stores, while product was piling up with no buyers in other parts of the economy.

The sectors surrounding gasoline, jet fuel, and diesel fuel – oil and gas drilling, equipment manufacturers, transportation services, refineries, etc. – were thrown into turmoil as demand vanished, leading to a total collapse in energy prices. In April, in a bizarre moment in the history of the oil business, the price of the US benchmark crude WTI collapsed to negative -$37 a barrel.

Since then, the price of crude oil has risen sharply (now at positive +$41 a barrel), as demand for gasoline has returned to near-normal while demand for jet fuel remains in collapse-mode, as people are driving to go on vacations, instead of flying, and as business travel is essentially shut down.

As a result, for a few months, all of the inflation data was going haywire, with some prices plunging and others spiking. This is now being worked out of the system.

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

The Dollar’s Ongoing Fall From Grace Will Soon Catapult Precious Metals to Even Greater Heights

The Dollar’s Ongoing Fall From Grace Will Soon Catapult Precious Metals to Even Greater Heights

gold vs dollar

I have been telling readers to put savings into gold and silver for well over 14 years now, and in that time, precious metals have had spectacular rallies as well as intense corrections. Weak hands have been selling and strong hands have been buying and holding for some time now. We have done this with the expectation of something far more than just a parabolic event; some of us have been predicting an economic crisis the likes of which have not been seen in almost a century.

Specifically, in 2018, I warned that there was a dramatic shift in Federal Reserve policy that would puncture the massive debt bubble they had been building since 2008. The crash of the “Everything Bubble” would inevitably lead to a spike in metals prices.

In an article published in January 2018, I warned that the Fed would increase the speed of its balance sheet cuts and interest rate hikes and that this would trigger an initial implosion in the U.S debt bubble and the dollar, along with flirtations with a stock market plunge. By the end of 2018, we saw exactly that.

By mid-2019, the Fed had reversed its fiscal tightening policies, but of course, it was too late; Pandora’s box had already been opened and economic instability was increasing. I continue to believe that this action on the part of the Fed was absolutely deliberate and that they knew they were initiating the beginnings of a crisis. The minutes of the October 2012 Federal Open Market Committee even reveal that Jerome Powell openly discussed what would happen, years before he became the Fed Chair.

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

Peter Schiff: The Dollar Crash Will Take Down the Entire US “House of Cards”

PETER SCHIFF: THE DOLLAR CRASH WILL TAKE DOWN THE ENTIRE US “HOUSE OF CARDS”

Peter Schiff says the new historic and record-breaking fall in gross domestic product numbers coupled with unemployment and the Federal Reserve’s excessive money creation will cause a dollar collapse. Once that happens, the entire house of cards that is the United States will fall.

Schiff says we should be prepared for the fall of the U.S. by the end of this year. According to a report by RT, Schiff, the ignorance of Americans is still present. People are not waking up, unfortunately. That ignorance is likely to remain the case until the fall becomes a crash, which I don’t think will begin until the Dollar Index breaks 80,” wrote  Schiff in a Tweet. ” At its current rate of decline that level could be breached before year-end, perhaps by election day.”

Remember, election time could be a gigantic planned disaster too, and Americans look like they’ll fall for that too.

Government Warning: “One Way Or Another, The Economy Is Going To Lockdown Again”

While the dollar continues to fall, gold, silver, and cryptocurrencies are all going up. This is a signal that people are leaving centralized systems for those that are decentralized and not controlled by the ruling class or elitists who think of us as their slaves.  According to Schiff, gold will supplant the dollar because the euro and other currencies are not ready to take its place.  They are also centralized and in the control of the same people who control the creation of U.S. dollars. “No other currency will take the dollar’s place, real money will take its place, particularly gold, because gold was there before the dollar,” he said, noting that the greenback “did a lousy job, and now gold is taking its spot back.”

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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