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Don’t Mess With the U.S. (Financially)

Don’t Mess With the U.S. (Financially)

Don’t Mess With the U.S. (Financially)

I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves.

Because as you’ll see below, it can directly impact your wealth.

Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions.

These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil.

The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions.

Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks?

We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it.

It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely damaged the Iranian economy, which has led to protests against the regime.

From the U.S. side, it’s a financial war. People need to stop thinking about financial sanctions as an extension of trade policy, for example.

This is warfare. It’s just a different form of warfare.

It’s critical to understand that financial war is not a sideshow. It may actually be the main event in today’s deeply connected and computerized world.

North Korea is also the current target of a U.S. “maximum pressure” campaign, where harsh sanctions are applied to a wide range of banks, companies and individuals.

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

How the US Wages War to Prop up the Dollar

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How the US Wages War to Prop up the Dollar

At Counterpunch, Michael Hudson has penned an important article that outlines the important connections between US foreign policy, oil, and the US dollar.

In short, US foreign policy is geared very much toward controlling oil resources as part of a larger strategy to prop up the US dollar. Hudson writes:

The assassination was intended to escalate America’s presence in Iraq to keep control of the region’s oil reserves, and to back Saudi Arabia’s Wahabi troops (Isis, Al Quaeda in Iraq, Al Nusra and other divisions of what are actually America’s foreign legion) to support U.S. control of Near Eastern oil as a buttress of the U.S. dollar. That remains the key to understanding this policy, and why it is in the process of escalating, not dying down.

The actual context for the neocon’s action was the balance of payments, and the role of oil and energy as a long-term lever of American diplomacy.

Basically, the US’s propensity for driving up massive budget deficits has created a need for immense amounts of deficit spending. This can be handled through selling lots of government debt, or through monetizing the debt. But what if there isn’t enough global demand for US debt? That would mean the US would have to pay more interest on its debt. Or, the US could monetize the debt through the central bank. But that might cause the value of the dollar to crash. So, the US regime realized that it must find ways to prevent the glut of dollars and debt from actually destroying the value of the dollar. Fortunately for the regime, this can be partly managed, it turns out, through foreign policy. Hudson continues:

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

What Will It Take to Get the Public to Embrace Sound Money?

What Will It Take to Get the Public to Embrace Sound Money? 

In the last decade, the combination of virulent asset price inflation and low reported consumer price inflation crippled sound money as a political force in the US and globally. In the new decade, a different balance between monetary inflation’s “terrible twins” — asset inflation and goods inflation — will create an opportunity for that force to regain strength. Crucial, however, will be how sound money advocacy evolves in the world of ideas and its success in forming an alliance with other causes that could win elections.

It is very likely that the deflationary nonmonetary influences of globalization and digitalization, which camouflaged the activity of the goods-inflation twin during the past decade, are already dissipating.

The pace of globalization may have already peaked, before the Xi-Trump tariff war. Inflation-fueled monetary malinvestment surely contributed to its prior speed. One channel here was the spread of highly speculative narratives about the wonders of global supply chains.

Digitalization’s potential to camouflage monetary inflation in goods and services markets, on the other hand, has come largely via its impact on the dynamics of wage determination. It has forged star firms with considerable monopoly power in each industrial sector. Obstacles preventing their technological and organizational know-how from seeping out to competitors means that wages are not bid higher across labor markets in similar fashion to earlier industrial revolutions. These obstacles reflect the fact that much investment is now in the form of firm-specific intangibles. Even so, such obstacles tend to lose their effectiveness over time.

As deflation fades, monetary repression taxes (collected for governments through central banks’ manipulation of rates to low levels so as to achieve 2 percent inflation despite disinflation as described) will undergo metamorphosis into open inflation taxes as the rate of consumer price inflation accelerates. Governments cannot forego revenue given their ailing finances. Simultaneously, asset inflation will proceed down a new stretch of highway where many crashes occur.

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

Peter Schiff: Americans Are in for a Rude Awakening

Peter Schiff: Americans Are in for a Rude Awakening

On Jan. 13, Peter Schiff appeared on RT Boom Bust with Bubba Horwitz to talk about the yuan, the dollar, the stock market and the US economy. Peter said the dollar is eventually going to collapse and it’s going to be a rude awakening for Americans.

The Chinese yuan has been gaining strength against the dollar in recent weeks, in part because of optimism that there will eventually be a resolution to the trade war. But the Chinese currency is still over 17% lower than it was when the US imposed its first tariffs. Does this mean the markets are cautiously positioning for a deal, or is there still skepticism about the phase 1 deal? Peter focused on the bigger picture.

Well look, a phase one might happen because a phase one is insignificant. The real deal is supposedly phase two. That’s the one that’s not going to happen. So, if anybody thinks we’re going to have a substantive deal, they’re wrong. But the reality is, I think the Chinese yuan is undervalued relative to the dollar and I expect it to rise rather dramatically over time.”

Peter said this is not good news for the US.

It’s going to make imports more expensive for Americans, so it’s going to reduce our standard of living. And I do think ultimately, it’s going to push up interest rates as well, as the Chinese and a lot of other creditors are no longer lending money to Americans, and so we have to draw from our own savings pool, which is extremely shallow. It means the Federal Reserve is going to be printing a lot more money as it monetizes the debt that the Chinese and other nations no longer want to buy, and this is further going to lower the American standard of living.”

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

Paul Volcker: The Man Who Vanquished Gold

Paul Volcker: The Man Who Vanquished Gold

The flood of obituaries that noted the passing of Paul Volcker (1927–2019) last week have almost all lauded his achievement as Fed chair (1979–1987) in reining in the double-digit inflation that ravaged the US economy during the 1970s. 

Volcker was referred to as the “former Fed chairman who fought inflation” (here);  “inflation tamer” and “a full-fledged inflation warrior” (here); and the “Fed chairman who waged war on inflation” and led “the Federal Reserve’s brute-force campaign to subdue inflation” (here).  Mr. Volcker certainly deserves credit for curbing the Great Inflation of the 1970s.  However, he also merits a lion’s share of the blame for unleashing the Great Inflation on the US and the world economy in the first place.  For it was Mr. Volcker who masterminded the program that President Nixon announced on August 15, 1971, which  unilaterally suspended gold convertibility of US dollars held by foreign governments and central banks, imposed a fascist wage-price freeze on the US economy, and slapped a 10 percent surcharge on foreign imports.1

Tragically, by severing the last link between the dollar and gold, Volcker’s program scuttled the last chance of restoring a genuine gold standard. 

More than two years before Nixon slammed down the “gold window,” Volcker, the recently appointed undersecretary of the treasury for monetary affairs, gave an oral presentation to Nixon and his closest advisors on US balance-of-payments problems. The presentation was based on a memo that the secret “Volcker group,” initiated by Henry Kissinger, spent five months preparing.  

Among other things, Volcker recommended a continuation of capital controls to prop up the inflated dollar’s overvalued exchange rate and a massive appreciation or “revaluation” of the currencies of less inflationary countries such as West Germany, placing the burden of adjustment to unrestrained US inflation on these countries. 

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

Trump Urges Fed To Cut Rates, Launch QE To Counter “Strong” Dollar

Trump Urges Fed To Cut Rates, Launch QE To Counter “Strong” Dollar 

President Trump took to Twitter this morning to admonish Fed Chair Powell (something he hasn’t done for a little while).

Trump said “Would be sooo great if the Fed would further lower interest rates and quantitative ease.”

Why? The economy is doing great right?

There’s just two things…

First, the dollar is at 5-month lows having tumbled since the Phase One trade deal was “completed”…

Source: Bloomberg

and Second, The Fed is printing money at its fastest pace since the financial crisis…

Source: Bloomberg

Notably Dallas Fed’s Kaplan hinted briefly in his speech this morning that we should not assume the dollar will be the reserve currency forever.

The Next Pearl Harbour? China’s Gold-Backed Crypto Currency Will Blindside US Dollar

The Next Pearl Harbour? China’s Gold-Backed Crypto Currency Will Blindside US Dollar

“A date which will live in infamy.” 

Indeed, this weekend marks the 78th anniversary of the attack on Pearl Harbor in Hawaii, which opened the door for the United States to enter World War II. Turn on your TV and you will see military mavens rambling on, pontificating about ‘the defense of the realm’, all the while completely aloof and unaware of the American empire’s real Achilles heel.

Recent, financial pundit and TV host Max Keiser outlined such a scenario, and warned that the US will be blind-sided the day that China introduces its gold-backed crypto currency – an absolute game changer which would create a “catastrophic trapdoor opening underneath the US economy,” said Keiser.

Not surprisingly, very few mainstream financial pundits in the West are willing to admit that China possesses gold reserves in excess of 20,000 tons, and by introducing a gold-backed cryptocurrency, it has the ability to “kill the US dollar deader than a door nail …. a new Pearl Harbor-type event and it’s coming in the next six to nine months.” 

Watch:

Source: 21stCenturyWire.com

America’s trade policy will end up destroying the dollar

America’s trade policy will end up destroying the dollar 

America’s tariffs against China are already showing signs of undermining the global economy and will create a funding crisis for the Federal Government when it leads to foreigners no longer buying US Treasury debt and selling down their existing dollar holdings. A subversive attempt by America to divert global portfolio investment from China by destabilising Hong Kong will force China into a Plan B to fund its infrastructure plans, which could involve actively selling down her dollar reserves and hastening the introduction of a new crypto-based trade settlement currency.

The US budget deficit will then be financed entirely by monetary inflation. Furthermore, the turn of the credit cycle, made more destructive by trade tariffs, is driving the global and US economy into a slump, further accelerating all indebted governments’ dependency on inflationary financing. The end result is America’s trade policies have been instrumental in hastening the end of the dollar as the world’s reserve currency, ultimately leading to its destruction.

Introduction

For almost two years President Trump has imposed various tariffs on imported Chinese goods. He advertised his tactics as hardball from a tough president who knows the art of the deal, taking his business acumen and applying it to foreign affairs. He even proudly described himself as a tariff man.

His opening gambit was to impose tariffs on some goods to get leverage over the Chinese, with the threat that if they didn’t cooperate, then further tariffs would be introduced. The Chinese declined to be cowed by threats, introducing tariffs themselves on US imports, particularly agricultural products, to bring pressure to bear in turn on President Trump. 

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

Mauldin: We Are On The Brink Of The Second “Great Depression.”

Mauldin: We Are On The Brink Of The Second “Great Depression.”

You really need to watch this video of a recent conversation between Ray Dalio and Paul Tudor Jones. Their part is about the first 40 minutes.

In this video, Ray highlights some problematic similarities between our times and the 1930s. Both feature:

  1. a large wealth gap
  2. the absence of effective monetary policy
  3. a change in the world order, in this case the rise of China and the potential for trade wars/technology wars/capital wars.

He threw in a few quick comments as their time was running out, alluding to the potential for the end of the world reserve system and the collapse of fiat monetary regimes.

Maybe it was in his rush to finish as their time is drawing to a close, but it certainly sounded a more challenging tone than I have seen in his writings.

Currency Wars

It brought to mind an essay I read last week from my favorite central banker, former BIS Chief Economist William White.

He was warning about potential currency wars, aiming particularly at the US Treasury’s seeming desire for a weaker dollar. Ditto for other governments around the world. He believes this is a prescription for disaster.

One possibility is that it might lead to a disorderly end to the current dollar based regime, which is already under strain for a variety of both economic and geopolitical reasons. To destroy an old, admittedly suboptimal, regime without having prepared a replacement could prove very costly to trade and economic growth.

Perhaps even worse, conducting a currency war implies directing monetary policy to something other than domestic price stability. There ceases to be a domestic anchor to constrain the expansion of central bank balance sheets.

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

Doug Casey on the Destruction of the Dollar

Doug Casey on the Destruction of the Dollar

Dollar

“Inflation” occurs when the creation of currency outruns the creation of real wealth it can bid for… It isn’t caused by price increases; rather, it causes price increases.

Inflation is not caused by the butcher, the baker, or the auto maker, although they usually get blamed. On the contrary, by producing real wealth, they fight the effects of inflation. Inflation is the work of government alone, since government alone controls the creation of currency.

In a true free-market society, the only way a person or organization can legitimately obtain wealth is through production. “Making money” is no different from “creating wealth,” and money is nothing but a certificate of production. In our world, however, the government can create currency at trivial cost, and spend it at full value in the marketplace. If taxation is the expropriation of wealth by force, then inflation is its expropriation by fraud.

To inflate, a government needs complete control of a country’s legal money. This has the widest possible implications, since money is much more than just a medium of exchange. Money is the means by which all other material goods are valued. It represents, in an objective way, the hours of one’s life spent in acquiring it. And if enough money allows one to live life as one wishes, it represents freedom as well. It represents all the good things one hopes to have, do, and provide for others. Money is life concentrated.

As the state becomes more powerful and is expected to provide more resources to selected groups, its demand for funds escalates. Government naturally prefers to avoid imposing more taxes as people become less able (or willing) to pay them. It runs greater budget deficits, choosing to borrow what it needs. As the market becomes less able (or willing) to lend it money, it turns to inflation, selling ever greater amounts of its debt to its central bank, which pays for the debt by printing more money.

BRICS Nations Discuss Shared Crypto to Break Away From USD and SWIFT

BRICS Nations Discuss Shared Crypto to Break Away From USD and SWIFT

BRICS Nations Discuss Shared Crypto to Break Away From USD and SWIFT

ANALYSIS

Brazil, Russia, India, China and South Africa, or the BRICS economic bloc, are engaging in discussions to issue cross-national digital money in order to reduce the dependence of their economies on the United States, as reported by Cointelegraph on Nov. 14. What will the new cryptocurrency look like, how does the BRICS group plan to use it and are there any existing projects underway that seek to achieve a similar goal of independence on such a high level? 

BRICS and its problems

BRICS is the largest geopolitical block of countries, spanning three continents and wielding substantial economic power in global affairs. As of 2018, the five nations of the BRICS block had a combined nominal gross domestic product of $40 trillion, or about 23.2% of the gross world product.

However, such economic power does not come without competitive penchants from other nations that are vying for the markets that BRICS nations cater to. The greatest competition comes from the European Union and the U.S.

The political experience of recent years has shown that BRICS countries’ diplomacy has arguably failed in alleviating international sanctions, especially in politically sensitive markets such as the arms and the energy carriers markets. However, advances in technology are here to help out where politics cannot, as blockchain and digital assets have the potential to open entirely new horizons for finance.

The idea of a single cryptocurrency as a means of payments and value transmission is not a new one, but it is one that is being actively purported not only in countries like Venezuela with its Petro, but also among BRICS countries. The advantages of a single cryptocurrency as a universal means of settlements among BRICS nations would solve many of the problems they face on the global economic market.

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

Vladimir Putin Sums Up The New World Order In 5 Words

Vladimir Putin Sums Up The New World Order In 5 Words

Russian President Vladimir Putin succinctly summarized the shifting tectonic plates of geopolitics.


Vladimir Putin: “The Dollar Enjoyed Great Trust Around The World. But For Some Reason It Is Being Used As A Political Weapon, Imposing Restrictions. Many Countries Are Now Turning Away From The Dollar As A Reserve Currency. US Dollar Will Collapse Soon.”


First he explained the status quo…

“The Dollar enjoyed great trust around the world. But, for some reason, it is now being used as a political weapon to  impose restrictions.”

Then Putin explained the consequences…

“Many countries are now turning away from the Dollar as a Reserve Currency.”

And ultimately what happens…

“US Dollar will collapse soon.”

And just like that, it was gone. Remember “nothing lasts forever”…

As Bloomberg reports, Russia’s central bank has been the largest buyer of gold in the past few years.

Source: Bloomberg

Of course, Putin is not the first (and won’t be the last) to suggest the end is nigh for the dollar…

The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. “The solution to this is to replace the national currency with a global currency.”

Warren Buffett once explained that “for 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”

We don’t mean to rain on his parade too much, but the following charts suggest time is ticking, as the world transitions from dollars to non-fiat reserves…

Source: Bloomberg

Rob Kirby-U.S. Dollar Rejection to Accelerate

ROB KIRBY – U.S. DOLLAR REJECTION TO ACCELERATE


Returning SBTV guest, Rob Kirby of Kirby Analytics, had a though-provoking conversation with us – he questioned the ridiculousness that the US has never had a failed bond auction given the poor fundamentals of the US dollar, even as de-dollarization sentiments are accelerating.

Discussed in this interview: 
02:07 Fed unwinding balance sheet to pre-QE levels is a pipe dream
06:19 Ridiculous that the US has never had a failed bond auction
10:15 US shale oil industry could be soaking up unwanted dollars
12:48 De-dollarization: Foreigners do not want dollars
20:31 Energy independence? US still needs Saudi oil
22:18 Oil is the main sustenance for the US dollar
22:45 The ridiculous paper gold market
26:21 World does not want dollar-denominated debt

Russia To Reduce US Dollars In National Wealth Fund As Putin’s De-Dollarization Continues

Russia To Reduce US Dollars In National Wealth Fund As Putin’s De-Dollarization Continues 

Russia’s de-dollarization effort is full steam ahead, in line with President Putin’s commitment to reduce the country’s vulnerability to the continuing threat of US sanctions.

Crossing the wires early Wednesday morning, Russian Deputy Finance Minister Vladimir Kolychev, was quoted by Reuters as saying the Russian sovereign wealth fund will reduce US Dollars and is considering adding Chinese yuan. 

  • RUSSIAN DEPUTY FINANCE MINISTER KOLYCHEV SAYS SHARE OF US DOLLARS IN NATIONAL WEALTH FUND WILL BE REDUCED 
  • RUSSIAN DEPUTY FINANCE MINISTER KOLYCHEV SAYS INCLUSION OF OTHER FOREIGN CURRENCIES INCLUDING YUAN IS BEING CONSIDERED
  • RUSSIAN DEPUTY FINANCE MINISTER KOLYCHEV SAYS FINANCE MINISTRY PLANS TO CHANGE NATIONAL WEALTH FUND’S FX STRUCTURE IN 2020 

Kolychev said the change to the foreign exchange structure of the wealth fund would occur in 2020.

Ukraine and Russian-backed rebels begin troop withdrawal in eastern regions

Last month, Russian Economy Minister Maxim Oreshkin told the Financial Times that the country would continue down the path of de-dollarization and begin trading some oil transactions in Euros and roubles.

“We have very good currency, and it’s stable. Why not use it for global transactions?” Oreshkin said in a recent interview with the FT.

 “We want (oil and gas sales) in roubles at some point,” he said.

Despite less than 5% of Russia’s $687.5 billion in annual trade being with the US, it remains that over half of that trade still relies on the dollar, according to Bloomberg figures.

US sanctions have been very selective as of recent, specifically targeting Gazprom, the country’s gas giant. Sanctions have banned any US company from supplying Gazprom with equipment.

Russia’s desire to abandon the dollar is a trend that continues to gain momentum and could be fully realized by the mid/late 2020s.

Plans for a global Dystopia

Plans for a global Dystopia 

Global policy planners intend to deliver replacements for both dollar hegemony and fossil fuels. Plans may appear uncoordinated and in their early stages, but these issues are becoming increasingly linked.

A monetary reset incorporating state-sponsored cryptocurrencies will enable exchange controls to be introduced between nations by separating cross-border trade payments from domestic money circulation. The purpose will be to gain greater control over money and to direct its investment into green projects.

The OECD will build on current tax disclosures to make everyone’s income and capital known to governments and therefore readily taxable, money destined to kick-start economic growth. Under the guidance of supranational organisations, governments will redirect investment into green technology. The objective, particularly for Europeans, is to neutralise Russia’s increasing dominance of the global energy market by becoming carbon neutral by 2030.

But perhaps as Robert Burns put it, “the best-laid schemes o’ mice an’ men gang aft agley”. They are based on Keynesian fallacies, but cannot be ignored.

Introduction

There appear to be policy areas being driven by statist responses to events, encouraging global institutions to take on a coordinating role. It means deeper levels of centralised planning by unaccountable bureaucrats. Assuming their plans continue to gain credence, we could end up with a dystopian world where supranational bodies direct individual governments to conform. We are already on this road to perdition. The OECD has coordinated attempts by governments to restrict the freedom of their citizens to avoid taxes by forcing over a hundred jurisdictions to automatically supply information on the financial affairs of every citizen, irrespective of nationality and where they reside. 

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

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