Saturday, December 14, 2019

Doug Casey on the New Fed Chair

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by Doug Casey, Casey Research:

Justin’s note: The markets and our offices are closed for the holiday. So for today’s Dispatch, I’m sharing a brand-new essay from Casey Research founder Doug Casey. Hope you enjoy…and have a wonderful Thanksgiving.

By Doug Casey, founder, Casey Research

A few words are in order about the likely new Chairman of the Federal Reserve, Jerome Powell.

I don’t know the man personally. Not that it would make any difference; denizens of the swamp within the Beltway usually present well, and a brief meeting rarely allows you to penetrate someone’s social veneer. But I’m pretty confident that if we dined together it would be tense and unpleasant. We’d have no common ground, after the obligatory two minutes on the weather and the state of the roads.

He’s a lawyer, has been a Fed Governor for five years, and appears to be a “steady as she goes” so-called moderate Republican. He’s a lifelong Deep State player. But let’s not waste time psychoanalyzing this bureaucrat; he’s just a cog in the machine. And the machine, at this stage, has a life of its own.

Many of my friends in the alternative press deplore Trump’s appointment of yet another conventional money printer. They were hoping for a “hawk,” who would start liquidating the Fed’s $4.5 trillion balance sheet, and raising interest rates. And they’re right. That $4.5 trillion of super money has driven stock, bond, and real estate prices to insane levels. And today’s artificially low interest rates are discouraging saving, and encouraging people to live above their means.

In an ideal world there would be some radical changes. The best thing for the US in the (famous) long run is to go “cold turkey.” To abolish the Federal Reserve, fire its thousands of employees with their worthless PhDs. Return to 100{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} reserve banking with a strict separation of demand and time deposits. Depoliticize money by using gold, not Federal Reserve Notes. And default on the national debt, which is rewarding crony capitalists, and will turn future generations of Americans into serfs. And massively deregulate. And abolish the income tax, while cutting spending 90{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Etc. Etc.

The chances of that happening are exactly zero. So let’s talk, instead, about what is going to happen.

We’re going to have much higher levels of inflation. The new Fed Chair will open a monetary hydrant, at least if he doesn’t want to be hung from a lamppost by his heels. But I’m quite pleased Trump has appointed the guy. That may sound shocking. Let me explain why.

A sound economist would work to stop money printing and let interest rates find a market level. But that would precipitate a deflationary collapse after decades of monetary debasement. And the powers of darkness would again be able to paint sound policies and the free market as the cause for the problem, when actually it’s the only cure for economic problems.

From an economic point of view an inflationist like Powell is a disaster. It’s too bad he’s nominally a Republican, since for some reason they’re associated with the free market. As is Trump. Wearing our speculator hats, we’d likely be better off under Hillary—even more inflation, even more distortions to capitalize on. Even wearing our economist hats we might be better off under her, because if the whole rotten structure collapsed on her watch, it might discredit her ideas for at least a few years. But, as ever, I suspect I’m being too optimistic.

For decades—at least since I started following these things in the early ‘70s—free market economists have argued whether the Fed’s ever-increasing money printing would result in a deflationary depression, or a hyperinflationary depression.

As to why a catastrophic depression is inevitable—despite the fact most people try to produce more than they consume, and despite the fact science and technology are advancing exponentially—is beyond the scope of this brief article. I refer you to these pieces (here and here) I’ve done in the past on that topic.

Read More @ CaseyResearch.com

Demise Of The Petrodollar Has The Potential To Reshape The Geopolitical World

by James O’Neill, New Eastern Outlook:

In the early 1970s President Richard Nixon instigated two changes that had profound effects. The first of these was taking United States off the gold standard; i.e. henceforth US dollars would no longer be convertible to Gold. Ordinarily this might have been expected to have significant ramifications for the value of the US dollar.

Deleterious effects however, were avoided by another equally profound change. Nixon’s National Security Adviser Henry Kissinger negotiated an agreement with Saudi Arabia that henceforth all oil(initially from Saudi Arabia but rapidly extended to all OPEC) countries would be traded only in US dollars, the birth of the so called petrodollar.

It was a classic mafia style arrangement. In exchange for Saudi Arabia’s agreement to the sole use of the dollar for oil transactions, the US underwrote Saudi Arabia’s security thereby ensuring the continuity of one of the world’s most corrupt and repressive regimes.

Also unknown at the time, the US and Saudi Arabia entered an arrangement whereby Islamist terrorist groups (as long as they were Sunni) would be financed by Saudi Arabia and armed by the Americans and then used in pursuit of US geopolitical goals. Operation Cyclone, begun under the Carter administration in the 1970s was an early forerunner of this tactic, but it has been refined and utilized in different formats in a wide number of countries ever since.

The objective was always fundamentally the same: to undermine and if necessary replace governments that were insufficiently compliant with US geopolitical aims. As and when necessary, US troops and their “coalition” allies would be inserted into the target countries. The destruction of Afghanistan (2001 and continuing) Iraq (2003 and continuing) Libya (2011 and continuing) are only three of the better-known examples.

The huge financial cost of these military and geopolitical ventures did not impose a proper price upon the US because of the hegemonic role of the US dollar. The US, in effect, had their multiple wars of choice paid for by other countries as the dollar’s role in world trade created a constant demand for US Treasury bonds.

The role of the US dollar also permitted the US to impose sanctions on recalcitrant countries. The selective nature of the sanctions, always directed toward a US geopolitical or commercial advantage, were clearly an instrument of repressive power. Notwithstanding claims that they were to “punish” the alleged misconduct of the specified country, their actually use betrayed their geopolitical purpose.

Sanctions against Russia for its” invasion” of Ukraine “annexation” of Crimea, and against Iran for its “nuclear program” are two of the better known illustrations of sanctions being justified on spurious grounds..

The use and abuse of the dollar’s power is clearly unacceptable, but the capacity to invoke countermeasures was until quite recently severely limited. The single most important countervailing force is the rise of China as the economic powerhouse of the world, and importantly, the creation of alternative structures in trade, finance and security, that translate China’s economic power into a force for major change.

That change is assisted by the number of collateral developments. In 1990, the G7 nations (Canada, France, Germany, Italy, Japan, the US and UK) had a combined GDP approximately six times greater then the seven economically most important emerging nations (Brazil, China, India, Indonesia, Mexico, Russia and South Korea).

By 2013 the “emerging seven” had surpassed the G7’s GDP total and according to the IMF’s estimates for 2017, the GDP of the two groups will be $47 .5 trillion and $37.8 trillion for the emerging seven and the G7 respectively. Turkey, which is growing at 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} per annum, has replaced Mexico in the top emerging seven.

BRICS, which contains four of the emerging seven nations and the Shanghai Corporation Organisation (SCO), which includes China, India and Russia, are working together on the architecture of a monetary alternative to the dollar. The SCO alone contains 42{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the world’s population.

India’s role in BRICS and the SCO is one reason it is being assiduously cultivated by Australia, Japan and the United States in an attempt to set up a “quadrilateral four” to slow and undermine the role of China and Russia in creating an alternative to longstanding western domination and exploitation.

It was in this context that Russia’s President Putin at the recent BRICS meeting in Xiamen, China said that

“Russia shares the BRICS countries concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies.”

This speech developed a theme that Putin had developed in an article published prior to the BRICS meeting. Putin bluntly vowed to destroy the US led financial system, aiming to reform a system that gives excessive domination to a limited number of reserve (i.e. predominantly western) currencies.

China has developed a new Cross Border Interbank Payments System (CIPS) to replace the US dominated SWIFT system, itself used as a tool for financial bullying by the US. Russia has also taken steps to insulate itself from the ill effects of being excluded from SWIFT.

Other major changes are also occurring. Venezuela, with the world’s largest known oil reserves, has ceased accepting payment in US dollars. In the past US retaliation through regime change would have been immediate as happened to Libya’s Gaddafi (confirmed by Clinton’s leaked emails) and the Iraq’s Saddam Hussein who had announced that he would henceforth accept payment in euros and not dollars.

China and Qatar recently concluded a $50 billion deal denominated in Yuan. There were immediate threats and absurd demands from Saudi Arabia, undoubtedly acting as the voice of the US administration, but nothing more serious. The lack of military intervention or attempted regime change was probably attributable to Turkey’s military intervention, a series of agreements with Iran, and the probable implied threat of Chinese intervention should the Saudis further demonstrate their military incompetence (as in Yemen) by anything as rash as direct military moves against Qatar.

Saudi Arabia is rapidly reaching a crunch point in its relationship with China, a huge purchaser of Saudi Arabia’s oil. It is widely known that China wants future oil contracts denominated in Yuan. The attraction for Saudi Arabia is that the Chinese guarantee their Yuan with gold traded on the Hong Kong and Shanghai exchanges. Ironically, this puts China in the same position as the United States prior to Nixon’s withdrawal from the gold backed dollar.

Read More @ Journal-NEO.org

Our National Madness

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by Charles Hugh Smith, Of Two Minds:

Fakery and trickery are not solutions; they are a form of self-delusional madness that destroys the nation’s ability to face reality squarely and choose real solutions, no matter how painful the choice and path might be.

The nation has lost its common sense, its soul and its sanity. Can we summarize the source of this remarkably pervasive madness?

Our efforts are now focused not on solving core problems but on covering up core problems, as if covering up problems is a substitute for solving them. Down this path lies madness, for this substitution of false narratives for reality erodes our ability to distinguish not just between reality and fantasy but our ability to distinguish between moral rights and wrongs.

The efforts of those in positions of power are now focused on obscuring the truth, marginalizing critics, blaming malevolent external forces, cloaking self-interest with virtue signaling and staking claims to victimhood. These are the five dynamics that are powering the nation’s descent into madness and dysfunction.

Consider Harvey Weinstein. Evidence is now emerging that Mr. Weinstein and his army of toadies, bullies, thugs, et al. put enormous effort and resources into obscuring the truth, marginalizing critics, and cloaking self-interest with virtue signaling. Next up for Mr. Weinstein’s team of apologists: blame the Russians (or an equivalently malevolent Other), and claim to be a victim of all those testifying against him.

This is the model for everyone in positions of power. The only variation is which of the five will be spewed as a first line of defense, and which will be held in reserve for the last-ditch defense against the truth becoming public.

I’m sorry if this is a shock, but the economic “recovery” is nothing but smoke and mirrors designed to obscure the pillage of the nation’s wealth and income by state-protected cartels. The central bank can’t actually fix what’s broken in our economy, but it can manually push the needle of the stock market higher.

So rather than actually fix what’s broken, the “solution” is to make the stock market the primary measure of “prosperity.” In effect, the stagnation of real prosperity is a problem that would require profound (and painful to those gorging at the feeding trough) changes in the status quo; so the solution is to label the stock market “the measure of prosperity” and then shove it higher.

This substitution of trickery for reality solves nothing. It is the exact equivalent of the student who didn’t study and who learned nothing erasing his F grade and forging an A in its place. Nothing has actually changed in terms of the student’s knowledge or skillset, but he has fooled the authorities focusing on superficialities: incompetent, self-serving administrators who then tout the student’s high grade as evidence of their own success, the media which mindlessly accepts the fake grade as evidence that all is peachy-keen in the school district, and so on down the line.

If this happens often enough, the student actually starts believing he can get away with trickery as a solution for all problems: just BS your way through any challenge, and if that fails, then marginalize one’s critics, blame malevolent external forces, furiously virtue-signal, and if all else fails, stake a claim to victimhood.

In other words, the student loses touch with reality and is lost. The USA has lost touch with reality, for its leadership has embraced the notion that trickery and fakery that covers up problems is a substitute for solving problems–and if this fails to convince an increasingly jaded and cynical public, then body-slam the public with the other four tactics: marginalize critics, blame malevolent external forces, cloak self-interest with virtue signaling and stake claims to victimhood.

Unfortunately for our nation, madness is repeating what’s failed and thinking it will work next time. Trickery, maligning critics, virtue signaling, blaming outside forces and claiming victimhood no longer have the desired effect on all but the most delusional (or self-serving) supporters of our profoundly corrupt leadership.

Actions have consequences. Fakery and trickery are not solutions; they are a form of self-delusional madness that destroys the nation’s ability to face reality squarely and choose real solutions, no matter how painful the choice and path might be.

Read More @ OfTwoMinds.com

Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?

by Wolf Richter, Wolf Street:

Canadians, fasten your seat-belt. Here are the charts.

The Financial Crisis in the US was a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down. Now, after eight years of experimental monetary policies and huge amounts of deficit spending by governments around the globe, public debt has ballooned. Gross national debt in the US just hit $20.5 trillion, or 105{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP. But that can’t hold a candle to Japan’s national debt, now at 250{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP.

And private-sector debt, which includes household and business debts — how has it fared in the era of easy money?

In the US, total debt to the private non-financial sector has ballooned to $28.5 trillion. That’s up 14{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} from the $25 trillion at the crazy peak of the Financial Crisis and up 63{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} from 2004.

In relationship to the economy, private sector debt soared from 147{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP in 2004 to 170{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP in the first quarter of 2008. Then it all fell apart. Some of this debt blew up and was written off. For a little while consumers and businesses deleveraged just a tiny little bit, before starting to add to their debts once again.

But the economy began growing again too, and private-sector debt as a percent of GDP fell to a low of 148{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in Q1 2015. It has since picked up steam, growing once again faster than the economy, and now is at 151.7{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP, back where it was in 2005. This chart shows US private sector debt to the non-financial sector, in trillion dollars (blue line, left scale) and as a percent of GDP (red line, right scale):

In the Eurozone, the pattern looks similar before the Financial Crisis, with total debt growing sharply both in euros and as a percent of GDP. But after the Financial Crisis, private-sector debt continued to grow in euro terms. As a percent of GDP, it largely leveled off, and as the economy picked up steam over the past two years, this debt declined to 163{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP:

These charts are based on data from the Bank for International Settlements and the St. Louis Fed.

Read More @ WolfStreet.com

John Rubino – Where Things Are Heading

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by Kerry Lutz, Financial Survival Network:

John Rubino notes that there are so many events happening in the world now. Angela Merkel’s days look numbered. Tax reform happening? Silver-Gold Summit, is it still relevant? Continue mission, charlie-mike, as they say in the army. But it’s certainly frustrating to all the believers. We keep taking on more and more debt and yet precious metals refuses to move. Gold and silver should be going up, but nothing is happening now. But as the saying goes, “Things take much longer to happen than you ever thought but possible, but when they do it unfolds much faster than you ever believed.” The numbers don’t lie and yet the liars seem to have made them irrelevant. Let’s see what happens.

Read More @ FinancialSurvivalNetwork.com

All The Old World Systems Are Being Deliberately Torn Down

by Brandon Smith, Alt Market:

As we approach the holiday season many people turn to thoughts on tradition, heritage, principles, duty, honor and family. They consider the accomplishments and even the failures of the past and where we are headed in the future. For most of the year, the average American will keep their heads in the sands of monotony and decadence and distraction. But during this time, even in the midst of the consumption frenzy it has been molded into, people tend to reflect, and they find joy, and they find worry.

What perhaps does not come to mind very often though are the institutions and structures that provide the “stability” by which our society is able to continue in a predictable manner. While many of these institutions are not built with the good of the public in mind, they often indirectly secure a foundation that can be relied upon, for two or three generations, while securing power for the establishment. The problem is, the establishment is never satisfied with a static or semi-peaceful system for very long. They are not satisfied by being MOSTLY in control, they seek total control. Thus, they are often willing to create chaos and crisis and even tear down old structures that previously benefited them in order to gain something even greater (and more oppressive for the rest of us).

The official Thanksgiving holiday, for example, did not really begin as a homage to the colonial settlers and pilgrims of America’s birth and their struggles to build a new life.  While George Washington did proclaim a “Day of Thanks” in 1789, the model for Thanksgiving began far later, in 1863 as the Civil War was raging. It was the Civil War that upset the traditional balance of power between the states and the federal government, nearly annihilating the nation and asserting federal power as unquestionable for decades to come. A moment of great chaos which destroyed old institutions (like the 10th Amendment) but gave establishment elitists even more control in the end.

In Abraham Lincoln’s proclamation for the Thanksgiving holiday, he stated: “In the midst of a civil war of unequaled magnitude and severity … peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed and harmony has prevailed everywhere, except in the theater of military conflict.”

This may sound like a rather delusional claim on Lincoln’s part as we look back now at that time period, especially for those who understand how much freedom was actually lost in the process. But this is what the establishment does — it provides some security and some stability for a time, then suddenly rips it away to frighten the masses into conforming to increased centralization, then it returns that security and stability afterwards as a reward for our compliance.

In 1864, Lincoln gave a second proclamation for a Thanksgiving holiday, stating that: “I do further recommend to my fellow-citizens aforesaid that on that occasion they do reverently humble themselves in the dust.” Now, I sometimes wonder if Lincoln was referring to reverence for God, or reverence to the power structure which was about to give back some of the predictability and tranquility it had taken away?

Well, America has enjoyed another period of relative calm in terms of institutional peace and most citizens have grown rather used to the idea that this calm is somehow the norm. However, it is becoming ever more clear that another shock to the system is coming, this time through domestic AND international events, and some of the old world structures we are used to seeing may not exist afterwards. Here are just a few…

NATO

The cold war era defense alliance between multiple Western nations is on the verge of breaking apart. Turkey, a key NATO ally in projecting power across the Middle East, has undergone a dramatic and aggressive shift towards increased totalitarianism recently. This has all been in the name of stopping a “coup,” which is rather bewildering because there is almost no evidence of a coup actually being planned or attempted.

Ever since, Turkey has launched a campaign of anti-western sentiment and is embracing closer economic and military ties with Russia. Recep Erdogen’s chief adviser has publicly called for Turkey’s membership in the NATO alliance to be reconsidered.

At the same time, two dozen European nations have signed a defense pact this month, seeking to build a centralized European military and end dependency on the U.S. and NATO.

The old world military order is being upended. But to what goal? As stated earlier, the establishment is shaking up our conceptions of what is safe and secure. They are taking away the carrot to make way for the stick. When all is said and done, the goal would be a renewed interdependency between nations to a greater degree and a reduced and hobbled U.S. populace more easily frightened into submission.

OPEC

As I examined extensively in my article “Saudi Coup Signals War And The New World Order Reset,” there is a vast change coming to the dynamic in the Middle East and specifically involving OPEC pillars like Saudi Arabia. The old order of oil trade and stability is about to crumble and be replaced with something much less agreeable to the U.S. economy.

It is important to remember that while oil and gas only make up about 10 percent of international trade, these are perhaps the most important commodities in the industrial world. Energy from petroleum sources is a root feeding all other trade and production. The fact that the dollar has been inexorably attached to this energy and production has allowed the U.S. a level of economic advantage that is perhaps unprecedented.

As multiple OPEC nations begin to question the validity of the dollar as the petrocurrency, and Saudi Arabia leads the way towards bilateral deals with Russia and China, it is imperative that we ask ourselves how much stability we can count on in the future of our currency? We also need to look at the systems that are being staged to take over from the dollar, including the IMF’s SDR currency basket system and ask ourselves who is really benefiting from the derailment of old world dollar dominance?

Cash And Anonymity

While fiat monetary systems are an abhorrent creation that destroy economies slowly over time, cash at least has the advantages of being anonymous and existing in a physical space – hopefully your pocket.  Unfortunately, current trends indicate that even these small consolations are about to be taken away.

Read More @ Alt-Market.com

An insider’s view on the gold versus cryptocurrency debate

by Simon Black, Sovereign Man:

In today’s podcast, I chatted with Silver Bullion’s founder Gregor Gregersen.

Silver Bullion is a precious metals storage company based in Singapore.

While here in Singapore, Gregor and I discussed why the gold versus Bitcoin debate is misguided. It’s not an either-or proposition.

Instead, with systemic risks in the financial system, the case for holding both precious metals and cryptocurrency makes sense.

And Silver Bullion offers solutions for both asset classes.

Click HERE to listen

Read More @ SovereignMan.com