Saturday, March 6, 2021

Tag: . global debt



by Egon von Greyerz, Gold Switzerland:

The dollar is dead but the world doesn’t know it.  It has been a slow death and the final stages will be very painful for the US and for the rest of the world. The US empire is finished financially and militarily.


It all started with the establishment of the Fed in 1913 and escalated with Nixon. For anyone old enough to still remember him, they will think about the Watergate scandal. This was corruption and bribery at the highest level in the Nixon administration, including the president himself. In order to avoid impeachment which would have been a certainty, Nixon resigned. All this broke out 11 months after Nixon’s disastrous decision to take away the gold backing of the dollar on Aug 15, 1971. Nixon should not have been impeached for the Watergate scandal but for his decision to end the gold backing of the dollar. That disastrous decision is what will lead to a total collapse of the world economy and the financial system, starting sooner than anyone can imagine.


By 1971, the US had already been running chronic budget deficits for 10 years consecutively. At the end of the 1960s, President Gaulle of France realised what would happen to the dollar and demanded payment in gold instead which was his right. This led to Nixon closing the gold window since this was the only way that the US could continue to live above its means. And this is exactly what the US has done for more than half a century now. Not only have they run a real budget deficit every year since 1961 but also a trade deficit every year since 1975.


Three things have allowed the US to do this: 1) The dollar being the reserve currency of the world, 2) The Petrodollar system. 3) Having a mighty military machine.

But the rest of the world now knows that the weakening US empire is losing out on all three fronts. The dollar has lost 50-70{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} against most major currencies in the last 46 years. And against gold, nature’s only permanent money, the dollar has lost 97{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since Nixon’s fatal decision.

The US military superiority has been crumbling for many years. In spite of a military spending higher than the next 8 biggest countries together, the US has not been successful in any military action for decades from Vietnam, Afghanistan, Iraq, Libya and many, many more. This weakening of the US military power, will make it impossible in future to enforce the petrodollar. The US attacks on Iraq and Libya were as result of these countries intention of abandoning the petrodollar.


China and Russia are now seeing what de Gaulle saw in the late 1960s. They know that it is only a matter of time before the dollar will lose its status as reserve currency. They also know that before this happens, the dollar will start crumbling and eventually disappear into a black hole resulting in an implosion of all the dollar assets and debts.


China and Russia are not waiting for this to happen They are actually going to orchestrate the fall of the dollar. Not by attacking the dollar itself but by killing the petrodollar. China will start to trade oil in yuan with Russia, with Saudi Arabia, Iran, Turkey etc. All these countries are now negotiating a number of agreements to facilitate the trading of oil and other commodities in yuan and rubles. These agreements cover a wide area such as new payment system and Forex trading between Russia and China as well as gold imports by China from Russia.

The intention of the Trump administration to repudiate the Iran nuclear agreement and to impose new sanctions will further strengthen the resolve of these countries to abandon the petrodollar. Sadly, it is also likely to lead to yet more terrorism in the West.

This is all happening at a much faster pace than the world is realising. And this time, the US cannot do anything about it. Because the US is unlikely to attack, China or Russia or Iran. A US attack with conventional weapons on any of these countries would be guaranteed to fail. The US wouldn’t stand a chance except in a nuclear war which would be the end of the world as we know it.


But it is not only the US empire which is crumbling. The decadent socialist system in Europe will not survive either. Socialism works until you run out of Other People’s Money. And this is happening fast in many European countries. Greece is totally bankrupt and should have defaulted on their debts many years ago and introduced a new devalued Drachma. This is the only way that Greece can ever progress and prosper. Instead, the EU insisted on them staying and imposed yet more loans that Greece will never repay leading to massive poverty and misery for the Greek people.

In addition, Brussels has forced them to process a massive number of migrants which Greece can ill afford. The same goes for Italy with their massive debt to GDP and crumbling economy. But it doesn’t stop there, Spain, Portugal, France, Ireland and the UK are all economies with massive debts. Since these debts can never be repaid, there are only two alternatives; either a default by the ECB and most European countries or money printing on a scale that the world has never seen. The likely outcome is that we will see both options. First money printing by the ECB in the €100s of trillions and then default, as the Euro becomes worthless.

The Eurocrats in Brussels including the European Commission are only interested in protecting their own position. Their main concern as unelected and unaccountable representatives of 500 million people is to hold their empire together at any cost. What they are doing is not for the good of the European people, but rather to serve these bureaucrats’ self-interest. The Brussels elite is more concerned about their own massive expense accounts and pensions than the Greek or the Irish people.


The European Commission in Brussels, with Junker leading, is now doing all they can do sabotage the Brexit decision by the UK electorate. They just can’t stand that anyone breaks rank in this very unholy alliance. Interestingly, the word sabotage, derives from the industrial revolution in Belgium when the workers threw their “sabots” (clogs) into the new machines that were taking their jobs away. So the Brussels tradition of sabotage is not a new phenomenon.


The EU is a failed experiment that will eventually collapse. So will the Euro which is an artificial currency that can never work for 19 Countries with different backgrounds such as growth and inflation rates, productivity, industrialisation and cultures.

The dollar is likely to fall before the Euro as they both compete in the race to the bottom. Just think about it, here we have the two richest regions in the World, North America and Europe, both on the verge of collapse, economically, financially, politically and morally. How can anyone ever believe that all the bubble assets can survive under those circumstances. Well they won’t. That is absolutely guaranteed. It is only a question of how soon it starts and how deep it will be. The sad thing is that no one is prepared for it and it will be a devastating shock the whole world.


22 charts and 52 questions that will make you Buy Gold

by Michal Matovcik, Market Oracle:

Since 2007 I am wondering how can the financial world continue in this insane artificial reality for such a long time. It is shocking how without any relevant systemic changes and resolution of issues from 2007 economic crisis the central banks were able to create the smokescreen of sustainability.

They were able to persuade the majority of the public that one does not need to be productive. We just need to print some more money and prop the markets here and there without consequences and so problems will magically go away. And why not to also double down on the most negative trends that got us into the 2007 economic crisis. How insane is that?

Unfortunately, I didn’t register the laws of nature changed so dramatically that suddenly we can live in a new paradigm of “Free lunch for everybody” for the foreseeable future.

Why the western world still believes we would not end up like Venezuela is beyond my comprehension? Yes, we have bigger guns, can impose sanctions and have major currencies ruling the other world for now. But what is really the difference between the trends in western economies and Venezuela?

I don’t see much more wisdom in western politicians. There is no end in their insatiable need to support every seemingly good or bad idea, only for the purpose of gaining points for their preferred electorate and financiers of their campaigns. They seem to be living in the world with infinite resources and energy. They obviously do not serve people as a whole, but their own local or worldwide political agenda. One can’t spot a grain of humility in the political leaders of today. Media is full of diversion stories, made up stories for brainwashing and the truth is seen only by the accident.

The tragic part is that the majority of people I speak with in developed world have obviously suffered some amnesia or never really spotted that the financial markets are facing an avalanche of problems. Past economic depressions would seem like a nice vacation if history is any guidance for the next few years considering the current state of economic affairs. And I am starting to believe that even my outlook would seem as very optimistic in retrospect when we suddenly enter the cleansing period in financial markets. The are no parallels to the current levels of ignorance.

If you do not believe me, try to ponder next 52 questions and try to find your answers. In the end, it may save you a lot of hard-earned money, pension, secure your family future or at least help you stay sane when others would be discussing how could they all be so blinded by the false promises of central banks printing press.

Central Banks

What if the stock market is in full collapse at a time when central banks decide to unload their balance sheet holdings?

Why do central banks need to continue buying bonds and stocks when the economy is in recovery? The simple answer is there is no recovery and never was any recovery. There was only the pumping of newly printed money into the markets and making algorithmic trading systems, all other big banks and funds follow their money flows. How can anyone sane talk about any market economies when central banks put at least 10 trillion dollars into the markets in just 10 year period? Did someone explain to people what does it mean for the future value of their currency and savings?

If bonds are really such a trustworthy investment why is there not enough investors lining up for buying government bonds? What would the interest rates look like when people stop believing that governments can continue to finance their enormous programs with printing more money?

Today most of the people that really understood the insanity of these policies got crushed and burned with the market development since 2009. Most of them closed their funds, are closing them or are for the laugh of the others who just went with the central bank flows.

The funny part is that market is today eagerly awaiting central banks to at least start talking about stopping this harmful practice. We cheer them when they only suggest possible changes in stopping the balance sheet expansion. The speeches of central bankers are symphonies of euphemism as every single sign of change in direction can uncover the fragility of belief in their ability to manage this mess. How insane is that? Why are central banks so influential and everyone positions according to their words in a free market economy? Free market economy is one imaginary concept not seen in the western world for the past few decades.

And let the above chart sink in for a while. The BOJ now owns 75{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of Japanese ETFs. The Swiss National Bank is now a hedge fund owning $85 billion of US stocks. The ECB is funding M&A deals at zero yields.

How can anyone be talking about the market economy in any major developed country? It was a casino before, but today even the casino owners would be surprised by the skill of governments and central banks.

Or should we all now start to invest in The Swiss National Bank? Price of their shares is up 11 days in a row, soaring 150{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in the last two months. Where is the discussion about the risks involved? Is there any clear exit strategy and timeline for putting these assets out of central bank balance sheets? Will the productive economy end up being owned by governments in full as the time goes by? Is sky the limit?

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