At the Crossroads

The dishonesty of the mainstream financial media manifests itself in hiding the terrible prospects for our future. Bankruptcy for 90 per cent of humanity, enormous profits for a handful of oligarchs. Your wealth will not be lost – it will just have another owner. The global financial system, built on the total exploitation of the peoples of this planet through a Ponzi scheme called paper “money” comes to an end. Every Ponzi scheme fails when the money coming in is not enough to compensate for the money going out. In a macro economic context it means that the wealth production in goods and services is not enough any more to compensate for the extraction of wealth through debt expansion including fiat money creation.

The Trump administration still spreads the propaganda that it can achieve three percent plus growth this year and forever and ever, thereby outgrowing the debt accumulation. Alan Greenspan refuted this beautifully in pointing out that the US needed at least two percent productivity growth per year.

Staring bankruptcy into the face, there are only two options: A soft bankruptcy via inflation and a hard bankruptcy via a cessation of payments. The Federal Reserve appears to do everything to bring about a hard bankruptcy with its insistence on two or more rate hikes this year, four next year, accelerated balance sheet reduction and a strong Dollar policy. Where is the weakest link in the daisy chain of the global financial system? Is is emerging markets, the US consumer or a blow up somewhere the Eurozone?

The main effects of a solvency crisis is felt in credit. Once abundant it can soon become unavailable. Here are a few thought on this:

1. Almost all business transactions rely on credit. What happens if credit dries up almost entirely? Who will still have currency to buy or pay?

2. The next recession will be different from all previous ones due to the unprecedented high levels of debt. High indebtedness ruins credit, thus ruins the ability to borrow. Who will be left with enough credit to borrow when the downturn comes?

3. If borrowing fails and cash up front becomes the norm, what part of the private sector will survive? What company has the resources to pay staff and suppliers in cash?

4. Banks will not lend if the counter party has no credit. Will the pledging of assets as collateral work if the market for selling the collateral will be gone due to a lack of funds?

5. What will happen to the global banks that dominate the financial world if the lack of credit shuts down other nation’s economies and the world economy as a whole? Massive rises in loan defaults would destroy their balance sheets. Governments and central banks can save them from collapse and keep them alive as zombie banks. Will this rekindle the bank lending that is needed to save the private economy?

6. In such a scenario cash would be extremely valuable and central banks around the world would produce it in unlimited quantities to fight the crisis. Worldwide, less than 10 per cent of all currency exists in bank notes and coins. How many months or years will it take to produce enough bank notes and coins for a cash based economy?

7. Events could unfold so quickly that any plan to revive the economy will come too late. How many meals is a nation away from mass insurgency and revolution?

8. What is the value of a Dollar if the private sector that produces the goods and services that back it has gone? If the shelves in the supermarkets are empty? If petrol stations have run dry of fuel because global trade has come to a halt?

9. Electricity is indispensable in today’s world. What happens if power stations shut down because they have no cash to pay for the fuel they need to generate electricity? Can you imagine what a world without electricity will look like?

10. What happens to hundreds of millions of pensioners if pension funds stop paying because they sit on piles of illiquid assets?


The last Roll of the Dice

It appears that the Federal Reserve has reached the limit of its capacities to manipulate world markets and economies. The spike in the Dollar, engineered with the help of foreign central banks was the last roll of the dice. It does not achieve its objective to stop the fall in value of the 10y Treasury.

Manipulations only work if the manipulated are ignorant. This is no longer the case. This becomes apparent when Mark Cudmore from Bloomberg talks about idiosyncratic issues with gold or representatives from major US banks express their confidence that the Dollar is on a long term decline. The black and white picture says: We do not believe you Fed/US Treasury and our support is gone.

It does not take much skill to figure out that Wall Street and the major banks are capable of playing out different scenarios to find the exit from this Everything Bubble madness. There is only one realistic way and that is the debasement of the currency to erode the weight of this unprecedented debt load. Unfortunately, the Fed is marching into the opposite direction. These are the fruits of its secret exchange rate targeting. A showdown between Wall Street, the international bankers and the Federal Reserve is on the horizon. Watch the DXY. We expect the banks to take the opposite side of the Fed in a battle that the central bank can not win. The FX market is too big to be controlled permanently. The ECB and the BOE may desert the Fed and join the banks in a fight that has been aggravated by President Trump’s new sanction regime for Iran. When the Dollar starts to tank again, prepare for the great turnaround. This will be the end to the rate hiking cycle and the beginning of a planned and long lasting depreciation of the Dollar.

It Doesn’t Look Good

This week’s market action focuses on the spike in the DXY and the relentlessly rising yields of the 10y US Treasury note. Both are moving into the wrong direction. Wrong because the appreciating Dollar threatens the solvency of emerging nations, struggling under the weight of 16 trillion of Dollar denominated debt. Wrong because the rising Dollar will undermine US exports and blow out the dramatic US trade deficit even further.

The biggest threat is the deterioration of the US bond market. The value of 10y Treasuries has been falling for weeks now, slowly and incrementally at first, much faster and more noticeable now. For a long time, market commentators and misinformants communicated the illusion that the 3 per cent ceiling would hold. It did not. Yields finally smashed through it and are now on the move towards 4 percent, a killer for the US economy and the stock market. If history is any guide it will spread from the US across the rest of the globe and will end this economic “expansion”.

For more than a month now we could see all attempts to stop the rot fail. The manufactured rise in the Dollar did not stop it, neither did the determined interventions in the US bond market, most notable today. The main underlying motivation is the growing flight out of the Dollar (the ongoing Dollar collapse) and the desire of foreign nations to move at least part of their Dollar reserves into precious metals. The gold and silver markets, manipulated for decades with a stealth depletion of western gold stocks are ill prepared for this event. This explains the enormous rise in the issuance of Exchange For Physical contracts. The latest defaults on physical deliveries for 2018 sales only are: For Silver 1266 million oz and for gold 3112 mt. So far the buyers stay quiet. It appears that the US government has put a gun to their head with the classic Humphrey Bogart quote from the Maltese Falcon: “When I slap you, you’ll take it and like it.”

There is always room for a miracle. This is now a moment for economic statisticians to teach us that the US economy did far better than we imagined in our wildest dreams and that the horrendous fiscal situation is the complete opposite. The hand of god may intervene and we will see that poor old Belgium becomes the world’s biggest investor in US Treasuries. Failing that there can can be only one advice: Put your tin hat on and get ready for a bumpy ride.

The Secret Agenda

The readers of the blog know that the Fed appears to have a secret agenda. This was revealed in an interview with JPM head and former Bank of Israel head Jacob Frenckel. Politicians, the public, the media, all believe the official narrative of inflation targeting, full employment support and interest rate normalising. This appears to be a dangerous misconception.

According to Mr Frenkel, the Fed is preoccupied with US Dollar exchange rate targeting. This is an entirely different game. Whilst the tools and measures look the same and make the cover almost perfect, the game plan is not. The public knows the tools and the parameters that guide the official policy of the Fed. Maintaining and defending a certain value of the Dollar requires additional tools and different parameters.

The additional tools required are other central banks who debase their currencies by printing them in large quantities to buy US Dollars. The ECB, BOE and BOJ come to mind. The mass deployment of derivatives like currency and interest rate swaps is another most likely tool. Propaganda via the mainstream financial media and the international banks is also essential. The talk about the healthy labour market and the robust US economy for example.

We do not know the internal Federal Reserve parameters for the exchange rate of the US Dollar. Our educated guess is that the Fed would like to anchor the Dollar at a level on the DXY of 90. In the last two weeks the Dollar overshot this target and is today over 93. This takes us to the question about the Fed’s mission and the motive for FX-rate targeting. The current discussion about European support for US sanctions on Iran helps us to explain it. The US administration is using its political, economic and most decisively its military to force uncooperative nations into submission.

The Soviet empire and the US empire are two sides of the same medal. The “allies” are mostly puppet states, remote controlled politically and militarily by Moscow or Washington. Readers interested in this subject may want to listen to some videos on YouTube about the Anglo-American Gladio network or read a book by Swiss author Professor Daniele Ganser about this topic. In the Eastern hemisphere the equivalent of the European Union was called COMECON and the NATO equivalent was called Warsaw Pact. The elites in East and West are educated in think tanks like the Atlantic Council. They become traitors to their people in order to serve their masters. Effective resistance to US demands is not to be expected from these “elites”.

Based on these steely foundations, the Federal Reserve does not find it difficult to have cooperative and helpful partners in European central banks. The most important one, the German Bundesbank was in fact established by the United States and never left its clutches. In the East, Japan and South Korea are occupied by the US armed forces and the political classes are house trained by Washington. The support regime for the US Dollar is nothing but a hidden wealth transfer from these nations to the US via the consumption their export surplus. No difference to the Soviet Union here. It is part of a long established system of servitude where nations are secretly exploited to the pay for their own occupation and oppression. In Germany this is written into the “constitution”, the Basic Law.

Article 79 (Amendments to the Basic Law) says: “(1) This Basic Law may be amended only by a law expressly amending or supplementing its text. In the case of an international treaty regarding a peace settlement, the preparation of a peace settlement, or the phasing out of an occupation regime……it shall be sufficient, for the purpose of making clear that the provisions of this Basic Law do not preclude the conclusion and entry into force of the treaty, to add language to the Basic Law that merely makes this clarification.”

Article 120 (Occupation Costs) says: “(1) The Federation shall finance the expenditures for occupation costs and other internal and external burdens resulting from the war, as regulated in detail by federal laws.”

The Federal Reserve is hemmed in by two imperatives. It knows the consequences of a failure to stabilise the Dollar at an appropriate level. This would simply destroy the US empire by making the huge military expenses unaffordable. That this empire is the source of many ills plaguing Americans and humanity alike, seems to be irrelevant. The second imperative is the level of interest rates. Today’s market action shows that the yield of the 10yr US Treasury is out of control and threatens to kill the economy. Experts believe that the housing and mortgage market will blow up if the yield of the 10yr reached 3.5 percent. It is currently at 3.042. Default rates on sub-prime auto loans are rising to danger levels. Falling US bond values threaten to bankrupt banks and pension funds and kill the stock market. The Fed can not buy bonds in any meaningful way, because it is committed to shrink its balance sheet. An appreciating currency shall pull punters, in particular foreign buyers, back into the US Treasury market to push yields down. Wall Street and the international bankers are eager to help because they know that failure means doom and gloom.

Some readers may argue that such machinations appear to be reasonable. That they serve a higher purpose, to stabilise the global financial system. They do not take the lethal effect of the cure into account. The rising Dollar threatens to kill the world economy by destabilising emerging markets who have borrowed Dollars and now struggle to service the loans. It will also kill the US stock market by making US exports unprofitable. The resulting loss of tax revenue will only aggravate the dire state of the US fiscal situation.

The consequences of a failure of coordinated central bank intervention to boost the Dollar are serious. The overshoot will become the undershoot, accompanied by a flight for safety out of US bonds and equities. The spike in yields will threaten to bankrupt the US and other countries.

New horrendous PM Default Figures

Gold and Silver are for two years now submitted to an escalated regime of market manipulation. As at of the 11 May, for this year alone, the defaults (EFP contract issuance) on physical silver and gold deliveries are without precedent in world history. For silver it is 1226.4 million oz, for May alone (nine trading days) 80.98 million oz. For gold it is 3026 mt, for May alone it is 268 mt.

This massive build up of liabilities is inconceivable without central bank backing. It is therefore likely that the longest running and most extreme market manipulation in history is backed by major central banks. No private institution would escape the regulators with such reckless and in all likelihood illegal actions.

What is most baffling is that the Cartel still believes that it can fool the markets when their footprints are now as infamous as the actions of the London Gold Pool. Where will the PM come from to satisfy the creditors? Will the United States and its western satrapies be denuded of all gold and silver when this reckless scheme blows up? Is it possible that the US empire will survive such a calamity? Ultimately President Trump’s America First policy calls on every nation to look after its own interests first. It is doubtful however whether European governments, used to behave like colonial masters, understand the seriousness of the situation.

Rogue Governments

Government is based on trust. If the people are being lied to, if they are deceived, defrauded and oppressed, government loses its right to govern. It takes a while for the electorate to come to this conclusion but in many countries the resistance movements are building. In Germany the party of the insurgents AFD regularly states, be it in the BRD “parliament” or in public speeches, that the Merkel regime is acting in an illegal way and that the rule of law has come to an end. Last week-end thousands of the German educated classes, university professors, fund managers, business people, teachers etcetera met at Hambach Castle to challenge the oppressive Merkel regime. It was the sequel to the a 1832 gathering (Hambacher Fest) that triggered a mass resistance movement that led to the over through of the feudal class and the establishment of the first democracies on German soil.

In the UK, a few days ago, on the 6 May, tens of thousands of citizens demonstrated in front of No. 10 Downing Street against the measures of government and establishment to abolish free speech and establish a dictatorship. Some speakers called the ruling classes fascist and the consensus was that the people had enough of being treated disrespectfully and in a tyrannical way.

NONE of the mainstream media even mentioned the event but anybody interested in it can look it up on YouTube. Just type in Day of Freedom and you will get videos of a truly revolutionary event. For the first time in many decades a representation of the British people, mostly young men of all colours and political persuasions, have shown that they are ready to rise up and to confront the government machine. Here are a few snippets:

Introduction: “This is a festival of freedom today!….We are here outside 10 Downing Street. You are the rebellion (loud cheers)!”

On BREXIT: “We are leaving, we are leaving” amid the cheers of the masses (whilst the unelected House of Lords, heir to the Norman invaders who have oppressed the British savagely for centuries, openly defy the will of the people to force them to stay in the European Union)

On freedom of speech, fascism and patriotism: “Somebody just turned up the heat. It’s a sunny day and the temperature is getting turned up politically as well and that’s why we are here! There is a song, rang several years ago and I hope it’s gonna be sung later on today. The first line of that song said this: ‘You have the words to change a nation but you are biting your tongue.’ We are NOT biting our tongues any more (cheers from the crowd)! We are not gonna be silenced any more! We are the silent majority! And the people who tried to close us down earlier on, the people who try to silence us they are fascists because they hate freedom of speech and we are patriots because we love freedom of speech (cheers again from the crowd).”

On the Hate Speech and the End Game: “The end game is to criminalise you, to criminalise me and to imprison and punish all political dissent to the political class.”

In Italy there is no government any more and the Italians are ready to elect a new leadership that wants to take them out of the European Union to regain their freedom and civil liberties. A week ago tens of thousands demonstrated against in Paris against French president Macron. He was depicted as a Bourbon King and the charge was tyranny. France these days is almost paralysed by strikes and the desire for change.

Sometimes it takes a bell weather moment to make the situation crystal clear and such a moment may be the address of president Trump yesterday afternoon. Since the Spanish-American War of 1898, all American wars were started with a lie and this time is no different. Equipped with one of the worst make ups in history, an ugly orangey paste that did not even cover his whole face and made him look like a clown, he uttered one misinformation after the other to justify the abrogation of the Obama-Iran agreement.

There was no need for such brutal dishonesty. Any intelligent speech writer could have produced a credible and polished case for his policies. Unfortunately disrespect and contempt for the public, the people and world opinion has grown within the political classes not just in the US to such extent that they do not care any more. This kind of behaviour is not limited to the political sphere. We see the brutal day by day manipulation of the news, the markets. The indoctrination at school, academia and last but not least the universal fight against free speech. Is it hubris or ill judgement that may ultimately lead to an over throughing of the established order and the establishment of democracy?

The Calm before the Storm

Today at 02:00 pm EST President Trump will announce whether his administration will end the Obama-Iran agreement and install a new systems of sanctions to achieve regime change in this country. The consequences of such a move are hardly discussed in the mainstream media. The only result suggested is that Iran will find it harder to build a nuclear bomb. Is there any evidence that Iran ever tried to build one?

The dispute about the usefulness of sanctions on Iran is not new. It raged on throughout the Obama presidency. There is an interesting statement by then foreign secretary John Kerry about this. Here is the transcript:

Are you kidding me? The United States is gonna start sanctioning our allies and their banks and their businesses because we walked away from the deal? Are we gonna force them to do what we want them to do even though they agreed to the deal we came to? Are you kidding? That is a recipe, quickly my friends, for them to walk away from Ukraine, where they are already very dicey and ready to say well we’ve done our bit. They were ready in many cases to say, well we are the one paying the price for your sanctions. We, we. It was Obama who went out and actually put together a sanctions regime that had an impact. By persua. I went to China. We persuaded China. Don’t buy more oil. We persuaded India and other countries to step back. Can you imagine trying to sanction them? After persuading them input various sanctions to bring Iran to the negotiating table? And when they have not only come to the table but they made a deal? We turn around and nix the deal? And then tell them you have to obey our rules and sanctions anyway. That is a recipe, very quickly, my friends, business people here, for the American Dollar to cease to be the reserve currency of the world. Which is already bubbling out there.”

This is a fascinating insight into how the US does foreign policy. It also exposes the fragile state of the US Dollar as global reserve currency. The future will tell whether the abrogation of the Obama-Iran deal will end this status.