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THIS WEEK’S EDITORIAL
LAVROV EXPLAINS THE FUTURE: Sergei Lavrov, the Russian Foreign Minister was reported last week as saying “Now that the West is taking the position of a dictator, our economic ties with China will grow even faster”.
He also said “this will give us the opportunity to implement plans for the development of the Far East and Eastern Siberia. The majority of projects with China are concentrated there. This is an opportunity for us to realize our potential in the field of high technology, including nuclear energy, but also in a number of other areas”.
These comments by Lavrov support what BOOM has been saying for some time. Russia has lost patience with the US and Western Europe. They will turn their economic attention much more now towards the South and East. And that will support China’s Belt and Road strategy and India’s economy.
Geopolitical reality reveals that three billion people who live in China and India are awaiting assistance from Russia where abundant food and energy is produced. Payment will be made in any currency except the US Dollar with a preference for the Ruble, the Yuan and the Rupee. China has CIPS, its cross border interbank payment system, ready to facilitate payments. And Russia has its interbank messaging system — SPFS — also ready, its alternative to the US dominated SWIFT. Over half of the planet’s population will soon be using less US Dollars for trade settlements than previously as other nations in the Belt and Road program inevitably join the alternative payment network.
MEANWHILE: China is now Saudi Arabia’s major trading partner and Saudi Arabia has been increasing its investments in Russia and China for some time. In March, after a long period of negotiation, it made the final investment decision to develop a refinery and petrochemical complex in northeast China at Panjin. Panjin is a large port city North of Dalian and North East of Beijing. The Panjin facility is a US$10 Billion investment in total.
At the time, a Saudi representative said that China was key to their plans to expand in Asia. Another Gulf nation, the United Arab Emirates has also recently strengthened relations with Russia, China and Iran.
The world is slowly but surely turning away from using US Dollars. But the strange thing is this. As US Dollar dominance in trade and capital settlements declines, its value relative to other currencies may paradoxically rise. Certainly, over the last 5 years, the US Dollar Index has been strong. BOOM sees US Dollar strength as a consequence of its deep, sophisticated capital markets and its abundant offshore Eurodollar volumes. These factors make it convenient to use in capital movements and that convenience supports its general acceptability. Other currencies have a long journey to make before they can really threaten its dominance in this regard. BOOM has always said that 50 – 100 years is the appropriate time frame for adjustment to global US Dollar dominance.
THE OTHER MAJOR TREND – DEMOGRAPHICS AND CASH: The other major global trend is found in the decline in working age populations in the advanced economies (including China). That decline will continue to happen over the course of this century. As working age populations decline, borrower demand for bank loans will decline and that inevitably will lead to a decrease in the supply of fresh new money.
In order to maintain stability and complexity in the advanced economies, electronic cash must be created and supported by Governments to maintain the total money supply. This is now critical to understand.
EVERYTHING IS BACKWARDS: BOOM saw this quote during the week. It sums up the last 2 years of Covid madness and Governmental over reactions succinctly.
“Everything is BACKWARDS; Doctors destroy health, Lawyers destroy justice, Universities destroy knowledge, Governments destroy freedom, Major media destroys information, And Religions destroy spirituality”. ~ Michael Ellner
HOPE FOR SRI LANKA: Tourists are coming back to Sri Lanka. This is good news for the island nation. With tourists spending foreign currencies, the nation can accumulate foreign exchange reserves and pay for urgent supplies of energy, food, fertilizers and medicines.
But the tourist arrivals are nowhere near the numbers that previously visited Sri Lanka. Currently, monthly arrivals are between 50,000 – 100,000. In recent years, they have numbered up to 250,000 monthly with an average close to 200,000 since 2016.
Last month’s arrivals of 62,000 are hopeful but in December 2019, before the Covid Panic Demic hit, the arrivals numbered almost 250,000. And April’s numbers were 40 % below arrivals in March.
Last week, BOOM suggested that Sri Lanka would (probably and inevitably) look to China and Russia for assistance. A report since then indicates Russian oil has now arrived and China is in negotiations to provide financial support.
RUSSIAN RUBLE PAUSES: Last week the Russian Ruble paused in its rise against the US Dollar. It fell by 2.2 % over the week. Western mainstream media have also now reported that the Ukraine military situation may be precarious. Perhaps this suggests the beginning of peace in the Ukraine?
CONTINUED WEAKNESS IN CRYPTO PRICES – THE DREAM MAY BE OVER: Over the last week, Bitcoin and Ethereum have again looked weak with buyers unwilling to bid their US Dollar denominated prices upwards. Bitcoin has traded in a band for almost 4 weeks. It now seems to be slowly sliding over an edge.
Bitcoin started the year at around US$ 47,700. It is now struggling to move above $30,000 and is currently at around $28,850. The lowest price during the week was at US$28,303. Its peak price was almost $68,000 in August last year.
Ethereum, the second most popular Crypto, suffered a fall of greater than 10 % over the last 7 days of trading. Its price is now at US$ 1,750 after starting the year at $3,800. But its peak price was around $4,800 in August last year.
The entire Crypto market reached a peak of capitalization at almost US$3 Trillion in August last year. BOOM has forecast its fall ever since. It is now approximately $1.2 Trillion and looks like it may soon dip below $1 Trillion.
Are the Crypto dreams over? Perhaps the promise of privately created so-called “Crypto Currencies” is a false promise? Perhaps they were never currencies at all and can never be currencies?
BOOM regards these strange inventions as digital assets (or commodities) that carry no real value. They are certainly not currencies. They have not erupted out of any great social need or demand. They are not representative of anything other than some odd theories concerning the nature of money. Gambling on them is akin to being in an exotic bar, sipping on equally exotic drinks while betting on flies climbing up a wall. The gamblers tell tales and trade lies about what makes one fly different to another. But the movement of the flies is random. There is no fundamental reason why one fly rises while another falls.
All Cryptos are US Dollar proxies — plain and simple. Their prices are always quoted in terms of US Dollar equivalents. When looked at through that lens, they are clearly an invention of the US Dollar Empire.
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice.
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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work. https://www.youtube.com/watch?v=EnC1UlnFLyI
AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today. https://www.youtube.com/watch?v=ziTE32hiWdk
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models. EMAIL: gerry {at} boomfinanceandeconomics.com
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Compare Lavrov to Blinken. We are an unserious country.
“We are an unserious country”
no, rather we are “led” by people who deeply and seriously hate us. they’ll have to be expelled. again.
If I were a cynical bastard, I’d say that the historic animosity many Hispanics feel toward certain ethno-religious groups should be encouraged by all available means.
“As working age populations decline, borrower demand for bank loans will decline and that inevitably will lead to a decrease in the supply of fresh new money.”
then this means that china will crash, because china’s ponzi and resulting debt load is ten times worse than anything in the u.s.
Not when measured by debt to GPD, nor by debt per capita:
“Not when measured by debt to GPD”
in china all data is cleared and manipulated by the chinese communist party ruling class families for their benefit and to keep the proletariat in line with communist party ruling class families’ goals. like the mandarin confucianists they are, they will never ever say anything that puts them in a bad light. they make “1984” look like a first grade book report.