Guest Post by Hugo Salinas Price
Way back in 1995, when Mexico was in the throes of another financial crisis, I figured out the problem of the existing world’s monetary system, based on the paper dollar as the fundamental currency of the world.
In my ignorance, I did not know that a man named Triffin had already pointed out that problem, which became known as “Triffin’s Dilemma”.
The problem is really very simple:
Continue reading “Donald Trump’s “Madness””
Authored by Tsvetana Paraskova via OilPrice.com,
The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.
From Birch Gold Group
Last week the dollar fell sharply against all major currencies. Both fundamental and technical indicators imply the trend could continue. When will the dollar find its bottom, and what should Americans do to protect the spending power of their savings?
Let’s examine a few possible scenarios, and investigate the best ways to preserve your wealth against a major dollar downturn…
Continue reading “Why the U.S. Dollar Has a Long and Rough Road Ahead”
Guest Post by Martin Armstrong
I have warned that rates will rise BECAUSE the Federal Reserve will be criticized if they fail to do so when they are faced with a stock market that is rising. However, while one by one, several Fed officials have all signaled in recent days that the Fed is ready to resume raising interest rates as soon as this month, the real crisis for the Fed will be raising rates will strength the dollar and put even more pressure on Europe and emerging markets. Hence, the 64 billion dollar question is will the Fed abandon international policy objectives for domestic?
John Connally, President Nixon’s Secretary of the Treasury, once remarked to the consternation of Europe’s financial elites over America’s inflationary monetary policy, that the dollar “is our currency, but your problem.” Times have certainly changed and it now appears that the dollar has become an American problem.
In a recent interview with the Wall Street Journal, the soon to be 45th President of the United States believes that the greenback’s strength – up some 25% against a broad basket of currencies since 2014 – is now “too strong,” “killing us,” and has hurt companies trying to compete overseas.* A top Trump economics advisor, Anthony Scaramucci, reinforced his boss’ sentiment adding that “we must be careful of a rising dollar.”
“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.” – Daniel Kahneman, Thinking, Fast and Slow
A couple weeks ago I was lucky enough to see a live one hour interview with Michael Lewis at the Annenberg Center about his new book The Undoing Project. Everyone attending the lecture received a complimentary copy of the book. Being a huge fan of Lewis after reading Liar’s Poker, Boomerang, The Big Short, Flash Boys, and Moneyball, I was interested to hear about his new project. This was a completely new direction from his financial crisis books. I wasn’t sure whether it would keep my interest, but the story of Daniel Kahneman and Amos Tversky and their research into the psychology of judgement and decision making, creating a cognitive basis for common human errors that arise from heuristics and biases, was an eye opener.
In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others. These rules work well under most circumstances, but they can lead to systematic deviations from logic, probability or rational choice theory. The resulting errors are called “cognitive biases” and many different types have been documented.
Who could have possibly thought that a soaring dollar would have an adverse impact on the US trade deficit, and thus, the US economy. Well, not the Fed, if only for now, because just as the Fed hiked rates only for the second time in a decade, the US advance goods trade deficit soared from $61.9 billion to $65.3 billion, far higher than the consensus print of $61.6 billion. This was the highest advance trade gap since March of 2015 when the dollar was likewise soaring.
The reason for the far greater than expected deficit: exports of goods fell 1.0%, while imports of goods rose 1.2%.
Guest Post by Martin Armstrong
The entire problem with trade and jobs has been its focus on only the job and not the consumer. David Ricardo developed his principle that nations should pursue their own competitive advantages. In other words, just because I might want to be a brain surgeon does not mean that (1) I might be very good at it, and (2) that I am entitled to state protectionism to prevent others coming into the field who could expose me as second-rate.
Continue reading “The Real Crisis Trump Will Face With Trade”
I stopped trying to predict markets back in 2008 when the Federal Reserve, Treasury Department, Wall Street bankers, and their propaganda peddling media mouthpieces colluded to rig the markets to benefit the elite establishment players while screwing average Americans. I haven’t owned any stocks to speak of since 2006. I missed the the final blow-off, the 50% crash, and the subsequent engineered new bubble. But that doesn’t stop me from assessing our true economic situation, market valuations, and historical comparisons in order to prove the irrationality and idiocy of the current narrative.
The proof of this market being rigged and not based upon valuations, corporate earnings, discounted cash flows, or anything related to free market capitalism, was the reaction to Trump’s upset victory. The narrative was status quo Hillary was good for markets and Trump’s anti-establishment rhetoric would unnerve the markets. When the Dow futures plummeted by 800 points on election night, left wingers like Krugman cackled and predicted imminent collapse. The collapse lasted about 30 minutes, as the Dow recovered all 800 points and has subsequently advanced another 1,500 points since election day. Krugman’s predictive abilities proven stellar once again.
Guest Post by The Zman
Recently, I was involved, in a limited basis, with a bankruptcy. The company that went belly up had over a million dollars in debts and no assets. Most of their debt was in the form of accounts receivable, but they had some loans and leases as well. Up until the point they filed for bankruptcy protection, they had paid all of their bills on time. In fact, they paid most vendors in ten days, something that is just about unheard of these days. This prompt payment is what led their vendors to be so generous with them.
This story reminded me of something that happened years ago. There was a house party at a mansion (are there mansion parties?) and many party goers were out on a balcony of some sort that extended over the pool area. The balcony was large enough to hold dozens of people, but it started to give way due to the mass of people. Panic set in and that made things worse as the frightened party goers scrambled to get off the balcony. The whole thing collapsed and took a bunch of people down in the process.
Guest Post by Francis Marion
Prologue:
Please note that food prices in the territories have always been unreasonably high due to isolation. In the early 80’s I lived for a short time near the border of Alberta and the North West Territories. A medium pizza could run you upwards of 20 bucks Canadian or more in the small community I resided in…. that was 30 years ago.
We have been through this before.
The provinces are now feeling the pinch as well with the collapsing dollar. Anything bought and paid for by retailers in US$ has seen inflation of roughly 30% in the past year and a half. This includes some domestically produced product – which when bought is ironically paid for in US$ and sold in CAD.
I have seen cauliflower here for as high as $9.00 CAD a head. A box of ammo that was $10.00 a year ago is now $13.00 to $14.00
Fuel has stayed relatively expensive even with declining oil prices. A litre of regular grade fuel will run anywhere from .85 cents CAD per litre to 1.05 CAD per litre.
I believe this is what is eventually in store for the US $ as it slowly but surely loses it’s reserve currency status. I am not a huge believer in hyper inflation but inflation – and I would add an uncomfortable level of it – is on the horizon.
Welcome to our world.
Submitted by Tyler Durden on 01/13/2016 23:18 -0500
It was just yesterday when we documented the continuing slide in the loonie, which is suffering mightily in the face of oil’s inexorable decline.
As regular readers are no doubt acutely aware, Canada is struggling through a dramatic economic adjustment, especially in Alberta, the heart of the country’s oil patch. Amid the ongoing crude carnage the province has seen soaring property crime, rising food bank usage and, sadly, elevated suicide rates, as Albertans struggle to comprehend how things up north could have gone south (so to speak) so quickly.
The plunging loonie “can only serve to worsen the death of the ‘Canadian Dream'” we said on Tuesday.
As it turns out, we were right.
The currency’s decline is having a pronounced effect on Canadians’ grocery bills.
As Bloomberg reminds us, Canada imports around 80% of its fresh fruits and vegetables. When the loonie slides, prices for those goods soar. “With lower-income households tending to spend a larger portion of income on food, this side effect of a soft currency brings them the most acute stress” Bloomberg continues.
Of course with the layoffs piling up, you can expect more households to fall into the “lower-income” category where they will have to fight to afford things like $3 cucumbers, $8 cauliflower, and $15 Frosted Flakes.
As Bloomberg notes, James Price, director of Capital Markets Products at Richardson GMP, recently joked during an interview on BloombergTV Canada that “we’re going to be paying a buck a banana pretty soon.”
Have a look at the following tweets which underscore just how bad it is in Canada’s grocery aisles. And no, its not just Nunavut: it from coast to coast:
The IMF and many economists (domestic and foreign) are now warning that a rate hike by the U.S. Federal Reserve, no matter when, will spark a major economic crisis in the emerging markets. They see this crisis being ripe for countries with high budget deficits, such as Turkey, as well as commodity-based economies. This includes the oil exporters such as Russia and even Saudi Arabia who has now begun to issue debt.
This is holding the Federal Reserve’s feet to the fire to the point that they are losing control of their own domestic policy objectives as a consequence of the dollar becoming the WORLD’S ONLY RESERVE CURRENCY no matter what the IMF inserts into the SDR. The emerging economies have issued debt worth nearly half that of the USA without the economic strength to back up that debt. True, there is going to be a debt explosion by 2017 and this is not going to look very nice at the end of the day. Clearly, the Fed is being pressured externally to give up its domestic policy objectives to help the debt burden of everyone else. And people keep saying the dollar will go into hyperinflation? Obviously, they do not understand the world economy or that what is taking place is OUTSIDE of the United States. Sorry, the dollar is not quite ready to burn to ashes.
Continue reading “USA Losing Sovereignty to World Fiscal Mismanagement”
Suppose someone wished to sell his house, way back in the 1890’s when gold was used as money, and somebody came to that person and said, “I’ll give you “x” ounces of gold for your house”, and suppose the offer was accepted. This was a commercial operation, where goods traded hands – the owner of a house sold a house, and received gold; the other party delivered some gold and purchased a house.
When, in bygone days, a house was sold for gold coins, all that the seller had to regard was the quantity of gold in the coins offered and whether that quantity was satisfactory or not. Gold was recognized as money!
Now suppose you wish to sell your house today, and someone offers to pay for it in “x” number of Bitcoins. The quantity of Bitcoins – unlike a quantity of gold in yesteryear – would mean absolutely nothing to you. You would have to relate the Bitcoins to something else, namely the dollar. You would want to know for how many dollars you could exchange your Bitcoins. The answer would determine whether or not you sold your house.
It is quite clear that the Bitcoin can only aspire to be a derivative of the dollar. It cannot aspire to anything greater: to have an independent, sovereign value, since, unlike gold, it is not something – something that has a physical existence.
The dollar is presently rising in its exchange value against all other currencies. But no one can deny that the dollar is itself a fiat currency, and that in all history, absolutely all fiat currencies have ended in the total collapse of their value in exchange.
The minutes from the last Fed meeting were released on Wednesday afternoon. The minutes, along with a squadron of jabbering Fed heads lying about the economy doing great, pretty much locked in the most talked about .25% interest rate increase in world history. Evidently the Wall Street titans of greed have convinced the muppets higher interest rates are great for stocks, as the market soared by 250 points. As institutional money exits the market on these rigged up days, the dumb money retail investor buys into the market with dreams of riches just like they did with Pets.com in 2000, McMansions in 2005, and Bear Stearns in 2007.
The Fed has lost any credibility they ever thought they deserved by delaying this meaningless insignificant interest rate increase for the last three years, so they will make this token increase in December come hell or high water. They want to give themselves some leeway for easing again when this debt saturated global economy implodes in the near future. The Fed is trapped by their own cowardice and capture by the Wall Street cabal. If they raise rates the USD will strengthen even more than it has already. The USD is already at 11 year highs. It has appreciated by 25% in the last year versus the basket of world currencies. The babbling boobs on the entertainment news channels authoritatively expound with a straight face about the rise in the dollar being due to our strong economic performance. It’s beyond laughable, as the economy has been sucking wind since the day the Fed turned off the QE spigot in October 2014.
