Monday, June 18, 2018
Saturday, June 16, 2018
Friday, June 15, 2018
By Brandon Smith and originally published at alt-market.com
There has been a longstanding narrative in economic circles that no matter what crisis occurs the U.S. dollar is essentially invincible. I have never been one to buy into this assumption.
Reason 1: Because I remember distinctly just before the derivatives and credit crisis in 2007/2008 the majority of mainstream economists were so certain that U.S. housing and debt markets were invincible, and they were terribly wrong. Whenever the mainstream financial media are confident of an outcome, expect the opposite to happen.
Reason 2: Because karma has a way of crushing grand illusions. When you proudly declare a Titanic “unsinkable,” nature or fate often tests that resolve and finds it wanting.
Reason 3: Because I understand that a primary goal of the internationalist, globalist, anti-sovereignty and New World Order crowd is to diminish U.S. economic performance dramatically, and this includes ending the reserve status and petro-status of the dollar in order to make way for a single global currency unit dictated by a single global economic administrator.
Mindless blind faith in the dollar (and U.S. treasury debt) seems to switch sides politically according to whose narrative it best suits. During the Obama administration, conservatives and Republicans witnessed unprecedented fiat currency creation and dollar devaluation by the Federal Reserve and rightly drew the conclusion that this would eventually trigger a currency crisis as various systems absorb and then regurgitate all these dollars back into the U.S. We saw the biggest foreign trading partners of the U.S. launching bilateral trade agreements that cut out the dollar as the reserve currency, and we witnessed many foreign creditors questioning the viability of U.S. debt.
Only a couple of years ago, conservatives were warning of potential disaster for the dollar caused by the bailouts and unchecked stimulus programs while leftists were staunchly defending the dollar as an immortal golden goose. Today, the roles appear to be switching, as many conservatives now defend “king dollar” in the wake of a Trump presidency, and adopt numerous arguments once reserved for ignorant lefty commentators.
One question that needs to be addressed is how long the current trade war will last? Some people claim that economic hostilities will be short-lived, that foreign trading partners will quickly capitulate to the Trump administration’s demands and that any retaliation against tariffs will be meager and inconsequential. If this is the case and the trade war moves quickly, then I would agree — very little damage will be done to the U.S. economy beyond what has already been done by the Federal Reserve.
However, what if it doesn’t end quickly? What if the trade war drags on for the rest of Trump’s first term? What if it bleeds over into a second term or into the regime of a new president in 2020? This is exactly what I expect to happen, and the reason why I predict this will be the case rests on the opportunities such a drawn out trade war will provide for the globalists.
In my article World War III Will Be An Economic War, I reiterated my longstanding view that there is indeed a global war brewing between major powers, but that this war will be fought primarily with financial weapons, not nukes. I also summarized my position that this war will be engineered by globalists deliberately to provide cover for something they call the “great economic reset.”
With Trump’s cabinet currently loaded with banking elites and neoconservatives with ties to institutions like Goldman Sachs and the Council On Foreign Relations, institutions notorious for promoting one-world economic and political programs, it seems to me that the worst case scenario for the U.S. could easily be staged. If the goal is to kill the dollar’s reserve status, then the trade war will be purposely prolonged.
The next question that needs to be addressed is how is the dollar actually vulnerable to destabilization?
Pro-dollar cheerleaders will say that the dollar is in high demand, with countries like India begging the Fed to stop balance sheet cuts for fear that this will reduce the amount of dollars and dollar denominated assets in circulation in emerging markets.
I see this as a gross misinterpretation of what India and others are warning about. Interestingly, foreign central banks are now sounding an alarm many of us in the alternative economic field have been sounding for years. When India’s Reserve Bank Governor, Urjit Patel, writes about the danger of speedy balance sheet cuts by the Fed causing a liquidity crisis in global markets, this is not necessarily a declaration that India has a insatiable desire for more dollars. What it is a declaration of is the fact that the global economy is weakened by its dependency on the dollar as the primary international trade mechanism.
When I see India complaining about the frailties in dollar liquidity caused by Fed balance sheet reductions, I don’t interpret that as them saying “go king dollar!” I interpret that as India coming to the realization that they are going to have to adopt other alternatives to the dollar, and they are going to have to do this quickly.
Emerging markets and much of the world have been propped up for the better part of a decade through Federal Reserve stimulus measures, from direct bailouts to near zero interest rate loans to asset purchases to outright stock market manipulation. The dollar has become a drug easing the pain of economic downturn, and many nations are addicted.
So what happens when the drug dealer, for whatever reason, suddenly stops providing the drug? The addict is going to look elsewhere for a fix.
The Fed is NOT going to stop its balance sheet cuts, and it’s not going to stop interest rate hikes. Not with the current discussion on “inflation dangers.” This will ultimately cause declines in various markets including equities, and I believe these declines will accelerate by the end of 2018. Meaning, liquidity in foreign trade and markets will have to be facilitated by other sources, such as the International Monetary Fund’s (IMF) basket currency system, or the application of a new global cryptocurrency system, which the IMF has been avidly studying.
The IMF has even been singing the praises of cryptocurrencies recently, even depicting them as the next stage in human evolution and perpetuation the lie that crypto is “anonymous.”
The dollar is vulnerable to destabilization by the very institutions and elitists that created it in the first place, and these people are seeking something much bigger than king dollar. The problem is, the globalists cannot implement such a vast “reset” in the economy without a considerable distraction. Enter Trump’s trade war…
I have been outlining the reality behind dollar weakness for quite some time. Rehashing the facts over and over again becomes tiresome but is unfortunately necessary, because there is always some new contingent of the public that falls into the trap of dollar worship. So, let’s do this one more time.
First, the dollar is NOT backed by U.S. military might. The U.S. military can barely manage its concerns in the Middle East, let alone take on nations like Russia or China in an attempt to force them to keep investing in U.S. treasury debt or retain the dollar as world reserve. If these countries drop the dollar, there is nothing the U.S. can do. Anyone who makes the dollar-by-military argument should not be taken seriously.
Second, while the dollar is in demand now, this is only because the current system has been propped up by endless Federal Reserve stimulus. If the Fed continues to cut assets and raise interest rates, then emerging markets and others will look elsewhere for support. The dollar is only valuable to global markets so long as the Fed continues to provide a perpetual supply of liquidity. Economies are fickle, and welfare recipients are even more so. Stop giving people free goodies and they will abandon you angrily.
Major foreign economies like China and parts of Europe have been adopting bilateral trade relations for some time. Rather than intimidating these countries into capitulation, a trade war on the part of the U.S. is far more likely to drive them more closely together. Germany and China in particular have been establishing strong trade ties, and OPEC nations have been much cozier with the East. The idea that the U.S. is somehow a linchpin to the entire global economy is a lie. The world can and will organize trade avenues without us if pushed. In fact, this seems to be the plan.
The U.S. has only two major points of leverage in a trade war. First, the U.S. dollar’s world reserve status, which I have already addressed as not a point of leverage at all unless the Fed continues stimulus indefinitely. Second, the U.S. consumer.
U.S. consumers and corporate buyers are sitting at historically high debt levels. In fact, their debt levels are higher than they were just before the crash of 2008. As the Fed continues to raise interest rates, this debt will become unsustainable and something will have to give. For corporations, this means job cuts and wage reductions. For consumers this means cuts to household spending. U.S. consumers are only a point of leverage in a trade war so long as they continue to consume at ever expanding rates. If we suffer another crash similar to 2008, foreign creditors will see this as a lack of incentive to continue placating the U.S.
Without a massive resurrection of American manufacturing and production, we enter into a trade war with little ammunition because we remain dependent on foreign production and goods, while other nations like China can easily expand into alternative markets and retain their own production capabilities. Trump could have launched a new renaissance of production in the U.S. if he had given corporations incentive to bring manufacturing back home. Instead, he gave them a sizeable tax cut without asking for anything in return. Those tax cuts, instead of creating jobs or luring factories back to the U.S., have instead been spent where we all knew they would be spent — on stock buybacks to prop up a flailing equities market.
The longer the trade war continues, the more other countries will consider the “nuclear option” of dumping the dollar as world reserve, or dumping U.S. debt. In my view, this is exactly what the globalists want. Trump bumbles into a trade war and is blamed for a crisis in the dollar as well as a crash in stock markets, while the banking elites introduce their new world order reset as a solution. In this case, I think the worst case scenario is the intended scenario.
Thursday, June 14, 2018
Wednesday, June 13, 2018
By Brandon Smith and originally published at alt-market.com
In the world of alternative economics we often focus on the schemes and machinations of central banks as well as international banks as their closely tied partners in crime. But it is easy to forget that these institutions are merely composites and proxies made up of specific people. The institutions themselves are no more invincible than the very mortal criminals that make up their memberships.
As a writer for the liberty movement I often hear the demand that we should “name names” when referring to groups like “globalists” in our analysis. These demands usually come from people who are too naive to understand how long such an article would be if we had to make a list of said globalists and their trespasses every time we sat down to make a point or convey a piece of information. That said, I’m happy to start a new series of articles which I will be publishing intermittently that will focus on “naming names,” one name at a time.
Some of these names will belong to people you rarely if ever hear about. These are the men behind the curtain of power, those that have much greater influence than is apparent at first glance.
In my last article I outlined the unfortunate propensity of Donald Trump to invite such “swamp creatures” into his cabinet and into the White House. Some of these people are rather notorious and well-known, like Council on Foreign Relations warmonger John Bolton. However, others have gone under the radar.
The name of Larry Kudlow has been making the rounds lately, at least in mainstream economic circles, largely because of his role in Trump’s accelerating global trade war efforts. Kudlow is the Director of the National Economic Council and adviser to the Trump administration, recently replacing Goldman Sachs alumni Gary Cohn. As such, he is perhaps the greatest influence in the White House in terms of U.S. economic policy when applied in international relations. A powerful position indeed.
Kudlow has been in the news feeds the past couple of days due to his remarks concerning tariffs on Canadian aluminum and steel, saying that Canada was “overreacting.” The media has also expounded on his confidence that the trade war will be "brief" and that deals will be easily reached that address the concerns of the US. He has also been aggressive in his comments on the World Trade Organization and the G7, which appeals to many of us conservatives at first glance; however, when one realizes how little leverage is truly behind such rhetoric, Kudlow's tough stance becomes unimpressive.
First, I highly doubt that Kudlow is surprised by Canada’s anger over trade tariffs considering their economy is so distinctly integrated with the U.S. Second, every time we hear rumors that the trade war is being quickly resolved, talks fall apart and tensions escalate. The most likely outcome in my view is that retaliatory measures by numerous foreign trading partners will be common and unrelenting during Trump’s trade war. Count on it. That said, the fact that Kudlow in particular is overseeing Trump’s economic war should not go without examination or concern by Trump supporters.
Larry Kudlow was often presented as a “conservative” economist and adviser during his transition into Gary Cohn’s role. There was some public criticism over the introduction of Gary Cohn into the Trump cabinet due to his extensive history with Goldman Sachs (former president) and his globalist leanings. The removal of Cohn for Kudlow was clearly designed to lure critics into a false sense of security and the hope that Trump would not be surrounded by elitist ghouls 24/7. Sadly, nothing has changed.
Kudlow is perhaps even worse than Cohn, considering he launched his career as an economist for the New York Federal Reserve. He worked as a financial analyst for Bear Stearns in the early days of the subprime era, and this private sector grooming seems to have had a heavy influence over his views of what makes the economy “healthy” for many years to come. He may have even stayed on at Bear Stearns until their collapse, except that he was fired due to his cocaine abuse.
Kudlow is often touted as a former member of the Reagan administration, but few mainstream news sources mention that he ALSO worked on Democratic campaigns alongside the Clintons as well as John Podesta. Since then, he has mostly been visible as a financial pundit on cable news, where his track record was less than stunning. To give you a point of reference as to where he stands on the fallibility scale, Kudlow started his commentating career working with Jim Cramer, the TV guru of poorly conceived economic analysis.
Some of his most notable bad predictions were made around the time his former employer, Bear Stearns, was on the edge of insolvency. Kudlow stated in November 2007:
I don’t have to tell you, this prediction was WAY off. It was this fraudulent but widespread narrative that helped lull the American public into a stupor of assumed safety on the eve of economic disaster. Kudlow also commented in March 2007:
Kudlow actually reminds me of nearly every mainstream media talking head in the economic world. Holding up all the wrong metrics (like the trade deficit) as evidence of economic health while ignoring the massive amount of data proving the contrary. Will Kudlow once again tout a shrinking deficit under Trump as some kind of evidence of fiscal improvement while ignoring all other detrimental signals?
One must consider two possibilities in Kudlow’s philosophy — either he is highly blind to the obvious, or he supports another agenda that runs counter to the truth. Either way, it’s not a good sign for America’s financial future. We must also ask ourselves why the Trump Administration would want him in the first place.
Kudlow has been quoted as highly opposed to Trump’s economic policies. This was, of course, before Trump’s election win and Kudlow’s appointment as economic adviser.
“And let’s not forget: The stock market, which is a leading indicator of the future economy, is in a wee bit of a correction. Given the recent rise of presidential candidate Donald Trump, we should all be thankful that stocks haven’t plunged. Trump’s agenda of trade protectionism, dollar devaluation, and immigrant deportation is completely anti-growth. It’s like Fortress America in an economy that is completely globalized and where the U.S. must compete in the worldwide race for capital and labor. Trump’s policies don’t fit.”
The claim that the stock market is a “leading indicator of the future economy” is perhaps the most idiotic thing I’ve ever heard. The stock market wasn’t a leading indicator for the crash of 2007/2008. Not in the slightest. In fact, the stock market is a far trailing indicator for economic instability. All other fundamentals flash red long before stocks ever figure out what is going on.
Beyond that, keep in mind that this is now the guy that is the champion of Trump’s trade protection agenda. The same guy that clearly despised such measures only a couple years ago. The same guy that is willing to flip-flop and state that Canada and other trading partners are “overreacting” to tariffs. So if we use Kudlow as the contrarian indicator he seems to be, what is the most likely outcome of the current trade war action? Disaster.
For now, immense effort is being poured into convincing the American public that trade war efforts are highly successful, even though negotiations have barely begun. The issue here, though, is US weakness in these negotiations. What the average American is not aware of is the precarious nature of the US dollar as the world reserve currency and the petro-currency. For the past ten years at least, major trading partners of the US have been shifting away from the dollar and seeking out alternatives in bilateral trade. The mainstream media has been very careful to ignore this threat as often as possible.
With the Federal Reserve cutting its balance sheet, the focus will now be on foreign buyers to prop up US debt. As long as the US is utterly dependent on foreign investment in the dollar and Treasury bonds, we will be vulnerable. All that is left is for someone to introduce an alternative reserve system, and of course my regular readers know that such a system already exists in the IMF's Special Drawing Right currency basket. Add to this the fact that the IMF is "looking into the benefits" cryptocurrencies and blockchain technology, and I think it is obvious where this is all heading.
Retaliations by foreign trading partners will not be limited or short-lived. A legitimate deal will not be struck between the U.S. and China or any other trading partners for that matter (though empty promises might be made). The trade war will escalate to include threats to the dollar’s petrostatus and world reserve status. And U.S. treasury debt will come into question or be used as leverage by other nations. In fact, this may very well be the plan.
With Kudlow (originally hostile to Trump's trade policies) in place as chief economic adviser to the White House, there is little chance that economic reality will be at the top of the White House schedule, or that any of the above concerns will be given proper examination.
Is it sensationalism to argue that the introduction of Kudlow into the Trump cabinet is a sign of economic Apocalypse? Maybe. But look at his record, his past associations, his affinity for institutions that act as breeding grounds for globalism and other very destructive ideas, as well as his ability to ignore all fundamentals in the name of promoting a directed agenda, and I think we have a recipe for something very ugly on the horizon.