What Wall Street fears

January 30, 2021

What Wall Street fears

By The Ister for the Saker Blog

The origin of modern banking can be found in the early days of the gold trade. In the Middle Ages, goldsmiths accepted deposits of gold in return for paper notes, which could be exchanged for the deposits at a later date. Because these paper notes were more convenient for commercial use than physical metal, they were usually not redeemed for gold right away. The goldsmiths noticed their customers’ deposits could be used in the meantime to generate interest and began surreptitiously lending out the savings of their depositors. Over time fractional reserve banking developed from this tendency of lending out money in excess of the actual reserves being held.

Goldsmith became banker, and from this early monetary system, banking families emerged. Prior to the existence of modern financial institutions, these houses were the entities which could be relied upon for large amounts of credit. A reputable surname gave confidence to depositors that their gold was in good hands, and from the intergenerational accumulation of wealth grew large pools of loanable capital. As nobles required weapons and pay for their armies, the conflicts of medieval Europe were fueled by families such as the Medici, Fuggers, and Welsers. Today, it is the Federal Reserve which finances America’s enormous military and conquests abroad.

To truly understand banking, the concept of free markets must be cast aside. Just as oil is a strategic resource for the real economy capitalist, gold and silver are strategic resources for the financial capitalist. Physical bullion is the basis from which all other lines of credit extend; we know this because the same central banks which publicly proclaim gold to be a barbarous relic still feel the need to maintain enormous hordes in their vaults.

As in oil markets, pricing is not influenced primarily by a large number of producers and buyers but by concentrated cartel dynamics. So while we witness yet another energy battle between OPEC and Russia unfold, it should be understood that similar dynamics are at play in the upper echelons of the monetary world as bankers seek to fix prices and control physical bullion flows in a manner which is beneficial to their interests.

A key difference from oil is that while the pump leads to the refinery and the refinery to the end-user, bankers do not generally like to part with their gold. Accordingly, markets have been designed so that prices are determined not by physical delivery but by the trading of unbacked or fractionally backed “claims” on the underlying metal: certificates, ETFs, and futures. We can be certain that there is not enough physical bullion to cover all these paper metal claims, just like the medieval goldsmith did not hold his deposits in full.

These paper markets set the price, although bars rarely leave the vault

Where is the vault? While Fort Knox claims the largest holdings, the price is set by the London Bullion Market Association and CME Group which together account for around 70% and 20% of global trading volume respectively. The London Bullion Market began in 1850, when N. M. Rothschild and Sons and several other banking families created a cartel to oversee the operations of the global gold market, including the establishment of the “London good delivery” list which created trading standards for size, dimensions, shape and fineness of bullion; today trading on London markets requires a high purity and being between 350-450 ounces.

This domination of the world’s gold market was not achieved through peaceful means: look into the forces behind the conquest of Transvaal’s gold mines, for it bears a direct parallel to America’s invasions of oil-rich nations today. Another similarity with oil markets is that military interventions have a habit of “liberating” the target nation of their gold: just ask Muammar Gaddafi.

The price of such a strategic resource could not be determined by an open market, thus alongside good delivery standards the “gold fix” was established in 1919 and was held in the offices of New Court until 2004, when its operations were passed on to a cartel of bullion banks such JP Morgan and HSBC. Ever since, these banks have been investigated and convicted countless times of manipulating and spoofing the prices.

How do we know that there isn’t enough gold to cover physical deliveries? Back in the 1970s the dollar was under a lot of pressure and Western banks maintained secret gentlemen’s agreements not to request delivery of bullion. In 1971 Dutch central bank chief Jelle Zjilstra ignored these formalities and planned to convert $600 million of the Dutch dollar reserves to gold, prompting Federal Reserve chair Paul Volcker to fly out to the Netherlands and warn him: “you’re rocking the boat.” Shortly after Zijlstra refused Volcker’s pressure and continued with the purchase, the US decoupled from the gold standard.

Abandonment of the gold standard risked a reduction in dollar demand, so Nixon enlisted Wall Street scion Gerry Parsky to negotiate with oil exporting Arab nations. After discussion, the Saudi state agreed to sell oil priced exclusively in dollars and to invest the proceeds of oil sales in America.

To those who say dismissively that the dollar is now backed by “nothing,” I say it is backed by oil and the threat of the US military.

Look at the somber fates of those that tried to ditch the dollar for gold or the Euro: Libya in a state of permanent civil war; starving Syrians picking through landfills in search of food only miles from occupied wheat fields.

So maintaining confidence in our reserve currency requires the undermining of confidence in gold, as its reemergence would unnecessarily democratize the international monetary order. Confidence is undermined first by price suppression, which is accomplished by the manipulation of precious metals futures markets. While it would be hugely wasteful for a private individual or consortium to manipulate such a market with their own money, that is where the unlimited fiat available at central bank trading desks come in: and we know central banks are secretly trading precious metals futures due to leaked documents from CME Group.

Leo Melamed, chairman of CME Group and the putative father of modern commodity futures markets noted in his book Escape to the Futures that CME’s Globex system was inspired by the original London gold fix:

Sandner, Kilcollin and I were in London with the chairman of the Rothschild Bank seeking his advice on how to bring the “gold fix” to Chicago. From the heated debate that followed one would have concluded that Kilcollin knew more about the subject than the legendary Rothschilds, the people who had founded the concept ages before.

What we can see from this is that strategic commodities such as gold and oil are far from a free market: recall my previous article The Empire is Losing the Energy War which described how the Saudi state functions as a price-suppression weapon against Russia’s oil exports. This global commodity suppression schema allows the importation of the planet’s finite resources at a fraction of the true cost in return for theoretically unlimited currency. Recall Fed governor Kevin Warsh’s comments in December of 2011 when gold hit an all time high that banks were:

“finding it tempting to pursue financial repression- suppressing market prices that they don’t like”

There are signs, however, that the thin pool of physical bullion which exists to maintain confidence in paper markets is drying up. In March of 2020, CME Group had to relax its own requirement of 100oz bars to allow 400oz London good delivery bars to be shipped from overseas and used for trade settlement. Some would say: if price suppression exists then why has the gold price gone up over the last few years?

The middle ground between setting the price to very low or very high levels, say, $100 or $10,000, is that the prices are set high enough to minimize outflows from vaults, while at the same time using futures to hammer down the prices at psychologically important levels and initiating margin calls on those who are long gold using leverage. Those who have watched gold for a long time can attest to the sudden and inexplicable drops which originate in the futures market and which occur every time the gold price appears *just* ready to break out.

It’s a very complicated charade for the bullion bank cartel. Allow the price per ounce to go too low and you risk running out of the gold necessary to facilitate markets. At the same time, if the price rises too high it attracts international attention and risks gold reemerging in monetary policy. Notice how as soon as the supply shortages became apparent in March 2020 the bankers were forced to reset gold from $1230 to over $2000 in order to stem the outflows of physical delivery.

Putin is intentionally exacerbating this drought of physical gold in Western banks by expanding the Russian central bank’s purchases of gold. For the past few years Russia has been the number one global purchaser of bullion, having spent over $40 billion to bring Moscow’s reserves to the highest level in history: a sum close to the annual military budget because it is a strategic asset.

Just last week, Russia’s gold reserves passed its dollar reserves for the first time reaching a sum of $583 billion, highlighted by the central bank as part of Putin’s de-dollarization agenda. Given that purchases have grown at roughly 15% per year we can predict that even if the price does not rise, the value of these holdings will be around $1 trillion in three years. Read the anxious commentary about these purchases in Bloomberg and Forbes, and remember the nervousness in the business press when Germany demanded its gold back in 2013, which would only exist if behind-the-scenes physical gold flows were disjointed and there was internal muttering in the financial world as to whether the demand could be fulfilled.

To any who doubt that this is an overt move, in the pre-WW2 monetary system the mass accumulation of gold was well understood among central bankers as an aggressive act intended to starve competitor states of their ability to create credit. For example, French and American hoarding resulted in hyperinflation for Germany and forced Britain’s pound sterling off the gold standard.

Russia’s acquisition of precious metal is a direct threat to the financial system. How funny that the system is so fraudulent that it is an act of aggression to simply demand in physical form what one has paid for in full on an open market; an act which the designers of the system cannot protest lest they reveal their own bankruptcy. Just as it did in the 1920s, the hoarding of gold in the East will eventually limit the West’s ability to extend credit, it is simply unfolding on a longer time frame.

So why is a tiny stock like GameStop causing billionaire Leon Cooperman to cry on CNBC, and why is the SEC threatening small-time investors?

Simply, the financial markets are being revealed as a highly illiquid house of cards. Retail investors from Reddit began trolling short-sellers by rapidly buying small stocks and causing hedge funds to blow up from expensive margin calls. The losses are now estimated at around $70 billion, and as these small-time investors funnel their unemployment and stimulus checks into their aggressive trades they have fought wealthy investors in a more effective way than Occupy Wall Street ever did. They have now turned their eyes to the small and illiquid silver market…

Look at the fate of the Hunt brothers fortune: they were oil billionaires who tried to exercise their legal right to take physical delivery of a large volume of silver futures contracts and had CME pull the rug out from under them before it could be achieved. CME Group defeated the Hunt brothers by instituting Silver Rule 7 which limited the dollar amount of physical silver that an individual investor could buy. But how will that stop the hordes of young low net worth traders who are now telling one another to purchase physical bullion and intentionally strain the rigged silver market?

This arcane financial system is doomed to fail because it is based on ever-higher and more unstable abstractions of underlying wealth: CDOs squared and cubed, dark pool derivatives markets totaling trillions of dollars, and so on: all of which depends on the financial sector sucking as much money as possible out of a shrinking global economy through securitization. Now that people are demanding the underlying assets themselves, change is beginning.

What an interesting timeline: where Russia and unemployed youths have come to the same conclusion for how to defeat the banks.


The Ister is a researcher of financial markets and geopolitics. Author of The Ister: Escape America

Blood Gold

Blood Gold

PressTV Interview with Peter Koenig

Transcript

Background

The Middle East Eye reports  there are no gold mines under Dubai’s sands with artisanal miners or children toiling away trying to strike gold. But there is the Dubai Gold Souk and refineries that vie with the largest global operations as the United Arab Emirates (UAE) strives to expand its position as a major gold hub.

In recent years, the UAE, with Dubai in particular, has established itself as one of the largest and fastest-growing marketplaces for the precious metal, with imports rising by 58 percent per annum to more than $27bn in 2018, according to data collated by the Observatory for Economic Complexity.

With no local gold to tap, unlike neighboring Saudi Arabia, the UAE has to import gold from wherever it can, whether it be legitimately, smuggled with no questions asked, sourced from conflict zones, or linked to organized crime.

Blood gold

The Sentry’s investigation (Sentry Investigations specialize in private and corporate investigations in the UK) found that 95 percent of gold officially exported from Central and East Africa, much of it mined in Sudan, South Sudan, the Central African Republic and the Democratic Republic of Congo, ends up in the Emirates.

Gold has become so important to Dubai’s economy that it is the emirate’s highest value external trade item, ahead of mobile phones, jeweler, petroleum products and diamonds, according to Dubai Customs.

And it is the UAE’s largest export after oil, exporting $17.7bn in 2019. Gold’s importance has only increased as Dubai’s oil reserves have dwindled and the UAE has tried to diversify its economy.

The Swiss connection

Dubai is not the only gold player with dirt, and even blood, on its hands.

“It is not just Dubai, it’s also Switzerland. The Swiss get large quantities of gold from Dubai. The Swiss say they are not getting gold from certain countries [connected to conflict gold], but instead from Dubai, yet the gold in Dubai is coming from these countries. Dubai is complicit, but Swiss hands are equally dirty as they can’t cut Dubai from the market,” said Lakshmi Kumar, policy director, at Global Financial Integrity (GFI) in Washington DC.

Switzerland is the world’s largest refiner, while [more than half] of all gold goes through the country at some point, according to anti-corruption group Global Witness. Switzerland’s trade is tied to the UK, which imports around a third of all gold.

—————-

RT Question:
Gold has become such an important commodity for the UAE, that it is the largest export after oil, exporting $17.7bn in 2019. But there is the other side to this story. A report by the UK’s Home Office and Treasury earlier in December also named the UAE as a jurisdiction vulnerable to money laundering by criminal networks because of the ease with which gold and cash could be moved through the country. Is this the case?

PK Reply
First, International Gold Laundering is a gigantic Human Rights abuse, foremost because laundered gold stems from many countries in Africa and South America where massive child labor is practiced. Children not only are put at tremendous risk working in the mines, in narrow rickety underground tunnels that could collapse anytime, and often do – but they are also poisoned on a daily basis by chemicals used in extracting gold ore from the rock, notably cyanide and mercury – and others.

Second, Gold laundering is an international crime, because it illegal and it is mostly run by mafia type organizations – where killing and other type of violence, plus sexual abuse of women – forced prostitution – is a daily occurrence.

There should be an international law – enforceable – issued by the UN – and enforced by the International Criminal Court against anything to do with gold laundering. Infractions should be punished. And countries involved in gold laundering should be held responsible – put on a black list for illegal financial transactions and for facilitating human rights abuses.

The United Arab Emirates — has no gold, so all of the $17.7 billion of their gold exports is being imported and “washed” by re-exporting it mainly through the UK into Switzerland and other gold refining places, like India. With a worldwide production of about 3,500 tons, there are times when Switzerland imports more gold than the annual world production, most of it coming from the UK, for further refining or re-refining, for “better or double laundering” – erasing the gold’s origins.

From the refinery in Switzerland, it goes mostly into the banking system or is re-exported as “clean” gold coming from Switzerland. And its origins are no longer traceable.

Worldwide about 70% of all gold is refined in Switzerland.

Gold mine production totaled 3,531 tons in 2019, 1% lower than in 2018. About 70% of all gold, worldwide is refined in Switzerland. So, it is very likely that the UK, receiving gold from United Arab Emirates, re-exports the gold to Switzerland, for re-refining, for further export to, for ex. India. – Coming from Switzerland it has the “label” of being clean. How long will this reputation still last?

Metalor is the world’s largest gold refinery – established in Switzerland. And they are absolutely secretive, do not say where they buy their gold from, because the Swiss Government does not require the origin when gold enters Switzerland.

Once it is refined – the origin can no longer be determined, because gold does not have a DNA.

RT Question
The Sentry’s investigation found that 95 percent of gold officially exported from Central and East Africa, much of it mined in Sudan, South Sudan, the Central African Republic and the Democratic Republic of Congo, ends up in the emirate, through what’s known as blood gold: gold obtained through brutal mining practices and illicit profits, including the use of children, how do you see this?

PK Reply
Yes, this is absolutely true.

As mentioned already before – much of the gold from Africa / Central Africa, Ghana and South America, notably Peru, is blood gold. Of course, it passes through many hands before it lands in a refinery in the UK, Switzerland or elsewhere, and therefore is almost untraceable.

But, the company that buys the gold, like Metalor, they know exactly where the gold is coming from, but, as mentioned before, since the Swiss government does not require the importing company to divulge the origin of the gold – the human rights abuses will never come to light, or better – to justice.

It is estimated that up to 30% of all gold refined in Switzerland is considered blood gold. Imagine the suffering, disease, and even death – or delayed death through slow reacting chemicals like cyanite and mercury.

However, if there is no international law – a law that is enforced – that puts the criminals to justice – and put countries that facilitate gold laundering on an international list – for the world to see – and hold them accountable, with for example financial sanctions, little will change.

Peter Koenig is a geopolitical analyst and a former Senior Economist at the World Bank and the World Health Organization (WHO), where he has worked for over 30 years on water and environment around the world. He lectures at universities in the US, Europe and South America. He writes regularly for online journals and is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed; and co-author of Cynthia McKinney’s book “When China Sneezes: From the Coronavirus Lockdown to the Global Politico-Economic Crisis” (Clarity Press – November 1, 2020)

Peter Koenig is a Research Associate of the Centre for Research on Globalization.

When Wall Street flies with Icarus’ wings

When Wall Street flies with Icarus’ wings

October 08, 2020

by Jean-Luc Baslé for The Saker Blog

Wall Street is forever rising. The S&P500 index rose to 3,581 on September 2nd, 2020 – the highest level it has ever reached since its creation. This makes no sense. Wall Street is a reflection of the state of the economy which is in recession since February[1], the worst recession since 1929. How can share prices rise when the economy is falling? To answer this question, let’s analyse the economic policy of the United States these past few years, taking Federal Reserve Chair Jerome Powell’s speech of August 27th, 2020 as our starting point. Going back in time, we see that American leaders ignored the fundamental laws of economics. We note that foreign leaders, such as the European Central Bank governors, followed the same path. We conclude that stock prices do not reach the sky, and that the United States is caught in a bind from which the only way it can extricate itself is through a dollar depreciation. This bodes ill for the American Empire. The dollar is one of its main pillars.

Jerome Powell questions the validity of quantitative easing

Depending on their editorial stand, the media understood Powell’s speech as a return to inflation, giving greater attention to unemployment. But this summary ignores the essence of the message which questions the validity of quantitative easing – a policy followed by the Federal Reserve since November 2008. This is what Powell said: “With interest rates generally running closer to their effective lower bound even in good times, the Fed has less scope to support the economy during an economic downturn by simply cutting the federal funds rate.” In short: pushed to its limit, quantitative easing loses its capacity to alter employment and inflation. Quite logically, Jerome Powell and the Federal Open Market Policy (FOMC) call for a softening of the rules governing inflation and employment: “appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time”, and “a strong labor market, particularly for many in low-and moderate-income communities”.[2] This was understood as a return to inflation which it is not. It is an attempt to rescue quantitative easing while waiting for a return to more traditional economic policies.

By dropping surreptitiously quantitative easing, Jerome Powell is sending a message to Congress: economic policy cannot rest solely on monetary policy. Congress has at its disposal another tool: the budget. Over the past thirty years, priority has been given to monetary policy for several reasons. For conveniency reasons: monetary policy is essentially defined by one man, the Federal Reserve Chairman with the FOMC congruence. Budgetary policy, on the other hand, is defined by Congress and the President. It takes time for the two to agree, especially if Congress is split between a Democrat and a Republican majority. For efficiency reasons: changes in monetary policy are felt quite rapidly in the economy: six months to a year. It takes a lot longer (one to two years) for changes in the budget to be felt. For practicality reasons: budgetary measures imply taxation or indebtedness. Taxation is not very unpopular with the electorate, and indebtedness, if overused, leads to higher interest rates and slower economic growth. For all these reasons and the more theoretical ones set out by Milton Friedman and the monetarists, monetary policy became the policy of choice for the last thirty years, with quantitative easing being its most advanced form.

Priority being given to monetary policy with the budget playing second fiddle, the budget deficit should have come down and, with time, turned into a surplus. It did not happen. Worse, it has grown over the last twenty years to reach -4.6% in 2019. The initial figure expected for 2020 (-4.6%) will be substantially larger due to the Covid-19 virus. The $2,200 billion CARES Act approved by Congress in March to provide much needed relief to individuals, families and businesses, will translate into a much higher deficit, and a much higher level of debt.

Quantitative easing and the economy

Excessive money creation by central banks is anathema to financial markets since it is synonymous to inflation, higher interest rates, slower growth and the collapse of the stock market. It must be prohibited at all cost. Yet, that’s what quantitative easing is all about, and quantitative easing saved Wall Street and the economy after the 2008 subprime crisis. How can this be? In the fall of 2008, banks’ balance sheets were loaded with corporate bonds whose market value were well below their face value. To avoid a collapse of the market, the Federal Reserve bought the bonds, in effect replacing junk bonds with cash on banks’ balance sheets. The Fed’s bailout commitment totaled $29 trillion.[3] In view of this amount, it is no wonder that the program worked… to Wall Street’s satisfaction. Trust returned, the economy took off, and shares regained and exceeded their previous values. All is well and good, except the Federal Reserve exceeded its mandate. Its job is to provide the liquidity the economy needs to grow and achieve full employment without generating inflation. Under normal circumstances, the banks whose equity was washed out by bad investments, due to senior management’s poor decisions, should have been allowed to fail. To avoid a collapse of the economy, the government would have bought the banks’ shares at their market value, fired the management, and re-introduced the banks on the stock market once their business was back to normal. But these were no “normal circumstances”. Neither Congress which oversees the Federal Reserve policy, nor Barack Obama who was anxious to move past the crisis, blamed the Federal Reserve for outstepping its legal framework. As for Wall Street, it had every reason to rejoice. Not only was it saved from total collapse, but within five years the market value of its stocks, as measured by the S&P500, exceeded its pre-crisis value. It has more than doubled (graph 1).

The Federal Reserve’s quantitative easing did not result in a depreciation of the dollar, as could have been expected. In fact, the subprime crisis strengthened its value somewhat, as it was perceived by foreign investors as a safe haven to protect their wealth in a tumultuous environment. This strength of the dollar and the relative stability of foreign exchange market is also due to the interconnexion of world’s economies. The subprime crisis first emerged in the United States but spread rapidly around the world. Faced with a potentially damaging economic crisis, world leaders of the largest twenty economies – the G20 – met in Washington DC on November 14-15, 2008, i.e. only two months after Lehman Brothers’ bankruptcy. Asian and European central banks agreed to espouse the Federal Reserve’s quantitative easing policy. Money creation around the world being essentially the same in relative terms, currencies retain their value in relation to each other, as shown by graph 2 (note: exchange rates are expressed as an index, and the value of the pound sterling and the euro have been inversed to make them comparable to the yen and yuan).

Money creation saved Wall Street without depreciating the dollar, but what about employment? The United States’ performance is excellent. The December 2019 unemployment rate is 3.5% – a rate lower than all other advanced economies with the exception of Germany and Japan. The picture is less rosy if one looks at it from a different angle: the length of time it takes to return to full employment. It took 15 months after the 1973 recession, 30 months after 1990, 46 after 2001 and 75 months after 2008, i.e. over six years (graph 3). Quantitative easing which served Wall Street so well, did little for Main Street. Of course, as noted by Jerome Powell, there are other factors to be considered besides monetary policy when studying labor issues. Nonetheless, the conclusion is inescapable: quantitative easing worked better for Wall Street than it did for Main Street.

What about inflation? Ever since Federal Reserve Chairman Paul Volcker put a brutal end to stagflation[4] in letting the overnight rate go over 21% in June 1981, inflation has been subdued. Quantitative easing which is an inordinate increase of money in the economy should have, according to the quantity of money theory, led to inflation. It did not. The large quantity of money injected in the economy by the Federal Reserve had no impact on the price level. Graph 4 compares the velocity of money[5] with the Consumer Price Index – the velocity (blue line) is inversed to underline its exceptional rise in the last few years. Full employment did not lead to higher prices either. Jerome Powell observes that “the historically strong labor market did not trigger a significant rise in inflation”, as the Phillips Curve[6] would predict. He then notes that “inflation that is persistently too low can pose serious risks to the economy”. Clearly, the United States is in a peculiar situation where neither money creation nor full employment translates into higher prices, as economic theories tell us. Several hypotheses may explain this abnormality.

The fairly rapid opening up of the American market[7] in the early 1990s, followed by the creation of the World Trade Organization in 1994, shaped a new environment in which the procurement of a given product was no longer restricted to the home country. Bilateral trade relations among advanced nations became global to include developing nations, such as China which joined the WTO in 2001. Competition among manufacturers became global, pushing prices down. Corporations offshored their production to take advantage of lower wages in developing nations. This weakened the negotiating power of trade unions who were faced with an unpalatable deal: accept lower wages or lose jobs to the Chinese. The digital revolution also played a role in bringing costs down with many firms “rightsizing” their labor force thanks to the adoption of the personal computer. Finally, Ronald Reagan’s decision to fire 11,000 air controllers in 1981 had a tremendous impact on middle income employees who realized status did not protect them anymore: they could lose their jobs as easily as manual workers could. These events put an end to what was known as cost-push inflation – an overall increase in prices due to higher labor and raw material costs.

Increased energy efficiency, as measured by the ratio of oil consumption to GDP[8], also helped contain inflation. The ratio doubled over the last twenty years. While a barrel of oil produced $450,000 of economic wealth in 2000, it produced $920,000 in 2019. This is why the rapid rise in oil prices over the last fifteen years had little if any impact on the state of the world economy, as opposed to shocks inflicted by the 1973 and 1979 price hikes.

In summary, inflation remained subdued due to globalization, the Reagan and digital revolutions, and energy saving. These watershed events spare the United States a rise in price levels that quantitative easing would normally have brought up. Quantitative easing is not inflation-free, it benefited from exceptional conditions. With respect to employment, the Federal Reserve’s performance is dismal when compared to previous periods. But Wall Street has every reason to be satisfied with it.

The Federal Reserve’s monetary policy in the recent past.

The decoupling of quantitative easing and inflation partially explains why Jerome Powell is distancing himself from this much vaunted but, in truth, inefficient policy. Besides the dual, yet incompatible inflation-employment objective Congress assigned to Federal Reserve, he must also watch over the largest banks’ financial health to make sure it remains strong. In fact, this was the main role the Federal Reserve Act assigned to the Federal Reserve in 1913. This duty is crucial. Economic crises often arise from a bank failure, as was the case with Lehman Bros.’ bankruptcy in September 2008. From this standpoint, Jerome Powell deserves our praise for he averted two crises in the recent past even though one may argue about the reasons they were conducted.

The first rescue took place in September 2019. Without warning, interest rates on the “repo” market shot up to 10% in mid-day on September 17th., 2019.[9] This market is a corner stone in Wall Street’s architecture. If it fails, the whole structure crumbles. The Federal Reserve had to act promptly to calm the market down. This is what it did in injecting $41 billion into the market that very day. Interest rates plummeted. On September 18th, they had returned to their September 16th level. The cause of this ephemeral panic remains a mystery. But the fact that the Federal Reserve had to keep intervening for several months, leads one to conclude that structural causes might have been at work.

This incident was the prelude of a much worse crisis which was averted thanks to the combined effort of the Federal Reserve and Congress. On February 19, the S&P500 reached a new high: 3,386, then dropped abruptly reaching its lowest level in the year: 2,237 on March 23, i.e. a 30% fall in 36 days. This time, the Federal Reserve was slower in reacting. It’s only on March 11th, nearly a month after the stock market began to tumble, that it began injecting liquidity into the economy, propping up the stock market (graph 5). On March 13th, two Congressmen from the Democratic Party offered to help people who lost their job due to the pandemic. It took the form of The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act for short, which was unanimously approved by the Senate on March 25th and signed by Donald Trump on the 27th. It took only 15 days to ratify a law granting $2,200 billion, or about 10% of the gross domestic product – the largest amount ever approved in the history of the United States – to dodge an economic crisis in the making. Considering that by March 11, only 37 people had died from the virus while the S&P500 had already lost 19% of its value, one may question the politicians’ motivation. Was it the Covid-19 or was it Wall Street which led them to act decisively? Generous as it is to the unemployed, the CARES Act is equally generous to corporations which already benefited from the Federal Reserve’s action. Wall Street resumed its rise.

May the stock market rise to the sky? One is tempted to believe it when considering its performance. Could investors be the victim of an “irrational exuberance”? Not so, say some analysts who attribute the market rise to the “big tech” corporations (Google, Amazon, Facebook, Apple, Microsoft), also known under the acronym GAFAM. They account for about 20% of the market value and they are pooling up the market. But, excluding them from the S&P500 would mean excluding them – as well as other outperformers such as Tesla, Netflix, Nvidia, or Salesforce – from the American gross domestic product. One cannot dissect the market according to one’s view. The market is a reflection of the economy at large: the more profitable the corporations, the higher the value of their shares. Right? Wrong. Over the last few years, the stock market is disconnected from the economy. Net income has been flat since 2017 while share values gained 43% (graph 6). This makes no sense. The market is acting irrationally. It’s a matter of time before it corrects itself.

Returning to orthodoxy

In the 50’s and 60’s, the American government was a paragon of virtue. The budget was in quasi-equilibrium. There was little debt, no inflation, and the workforce was fully employed. Things have changed since then. The deficit is rising, the debt is growing ever-larger, and employment is not what it is purported to be. In the trio it makes up with the Federal Reserve and Wall Street, the federal government is the most important element for it defines the economic policy.

This brings us back to Jerome Powell’s speech. A lesser importance granted to monetary policy, as he posits, means a great one given to budgetary policy, assuming of course that the government has the latitude necessary to do so. This is not the case. The deficit is on a downward slope ever since the late 1960s, with the exception of a four-year gap from 1999 till 2002[10]. The federal debt rose from 40% of GDP in the early 1980s to 107% in December 2019. The combined Federal Reserve/CARES Act rescue package pushed it up to 137% as of June 30th – a level higher than at the end of World War II (119%). Giving a greater role to budgetary policy means either higher taxes or more debt, or both. Taxes have never been very popular with the electorate, and the federal debt reached a level beyond which the United States’ credit rating may fall and the value of the dollar may drop. Authorities are caught between a rock and a hard place: monetary policy lost its effectiveness at a time the budget deficit should be reined in.

With 29.7 million unemployed (including the 13.6 million “gig” workers with no insurance coverage), the situation could quickly become worrisome, politically and socially. Aware of the danger, members of Congress had hoped to prolong the CARES Act for the unemployed, but electoral rivalry with the upcoming presidential election quickly set in and any attempt to maintain some of the benefits of the CARES Act were doomed to failure. On August 8th, Donald Trump signed an Executive Order granting $300 a week to unemployed people – humanitarian and electoral reasons no doubt explain his decision. The Center for Control Disease and Prevention declared a moratorium forbidding tenant evictions until the end of the year, bringing some relief to the most vulnerable families. Praiseworthy as the decision might be, it carries a risk: bankruptcy for real estate owners who, deprived from rental revenues, may not be able to reimburse their bank loans. In turn, this may weaken the banks’ financial health and be the cause of a crisis.

The situation is becoming inextricable. The on-going deterioration of the economy increases the budget deficit and the public debt beyond reasonable levels while monetary policy has lost its effectiveness. The government’s two main levers to direct the country’s economic policy have become ineffectual. Due to the presidential election, no new measures are likely to be implemented between now and February or March – a time lapse during which the economy is likely to deteriorate further.

To prevent such an unwelcome development, Ms. Loretta Master, president of the Federal Reserve Bank of Cleveland suggested on September 23rd to credit every American’s bank account with “digital dollar” directly from the Federal Reserve. Her proposal was well received. Market analyst Wolf Richter calculates that a $3 trillion transfer would translate into a $28000 sum for a household of two adults. This would prop up consumer spending and pull the American economy out of recession. But it would also create inflation and depreciate the dollar. A digital dollar is a dollar. Ms. Master’s proposal is another form of money creation. The total of the Federal Reserve’s balance sheet which amounted to 40% of the gross domestic product in the 1960s, rose to 100% in December 2012. It now stands at 125%. Is the United States on its way to repeating the Wehrmacht Republic’s mistakes of the 1920s? What will happen to the dollar, if the Federal Reserve pursues its money creation policy? And what will happen to the United States’ credit rating?

Icarus’s wax is melting

Whatever measures are eventually agreed upon the public debt will rise. Who will finance it? About 70% of it is presently financed by the American public, federal agencies and the Federal Reserve. The remaining 30% is financed by foreigners. The percentage is dropping. In the summer of 2012, foreign investors held 34% of the public debt. The trend is likely to continue if we use gold prices. Gold is a yardstick of investors’ confidence. For several years, worried investors have been exchanging their dollar-denominated U.S. Treasury holdings for gold, pushing up its price. Graph 7 is most interesting in that it shows the investors’ change of mood. Following the 2008 subprime crisis, they put their financial assets into dollar and gold. Today, they are moving out of the dollar into gold. This is not a good sign for the dollar.

Meanwhile, the stock market is fumbling. After reaching its highest value ever on September 2nd (3,581), it is falling. Share values, like Icarus, do not rise to the sky. If the stock market fall continues which is most likely due to the state of the economy, the American recession will translate into a world recession, since the U.S. economy accounts for 15% of the world economy. In turn, the world recession will aggravate the American recession in a vicious circle analogous of the Great Depression. This could mean the demise of the American Empire.

Jean-Luc Baslé is a former Citigroup (New York) Vice President, Columbia University graduate, Princeton University graduate, 20 years in the United States, author of “The International Monetary System: Challenges and Perspectives” (1982), “L’euro survivra-t-il ?” (2016).

  1. National Bureau of Economic Research. 
  2. “New Economic Challenges and the Fed’s Monetary Policy Review”, Jerome H. Powell – August 27, 2020. 
  3. $29,000,000,000,000: a detailed look at the Fed’s bailout by funding facility and recipient. James Felkerson, Dec. 2001. 
  4. Stagflation is an unusual combination of inflation and recession (unemployment). 
  5. The velocity of money is the ratio of money to the gross domestic product. 
  6. Higher level of employment leads to higher wages and higher inflation. 
  7. In the 1960s, U.S. imports amounted to 5% of gross domestic product. They averaged 16.5% in the last decade. 
  8. Gross domestic product 
  9. A repurchase agreement “repo” is a short-term secured loan: one party (usually a financial institution) sells securities to another and agrees to repurchase them within a short period of time. 
  10. This was due to the “peace dividend”. 

The Twilight of Neo-liberalism?

The Twilight of Neo-liberalism?

by Francis Lee for the Saker Blog

It speaks volumes about the gravity of the current political and economic situation that the leading US investment bank Goldman-Sachs has seen fit to issue a sombre warning.

‘’Goldman Sachs Group Inc. put a spotlight on the suddenly growing concern over inflation in the U.S. by issuing a bold warning on Tuesday that the dollar is in danger of losing its status as the world’s reserve currency. With Congress closing in on another round of fiscal stimulus to shore up the pandemic-ravaged economy, and the Federal Reserve having already swelled its balance sheet by about $2.8 trillion this year, Goldman strategists cautioned that U.S. policy is triggering currency “debasement fears” that could end the dollar’s reign as the dominant force in global foreign-exchange markets …

There are many factors pushing the gold price higher, including fear of increasing political uncertainty, rising concerns involving another spike in COVID-19 infections in the country, increasing government debt, rising inflation, and concerns that the US dollar is seeing a new downtrend to the Chinese Yuan.’’ (1)

The fact that gold is being spoken about by the financial cognoscenti is in itself significant. Gold bugs (like me!) have long been regarded by orthodox academic economists and business financiers as being beyond the pale in terms of their relevance to current economic and financial issues. But, as with everything, times change, fashion changes, paradigm shifts take place – such is the way of the world.

At the time of writing gold has, after the 2012 engineered smackdown, been ascending remorselessly toward its present gold price of $1972,00.00 a whisker away from $2000.00 per oz. This latter price has an important psychological significance – a tipping point for both investors and owners of this particular asset. The new economic order established paper assets – representations of wealth, which replaced real wealth – i.e., gold. This was the beginning of the new epoch, a turbulent period now reaching what appears to be a climax. The increasing economic disorder has become chaotic since that date as fundamental and seemingly intractable problems began to manifest themselves.

The Nonage

In order to maintain a semblance of vitality, western capitalism entered into a period of steroid-enforced growth based upon increasingly unorthodox methods. This inflexion point took place in 1971 when in a televised broadcast Richard Nixon took the US off the gold standard and introduced a fiat standard based purely upon the US dollar. This was a little later supplemented by the US-Saudi agreement whereby oil would be fixed to a dollar price. At a stroke, these two events destroyed the Bretton Woods system of a dollar-gold standard with the $ convertible with gold at $35 per oz. The old order was finished; a new ideological economic regimen was rolled out. When and how long it might last is a matter of speculation.

In this Brave New World and following the lead of the US most of the rest of the world economies followed suit. This was a pivotal moment in economic history. But, whisper it softly, there were deep-going structural weaknesses initially hidden from view in the new economy which would eventually become increasingly problematic. The global economy had become increasingly dependent on expanding debt levels and on the expansion of fictitious capital. This was all part of what was to become known as neoliberalism, globalization or increasing financialization, call it what you will, it amounts to the same thing. [2]

Fictitious capital, consists of layers of financial paper assets – but it should be understood that these ‘assets’ are only symbols of value, not real values. For example, company shares which are traded like goods and services do not, in the same way, embody value. They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value it is only a claim on value. Real value is the production of goods and services such as cars, haircuts, IPhones, hotels and eating out, aroma therapy, shoes, books … and so forth, in a productive economy. This as opposed to rising share/stock prices which are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity.

John Stuart Mill once commented in this respect.

‘’The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies’’ (3)

Capital movements into and out of existing assets was not necessarily productive investment but mainly pure speculation. And speculation itself was driven by increasing levels of cheap debt, both sovereign and private. This process may be observed in the Fed’s force-feeding new monies into the economy at which corporations use this largesse to buy-back their own stock thus enhancing their market price. Insofar as it might be produced it becomes clear that finance led growth is based upon trickle-up economics in which the gains of the wealthy come directly at the expense of ordinary people. Financialization involves the extraction of economic rent from the circulation (of capital) process, as well as patents, copyrights and land/property.

The United States demonstrates these tendencies very clearly and its interest rates remain the dominant influence across the mature economies. This is due to the dollar’s role as a reserve status, i.e., the world money. But there has been a long trajectory of decline in real commercial bank interest rates which averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% and even lower ever since. They are now being held down to zero or even minus interest levels and functioning as free monies for the speculating community or corporations who wish to avail themselves to this monetary largesse to increase their market capitalisation. Demonstrably the US and the rest of the mature economies have been undergoing a secular decline since the 1970s which has eventuated in what seems to be a policy of demented money printing.

Moreover, financialisation has not to any extent been adept at creating more wealth for all, but instead has channelled this wealth to particular favoured groups. This is evidenced with the GDP metric which is only measured in terms of output and not the distribution of and ownership of wealth produced. The result is, in short, that the rich have got considerably richer and the rest have either stagnated or declined. And this has not been an accident.

Maturity and Decline

The present crisis in the global economy has been brought about by the culmination of a number of variables which taken as a whole have been responsible for the present impasse. All the early promises of a new world order of stability, prosperity and peace which were touted in the 80s 90s and 00s never lived up to their billing. The then UK Prime Minister, Gordon Brown, boasted that under ‘New Labour’s’ stewardship the boom-bust cycles of both the domestic and world economies had been banished. University of Chicago’s Professor Robert Lucas claimed that macro-economics had ‘’solved for all practical purposes’’ the problem of economic depressions. In the real world, however, the entire period from 1971 and well into the 21st century was punctuated by a series of rolling bubbles and crises: the 1987 stock market crash, 1990, the collapse of the junk bond market, the 1994 great bond market massacre together with the Tequila crisis in Mexico, the 1997 Asian financial crisis, the 1998 collapse of Long Term Capital Management, the 1998 default in Russia, and the 2000-02 dot-com bubble crash and finally the 2008 blowout. These once in a lifetime events seem to occur every year or so.

But the economic/financial powers that be (PTB) ensconced in the ivory towers of University Economics departments and Editorials in the Washington Post, Financial Times, The Wall Street Journal and Economist were having none of it. As these esteemed ladies and gentlemen saw it the new paradigm was going through a ’tricky’ teething stage and all would be well in the fullness of time, or so we were persuaded. It is difficult to know whether or not these people actually believed what they were articulating or were just plain stupid. But their theories at times actually verged upon a timeless circulation of axioms which are true by definition. It has been noted that,

‘’Academic economics has become a disaster and disgrace … Not only did the academic economists fail to see the great 2008 implosion coming, they weren’t even looking in the right direction. And having been surprised by its arrival, they had little to say about its implications – the greatest event to have befallen the capitalist system since WW2 … although there are shining exceptions, most academic economists, whilst clinging to the idea that their subject is relevant and of interest to the wider world, in fact practice a modern form of medieval scholasticism – of no use to man or beast. The output of this activity consists of articles entombed in ‘scholarly’ journals usually about questions of startling irrelevance, badly thought out and appallingly badly written, littered with jargon and liberally dosed with mathematics, destined to be read by no-one outside of a narrow coterie, and increasingly, not even by them.’’ (5) Agreed!

The Interregnum 2008-2020

The Great Financial Crisis (GFC) of 2008 has shown that perpetual growth and progress is an illusion. Moreover this was the first leg of the mega-crisis of which the second leg is now looming. Recent indicators include structural unemployment which is around 15% in the US – but this figure is almost always understated: See John Williams’ excellent repudiations in Shadow Government Statistics. Additionally there has been the growth of semi-employment in the ‘gig’ economy, short-term contracts, non-unionized labour, and illegal (often foreign) presence in itinerant employment and workers from the EU’s southern and eastern peripheries who are temporarily employed on farms during the summer for lack of UK workers. Many of these workers have no insurance or medical cover and live hand-to-mouth on a daily basis.

Unprecedented debt levels, chronic levels of debt-driven consumption are now common-place and the modern workforce is increasingly stratified. There are well-paid jobs for a small portion of those with requisite skills, but the vast majority of new employment is in the low paid service sector, such as retail, leisure, hospitality, security, aged care, and health care … youth unemployment remains high, even where work can be found starting incomes are around 10 to 12 percent lower than they were in 2007.

This situation was not only present in the UK but on the European continent also.

Millions of Europeans in temporary, part-time or bogus self-employed contracts can only find insecure and badly paid jobs, despite the healthy economic climate. That is the price of deregulating labour markets, Investigate Europe reports. This precarious set of labour conditions was created intentionally.

‘’The misery of bad jobs has many faces. It can take the form of work contracts without health or social insurance; it can be part-time jobs, which don’t pay enough to live on. Or those affected are kept dangling from one temporary contract to the next, or they have to eke out a living as bogus self-employed and contract workers. The methods vary from one country’s national legislation to that of another, but the outcome is always the same: millions of EU citizens have to get by with insecure and badly paid jobs, offering them no prospects.’’ (6)

2020 – the Debacle

Thus the world enters the second decade of the 21st century totally unprepared for what’s coming and with a leadership bereft of any plans or ideas of how to handle the situation. GDP growth is in unprecedented negative territory pretty much everywhere. In the United States, the birthplace of the Washington Consensus, GDP growth rate fell by no less than -32.9% and GDP annual growth rate by -9.5%. In Germany GDP growth rate fell by -10.1% and annual GDP growth rate by -11.7%. In China GDP growth rate was positive 11.5% and annual GDP growth rate was 3.2%. In the euro area GDP growth rate was -12.1% and annual growth rate was -15%. These are quite extraordinary figures which will need to sink in before any reasoned judgements are made. One look at the US situation is hardly comforting however.

‘’On Thursday, the Labor Department reported that 1.43 million new claims for unemployment benefits were filed last week, the 19th straight week that new claims have exceeded one million. After declining for months, new claims have risen over the last two weeks.

The number of workers claiming continuing unemployment benefits also rose from 16.1 million to 17 million for the week ending July 18. In addition, 830,000 new claims were filed for federal Pandemic Unemployment Assistance, which covers self-employed, gig workers and others who do not qualify for traditional jobless benefits.

Under these conditions, the $600-a-week federal supplement to state unemployment benefits is running out today for an estimated 20 million workers. Overnight, millions will see their incomes cut by two-thirds, from an average of $921 a week in May to about $321 a week. In some states, the theft of this lifeline will be even worse. In Oklahoma, jobless aid will be cut by 93 percent to $44 a week.

It is a measure of the precarious situation American workers faced even before the pandemic that the weekly supplemental assistance and the paying out of a one-time $1,200-per-person “stimulus” check led to a 45 percent increase in US personal income in the second quarter. Seventy percent of those who returned to work in June suffered an income loss by doing so.

Last week, the moratorium on evictions expired for about 18 million renters—more than a third of the 44 million total US renter households—who live in buildings with mortgages backed by the federal government. With rent bills accumulated over the last four months now due, housing advocates predict a “tsunami” of evictions, with half a million households in Los Angeles alone threatened.

Millions in the US are also going hungry. According to a US Census Bureau survey, food insecurity last week reached its highest reported level since May, with almost 30 million Americans reporting they had not had enough to eat at some point in the seven days through July 21.’’ (7)

Mindful of the impact of the Corona Virus and not wishing to rush to any rash judgement, the fact still remains that the world economy was already in a parlous and brittle condition, long over-due for a big correction which was going to happen with or without the complication of the Corona Virus. All the sugar-coated promises made at the turn of the century by various politicians, journalists, and world leaders regarding the new economy, a world-wide system of prosperity peace, harmony and growth turned out to be fairy-tales best suited to infants – and infants are precisely what our leaders seem to think we are.

Speculating about future developments is difficult since we are in the early phases of the downturn. What we do know is that it is like most previous downturns but beyond bad and seemingly unprecedented. Events can only be assessed retrospectively. It is now also clear that hegemonic turbo-capitalism and its tendency toward imperialism and war is not congruent for further human development and even perhaps life on this planet. This seems patently obvious to anyone who actually thinks about these issues. We (humanity) is now at a critical juncture in history. But the world has postponed, indefinitely, dealing decisively with the challenges. Anyone who questions the present course is held up to ridicule as a professional permanent pessimist, or worse. Nothing is done, and we ignore reality. Unfortunately as the Russian/American writer Ayn Rand – who is not one of my favourite writers – declared. “We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

Enough said. Francis Lee

NOTES

(1)Bloomburg – 27-July-2020

(2) Phillip Mullan – Creative Destruction – pp57/5 – ’In addition to the direct contribution of the fire sector to raising GDP artificially, the explosive growth in debt and other features of financialization a major, probably a bigger role.

(3) The notion of economic rent – made famous by David Ricardo and his theory of ground-rent – is based upon the extraction of rent from particular income streams or other assets, including land. Monopolistic rents are those which contain price levels which are over and above the costs of production.

(4) J.S.Mill – The Principles of Political Economy – 1848

(5) Roger Bootle – The Trouble with Markets – pp.232-233

(6) Tagesspiegel – Berlin – 25-10-2017

(7) World-Wide Socialist Website – 31-July-2020

Syrians consider gold as jewelry and a means to save money for years to come: Head of Goldsmiths’ Association

Source

 Sunday, 19 July 2020

Skyrocketing prices

Gold is one of the most important valuable metals on earth. This lustrous yellow precious metal has been considered as a wealth by all countries of the world as its price measures the strength of economies, that is, when gold prices are high in a country, this means that the economy of this country is not healthy.

In Syria, the price of 1 gram of 21 karat gold was 1805 Syrian pound (SYP) in 2010, a year before the crisis caused by the terrorist war on the country started. The prices witnessed gradual increase in later years to hit 17,500 Syrian pound per 1 gram of 21K gold in 2018. In 2019,  gold prices jumped to 28,000 Syrian pounds per gram of 21K gold, a 15-fold increase compared to the prices before the crisis.

However, a skyrocketing increase in gold prices in Syria has been registered this year, 2020, particularly under the coronavirus pandemic crisis and the deteriorating economic situation in the country caused by the western sanctions and the unfair coercive measures which have badly affected the exchange rate of the Syrian pound and consequently weakened the Syrians’ purchase ability.

According to Ghassan Jazmati, Chairman of the Association of Goldsmiths and Jewelry Making in Damascus, gold prices in Syria have hit a record high (about 111,000 SYP per 1 gram of 21 karat gold early this month), as a result of manipulation in the exchange rate of the US dollar on the black markets that caused devaluation of the Syrian pound (2500 Syrian pound to 1 US dollar).

“The price of gold is basically associated with the price of the ounce in global markets and with the exchange rate domestically. Currently, an ounce in global markets is valued at $1744 because of the Coronavirus crisis, which caused havoc in all economies around the world,” Jazmati told the “Syria Times” e-newspaper.

He said that in order to limit their loss, most of the companies, which have closed during the coronavirus crisis, have changed their money into gold , thereby creating a demand for this precious metal, a demand that raised the value of the ounce globally.

How the Syrians view gold

About the importance of gold in the life of the Syrians, Jazmati, the Syrian gold expert, said that “gold is essential in the life of all people. The Syrians consider it as a jewelry, and, more importantly, as a means to save money for years to come. This has been proven during the critical circumstances Syria has been experiencing over the past years and during the coronavirus crisis.”

“Many Syrians resort to changing part of their properties- cars, houses or lands- into gold, mainly liras or ounces, in order to avoid a loss,” he said, stressing that investment in gold is currently the most successful and the safest project. He noted that the value of an ounce is currently estimated at 4.5 million SYP.

With gold prices growing higher in Syria, one may ask: “Are the Syrians still buying gold?”

Surprisingly, the answer was yes! “Many Syrians are still interested in investing their money in gold, mainly by buying small, but valuable pieces like ounces or liras. There is a demand for buying gold in Syria particularly by traders, investors and rich people,” said Jazmati.

However, most of the Syrian citizens don’t have enough money to buy gold amid the current difficult circumstance, and they rather concentrate on buying their basic needs, he went on to say, indicating that before 2011, a citizen who wanted to get married, could buy his bride a complete collection of gold, but now he can hardly buy the rings, and even less, at the same value of that collection.”

Stagnation

According to Jazmati, these developments, besides citizens’ hesitation to buy or sell gold hoping that the SYP’s exchange rate will restore its stability, have led to notable stagnation in the gold market, thus necessitating more efforts by the Goldsmiths’ Association to ensure the availability of raw gold in the workshops. These efforts go in line with the legislative decree that allows any Syrian citizen to legally bring in raw gold to the country in exchange for paying 100 dollars per kilo of gold at borders, he said, noting the importance of this step in boosting the country’s resources of hard currency.

The Coronavirus crisis in the world has caused further stagnation in the Syrian gold markets.  “Many Syrian expatriates, mainly in the Gulf and Europe, used to visit the country during summer- between June and September- for many purposes including to get married. They used to buy their wedding rings and other gold accessories to their brides, a tradition without which no wedding is complete. However, this will be difficult this year as airports are still closed because of anti-coronavirus measures,” Jazmati said.

He made it clear that during the period of lockdown and curfew imposed in Syria between March 25th and May 25, all economic and trade activities as well as transportation stopped. The gold hallmarking process, a precondition for gold items offered for public sale, also stopped over a period of three months during which goldsmiths ran out of stamped gold, mainly ounces and liras, thus negatively impacted the market.

Gold hallmarking returns

 In order to restore the hallmark, Jazmati explained, “we reached an agreement with the Finance Ministry on July 1, according to which the goldsmiths’ associations in Damascus and Aleppo agreed to pay 80 million Syrian pound per month to the Ministry as a consumption spending tax.”

“Two years ago, the situation of the gold market was very good despite the war on the country and the sanctions. Hundreds of artisans used to come to the association everyday to stamp their gold products and we used to pay some 120 million SYP per month as taxes to the Finance Ministry,  but now, given the difficult economic situation in the country, we are going to pay 80 million,” he said.

The return of the gold hallmark will contribute to reactivating the gold market and to making stamped gold available to customers, he made it clear, pointing out sales in the gold market have slightly improved at 20%, as markets have reopened and the gold hallmark has returned.

According to Jazmati, there has been a great demand for Syrian gold in Arab countries, mainly the gulf states, due to its distinguished characteristics, noting active talks to encourage Syrian traders to take part in future gold and jewelry exhibitions abroad. However, the local request for gold comes mostly from the coastal area, Lattakia and Tartous, the two key Syrian tourist destinations, he indicated.

He made it clear that Syrian gold is one of the most prestigious kinds of gold in the world. It competes with the Italian gold and it has many advantages that are not available in the gold of other countries.

The work of a goldsmith in Syria is distinguished by its high quality innovate designs, professionalism, accuracy and purity. Most of the Syrian gold jewelries are hand-made, not machine-made which indicates the craftsmanship of Syrian jewelers, who have sought preserving the identity of a handicraft that goes back to thousands of years.

On gold smuggling, Jazmati said that there are no smuggling incidents currently as borders are closed. Before the coronavirus crisis, there were many cases of smuggling raw gold and selling it in neighboring countries because its value is higher there, he added.

He explained that gold is usually being brought in to Syria via the Lebanese capital, Beirut, noting that the pricing of gold is specified in conformity with its value in the neighboring countries in order to avoid smuggling.

To know more about the situation of the gold market, the Syria Times visited Souk al-Sagha or “the jewelry market”, located in al-Hariqa neighborhood of old Damascus. Most of the shops were open, displaying their goods. But sadly, very few people visited the market, most of them came either to repair damaged gold or to have an idea about gold prices.

A wholesaler working in the market told Syria Times that “gold is very expensive. we used to sell 100-200 pieces a day before the coronavirus crisis, but today I haven’t sold a single piece. High gold prices are a problem to both customers and goldsmiths and we hope that prices will decline so that people can buy and the market restores its activity.”

Another wholesaler complained about the lack of gold coming to the market, calling on the government to help ensure raw gold to goldsmith workshops so they can manufacture gold products and fill their shops with wonderful pieces.  He said that citizens are not selling gold nowadays. they prefer to keep their own and buy new pieces to preserve their money in the light of unstable exchange rate of the Syrian pound.

Just about 100 meters away from Souk al-Sagha, Manal, a retired teacher, told Syriatimes “I like gold and I like buying it to wear as jewelry or to keep for hard times.”

“Besides my wedding gold, I used to save money from my salary and buy gold, especially liras because, unlike money, they don’t lose their value,” she said, pointing out that the difficult economic situation in the country and the increase in the prices of goods left no place for gold in people’s life, particularly in the light of high gold prices.

Report and photos by: Hamda Mustafa

UK denying Maduro access to Venezuelan gold is not only THEFT, it’s MURDER of London’s reputation as trusted financial center

Source

George Galloway

George Gallowaywas a member of the British Parliament for nearly 30 years.

He presents TV and radio shows (including on RT). He is a film-maker, writer and a renowned orator. Follow him on Twitter @georgegalloway

©  Getty Images / Vitoria Holdings LLC

The standards are poor at the Bank of England these days, I don’t know why anyone would want to do business with them. George Galloway gives British banking, and justice, a triple-fail rating.

It used to be “a thing” when I was growing up. “As safe as the Bank of England” was the acme of trustworthiness and security. But as Venezuela – and any other Global South country foolish enough to entrust the British with their sovereign wealth just found out in the High Court in London – the Bank of England isn’t any longer safe at all.

Almost a billion dollars worth of Venzuelan gold bullion has just been stolen by the British government, theft has just been legalized, and the thieves didn’t even bother to wear a mask.

The gold was deposited in London by the then internationally recognized government of Venezuela. But the now internationally recognized government of Nicolas Maduro has been refused permission to have its value transferred to the United Nations in New York for work they wish the UN Development Program to conduct against the coronavirus pandemic.

READ MORE

Venezuela in legal battle to get its gold back from Bank of England

Venezuela in legal battle to get its gold back from Bank of England

Instead, a man off the street in Caracas by the name of Juan Guaido – who has not only never been elected to power in Venezuela, he’s no longer even elected as the leader of the opposition – is the legal owner of the gold, says Justice Alice-in-Wonderland. After all, words mean whatever the British government wants them to mean.

The elected president of Venezuela, Nicolas Maduro, is recognized by the great majority of countries in the world. More importantly, his government is recognized at the United Nations. It is not true, as the British government told the High Court, that they “do not recognize” the Maduro government – they recognize it every day at the UN, in discussions in the canteen as well as in the chamber.

Moreover, it is the principle of British diplomacy that they “recognize” whomsoever is in effective control of a territory – whether they like them or not. Though, come to think of it, they did breach that “principle” once before – when they continued to recognize the Cambodian genocidal murderer Pol Pot  and insist that Comrade Number 1 remains in his seat in New York long after he was actually overthrown and while the mountain of corpses in Cambodia were being counted.

By any standards, Maduro is in effective control of Venezuela and Juan Guaido is not. Maduro controls every square inch of Venezuela, is the elected president, is recognized by the United Nations and by most countries in the world. Guaido is not elected, is not recognized by the United Nations, nor by most countries in the world and doesn’t control one single inch of Venezuelan territory. But he is now the proud owner of the gold in the Bank of England. It makes the Great Train Robbery look like a mere bagatelle, Guaido makes the Thief of Baghdad look like an amateur. It is the greatest single act of theft ever to take place on British soil. And that’s saying something.

ALSO ON RT.COMMystery of the Venezuelan gold: Bank of England is independent of UK govt – but not of foreign govt

But away from the scene of the crime, away from Venezuela, British officials in their ivory tower should take note. It wasn’t just theft which took place in the Strand this week – it was murder. The murder of London’s reputation as a financial center you can trust.

Certainly, any sovereign government which has invested its sovereign wealth in London should examine their head if not the current state of their balance. This decision has given a green light to the Pirates of the Caribbean, and you could be next. Fall out with the British government and they can now hand all your country’s wealth they can grab, over to your opposition, however discredited.

Quite a day’s work in financial standards, a triple-A fail.

If I ever won the National Lottery (which I don’t enter) the last place on Earth that I would deposit my millions would be in London. Standards here just went down the rabbit-hole and will never re-emerge. The City of London has fallen.

When I was young I told my Irish grandfather that the teacher had told me that the British had an empire so vast that the Sun never set upon it. He answered “that’s because God would never trust the British in the dark.” I knew he was telling the truth. And now so does Venezuela.

©  Getty Images / Vitoria Holdings LLC

https://www.rt.com/op-ed/493718-uk-maduro-venezuela-gold/

What is China really doing with its digital Yuan?

Source

What is China really doing with its digital Yuan?

June 28, 2020

by Chris Faure for the Saker Blog

Reserve currency, backing of a currency and value of the financial systems that distribute a currency.

Its going to take years for the US dollar as reserve currency to fully reduce in importance and of course, the US should continue to use their currency as their own even when it changes into a normal currency. Yet there are financial technologies (FinTech) which may accelerate this process via leapfrogging and I would argue that from a Chinese perspective this is happening. (Leapfrogging is easiest understood by looking at an older example: slower developing countries without a well developed terrestrial telephone system, where these countries leapfrogged the building of a terrestrial system, and directly went to cellular telephone technological networks without loss of function.)

Let’s first take a look at some general concepts:

The fact of ownership of financial systems is very powerful. There is value in the currency that the financial system produces, and there is value in the system itself.

The value proposition is similar but differently done in cryptocurrencies and in digital currencies. The backing frequently lies in the system itself, and not as many think, in a hard asset such as gold. This is a large step to take in thinking for most people, as the idea generally still is that money has to be something that is tangible and real – like gold (or cowrie shells). But it is not such a big step to take if one considers that the act of money creation, production and distribution of currency itself is modernizing and is developing on the same trajectory that the rest of our technological and currently digital society is developing in.

As an example, compare the development of current money distribution systems and the new Financial Technologies (FinTech) with fully automated manufacturing plants for example, where the product coming off the production line is as a result of the technological system. Money is the same, it has to be manufactured, distributed or created or somehow brought into being and these systems are now modernizing, just the same as modern fully automated manufacturing.

The current financial systems belong to the west and banking systems technology is expensive, old, legacy, decrepit and not friendly to the ordinary person, not to mention very hard to maintain. Even the ubiquitous credit cards are now old technology and fast becoming deprecated technology and being replaced by wallets on cell phones that work like supermarket scanners.

It is often speculated that China will back their digital Yuan with gold. This is not an accurate speculation. The backing is the same as with other digital and cryptocurrencies, i.e., the work that the system provides to create the financial transactions in the financial ledger confirms that the transaction is secure and someone actually owns digital currency, they can pay for goods or sell goods and they can do it much easier and incredibly cheaper via a scan of a cell phone or other digital device.

The difference between China’s digital Yuan and common crytocurrencies is the ownership of the system. In modern independent cryptocurrencies the system (the technology) is owned by those that use the cryptocurrency – it is open source. Obviously for the digital Yuan ownership of the system lies with the Chinese State. The digital Yuan though retains the strength of other cryptocurrencies. It is secure transactions, tamper proof, immediate, inexpensive, easily distributed, can cross borders and all this by virtue of being a distributed blockchain system. The easiest to explain a blockchain is that it is self-policing because of technology of consensus algorithms that verify the efficacy of financial transactions. Blockchain very simply stated is blocks of financial transactions that are algorithmically created, are by definition encrypted, and chained together in such a way that nobody can meddle with any one of them.

To recap:

– The digital Yuan is not a cryptocurrency. It is a state issued digital electronic currency that happens to run on a blockchain (the FinTech).

– As the Chinese digital yuan is not and will not be backed by gold at least in our term (it is backed by the strength of the yuan as well as its system), we may well ask what the objective is of this currency.

Is it just a cute technological way of using money?

I would argue absolutely not.

Internationalization of the Yuan

Few realize the extent of the internationalization of the Yuan. As example, 20% of French trade with China is currently settled in Yuan and this is 55% of payments made between both countries. The Macron government is encouraging banks and companies to increase Yuan uptake.

I would argue that the digital yuan is a part of the 5th plank of the Belt and Road process of facilitating cross border investments and supply chain cooperation (perhaps not openly stated).  If one takes into consideration that belt and road is operating now in infrastructure development and investments in nearly 70 countries and international organizations – this is not such a difficult leap to make.

So how can that bold statement be supported? It may be hard for people in countries with old financial systems (the US would be one), to even imagine the new FinTech operating in many other countries. Where I live, I can go to the local corner store, and literally send cash money to someone on the other side of the country, and they will have it immediately. I don’t have to go to a bank, do a bank transfer, send a check, or interact with a bank or a type of Paypal at all. This is a service that the corner store offers at a very reasonable cost. I can also do this directly from my cell phone. We know that in China there is little use for hard currency, and most transactions take place on internal Chinese financial networks and cell phones for the average person, but business finance still flows through banks.

So, let’s start supporting that bold statement

  • The Chinese authorities added Crypto (cryptographic as well as cryptocurrency) to the School Curriculum – quite literally ‘educating the future’ in new FinTech.

https://cointelegraph.com/news/chinese-communist-party-adds-crypto-to-curriculum

  • In reality the distribution of the new Chinese Digital Yuan is proceeding apace. In size, the following is not a massive deal, but in construction of the agreement, this is probably the number one of the new Chinese Digital Yuan Deals and is pure modern FinTech.

China Baowu Group, the world’s largest iron and steel complex, completed a yuan-denominated, blockchain-technology-based transaction of more than 100 million yuan ($14 million) with Rio Tinto …, a move signaling the rising influence of Chinese currency in pricing major commodities.

Standard Chartered issued a blockchain-technology-powered letter of credit for the Baowu-Rio Tinto deal, which the bank said was the world’s first such certificate pegged with offshore yuan.

The use of blockchain technology – a digital public ledger of transactions that has seen increased usage in the global commodity trade – helped facilitate the trade and reduced costs for all parties involved in the transaction …”.

https://www.globaltimes.cn/content/1188131.shtml

So, what can we learn from this transaction?

This is not only a further distribution of the Yuan, but is a further distribution of the digital Yuan. While we do not know how this deal is constructed in detail, the use of the words blockchain-technology-powered letter of credit says it all. It looks like this deal will run completely on a blockchain, in the form commonly known as a smart contract, where each step of the deal and its payment schedule in digital currency are transactions on a blockhain. (Now try and skim off that transaction where the rules are hardcoded at the outset with technical principles of consensus pre-programmed in the smart contract and agreements signed directly on contract existent on the blockchain– those that know project management, will know the value of a self-documenting project).

  • the “Moodies

In addition China has become the ranker of record for private cryptocurrency projects.

The health of financial systems or countries are ranked by three major ranking agencies. These are S&P Global Ratings (S&P), Moody’s, and Fitch Group. S&P and Moody’s are based in the US, while Fitch is dual-headquartered in New York City and London, and is controlled by Hearst. These organizations hold the collective global market share of who can be considered good, and who can be considered bad in the global financial system. Not too healthy in my opinion as this is a disproportionate western control over the financial well-being of other countries.

So, as the proverbial quote from Buckminster Fuller states: “You never change things by fighting against the existing reality. To change something, build a new model that makes the old model obsolete.

The old banking and financial systems are indicative of the existing reality and are old, decrepit, ancient technology, needs a bunch of maintenance, and the worst is that they are of course owned by those that use them as weapons against others.

China is doing no less than building a new model in FinTech that will make the old model obsolete and in this way they are simply leapfrogging the current financial systems distributing the dollar with fast, lean and modern systems supporting the Financial Silk Road. They have made their own ranking system in new FinTech, i.e., cryptocurrencies. The June rankings are as follows:

Quite rightly the Asiatimes is asking .. Who is actually decoupling from Whom? And I can add, and using modern FinTech to do so with solutions appropriate contextually to our modern world.

My own expectation is that the notable private cryptocurrency systems (those that actually make it to the Chinese ranking system) will eventually be able to exchange smoothly and seamlessly with the Chinese Digital Yuan.

A quick look for the same trajectory, leapfrogging legacy systems, outside of FinTech

We see this creation of seamless new systems outside of hard FinTech as well. Here are three examples. The current hegemon in its common ‘break it’ style, made errors as it thinks if it breaks something, people will come back begging, to make a new plan. This is not happening any longer, and the world simply decouples and creates new systems, as we see from three seminal events and the hegemon further losing its power base.

– The US attacked the WTO on the basis of refusing to allow it to vote for and institute staff for the appeals body for trade disputes. Usually this would have taken many meetings to solve. This time, what happened is that China has joined 18 other members including the European Union, Canada, Australia, Singapore and Hong Kong in launching a temporary system for trade disputes at the World Trade Organization, with the agency’s appeal body having ceased to function in December after the United States blocked appointments of new judges to the top trade court.

The needed functionality is now still there, the US having excluded itself (actually shot itself in the foot), while the rest of the world moved forward saying we need this body, and we will have this body, with or without hegemon. The Multi-Party Interim Appeal Arbitration Arrangement (MPIA) was developed in just over three months, after the members announced at the World Economic Forum in January that they would seek to form a new body to work around the demise of the regular WTO panel.

From a combined statement by the European Union: The new system is designed to preserve the principle enshrined in international trade law that governments have the right to appeal in any dispute.

https://www.scmp.com/economy/global-economy/article/3082748/china-eu-join-19-member-temporary-global-trade-dispute

– Most readers of this blog will know how the US is trying to carve out for itself some way back to the JPCOA, the Iran agreement, after simply breaking this agreement. It is proving to be not so easy to walk this one back and so far, they have lost their power base. Do-overs are not so easy in terms of diplomacy, after one has squandered the world’s goodwill and Iran is receiving widespread help to overcome the results of any further sanctions.

It is no wonder then that the EU policy chief made this statement: US century ceding to Asian one, says EU foreign policy chief. https://tass.com/world/1160031

– The third event is the US stunt at the recent Vienna arms control talks. The US stealthily placed Chinese flags, took photos and posted media – then accused China of being a no-show, knowing full well that China declined to attend these talks and refuses to be roped into an agreement that is not in the least appropriate for it. Clear petulance is the hegemon’s only response to a visible decoupling of the world with the US and western cronies. They have nothing more left than petulance and literal pictures of false flagging to offer.

So, it is clear that both inside and outside of hard FinTech which this writing is about, the trajectory of recreating systems and simply leaving the US out, is alive and well.

A small note on Iran and Venezuela as part of the empire resistance countries. Iran is mining cryptocurrency and Venezuela floated theirs, namely the Petro. Unfortunately (and this is not the focus of this writing), they did not do that cleverly but the newest news is that the Venezuelan government is now beginning to trade in cryptocurrencies, and for example, accepting current private chain cryptos for payment for passports. Bear in mind I said that some private chain cryptos will eventually be exchanged with the digital Yuan, so, very soon now, if a government takes payment in a crypto, they will have digital Yuan if they decide to exchange – and they do not need anyone’s permission (Like a Central Bank).

What is the Chinese View

With ‘the moodies’ rating system, cryptography education in China, a clear project based on the digital yuan and blockchain technology and more to follow, it becomes clear that the Yuan and the digital Yuan is being moved into the global financial sphere, de facto without years of negotiation and agreements and trade type negotiations. My expectation then is that certain cryptography and cryptocurrencies will eventually be seamlessly exchanged on China’s blockchain(s) – and you will have a digital yuan wallet on your phone, or on your computer or even a credit card supporting and in this way, you and I could be right on the Belt and Road. In other words, if I want to use a cryptocurrency to pay for something, and I have digital Yuan or another crypto, I can simply, within my electronic wallet exchange for the right currency that I need. This is how China is distributing their Digital Yuan de facto.

What is the Russian view

Russia is still a little behind this revolution in FinTech. but with one fell swoop they can get rid of their central bank if they so choose. The Russian Central bank is following Western ways on the renewal of currency through their central bank. https://cointelegraph.com/news/russias-central-bank-seeks-to-ban-crypto-issuance-and-circulation.

Yet, the decoupling continues. It is interesting to wait to see if the 5 UN security council countries will in fact gather for the summit that Mr. Putin invited them to. My expectation is that if they don’t, Putin will run out of patience and choose others, perhaps the G20 or something new. The decoupling will continue.

We now have clear precedence set on the decoupling part of FinTech and other organizations. It is no longer a big deal to decouple from empire.

What is the Western view?

Forbes stated recently that the launch of the Digital Yuan could create serious problems for the U.S. banking system—potentially forcing the U.S. to digitalize the dollar to compete. The Federal Reserve has warned that central bank digital currencies might one day replace commercial banks, creating “a deposit monopolist” and playing “havoc” with the banking system. (This seemed to me somewhat like gobbeldy-gook and is meaningless – yet, they know something is happening.)

The West is 20 years behind this technology, because China decided to leapfrog and not follow the accepted development trajectory and as such has reconfigured the potentials for the entire planet.

It is high time and in the words of Michael Hudson: “So the United States, through the World Bank, has become I think the most dangerous, right-wing, evil organization in modern history — more evil than the IMF. That’s why it’s almost always been run by a Secretary of Defense. It has always been explicitly military. It’s the hard fist of American imperialism.”

The world is leapfrogging, and elegantly zig-zagging around current imperial financial systems, for a true birth of a new post capitalist post industrial order, without going to war for it.

Economic Cycles and Coronavirus

Economic Cycles and Coronavirus

June 13, 2020

by Francis Lee for the Saker Blog

‘’The years since the 1970s are unprecedented in terms of their volatility in the price of commodities, currencies, real estate, and stocks. There have been 4 waves of financial crises: a large number of banks in three, four or more countries collapsed at about the same time. Each wave was followed by a recession, and the economic slowdown which began in 2008 was the most severe and most global since the great depression of the 1930s … Bubbles always implode, since by definition they always involve non-sustainable increases in the indebtedness of a group of borrowers and/or non-sustainable increases in the price of stocks/shares … Debt can increase much more rapidly than income for an extended period …’’ But ‘’… when eventually the rate of their indebtedness slows the ‘day of reckoning’ occurs, when there isn’t enough cash to pay the interest on outstanding loans the bust is inevitable.’’ (1)

Interestingly enough 1971 was the year when Nixon took the world off the gold standard, which had been in effect since 1944. At a stroke this was probably the most destabilizing event since the Wall Street Crash of 1929. But the full effects didn’t filter through the system until the decades beginning in the 1960s. The problem was the fact that the US economy had undergone a metamorphosis from being a surplus trading nation to being a deficit nation. Earlier, in 1944 to be exact, it was agreed at the Bretton Woods conference that a new trading system needed to be constructed, this in order to overcome the problems of the inter-war trade wars which had led to mutual impoverishment. The new global trade architecture was to be based upon a hierarchy of hard currencies, the British pound, the French Franc, the Italian Lira et cetera all aligned at a fixed rate of exchange with the US dollar which was to be convertible with gold at $35 per ounce.

The system worked for a while but excess US expenditures – namely the imperial expeditions in Korea and Indo-China, as well as a bloated system of some 800 military bases stationed in areas all over the world, and add in the social expenditures of the LBJ administration in the US, all of which meant that abundant US$s were turning up all over the place, particularly in Europe and Japan. Holders of these surplus greenbacks sought conversion into either their own currencies or the universal equivalent – gold. This gave rise to a run on gold since the US was required to honour the arrangement of convertibility. In its turn this led to a serious depletion of US gold reserves which necessitated the US (and by implication involve the rest of the world) to unilaterally suspend the gold standard. Henceforth US trading partners would, whether they liked it or not, take dollars which they were assured were as good as gold (a ridiculous proposition). This was described by the French politician Valery Giscard D’Estaing as an ‘Exorbitant Privilege’ and of course he was perfectly correct. At this point the Triffin Dilemma/Paradox kicked in. But I have covered this elsewhere (See The Rise and Fall of Empires).

It should be understood that booms and busts have always been normal in a capitalist economy. Two eminent political economists have put forward their explanation of this phenomenon as follows.

Karl Marx (1818-1883) explained that capitalists would try to boost their profits in new and more productive technology to save labour costs. In a letter to his close compatriot and friend – Friedrich Engels – he wrote: ‘’All of you note that from reasons I no longer have to explain, that capitalist production moves through certain periodical cycles.’’ He particularly identified the rate of profit to be the independent variable in capitalist production; this variable gave rise to a number of other dependent variables such as employment and unemployment, investment decisions, stock market booms and slumps, and capitalist companies borrowing monies by issuing shares/stocks or borrowing directly from banks. They also began to issue bonds as did governments. Thus the role of finance capital was enormously enhanced.

Joseph Schumpeter (1883-1950) reckoned that when capitalism went into a crisis or slump, it made much of the old equipment or plant obsolete. Other capitalists then began to turn to the new technology to gain advantage, so capitalist slumps led to innovations. Schumpeter called this process ‘creative destruction’. So a cycle of new technology would start after a major slump. But this new technology would not be developed until the profits cycle moved into upswing. Then there would be a take-off of the new technology. The next downward wave would mean a setback to the new technology cycle and an even worse situation for capitalists depending on the old technology. Finally, in another new upswing for profits, the new technology would take over as the dominant force. In the next downswing the new technology would become mature and capitalists would look for new systems and the whole process would restart.

These cycles, however, would very much vary in duration from fairly short-term business restocking, to longer term business cycles, property cycles, profit cycles and into longer and more profound upheavals which may have matured over decades. The Kondratiev cycle being a prototype which has lasted for at least 60 years. Nikolai Kondratiev himself was a Soviet economist who was able to identify such cycles. Four such waves were identified from the late 1700s and four complete waves were identified by Kondratiev. Such waves were occasioned by the usual boom-bust cycle but essentially these cycles were pushed forward by the production and diffusion of new technologies and the operationalization of new modes of production. From water powered, steam powered, electrification, Fordist organized production, and digital communications and computerization of the entire economy. These were the ongoing means of production, although the class nature of the capitalist system did not change.

Unfortunately Kondratiev found himself on the wrong side of the Stalinist nomenklatura and was arrested for suggesting that the US would not necessarily collapse in the great recession of ’29. Heresy! He was arrested and did 8 years in one of those grim Soviet prisons, and finally taken out and was shot by firing squad in 1938. These were grim times.

In recent years, however there has been a new development feature which has been exacerbated during crisis situations involving that part of the economy indicated by the acronym FIRE (Finance, Insurance and Real Estate) and its growing importance in the economy in both qualitative and quantitative terms.

Finance as it is referred to has always been part of the general economy. But it was always in a sense the junior partner to industry and subordinate as such. Its role was to support the productive sector in terms of credit and liquidity, but the relationship has now become almost inverted. Value producing Industry is now relegated to the second tier of the economy and finance now runs the show.

‘’To maintain the semblance of vitality Western capitalism has become increasingly dependent on expanding debt levels and on the expansion of fictitious capital … fictitious capital is made up of financial assets that are only symbols of value, not real values. For example company shares that are traded like goods and services do not in the same way embody value. They are tokens which represent part ownership of a company and the potential of a distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value that can create more value. Rising share/stock prices are often presented as the evidence of a healthy economy, but the amount of money that a share/stock changes hands says nothing definitive about the value of the company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.’’(2)

Turning to financialisation proper and its genesis. This phenomenon was enabled through the holy trinity of privatisation-liberalisation-deregulation. This was a political/economic project which began to take root in the 1970s but came into full fruition in the 1980s led by Margaret Thatcher and Ronald Reagan. At both the political and economic level radical theorists such as those ensconced at the Chicago University department of Economics became the crucial protagonists in a movement led by Milton Friedman and which was to become known as the Chicago School. Its impact was profound. This insofar as it signalled the end of one epoch and the beginning of another.

‘’The expansion of the financial sector is the most recognisable aspect of financialisation. However a more telling part for how the workings of the economy change is the adoption of financial activities by the non-financial corporate sector, by the wider industrial economy. The core feature of financialisation is the fusion of industry with financial activity. (My emphasis -FL) Troubled financial firms turn to financial activity in order to raise cash and/or shore up profitability.

These activities start with raising debt to fund business operations working at sub-par profitability. They extend into financial engineering where buying and selling shares or acquiring companies take precedence over productive investment and organic growth in the underlying businesses. Financial services companies are often helpful in conducting these activities. The drive-through comes from the non-financial businesses that are obliged to pursue financial activities when their original productive ones are less profitable and remunerative.’’ (3)

The hegemon of deregulated finance had thus assumed a seemingly unstoppable momentum from the late 20th century, through to the 80s and 90s until the early 21st century. It has been a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. It has impacted on the economy producing deep-going changes, not necessarily for the better. But its principal raison d’etre has been to elevate the significance and practice of rent-seeking activities relative to the real value-producing sector. Economic rent is essentially parasitic involving the tapping into those income streams which are producing real value. These consist inter alia of – banks, credit agencies, investment companies, brokers and dealers of commodities and securities, security and commodity exchanges, insurance agents, buyers, sellers, lessors, lessees and so forth – has now reached such a level that it has become larger, more ubiquitous, and profitable than productive industry.

In contemporary terms financial institutions had been involved in the acquisition of economic rent. This consisted of little more than a parasitic claim on real value as was produced in the production process. To cite a simple example. Parking meters don’t produce any new value, they merely transfer existing value from the motorist to whoever is collecting the meter charges. Other examples are rent from land, patents and copyrights, monopolistic pricing and so forth. This situation was initially outlined by David Ricardo (1772-1823) who argued that ‘’The interest of the landlord is also opposed to the interest of every other class in society – namely, capitalists and workers. Ricardo’s animus toward the land-owning classes was in part based upon this theory of economic rent as outlined in his definitive work, The Principles of Political Economy and Taxation first published in 1817. It was a theme that Keynes took up 2 centuries later with his recommendation of the early ‘euthanasia’ of the ‘rentier’ and the rentier class. The views of Ricardo and Keynes were unfortunately disregarded, and to this day, in the UK at least, the Monarchy, landed aristocracy and rentier class are still very much a power in the land. (The UK never had its bourgeois revolution, or rather it did in the civil war between Parliament and the King – 1642-49. Cromwell and Parliament won, and Charles 1 had his head chopped off in 1649, but there was a restoration whereby his son Charles 2 was brought back from France to claim the throne of England.)

But I digress.

The whole process of financialisation was to divert income from the real value-producing sector of the economy and transferring it through various rental manipulations to the financial sector. Needless to say this would purposely result in inequality and stagnant and/or falling wage levels.

Thus from 1970 onwards this part of the economy has grown from almost nothing to 8% of US Gross Domestic Product (GDP). This means that one dollar in every ten is associated with finance. In terms of corporate profits finance’s contribution now represents around 40% of all corporate profits in the US. This is a significant figure and, moreover, it does not include those overseas earnings of companies whose profits are repatriated to their countries of origin.

Finance operates at different levels in the economy: through changes in the structure and operation of financial markets, changes in the behaviour of nonfinancial corporations, and changes in economic policy

The increasing pervasiveness of finance in the contemporary world economy and its ever-expanding role in overall economic activities, and in addition to its ongoing growth in profitability, are the indicators of growth and spread of financialisation. Given the historical record, however, it seems highly probable that this financial ascendency will not be permanent and the whole house of cards will eventuate into a collapse into debt-deflation and a long period of economic depression.

The template for contemporary financial operations can be described from activities of Investment banks like Goldman Sachs as well as run-of-the-mill commercial banks. Of course, as stated, these venerated institutions do not create value as such; they are purely rent-extractive. Commercial banks can and do make loans out of thin air, debit this loan to the would-be mortgagee who then becomes a source of permanent income flow to the bank for the next 25 years. At a more rarefied level Goldman Sachs is reputed to make year-on-year ‘profits’ by doing – what exactly? Nothing particularly useful. But then Goldman Sachs is part of the cabal of central banks and Treasury departments around the world. It is not unusual to see the interchange of the movers and shakers of the financial world who oscillate between these institutions. Hank Paulson, Mario Draghi, Steve Mnuchin, Robert Rubin, and most recently from the IMF to the ECB, Madame Lagarde … on and on it goes.

This system now moves into ever more vertiginous levels of instability. But this was the logical consequence of deregulation. Regulation involves additional costs, but the last thing financial markets want is an increase in costs: ergo, deregulation. But this was to be wholly expected. As a result the history of regulation is that new types of institutions are developed that exist outside the scope of regulations, e.g., money-market funds were developed as a way to pay interest on demand deposits. The offshore market developed to avoid the costs that domestic banks incur in the form of reserve requirements and deposit insurance premiums; the offshore branches of US banks – i.e., the Eurodollar market – could pay higher interest rates than their domestic branches. The whole institutional structure – its rules, regulations and practises were deregulated, and finance was let off the leash. Thatcher, Reagan, the ‘Big Bang’ had set the scene and there was no going back: neoliberalism and globalization had become the norm. From this point on, however, there followed a litany of crises mostly in the developing world, but these disturbances were in due course to move into the developed world. Serial bubbles began to appear.

Ever mobile speculative capital was to move from one financial debacle to the next leaving a trail of wreckage and destruction in its wake. But, hey, that was someone else’s problem. The Savings and Loans crisis 1980’s and 90’s, Long Term Capital Management, 1998, dot.com bubble 2000/2001 and the property market bust in 2008 where the precursors of the current and even deeper blow-out.

But contrary to popular mythology – ‘this time it’s different’ – any boom and bust has an inflexion point where boom turns to bust. This is when buyers incomes, and borrowers inability to extend their loans could no longer support the rise in the price level. Euphoria turned to panic as borrowers who once clamoured to buy were now desperate to sell. 2008 had arrived. The same financial drama of boom and bust was to repeat itself. In the initial euphoria property prices went up but the market became oversold. At this point house prices and the prices of attendant derivatives – e.g. Mortgaged Backed Securities (MBS) – began to stall. The incomes and borrowing of would-be purchasers could no longer support the ever-rising property asset prices. The cycle had reached its inflexion point, now the whole thing went into reverse. Everyone was frantic to sell, prices collapsed. Some – a few – made money, quite a few lost monies. Investors were wondering what had happened to their gains which they had made during the up phase. Where had all that money gone? In fact the ‘gains’ were purely fictional as were the losses. Such gains/losses which had appeared then simply disappeared like a will ‘o’ the wisp. The gains and losses were never there in the first place given as an accounting identity they were balanced.

One would have thought that past experience would have chastened investors into a more conservative frame of mind. But no. Whenever there was a sniff of something for nothing the mob starts to move like Wildebeest on the plains of the Serengeti, an unstoppable stampede. Even such luminaries as Sir Isaac Newton perhaps one of the greatest scientific minds of his day who lost a cool £20000.00 on the South Sea Bubble lamented in 1720 that ‘’I could calculate the movement of heavenly bodies but not the madness of the people.’’ I suppose you could see this as being yet of another instance of human irrationalism – a recurring theme and instances in human nature, of which sadly there have been many.

And what has all of this to do with Coronavirus? Well everything actually. I take it that we all knew that the grotesquely overleveraged and dangerously poised world economy was heading for a ‘correction’ but that is rather an understated description. Massive downturn would be more accurate. This was already baked into the cake prior to the COVID-19s emergence and warnings were duly given and then routinely ignored. We are now left with a combination of a dangerous pandemic crisis combined with a huge financial and economic correction. The world was a combination of a unprecedently bloated paper money bubble and a rampant and virulent pandemic virus. Anticipated consequences can only be imagined.

NOTES

(1) Manias, Crashes and Panics – Kindelberger and Aliber – P.1/2 – 6th Edition 2011.

(2) Phillip Mullan – Creative Destruction – p.22

(3) Mullan – Ibid, – p.22/23

*A note on fictitious capital:

Fictitious capital is a by-product of capitalist accumulation. It is a concept used by Karl Marx in his critique of political economy. It is introduced in chapter 25 of the third volume of Capital. Fictitious capital contrasts with what Marx calls “real capital”, which is capital actually invested in physical means of production and workers, and “money capital”, which is actual funds being held. The market value of fictitious capital assets (such as stocks and securities) varies according to the expected return or yield of those assets in the future, which Marx felt was only indirectly related to the growth of real production. Effectively, fictitious capital represents “accumulated claims, legal titles, to future production’’ and more specifically claims to the income generated by that production.

The moral of the story is that it is not possible to print wealth or value. Money in its paper representation of the real thing, e.g., gold, is not wealth it is a claim on wealth.

The problem with the various ‘Fiat is all the problem!’ (FIATP) crowds

June 09, 2020

The problem with the various ‘Fiat is all the problem!’ (FIATP) crowds

By Ramin Mazaheri for the Saker Blog

“‘(The German economist Kestner wrote:) The greatest success no longer goes to the merchant whose technical and commercial experience enables him best of all to understand the needs of the buyer, and who is able to discover and effectively awake a latent demand; it goes to the speculative genius [?!] who knows how to estimate, or even only to sense in advance the organisational development and the possibilities of connections between individual enterprises and the banks.’

Translated into ordinary human language this means the development of capitalism has arrived at a stage when, although commodity production still ‘reigns’ and continues to be regarded as the basis of economic life, it has in reality been undermined and the big profits go to the ‘geniuses’ of financial manipulation. At the basis of these swindles and manipulations lies socialised production; but the immense progress of humanity, which achieved this socialisation, goes to benefit the speculators. We shall see later how ‘on these grounds’ reactionary, petty-bourgeois critics of capitalist imperialism dream of going back to ‘free’, ‘peaceful’ and ‘honest’ competition.” (emphasis his)

  • V.I. Lenin

The rather ideology-defining question of connecting banks and businesses; socialising the production and creating massive human progress, but then privatising the gains; (Corona proving the loser of the Cold War was both the USSR & the USA because corona exposed how in order to beat the USSR the US turned to) the constant swindles and manipulations of hyperfinancialisation, like Quantitative Easing… Lenin could have easily also unmasked the “Fiat is all the problem” critics of neoliberal capitalism in 2020 – like this article will – but Lenin lays in Red Square (because he is still so important today).

******************************************

During the corona overreaction into Great Lockdown into US rebellions era many of the most dynamic commentators are those who feel dominated, insulted, financially cheated and unfairly bested by the almighty US greenback, which they insist is about to become less valuable than used toilet paper (as the value of unused toilet paper has infamously skyrocketed during the Great Lockdown).

A whole range of political, economic and moral ideas are represented by these who insist that the primary problem in non-socialist-inspired nations is paper (fiat) money and its alleged overprinting:

Goldbugs, bitcoin evangelists, and silver miners; crooked Austrian economic policemen and their sons and daughters who follow “the (University of) Chicago Way: Get them before they get you”; Trotskyists who kind of understand economics but interpret every stock market dip as a sign that capitalism is finally collapsing under the weight of its own contradictions; anti-imperialists who are getting ready all the yuan they have been hoarding under their mattress – all these groups have insisted since the start of QE5 (i.e., QE 2.1) that the very next sheet of printed dollars will be the one which breaks the greenback’s back.

I accurately related what happens to the US dollar in times of economic crisis in No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all, but this article seeks to correct another incorrect view related to and often shared by these ardent “dollar demisers”:

The problem is not the dollar, nor the fact that it is issued on paper, nor the fact that QE issues money via a keyboard tap – the problem is not even the nature of money itself but the capitalist-imperialist culture which surrounds that money. Thus, the problem with the “Fiat is all the problem” (FIATP) crowds is that they obsessively see only a financial system instead of a moral-political system.

Translated into ordinary human language: The “dollar demisers” have no conception that the problem is not paper money, nor is it all money – it is the capitalist ideals regarding money.

Goldbugs: Old Testament fire and brimstone in monetary policy

Of the FIATPs the most resistant to modern political ideas – and the ones who are the most vocal and the most certain about the immediate collapse of the dollar – are the proponents of gold, but also many bitcoiners.

I understand their frustration: I, too, would be upset if I believed that overprinting should lead to a drop in the greenback… but then if I believed that it would mean that I foolishly believed that economics followed mathematical laws, and it would also indicate that I had little understanding about the political-social-moral role money plays in the absolute non-science of economics.

This group, which believes that the physical asset they have invested in should be worth more than it currently is, has two major flaws: 1) They view economics as investors, not as real people/workers. The former are competing at least partially as carnival barker salesmen: they want THEIR product to win so they can profit. 2) Unlike normal people/workers, they do not realise that it doesn’t matter at all if nothing is “backing” fiat in the 21st century – the real-world necessity of needing to get something in return for your labor makes paper as good as gold, or as good as cowrie shells, or as good as increasingly scarce toilet paper, or as good as whatever a government-backed-by-guns says that it is. If the government says we go back to cowrie shells then we all go back to cowrie shells, and this could absolutely be a positive thing because money is merely a tool, duh!

The gold proponents sound the most Old Testament – they act as if it is a God-given law that gold and only gold or gold-backed tools must be used as a medium of exchange and that it is just a matter of time before God’s wrath smites us for going fiat. I am unaware of this verse in Scripture.

Goldbuggers especially feel entitled to some sort of moral supremacy over the “early adopters” of digital fiat money (i.e. QE) when the average person knows they deserve nothing of the sort.

Gold and silver, after all, only became poplar because monarchs and aristocrats thought that wearing shiny stuff would give them an air of divinity to us plebes. That Lenin quote doesn’t apply to this crowd, for whom there is no “development of capitalism” – no changes or progress – merely the eternal value of gold (their God), which always was and always will be.

Austrians/Chicagoans/Bitcoiners – ‘moral hazard is when I don’t profit’

Bitcoiners can be placed along with the goldbugs because they both share an intense moral rage. However, libertarian/radical-individualist bitcoiners don’t have an old-fashioned sense of collective morality, thus their critiques of 21st century Western capitalism lack Biblical depth. This is why many of them really belong with the Chicago/Austrian crowd, which is ruled by competition, cruelty and greed-is-good.

(However, I am an open supporter of bitcoin, and we’ll see that those who would use bitcoin for personal and not social gain actually fall into all three camps.)

The Austrian/Chicagoan crowd… wow. It’s not really sure what they want – other than that they want money for themselves, and for the exciting law of the jungle to rule unchecked.

This group is defined by one primary characteristic: anti-socialism. The proof of their opposition to the ideology of political modernity is their Salafistic, fundamentalist insistence that all would be well if we could only just return to the roots of classic English liberalism. Oho! How they pine for the sweet days of Adam Smith & David Ricardo up until the Third World holocausts of the late Victorian era – what sweet days unmarred by problems they were!

These sentimental and thus ultimately right-wing critics of QE merely “dream of going back to ‘free’, peaceful’ and ‘honest competition” – Lenin had to deal with these types in his day as well.

We can certainly include many MMT-ers (Modern Monetary Theory) here, as they believe that capitalism is a way to control rentier exploitation, not expand it.

This entire group truly acts as if capitalism only started with the invention of the cotton gin or steam engine, and their primary fear mongering reflects that limited historical view: a warning that we are headed towards to “neo-feudalism”. But feudalism was certainly capitalist – there is ultimately no significant difference between the two in either their means nor their ends (simply change “king” for “banker” and “church” for “corporation”; certainly, nobody has ever confused feudalism with socialism.

This group insists that QE is a perverted degradation of sweet, sweet capitalism from the Salafist era of Smith and Ricardo. Oho! If only we could return to that angelic era unmarred by economic inequality when those mild and holy saints of competition spread the ideals – the TRUE ideals, not the false ones of this QE-corrupted era! – of the true capitalist gospel!

People like the MMT-ers because they are capitalists but at least they are not heartless hypocrites bent on ruining their country in order to show their personal greatness. However, they essentially claim to have found the elusive “Third Way” – I just don’t understand why they don’t openly push socialism, because after over a century of trying humans have found that there is no Third Way.

However, absolutely nobody likes Austrians/Chicagoans, and Austrians/Chicagoans are made quite content by that: they view it as proof that they are winning the competition over losers who are just jealous of their success.

The ‘QE feeds imperialism’ crowd – but then why did imperialism exist before digital fiat?

Bitcoin evangelists can often declare how fiat money feeds American imperialism. Surely, if everyone would buy some of their bitcoin and use it in everyday purchases, then Western militarism would collapse.

The obvious problem here is that these laudable anti-imperialists correctly perceive how imperialism is wrong and predatory as an economic system, but they fail to see how neo-imperialism is equally undergirded by a political-cultural-moral system. The Pentagon’s “war on ____” is not solely about the greenback – that is an outdated nation-state analysis and not a class-based view.

Their inevitable solution of isolationism (towards non-bitcoining nations) is the same flaw of the libertarians: as long as the extent of my individual rights/society are not curtailed, then I am content to not become involved in the problems of others. This “just wait for fiat to implode” leads to the same flaw as the Trotskyists “just wait for the capitalist system to implode” – what does Palestine, for example, do in the meantime? The moral aspect of this question should be obvious, but have you ever heard a bitcoiner discussing Palestine?

They discuss Palestine about as often as they discuss bitcoin’s moral Achilles heel: the fact that 40 percent of bitcoin is held by perhaps 1,000 owners (known as “whales”). If the moral philosophy of that tiny vanguard party is libertarianism, radical individualism and Anglo-American liberal Salafism (which it sadly is), then I for one say that we should confiscate their bitcoin immediately because how is their political-cultural-moral system they any different than American banksters? Aspiring to be an all-controlling bankster but with bitcoins is still banksterism.

Inevitability has laziness inherently inscribed in it, as well as selfish individualism, because YOU do not need to do anything, take a moral stand, resist, sacrifice, etc., only wait. Thus, of course comfortable bitcoin investors do nothing but play defense around their own little yard and digital wallets, waiting for the fiat-based economy to implode and then the price of bitcoin to explode: They feel they are all set – Palestinians deserve what they get because they haven’t gone fully bitcoin quickly enough.

Even Kestner had to write “[?!]” at these “speculative genius(es) who are indeed at the crest of the wave: Lenin, however, would surely say that many of them are actually just “reactionary, petty-bourgeois critics of capitalist imperialism”.

Conclusion: The world actually had major problems before QE-fiat

These groups lack coherence, modernity and popular appeal because when they look at the QE economy they see a financial system and not its concomitant political system.

When they do perceive a moral system they look with the isolated eyes of a Western individualist instead of with the united, consensus-respecting socialist outlook provided by billions of pairs of eyes. Therefore, FIATPs answer comes down to the same old Western answer post 1989: technology and technocratism. The FIATPs could have become epidemiologists, had they been biologically and not monetarily inclined.

FIATPs often deserve credit for seeing the internationalist aspects of Western war, but their lack of modern political ideology causes them to fail to see the domestic & historical aspects such as the Yellow Vests, Black Power Movement, the jailing of Eugene V. Debs, etc. They seem to think that because they have invented a new tool they have discovered a new morality – they have not, and this is another example of their often blatant arrogance and overweening pride.

The FIATPs hostility to socialism is based entirely on the outdated and always-inaccurate Western capitalist-imperialist propaganda that socialism is totalitarian (when it is instead all about the empowerment of the individual in order to reach his or her full potential), of course, but it is especially unfortunate with many of the bitcoiners because the social morality they are demanding in public policy is fundamentally socialist democratic, not liberal democratic – 99.9% of bitcoin holders are not whales, after all.

Money in any form – fiat, bitcoin, gold, beads, whatever – is not the key to happiness for anyone with a compass whose pointer extends to heaven even only occasionally. Money is the root of all evil – its pointer only drops towards earth, thus it will always carry the potential of carrying disastrous imbalances.

Goldbugs, bitcoin whales and Austrian/Chicagoan gangsters may be speculative geniuses and merchants talented at finding profits, but they are not a vanguard political party which can lead society to a healthy balance of broad prosperity and stability – they aren’t even right about money.

*********************************

Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis.

Capitalist-imperialist West stays home over corona – they grew a conscience? – March 22, 2020

Corona meds in every pot & a People’s QE: the Trumpian populism they hoped for? – March 23, 2020

A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020

MSNBC: Chicago price gouging up 9,000% & the sports-journalization of US media – March 25, 2020

Tough times need vanguard parties – are ‘social media users’ the West’s? – March 26, 2020

If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020

Landlord class: Waive or donate rent-profits now or fear the Cultural Revolution – March 31, 2020

Corona repeating 9/11 & Y2K hysterias? Both saw huge economic overreactions – April 1, 2020

(A Soviet?) Superman: Red Son – the new socialist film to watch on lockdown – April 2, 2020

Corona rewrites capitalist bust-chronology & proves: It’s the nation-state, stupid – April 3, 2020

Condensing the data leaves no doubt: Fear corona-economy more than the virus – April 5, 2020

‘We’re Going Wrong’: The West’s middling, middle-class corona response – April 10, 2020

Why does the UK have an ‘army’ of volunteers but the US has a shortage? – April 12, 2020

No buybacks allowed or dared? Then wave goodbye to Western stock market gains – April 13, 2020

Pity post-corona Millennials… if they don’t openly push socialism – April 14, 2020

No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all – April 16, 2020

Same 2008 QE playbook, but the Eurozone will kick off Western chaos not the US – April 18, 2020

We’re giving up our civil liberties. Fine, but to which type of state? – April 20,

2020

Coronavirus – Macron’s savior. A ‘united Europe’ – France’s murderer – April 22, 2020

Iran’s ‘resistance economy’: the post-corona wish of the West’s silent majority (1/2) – April 23, 2020

The same 12-year itch: Will banks loan down QE money this time? – April 26,

2020

The end of globalisation won’t be televised, despite the hopes of the Western 99% (2/2) – April 27, 2020

What would it take for proponents to say: ‘The Great Lockdown was wrong’? – April 28, 2020

ZeroHedge, a response to Mr. Littlejohn & the future of dollar dominance – April 30, 2020

Given Western history, is it the ‘Great Segregation’ and not the ‘Great Lockdown’? – May 2, 2020

The Western 1% colluded to start WWI – is the Great Lockdown also a conspiracy? – May 4, 2020

May 17: The date the Great Lockdown must end or Everything Bubble 2 pops – May 6, 2020

Reading Piketty: Does corona delay the Greens’ fake-leftist, sure-to-fail victory? – May 8, 2020

Picturing the media campaign needed to get the US back to work – May 11, 2020

Scarce jobs + revenue desperation = sure Western stagflation post-corona – May 13, 2020

France’s nurses march – are they now deplorable Michiganders to fake-leftists? – May 15, 2020

Why haven’t we called it ‘QE 5’ yet? And why we must call it ‘QE 2.1’ instead – May 16, 2020

‘Take your stinking paws off me, you damned, dirty public servant!’ That’s Orwell? – May 17, 2021

The Great Lockdown: The political apex of US single Moms & Western matriarchy? May 21, 2021

I was wrong on corona – by not pushing for a US Cultural Revolution immediately – May 25, 2021

August 1: when the unemployment runs out and a new era of US labor battles begin – May 28, 2021

Corona proving the loser of the Cold War was both the USSR & the USA – May 30, 2021

Rebellions across the US: Why worry? Just ask Dr. Fauci to tell us what to do – June 2, 2021

Protesting, corona-conscience, a good dole: the US is doing things it can’t & it’s chaos – June 3, 2021

Why do Westerners assume all African-Americans are leftists? – June 5, 2020

Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books Ill Ruin Everything You Are: Ending Western Propaganda on Red China’ and the NEW Socialisms Ignored Success: Iranian Islamic Socialism.

No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all

April 16, 2020

by Ramin Mazaheri for the Saker Blog

No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all

There is a lot of chatter about how the coronavirus economic overreaction and subsequent US bailouts will end the dollar’s reign as the global reserve currency – such wishful thinking is shortsighted and ignores even recent Western capitalist history.

Last November, in a then-boring but now-prescient 10-part series (I socialistically re-interpreted ex-Wall Streeter Nomi Prins’ book Collusion, which chronologically detailed the QE-spreading collusion between G20 central banks since 2008), I wrote the following in Part 3: QE paid for a foreign buying spree: developing countries hurt the most:

“Yet by flooding the world with trillions of dollars via QE the US was able to, paradoxically, maintain dollar dependence despite their crimes. The US dollar share of global reserves today is 62%, almost exactly what it was in 2008. Combined with the other source of the crisis – the euro – the two combine for 82% of global reserves. By comparison, the yuan – which so many predict is about to dethrone the dollar – is at below 2%; I wouldn’t hold my breath.”

But corona is different, right? Two percent and 62% will suddenly change places, right?

No, more QE is more of the same thing, and this is a “thing” which has worked exactly as designed; it is also a “thing” which is never broached in the Mainstream Media: “A way to create debt traps which increase Western control over their neo-imperial subjects. … Neoliberal-capitalism financial policies must be viewed as a neo-imperial tool, of course.”

People are acting as if Western neoliberalism hasn’t worked, LOL? It has worked spectacularly well… but only for their 1% and not for “the nation”, exactly as designed.

Many fine semi-dissident commentators apparently do not follow high finance, nor can they interpret their actions, even though high finance is the West’s vanguard party (thus the theme of my recent series – “bankocracy”); they often incorrectly focus on an easier-to-grasp storyline of nationalist competition, which (like racism, sexism or tribalism) simply cannot ultimately take precedence over class warfare.

I’m not being dogmatic – this simply provides the fullest explanation of economic events. Reject what socialists could call the “conspiracy” of the 1% via class warfare? Then you likely move on to absurd, unprovable “conspiracy theories” involving secret cults, elaborate handshakes, ritual sacrifice, etc.

This is the bottom line which (whom I will call) “dollar-demisers” simply do not understand: For better or for worse (certainly worse), the US and their greenback are still the gold standard when it comes to 1%er perceptions of a safe harbour in a crisis.

This will hold true in 2020 just as it did in 2008.

Many semi-dissident analysts unwittingly take a rather Trotskyist view that capitalism will eventually implode under the weight of its own contradictions. It won’t – some rats always find a way to survive a sinking ship, eh? Thus, open socialist combat is the only way to defeat modern Western capitalism, and also to satisfyingly explain what is going on in the Western Great Recession/Depression 2.

So maybe the yuan will become the dominant currency… but not in two months, nor two years – maybe two decades? That’s a big “maybe”. In my lifetime, I think.…

Until then, please believe me: Western globalisation/neoliberalism has a LOT of ammo, clout, clients, banks, real money, real gold, fake money and paper gold to keep their mighty dollar on top. Socialism teaches us: it is NOT just Americans who will deploy these weapons.

Just look at what high finance did when the corona crisis hit – journalism is just recent history

As soon as the lockdowns hit Western Europe you couldn’t buy a dollar from high finance. Why? Because people were panicking and wanted a safe haven (and had huge bills to pay) – they did not run to the yuan, but the greenback. The yuans ran to the greenback!

(Some Western commentators often act as if China doesn’t know what they are doing by being the second-biggest holder of US Treasuries – as if Beijing is somehow being suckered or something? Similarly, but from the other side of misunderstanding, Trotskyism faults China for playing along with capitalist-imperialists in order to strengthen Chinese socialism. Both views are absurd.)

As the corona overreaction progressed, and even as it became clear that a country with third-world inequality and gaping structural flaws was about to go on lockdown and impoverish half its populace within a season, this country’s currency did not drop in value as it should have – I am speaking of the US.

Fair? No. Reality? Proven. Predictable? Entirely.

Equally unprecedented during these March days was a historic run on physical gold, history’s nostalgic (not current) safe haven, which I would have bought if I could have found any (I actually did not even look, as I have no money). This was a major step in a vital historical trend – let’s call it “fiat regoldification” – but please note: here we are, still using fiat (paper) money. Please note #2: individual 1%ers are still buying (parking their assets) way more in dollars than they are in bars of gold, even if central banks have edged more towards gold than dollars only recently.

What also happened in March? Just like in 2008, the US immediately opened more “currency swaps” – loaning scores of billions of dollars to their main client states to satisfy dollar demand… and make them even more beholden to maintaining dollar supremacy.

And by the end of March the US announced (effectively) $6 trillion in new bailout money. Yet no dollar devaluation, still? Return back to that 62% figure: yes, dollar dominance didn’t increase significantly since 2008, but there was no stagnation because the total reserves held by all central banks has expanded by more than half since 2008.

The “dollar-demisers” just don’t get it – they must live in nationalist vacuums? Germany just announced $1 trillion, after all, right? (France finally announced theirs – just $120 billion… because the global 1%’s plan continues to be “strangle the French model”.) Many nations have announced a similar “devaluation” as well, and they didn’t benefit from the dollar’s perception of unrivalled stability to begin with. The US $6 trillion comes within this critical context. But now extend out your timeframe to 2008 – how much new money has been printed across the G20? In this global context of recent history $6 trillion isn’t much, certainly not enough to ruin the dollar.

But beyond the unshakable perception of stability, the dependance entrapment, and the global money printing bonanza, what’s the biggest reason why everyone is rushing to the dollar? Simple – everyone else’s debt and collateral sucks even harder than it did in 2008: Eurozone bonds, corporate bonds, mortgage/credit card/auto loan-backed securities, overinflated stocks, overinflated real estate, overinflated Da Vincis, Third World investments about to go bust, any-World investments about to go bust post-global corona lockdown – US bonds are still the best, safest place for the 1% to park their savings.

So – don’t get it twisted – the dollar is now stronger than ever in 2020.

Just check the dollar index – it’s up over 20% since 2008, even though they were the cause of the crisis, and for the reasons I listed. The dollar will only strengthen post-corona, as usual: it’s a crisis, after all.

You’re underestimating people, and you underestimate how much room the US has

Here’s the thing about people not understanding high finance – they also are too dismissive of them (like with China’s treasury-holding bankers): People mistakenly assume that US bankers are a bunch of rich-kid idiots, and that they do not realise that being viewed so positively by the rabid capitalists of the global 1% undoubtedly gives them unparalleled leverage. No – the US is well-aware that its money machine can go brrrrrr, to use the top meme on this subject, and the dollar will not crater.

So when Neel Kashkari goes on TV and says the Fed has an “infinite amount of cash” it is wrong to make fun of him – the focus should be on the fact that he is taken SOMEWHAT seriously despite making such an economically-illogical claim. He is taken seriously because that is HOW VERY much money the US can print before they imperil the dollar’s reserve currency dominance.

The dollar is used in 40% of the world’s debt, 80% of global payments and nearly 100% of its oil sales – again: the world’s rich want to use dollars. Again, China doesn’t even want to use their own currency – in the past two decades dollar-denominated debt has exploded, and this trend was led by China. And yet we should assume the yuan is on the cusp of replacing the dollar? This unwind will not, I’m sorry to say, happen at corona-speed.

How much room does the Fed have to inject? A lot, depressingly.

(So we’re clear: What is this injecting doing? It is assuming the bad debts/failed investments of multinational high finance dominated by NYC. That total is not some infinite, abstract, undefined mathematical variable. This is what the phrase “picking the winners” means. Nobody is holding a marker with “quadrillion” after the number. )

From $2 trillion in 2008, in late March it was suggested it could hit $10 trillion to stem the corona craziness. That won’t be enough – and the hidden “10-to-1” lever in the $450 billion section of the $2.2 trillion bailout implies that already – but the US probably has $20-30 trillion worth of room before difficulty sets in.

People will fly off the handle at that (mainly Austrians and Chicagoans), but they don’t seem to comprehend reality: the unparalleled demand, the importance of competitive context in currency wars, as well as the political reality that the US as well as their allies (capitalism is collusion) will use all their political and probably military tools to postpone the monetary/political/historical revolution which is fundamentally implied by the end of dollar dominance.

And there’s even more advantages, because bankers are not as dumb as you think.

First of all: duh, they aren’t going to inject it overnight. Did they inject their $4 (or $8) trillion since 2008 overnight? Of course not – the US colluded with other G20 nations for over a decade so that the QE machine could keep going “brrrrrrr” – just at different nodes, as Prins’ books an my series related. The Fed works with other G20 central banks, it must be recognised – nationalism does not supersede a class analysis.

Secondly, it’s crucial to recall that the global 1% forced first Japan then the Eurozone (the biggest competitors of the US, at least until the 2008 crisis & response allowed China to rise so high) to take on austerity, bailouts and multiple Lost Decades which made their debt-to-GDP ratios explode. So this bringing down of the competition is only giving US Treasuries more leeway and power. Modern capitalism IS always international collusion – this didn’t start in 2008.

Of all the major Western economies only Germany and South Korea have good debt-to-GDP ratios, but Washington the global 1% have simple solutions to force them to increase their debt in order to protect THEIR dollar: Korean reunification, and an end to German strangulation of the Eurozone. If you don’t think they would force to protect THEIR dollar, then you fatally overrate the power of nationalism.

This 1%er collusion is what so many good commentators just can’t see because they reject the class struggle. This is why they are rather absurdly expecting to use only yuan – or maybe euro or yen or loonies – by next Tuesday. The reality is that a socialist victory against predatory capitalists is long, hard and unyielding – this provides great inspiration and creativity when accepted. It does hurt your job opportunities in journalism, though. But many journalists and analysts are happy with just complaining.

So the corona bailouts are NOT going to end global dollar dominance, for all the reasons I’ve listed.

QE provokes inflation, but do you understand inflation? I mean, REALLY?

Corona’s “Great Lockdown” is sure to provoke falls in subservient currencies, but it won’t cause the dollar to double in value, either. That won’t be permitted:

A weak dollar hurts the average American but it certainly helps the sectors of society supported by the 1%: export-driven corporations, debtors (banks) and landlords (rentier exploiters). I explained this in my “bankocracy” series – Part 5: Understanding the West’s obsession with inflation. The 1% only cares about inflation which hurts their investments – they could not care less about rises in the price of bread, metro tokens, rent, etc. This is precisely why the MSM keeps saying how inflation is low… when 99% of their readers think, “No it isn’t.”

Due to this widespread misunderstanding/misinformation regarding inflation, many commentators confuse a rise in domestic prices for key goods with the international strength of the dollar. The former is a domestic concern – domestic inflation will be a result of money-printing. Domestically the dollar has lost an estimated 80% of purchasing power since Nixon went off the gold standard. However, the latter is an international concern and – while no one stays at the top of the hill forever – the US dollar is (of course!) protecting and re-protecting itself via international 1%er collusion to stay there as long as possible regardless of the effect on the average US consumer. What “1%er patriotism” are you talking about, and in the age of globalisation, too?!

Yes, rents and food will go up: No, the dollar will not stop being the international reserve currency. Yes, because you won’t openly support socialism you suffer under a bundle of unjust contradictions and cognitive dissonances.

Again, a class analysis provides a fuller explanation of corona-related high finance machinations than does an analysis based around mere nationalism.

But many of you older readers can, sadly, take this to your graves: the dollar’s dominance is unquestioned and will be defended by the international 1%, just as it has been since 2008, and just as it has been since it ascended the bloody capitalist heap. The 1% has never known eras, epochs, patriotisms, etc., and certainly not since the rise of industrial capitalism.

The problem is not QE, nor is it the “dollar system” – it is the entire system of values encapsulated by “capitalism-imperialism” and undoubtedly in “capitalism with Western characteristics”.

You can find the odd article like Pandemic proves there is only one world reserve currency, but this article gave the real reasons why; only a socialist microscope can reveal the core economic truth.

I could be wrong – and so could that article – about 20-30 more years of dollar dominance. Maybe the corona overreaction will set off a Great Depression so unmanageable that a socialist revolution occurs quite soon? That’s the only possible way the dollar is dethroned earlier.

(Of course, according to logic, any uprising which is not openly pro-socialist – and is thus pro-capitalist – cannot be a “revolution” at all. The development of post-corona “coups” would produce regimes which would – at best – still certainly collaborate with the dollar for national benefit.)

The West has no solution – wants no solution – wants only more of all this capitalist-imperialist chaos for the 99%… and thus corona immediately kicked off the “solution” of QE Infinity. No Western nation’s 1% is going to stop colluding to make that continue.

So keep your yuan under your mattress – infinity won’t end next Tuesday. I hope you find this article useful in your leftist struggle!

***********************************

Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis, and I hope you will find them useful in your leftist struggle!

Capitalist-imperialist West stays home over corona – they grew a conscience? – March 22, 2020

Corona meds in every pot & a People’s QE: the Trumpian populism they hoped for? – March 23, 2020

A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020

MSNBC: Chicago price gouging up 9,000% & the sports-journalization of US media – March 25, 2020

Tough times need vanguard parties – are ‘social media users’ the West’s? – March 26, 2020

If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020

Landlord class: Waive or donate rent-profits now or fear the Cultural Revolution – March 31, 2020

Corona repeating 9/11 & Y2K hysterias? Both saw huge economic overreactions – April 1, 2020

(A Soviet?) Superman: Red Son – the new socialist film to watch on lockdown – April 2, 2020

Corona rewrites capitalist bust-chronology & proves: It’s the nation-state, stupid – April 3, 2020

Condensing the data leaves no doubt: Fear corona-economy more than the virus – April 5, 2020

‘We’re Going Wrong’: The West’s middling, middle-class corona response – April 10, 2020

Why does the UK have an ‘army’ of volunteers but the US has a shortage? – April 12, 2020

No buybacks allowed or dared? Then wave goodbye to Western stock market gains – April 13, 2020

Pity the lives of post-corona Millennials… if they don’t openly push socialism – April 14, 2020

Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’ and the upcoming ‘Socialism’s Ignored Success: Iranian Islamic Socialism’.

Basel 3: A Revolution That Once Again No One Noticed

April 07, 2019

By Aleksandr Khaldey

Basel 3: A Revolution That Once Again No One Noticed
Translated by Ollie Richardson and Angelina Siard
cross posted with https://www.stalkerzone.org/basel-3-a-revolution-that-once-again-no-one-noticed/
source: http://www.iarex.ru/articles/65626.html

Real revolutions are taking place not on squares, but in the quiet of offices, and that’s why nobody noticed the world revolution that took place on March 29th 2019. Only a small wave passed across the periphery of the information field, and the momentum faded away because the situation was described in terms unclear to the masses.

No “Freedom, equality, brotherhood”, “Motherland or death”, or “Power to Councils, peace to the people, bread to the hungry, factories to the worker, and land to the farmers” – none of these masterpieces of world populism were used. And that’s why what happened was understood in Russia by only a few people. And they made such comments that the masses either did not fully listen to them or did not read up to the end. Or they did listen to the end, but didn’t understand anything.

But they should’ve, because the world changed so cardinally that it is indeed time for Nathan Rothschild, having crumpled a hat in his hand, to climb onto an armoured Rolls-Royce [a joke referencing what Lenin did – ed], and to shout from on top of it to all the Universe: “Comrades! The world revolution, the need for which revolutionaries spoke about for a long time, came true!” [paraphrasing what Lenin said – ed] And he would be completely right. It’s just that the results of the revolution will be implemented slowly, and that’s why they are imperceptible for the population. But the effects, nevertheless, will be soon seen by absolutely everyone, up to the last cook who even doesn’t seek to learn to govern the state soon.

This revolution is called “Basel III”, and it was made by the Bank for International Settlements (BIS). Its essence is in the following: BIS runs the IMF, and this, in turn, runs the central banks of all countries. The body of such control is called BCBS – the Basel Committee on Banking Supervision. It isn’t just some worthless US State Department or Congress of American senators. It’s not a stupid Pentagon, a little Department of the Treasury, which runs around like the CIA’s servant on standby, or a house of collective farmers with the name “White House”.

This isn’t even the banks of the US Federal Reserve, which govern all of this “wealth”. This is a Government of all of them combined. That real world Government that people in the world try not to speak about aloud.

BCBS is the Politburo of the world, whose Secretary General, according to rumours, is comrade Baruch, and the underground structure of the Central Committee is even more secret. It has many euphemisms, the most adequate of which is “Zurich gnomes”. This is what Swiss bankers are called. Not even owners of commercial banks, but namely those ordinary-looking men sitting in the Swiss city of Basel who Hitler – who tried to attach the whole world to the Third Reich, and who preserved neutrality with Switzerland during all the war – didn’t dare to attack. And, as is known, in Switzerland, besides Swiss rifleman, in reality there isn’t even an army. So who was the frenzied Fuhrer afraid of?

Nevertheless, the “recommendations” that were made by BCBS on March 29th 2019 were immediately, at the snap of the fingers, accepted for execution by all the central banks of the world. And our Russian Central Bank is not an exception. There is even the statement of the press service of the Central Bank of the Russian Federation posted on the official website of the Central Bank. It is called “Concerning the terms of implementation of Basel III”. The planned world revolution was in 2017 (magic of dates and digits or just a coincidence [a reference to 1917 – ed]?), but it has started only now.

Its essence is simple. In the world the system of exclusive dollar domination established in 1944 in Bretton Woods and reformed in 1976 in Jamaica, where gold was recognised as an equivalent of world money that became invalid, is being cancelled. The dollar indeed became world money, and gold became an ordinary exchange good, like metal or sugar traded in London on commodity exchanges. However, the weather was determined there by only three firms of the “Pool of London” that belong to an even smaller number of owners, but, nevertheless, it’s not gold, but oil that became the dollar filler.

We have lived in such a world ever since. Gold was considered as a reserve of the third category for all banks, from central to commercial ones, where the reserves were, first of all, in dollars and bonds of the US. The norms of Basel III demand an increase, first of all, in monetary reserves. This impeded the volumes of monetary resources of banks that could be used to carry out expansion, but it was a compulsory measure for saving the stability of a world banking system that showed to be insufficient in a crisis.

In Russia pseudo-patriots were very much indignant at this, demanding to reject Basel III, which they called a sign of “a lack of sovereignty”. In reality, this is a quite normal demand to observe international standards of bank security, which were becoming more rigid, but since we [Russians – ed] were not printing dollars, so of course it had an impact on us. And since the alternative is an exit from world financial communications into full isolation, so our authorities, of course, did not want to accept such nonsense that was even designated by pseudo-patriots as a “lack of sovereignty”. To call sovereignty – freedom, to put your head in the noose is, let’s agree, a strange interpretation of the term.

The Basel III decision meant that gold as a reserve of the third category was earlier estimated at 50% of its value on the balance sheets of world banks. At the same time, all owners of world money traded in gold not physically, but on paper, without the movement of real metal, the volume of which in the world wasn’t enough for real transactions. This was done in order to push down the price of gold, to keep it as low as possible. First of all, for the benefit of the dollar. After all, the dollar is tied to oil, which had to cost no less than the price of one gram of gold per barrel.

And now it was decided to place gold not in the third, but “just” in the first category. And it means that now it is possible to evaluate it not at 50, but at 100% of its value. This leads to the revaluation of the balance sheet total. And concerning Russia, it means that now we can quietly, on all legal grounds, pour nearly 3 trillion rubles into the economy. If to be precise, it is 2.95 trillion rubles or $45 billion at the exchange rate in addition to the current balance sheet total. The Central Bank of the Russian Federation can pour this money into our economy on all legal grounds. How it will happen in reality isn’t yet known. Haste here without calculating all the consequences is very dangerous. Although this emission is considered as noninflationary, actually everything is much more complicated.

During the next few months nothing will change in the world. The U-turn will be very slow. In the US the gold reserves officially total 8133.5 tons, but there is such a thing as a financial multiplier: for every gold dollar, the banks print 20-30 digital paper ones. I.e., the US can only officially receive $170 billion in addition, but taking into account the multiplier – $4.5 trillion. This explains why the Federal Reserve System holds back on increasing interests rates and so far maintains the course towards lowering the balance sheet total – they are cautious of a surge in hyperinflation.

But all the largest states and holders of gold will now revaluate their gold and foreign exchange reserves: Germany, Italy, France, Russia, China, and Switzerland – countries where the gold reserves exceed 1,000 tons. Notice that there is no mumpish Britain in this list. Its reserves are less than 1000 tons. Experts suspect that it is perhaps not a coincidence that the dates of Brexit and the date of Basel III coincide. The increased financial power of the leaders of Europe – Germany and France – is capable of completely concluding the dismantlement of Britain on the European continent. It was necessary to get out as soon as possible.

Thus, it seems that it is possible to congratulate us – the dollar era lasting from 1944 to 2019 has ended. Now gold is restored in its rights and is not an exchange metal, but world money on an equal basis with the dollar, euro, and British pound. Now gold will start to rise in price, and its price will rise from $1200-1400 per troy ounce up to $1800-2000 by this autumn. Now it is clear why Russia and China during all these years so persistently decanted its export income into the growth of gold reserves. There is now such a situation where nobody in the world will sell gold.

Injections of extra money will suffice for the world economy for 5-6 months. In the US this money can be used to pay off the astronomical debt. Perhaps this wasn’t Zurich’s last motive for making such a decision. But after all, the most important thing is an attempt to slip out from under the Tower of Pisa that is the falling dollar.

Since the dollar and oil are connected, the growth of the price of gold will directly affect the growth of the price of oil. Now a barrel costs as much as 1.627 grams of gold. A price growth will cause the world economy – where 85% of the money dollar supply turns into stock surrogates like shares, bonds, and treasuries – to cave in. The stock exchange will not be able to bundle together such an additional mass of money any more.

It will be good for oil industry workers – even, perhaps, best of all, but not for long. The economical crash because of expensive oil will become a crash for all oil industry workers too. It is precisely this that is the main reason why our rights for additional emissions can remain unused in full volume, although a gift in such a form will not be completely ignored. The May Decrees of Putin in the current context are being understood completely differently. Russia runs away from the oil-based economic model in all ways. Including by political reforms and changing the elites.

However, why is the decision of Basel a revolution? Because from the autumn the financial flood in the world economy will begin. It will entail the acceleration of Russia and China’s isolation from the dollar system and the crash of the economies that completely depend on the dollar – the vassal countries of the US. It will be worst of all for them. And this means that the reasons for increased distancing between the EU and the US will increase in number manyfold. A redrawing of the map of global unions awaits the world.

And the redrawing of these unions will be carried out not least by military methods. Or with their partial use, but in one way or another, reasoning involving force in the world will increase almost to the level of guaranteed war. “Almost” is our hope for rescue, because the US loses all main instruments of influence on this world. Except force.

But it’s not for this purpose that the “Zurich gnomes” created this world, so that the US is so simply turned into radioactive ashes. The US will be drenched with cold water like a broken down nuclear reactor, while the world has entered the zone of the most global transformations over the past few centuries. The revolution that so many waited for, were afraid of, and spoke so much about has started. Buckle up and don’t smoke, the captain and crew wish you a pleasant flight.

 

%d bloggers like this: