Syrian Conflict Is A Distraction From A Secret War

This report was originally published by Brandon Smith at Alt-Market.com

Back in March 2010 I published an article titled ‘Will Globalists Trigger Yet Another World War?’ under the pen name Giordano Bruno describing what I felt would be the most effective triggers for a new global conflict. In that article I pointed to Syria as the primary powder keg, followed in close second by Iran and Yemen. This was written well before the Syrian civil war was engineered by establishment interests. I focused on potential false flags that could be used as a rationale by the U.S. or Israel to invade the region, thereby giving Russia and China reason to retaliate, for the most part economically. Ultimately, this scenario would play out perfectly as a cover for the deliberate collapse of the U.S. dollar as the world reserve currency.

In August 2012 I reiterated my concerns in an article titled Syria And Iran Dominoes Lead To World War, right after the Syrian civil war began to gain momentum.

Needless to say, I have not changed my general thesis since those days; however, I would like to touch upon certain factors now that the dangers I examined in those articles are mostly coming to pass in 2018.

First, no hard evidence has been produced by western intelligence agencies to support the claim that Bashar Al Assad used chemical weapons against his own people. None. Therefore, there is no basis for the latest missile attacks on the regime. This same exact false flag tactic was attempted under the Obama administration to draw the U.S. people into open war in Syria, and it failed. Now the chemical weapon card is being played again, this time with a “conservative” president. The establishment must be hoping that Republicans will find excitement in becoming the war party so long after the Bush years.

As I queried the last time a chemical false flag was attempted, what exactly does Assad have to gain by initiating a chemical attack against innocent civilians when he has the tactical momentum and upper hand in the civil war?  The answer is nothing. The only people that have anything to gain by asserting such an attack, either real or fabricated, are people seeking to create chaos for their own benefit.

The insinuation of neocon warmonger John Bolton into the Trump cabinet suggests that the neocons are very much back in charge and that ongoing war is guaranteed. At this late stage in the game, it is unlikely that our government or any other government involved in the Syrian theater even cares to explain its actions. When establishment criminals no longer care if their criminality is transparent to the public, THEN it is time for a large scale societal collapse.

Second, each successive Trump involved theater, from the trade tariffs to international war tensions, has become progressively more dramatic, and I believe this is meant to hide the effects of the Federal Reserve’s balance sheet cuts and interest rate hikes. The real and secret war being waged is not against Syria or Syria’s allies, but against the American people and our economic stability.

In January of this year, I warned that central banks were preparing to enter into an accelerating process to deflate the massive market bubbles they created to prop up our fiscal system over the past several years. That process is indeed continuing, and each successive rate hike and balance sheet cut will act in a cumulative fashion. Meaning, central bankers are treating the global economy like an oversized Jenga tower, pulling blocks here and there until the system topples completely from lack of stability.

This latest event in Syria is yet another grand gesture of illusion, designed to provide cover for the banking cabal as they pull the plug on financial life support. It also is timed rather conveniently for the Fed’s next policy meeting on May 1-2. The meeting is likely to include yet another interest rate hike as well as a large reduction in the balance sheet, resulting in another sizable plunge in stocks. All negative moves in our manipulated markets will now be blamed on Trump administration activities as well as blamed on trade retaliations by eastern nations. The mainstream media will no longer discuss the reality that central banks are the true cause behind a systemic breakdown.

Third, the current pattern of events suggest there will be a joint economic retaliation by Russia and China. China has publicly admonished the U.S. government for its strike in Syria, and this is merely added to the increasing tensions over trade tariffs by Trump. Again, this is a perfect opportunity to undermine the U.S. economy, primarily through China and Russia initiating a dump of the dollar as the world reserve currency.

The dump of the dollar has already begun in a semi-covert fashion. China’s currency has been inducted into the IMF’s Special Drawing Rights basket system, and China has also launched the first international oil exchange that does not use the dollar as the petro-currency. What many people are ignoring is the fact that the shift away from the dollar is being championed and helped along by the globalists at the IMF itself.

An impending change in the global monetary framework is often referred to as the great “global economic reset” by IMF members like Christine Lagarde. This change will be facilitated by central banks as they sabotage their respective national economies through the creation and destruction of market bubbles. Ultimately, it will not be the Chinese Yuan that replaces the dollar as world reserve currency, but the SDR basket system, controlled by the IMF.

The question of how this can be done by the globalists without an unprecedented liquidity crisis often comes up. I’m not so sure they care if there is a liquidity crisis, at least for a short time. Yes, the U.S. dollar has some of the most liquid markets in the world, but it is wrong to assume the globalists will not sacrifice those markets in order to force the public into accepting one world centralization of monetary administration (the biggest and most important step in establishing global government).

People who argue that the dollar will never be demolished by the globalists cling to the false notion that there is no liquidity replacement for the dollar. In reality, there is a replacement — cyrptocurrencies and blockchain technology.

The IMF has recently applauded blockchain systems and crypto as a potential rejuvenating force in international money transactions. Far from being opposed to cryptocurrencies, global elitists have been piling into them with praise and with investment dollars.

The global economic reset is not about East versus West. It is not about trade wars and nationalism. No, the global reset is about banker centralization of assets and consolidation of power. Beyond that, it is about the public ACCEPTING the reset as necessary and “good” for society. Globalists want us to beg for their rule. When one understands this simple truth, all the current events and disasters of our era begin to make sense. Crisis is the quickest path to complacency and tyranny.

The Syrian quagmire is a path to engineered and guided calamity. Its effects will continue to leach into the economic world as an international excuse for a trade war tit-for-tat. Syria is a smoke and mirrors game.

The true war, a secret war, is being fought between liberty champions and lying globalists. For now it remains a cold war, a battle of principles and facts versus disinformation and fear. One day this war will become a hot one. Until that time, distractions will assail the public like a hailstorm. My hope is that we can educate enough people to see through the fog of this hidden war; enough people to come out the other side and change things for the better.

******

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

World War III Will Be An Economic War

This report was originally published by Brandon Smith at Alt-Market.com

There is a mass delusion in the mainstream created I think in large part by too much exposure to movie fantasy and TV fiction. It is an immediate assumption; one that I believe is far more dangerous than many people give it credit for. The assumption is that the next great war, should it occur, will inevitably be a nuclear one, and the doom surrounding it will end everything as we know it. Many people even get excited at the idea of World War III and the notion that it will “wipe the slate clean,” setting the stage for a positive human reformation from the ashes. I’m here to say that this is likely not how things will play out.

There are much more precise and effective weapons than nukes in the arsenal of the establishment globalists that manipulate political systems in various nations.

For example, the use of weaponized economics and false paradigms. As I have warned for years now, a conflict between East and West has been engineered to take place, and this conflict will primarily be an economic one. I outlined this dynamic in October 2016 in my article East vs. West Division Is About The Dollar — Not Nuclear War.

The excitement and dread surrounding potential nuclear warfare distracts from the much more legitimate threat of a staged financial war between East and West (as well as regional wars by proxy in Syria and North Korea which could bog the US down in a mire). It is important to remember that all wars are invariably banker wars — that is to say, almost all wars benefit international financiers by creating an environment ripe for centralization of wealth and political power. This notion tends to confuse some analysts and activists in the liberty movement.

There is a strange clinging obsession with these people to the idea that there is true international division and that this division includes Eastern governments on one side verses globalist controlled governments on the other. Nothing could be further from the truth.

Considering the reality that the very same globalist representatives and institutions that permeate Western finance and politics ALSO sit in positions of influence in countries like Russia and China, I find it hard to believe that there is any sort of “division” in the upper echelons of their respective power structures. For all intents and purposes, the same poisonous influences, from Goldman Sachs to JP Morgan to Rothschild run corporations to Henry Kissinger (Mr. “New World Order”), all loom over Eastern economic policy and politics as well.

I have been writing about the false east/west paradigm since at least 2014 and compiling evidence on globalist influences in Russia and China; you can read more here and here.

The bottom line is this: Russia and China are in full support of globalist controlled institutions like the Bank for International Settlements (the central bank of central banks) and the International Monetary Fund (IMF). The governments of both nations have called for the IMF to assert their Special Drawing Rights basket currency framework as a foundation for a new world reserve currency system. Again, both Russia and China want the IMF, a globalist controlled entity, to become the de facto ruler of a new global monetary structure.

This call for a complete world monetary shift has not been taken as seriously as it should have been, primarily because mainstream economists argue that there is no alternative to the highly liquid U.S. dollar. This is no longer true, though.

With the rise of simple to generate cryptocurrencies and the easily tracked blockchain exchange mechanism, globalists now have the perfect liquidity tool for replacing the dollar as world reserve. All they need now is a crisis event to provide cover for the transition. That is to say, the masses must be thoroughly distracted by an engineered disaster theater. This would create the proper level of fear and confusion necessary to implement full spectrum changes in the world’s fiscal systems without ample resistance from populations suffering from the effects of the reset.

It would appear that a crisis event is now being triggered in the form of an international trade war. This trade war, in my view, is designed to become so widespread that it will one day be considered a “world war.”

China has been preparing for the move away from the US dollar since at least 2005 when they began issuing what the western financial media called “panda bonds”, or Yuan denominated bonds. Back then, the idea was almost treated as a joke. Not so much anymore, as China has expanded its liquidity by trillions over the past 13 years through various Yuan denominated instruments and has now even begun purchasing oil in Yuan instead of dollars. This has created what is being called a “petro-yuan” market, a move which was predicted far in advance by many of us in the alternative media, but for the mainstream it has been presented as something out of left field. Petro-yuan futures are being traded globally, and considering the fact that China is the largest importer/exporter in the world, it is only a short matter of time before many of China’s trading partners switch from the dollar to the yuan for exchanges.

All of this is culminating in a final action – the end game for developing trade war. This action will be the complete dumping of the dollar itself by China and its allies. With evidence building that China is stopping purchases of US treasury bonds, this action may come much sooner than many people seem to think. The naysayers continue to argue that China “will never break from the US and the dollar”, yet, this is exactly what is happening. It appears that these people will not accept the reality of the situation until it sets up camp on their front lawn in the form of a monetary collapse.

As far as distractions are concerned, the trade war activity has been very effective. For example, over the past few months I have been pointing out the strange relationship between announcements by the Federal Reserve concerning interest rate increases and balance sheet cuts and announcements by Donald Trump on tariffs against China and other nations. In almost every instance that the Fed’s actions precipitate a major drop in stock markets (such as last week when Jerome Powell announced an increased number of interest rate hikes and further balance sheet reductions) Trump simultaneously announces more aggressive tariff measures.

The mainstream media automatically blames Trump and the trade war for instability in stocks while completely ignoring the direct correlation between the Federal Reserve removing artificial support from stock markets and their continuing declines. The central bankers created the massive market bubble, now they are imploding it, and they want to do this without suffering any blowback to themselves. Trump seems to be helping them in this regard.

Even now, there are alternative economists and their followers that still don’t get what is happening. People who still think the Fed’s actions are a “policy error;” that the bankers are unaware of what they are doing, and that they will eventually reverse course and begin propping up stocks once again. My question is — why would they?

International financiers and central banks have everything to gain by pulling the plug on life support for stocks, bonds, real estate, etc. at this time. In the midst of a trade war panic, they can pretty much do anything they want without retaliation. All future catastrophe can now be dumped in the lap of any number of scapegoats. Some people will blame Donald Trump and the conservatives that voted for him. Some people will blame China and Russia as the culprits behind our ills. Other people will blame “capitalism” and “free markets” in general for the crisis even though we haven’t enjoyed true free markets in well over a century. But, very few people will blame global banks specifically.

I can tell you exactly what globalists will say as they salivate over the panic; they will blame the “selfishness” of “nationalism” as the great culprit, and they will call for a one world economic system built on a one world currency framework as the solution.

In many ways a world economic war could be far more disastrous than a nuclear one. In the event of economic collapse just as many people could very well perish as trade infrastructure and freight systems shut down, but the damage can be more easily directed and centrally controlled by financial elitists. Wealth can be shifted into any number of assets anywhere on the planet — so the idea that globalists have anything to lose in this scenario is rather naive. In the meantime, the banks plan to steal even more power for existing organizations like the IMF. As some countries suffer economic breakdown, globalist institutions will only grow.

In a nuclear war, there is only pandemonium. In an economic war, centralized dominance remains possible. The greatest disaster would not be the tragedy of mass unemployment, degradation of infrastructure, loss of monetary stability or loss of reliable food and energy production. No, the greatest disaster would be the continued thriving of banking conglomerates and central bank organizations as large portions of the world crumble. The greatest disaster will be what happens AFTER the collapse — the consolidation of a “new world order,” if the banking elites are not unmasked as the real catalyst behind the next world war.

******

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

China Declares Trade War Victory: Gloats At US “Suffering” After “Crushing Counterattack”

This report was originally published by Tyler Durden at Zero Hedge

Barely a day after China dropped the hammer on US stock markets by unveiling retaliatory tariffs on $50 billion in US imports that – unlike US measures that mostly targeted obscure industrial products – actually struck at key industries like soybean farmers, automobiles and airplanes, the Communist Party crowed about what it already sees as its “victory” in the nascent trade war in an editorial published by the Global Times, China’s state-owned, English-language tabloid and extremely hawkish party mouthpiece.

In the editorial, China swatted away US claims – repeated most recently by Larry Kudlow during this morning’s interview with Fox Business’s Maria Bartiromo – that China has somehow victimized the US via its trade agreements while gloating about the leadership’s decision to strike at a “massive weak spot” for the US economy.

While the tit-for-tat tariffs could hurt both economies, the damage to China’s economy caused by the US’s Section 301 tariffs will “pale in comparison to the damage done to the US economy via China’s retaliations.”

And just to illustrate that point, literally, a Chinese cartoonist showed that another way Beijing will hurt the US is by a “stockmarket squeeze.”

Furthermore, in standing up to America’s “bullying tactics”, China warns that the pleasure the US had derived from its sanctions in the past “will now cause them suffering as their financial and political gains diminish to zero.”

This is Beijing’s clear show of retaliation toward the proposed tariff list on Chinese products from the US. Beijing showed an impressive response time for its retaliation efforts, taking less than 12 hours to announce its trade countermeasures. Chinese officials agree that its country’s countermeasures match those imposed by the US and that they showcase China’s determination to win this trade war.

It is worth noting that China strikes the US side by targeting its most valuable imports, such as soybeans, automobiles and chemical products. These aspects were targeted because they represent key pillars in the US imports and can create a massive weak spot for the US economy if their profitability is at risk.

Although China will sustain financial losses thanks to the US’ Section 301 investigation tariffs,they will pale in comparison to the damage done to the US economy via China’s retaliations.

China’s counter tariffs are a spectacular way of standing up to America’s bullying tactics, not only for itself, but for other countries threatened by the US’s new trade policies.

And with China digging in for a long, protracted trade conflict, one from which it will never surrender, if it is indeed Kudlow’s – and the Administration’s – hope that China will concede to US trade demands, then there will be much disappointment all around.

Underscoring China’s preparation for a “scorched earth”, and tit-for-tat escalating war, the Chinese government has told its citizens it is prepared to go toe-to-toe in its fight with Washington. In fact, more and more Chinese citizens think that an “epic trade war” is inevitable, which would knock some common sense into the US government so that it will change its way of dealing with China.

Hawkish politicians in Washington have obviously overestimated the capability and endurance of the US economy in a trade war, since they believe they can do whatever they like. China has shown a great deal of restraint for now, but if the US persists in this trade war, China is ready to fight to the end.

Washington will eventually see what they have lost, thanks to their actions, and it will only serve to embarrass the US. This trade war will serve as a good example to the US that it cannot use intimidating trade tariffs as a form of diplomacy.

Before China announced its recent retaliatory tariffs on US products, Washington enjoyed crushing and threatening other countries on trade sanctions. Now, as China deploys its counterattack, the pleasure that the US achieved from those tariffs will now cause them suffering as their financial and political gains diminish to zero.

If a trade war does happen, China has contingency plans to help its economy avoid a slump.

And, in a dramatic break with precedent, China warned it could even take steps to weaken the US dollar, something that, if history is any guide, should be a concern to the Treasury market as it would suggest that China may be thinking of liquidating its Treasurys .

Many believe that the Trump administration’s $50 billion tariff on Chinese products is meant to pressure China to submit to the US demands. If that is the case, the US will undoubtedly lose. This is because the Chinese government has rallied its citizens and is prepared to go toe-to-toe in its fight with Washington. In fact, more and more Chinese citizens think that an “epic trade war’ is inevitable, and could knock some common sense into the US government, so that it will change its way of dealing with China.

If the trade war happens, China will show that it has just as many reserve plans as the US, if not more. Chinese experts suggest that China could even take actions to weaken the strength of its currency. Since China is the world’s largest trading economy and the largest buyer of commodities like oil products, China could use its influence to push its own currency, RMB, in global markets to reduce the dominance of the US dollar. That would be a heavy blow to Washington.

If this trade war comes to pass, it will be an evenly matched total war between China and the US economies, and not some small scuffle. It would be delusional for the US to think it will be victorious at the end of this trade war. China comes up with the conclusion in confidence, and will not shy away from letting Washington know in this situation.

And while taking overt steps to weaken a currency would violate a G-20 communique agreeing to avoid currency wars through competitive devaluations, we doubt that would stop Beijing should Trump push it too far.

Meanwhile, a greater – and more likely – risk than a Treasury dump by Beijing is another devaluation: after all the Yuan is already back to where it was in the days just before the Yuan’s 2016 deval. Fears about an impending yuan devaluation akin to the drop that unleashed turbulence across global markets back in August 2015 have historically had a negative impact. Traders will remember 2016, when markets got off to one of their worst early performances in decades as continued daily, if less acute, Yuan devaluations hurt stocks.

While this warning appears to have been largely overlooked by markets, it’s definitely something to keep in mind.

China Defense Minister In Moscow: “America Must Know How Close Chinese And Russian Armies Are”

This report was originally published by Tyler Durden at Zero Hedge

Nothing continues to scream bullishness – or, less sarcastically, volatility – like the world’s number two and number three superpowers aligning their armies and putting on a show of force to make a strong statement to the United States and fend off “Western Pressure”.

The prescription for volatility becomes even clear when we consider that the United States, Russia, and China are all in a precarious position with one another that has stemmed from, and has implications on, everything from trade to how to handle North Korea.

This military show of force and sign of unity between the two countries is exactly what has been reported by RT just today. Apparently, China and Russia are strengthening their ties in order to make a clear statement to the United States. To do that, Beijing sent a delegation to Russia to show Washington the unity of Russian and Chinese military forces and “support” Russia at the 7th Moscow Conference on International Security.

Chinese Defense Minister Wei Fenghe voiced strong support for Russia during the talks with his Russian counterpart, Sergey Shoigu. While stressing “the united position” on the international arena, the minister said that one of the main goals of the visit was to send a message to Western powers. 

“The Chinese side came to let the Americans know about the close ties between the Russian and Chinese armed forces,” Wei said. The RT article continues:

It is General Wei’s first foreign trip since he was appointed head of the Chinese Defense Ministry. The choice of the destination is not a coincidence, but underlines the “special character” of the bilateral partnership, according to Shoigu.

Prior to the visit, the Chinese state-run Global Times newspaper published an article titled “Western pressure brings China and Russia closer.” The report quotes analysts, who believe that the current international environment – including Western anti-Russia hysteria and the looming US-China trade war – will only strengthen the Sino-Russian alliance.

Both nations have been engaged in their own disputes with the West. The NATO military buildup on Russia’s doorstep has already “crossed the red line,” according to Russian envoy to NATO Aleksandr Grushko. At the same time, Russia is at loggerheads with the US and EU over the poisoning of ex-double agent Sergei Skripal and his daughter in the UK. The British blame-game over Russia’s alleged involvement in the incident sparked tit-for-tat expulsions of diplomats.

It is unclear which tension out of all of them involving these countries has pushed these two superpowers to not only move closer together, but to make it public to the United States. But, as the RT article notes, tensions not only surrounding North Korea, but also surrounding trade and the “Russian diplomat shuffle” that has taken place over the last couple weeks are starting to pin the two like-minded governments together.

In addition to this, and at the same time these two countries are getting cozy, China and Russia have also been notably increasing their gold reserves. This follows our coverage from February, where we pointed out that Russia’s gold purchases were surpassing that of China:

• Russian gold reserves are now the fifth largest in the world.


• Russia added 600,000 ounce of gold (18.66 tons) to reserves in January.


• Russia added a record 224 tons of gold to reserves in 2017.


• Since June 2015, the Central Bank of Russia has added over 576 tons of gold to reserves.


• Overall Russian reserves rose from $432.742 billion in December to $447.735 in January.


• Russian holdings of U.S. Treasuries top $100 billion for ninth in a row.


• Gold reserves worth $80.4 billion constitute 17.95% of overall Russian reserves.

As we wrote just two weeks ago, the “decision point” for gold could be forthcoming and the demise of the dollar could finally be on the horizon: Russia and China are increasing their gold reserves while last week China launched the Petroyuan, announcing it would start paying for oil in local currency, and not dollars.

As such, the joint Chinese and Russian show of force could not only be military, but also monetary, in the near future.

Regardless, this armed forces show of force is one notch higher in the tension pegboard for the global political and global economic climate. However, as has happened with volatility as it has increased over the last decade, we won’t be surprised when equity markets shrug off or ignore this news and continue to push stocks to record highs while hoarding today’s overpriced, oversubscribed and money losing Spotify IPO hand over fist.

In Unprecedented Move, China Plans To Pay For Oil Imports With Yuan Instead Of Dollars

This report was originally published by Tyler Durden at Zero Hedge

Just days after Beijing officially launched Yuan-denominated crude oil futures (with a bang, as shown in the chart below, surpassing Brent trading volume) which are expected to quickly become the third global price benchmark along Brent and WTI, China took the next major step in the challenging the Dollar’s supremacy as global reserve currency (and internationalizing the Yuan) when on Thursday Reuters reported that China took the first steps to paying for crude oil imports in its own currency instead of the US Dollars.

A pilot program for yuan payment could be launched as soon as the second half of the year and regulators have already asked some financial institutions to “prepare for pricing crude imports in the yuan“, Reuters sources reveal.

According to the proposed plan, Beijing would start with purchases from Russia and Angola, two nations which, like China, are keen to break the dollar’s global dominance. They are also two of the top suppliers of crude oil to China, along with Saudi Arabia.

A change in the default crude oil transactional currency – which for decades has been the “Petrodollar”, blessing the US with global reserve currency status – would have monumental consequences for capital allocations and trade flows, not to mention geopolitics: as Reuters notes, a shift in just a small part of global oil trade into the yuan is potentially huge. “Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s gross domestic product last year.” Currently, virtually all global crude oil trading is in dollars, barring an estimated 1 per cent in other currencies. This is the basis of US dominance in the world economy.

However, as shown in the chart below which follows the first few days of Chinese oil futures trading, this status quo may be changing fast.

Superficially, for China it would be a matter of nationalistic pride to see oil trade transact in Yuan: “Being the biggest buyer of oil, it’s only natural for China to push for the usage of yuan for payment settlement. This will also improve the yuan liquidity in the global market,” said one of the people briefed on the matter by Chinese authorities.

There are other considerations behind the launch of the Yuan-denominated oil contract as Goldman explains:

• A commercial benchmark and hedging tool. Until now, Chinese oil imports were based on FOB benchmarks, with long-term procurement contracts settling off Platts Oman/Dubai or Dated Brent. The INE contract has therefore the potential to become the pricing reference for CIF China crude oil, enabling corporate financial hedging. Its warehouse structure is however likely to limit its use for physical crude delivery and may in fact at times reduce its hedge efficiency.


• A new investment vehicle for onshore investors. The majority of China commodity futures trading volumes are from retail investors, yet these had until now little ability to trade oil futures. China’s capital control was the main bottleneck  to trading contracts like Brent as authorities only allow $50,000 outflow a year per person. While several petrochemical and bitumen contracts already trade in China, INE will be the first contract for crude oil, likely drawing significant interest.


• Direct access to China’s commodity markets for offshore investors. China offers deep and liquid commodity markets to its onshore investors. Due to China’s tight capital controls, however, foreign investors have so far only been able to trade these through qualified onshore subsidiaries. The INE contract opens up the first channel for offshore investors to trade in its onshore commodity market, with both the USD deposit and capital gains transferable back to offshore accounts. The government further announced last week that it would waive income taxes for foreign investors trading these new contracts for the first three years. The obligation to trade in Yuan will also add a currency risk exposure to offshore investors. We illustrate in Exhibit 6 a likely template (amongst others) of how overseas investors will be able to access INE liquidity.

The danger, of course, is that such a shift would also boost the value of the Yuan, hardly what China needs considering it was just two a half years ago that Beijing launched a controversial Yuan devaluation to boost its exports and economy.

Still, in light of the relative global economic stability, Beijing may be willing to take the gamble on a stronger Yuan if it means greater geopolitical clout and further acceptance of the renminbi.

Which is why restructuring oil fund flows may be the best first step: as of this moment, China is the world’s second-largest oil consumer and in 2017 overtook the United States as the biggest importer of crude oil; its demand is a key determinant of global oil prices.

If China’s plan to push the Petroyuan’s acceptance proves successful, it will result in greater momentum across all commodities, and could trigger the shift of other product payments to the yuan, including metals and mining raw materials.

Besides the potential of giving China more power over global oil prices, “this will help the Chinese government in its efforts to internationalize yuan,” said Sushant Gupta, research director at energy consultancy Wood Mackenzie. In a Wednesday note, Goldman Sachs said that the success of Shanghai’s crude futures was “indirectly promoting the use of the Chinese currency (which, however as noted above, has negative trade offs as it would also result in a stronger Yuan, something the PBOC may not be too excited about).

Meanwhile, China is wasting no time, and Unipec, the trading arm of Asia’s largest refiner Sinopec already signed a deal to import Middle East crude priced against the newly-launched Shanghai crude futures contract, which incidentally is traded in Yuan.

The bottom line here is whether Beijing is indeed prepared and ready to challenge the US Dollar for the title of global currency hegemon. As Rueters notes, China’s plan to use yuan to pay for oil comes amid a more than year-long gradual strengthening of the currency, which looks set to post a fifth straight quarterly gain, its longest winning streak since 2013.

In a sign that China’s recent Draconian capital control crackdowns have sapped market confidence in a freely-traded Yuan, the currency retained its No.5 ranking as a domestic and global payment currency in January this year, unmoved from a year ago, but its share among other currencies fell to 1.7 percent from 2.5 percent, according to industry tracker SWIFT.

A slew of measures put in place in the last 1-1/2 years to rein in capital flowing out of the country amid a slide in yuan value has taken off some its shine as a global payment currency.

But the yuan has now appreciated 3.4 percent against the dollar so far this year, with solid gains in recent sessions.

“For PBOC and other regulators, internationalization of the yuan is clearly one of the priorities now, and if this plan goes off smoothly then they can start thinking about replicating this model for other commodities purchases,” said a Reuters source.

Still, it will be a long and difficult climb before the Yuan can challenge the dollar and for Beijing to shift the bulk of its commodity purchases to the yuan because of the currency’s illiquidity in forex markets. According to the latest BIS Triennial Survey, nearly 90% of all transactions in the $5 trillion-a-day FX markets involved the dollar on one side of a trade, while only 4% use the yuan.

* * *

Still, not everyone is convinced that the new Yuan-denominated contract will create a “petro-yuan” as the following take from Goldman highlights:

The launch of the INE contract is not just about oil, as it will also be the first Yuan denominated commodity contract tradable by offshore investors. Such a set-up meets the PBOC’s monetary policy committee goal to raise the profile of its currency in the pricing of commodities. It has raised however the question of whether the INE contract is an incremental step in achieving the currency reserve status for the Yuan. We do not believe so.

While the INE launch does represent an additional step in the CNY internationalization, the CNY denomination of the INE contract does not in itself imply CNY investments. The INE contract does not represent an opening of China’s capital accounts since foreign deposits operate in a closed circuit, deposited in designated accounts and not to be used to purchase other domestic assets. In practice, the collateral deposit and any capital gains can be transferred back to offshore accounts. The potential for greater foreign ownership of Chinese assets is therefore not impacted by CNY oil invoicing and would require instead oil exporters to recycle their proceeds in local assets, for example. The incentive to do this has not changed with the introduction of the INE contracts. In particular, most Middle East oil producers still have currencies pegged to the dollar and limited ability to hedge CNY exposure.

Whether or not Goldman is right remains to be seen, however it is undeniable that a monumental change is afoot in global capital flows, where the US – whether Beijing wants to or not – will soon be forced to defend its currency status as oil exporters (and investors in this highly financialized market) will now have a choice: go with US hegemony, or start accepting Yuan in exchange for the world’s most important commodity.

Deutsche: “Nobody Can Understand What’s Going On With The Dollar… The Answer Is Simple”

This report was originally published by Tyler Durden at Zero Hedge

Earlier this week, the bizarre, unexplainable, ongoing plunge in the dollar and US bond prices in the aftermath of the stronger than expected CPI print which also sent equities surging, prompted at least one trader at Citi to explode: “Wake Up Folks, It’s Not Risk Positive”

Then again, maybe it is not all that unexplainable.

As Deutsche’s FX strategist, George Saravelos, writes, he has been getting numerous inquiries as to how can it be that US yields are rising sharply, yet the dollar is so weak at the same time?

He believes the answer is simple: the dollar is not going down despite higher yields but because of them. Higher yields mean lower bond prices and US bonds are lower because investors don’t want to buy them, or as he puts it “this is an entirely different regime to previous years.”

Below we repost his simple explanation, while highlighting that maybe…

… just maybe, the bottom for the dollar is now in?

From Deutsche Bank:

Blame the dollar on yields

We are well into 2018 and our feedback from recently attending the TradeTech FX conference in Miami is that the market is still struggling to understand or embrace dollar weakness. How can it be that US yields are rising sharply, yet the dollar is so weak at the same time? The answer is simple: the dollar is not going down despite higher yields but because of them. Higher yields mean lower bond prices and US bonds are lower because investors don’t want to buy them. This is an entirely different regime to previous years.

Dollar weakness ultimately goes back to two major problems for the greenback this year. First, US asset valuations are extremely stretched. As we argued in our 2018 FX outlook a combined measure of P/E ratios for equities and term premia for bonds is at its highest levels since the 1960s. Simply put, US bond and equity prices cannot continue going up at the same time. This correlation breakdown is structurally bearish for the dollar because it inhibits sustained inflows into US bond and equity markets.

The second dollar problem is that irrespective of asset valuations the US twin deficit (the sum of the current account and fiscal balance) is set to deteriorate dramatically in coming years. Not only does the additional fiscal stimulus recently agreed by Congress push the fair value of bonds even lower via higher issuance and inflation risk premia effects, but the current account that also needs to be financed will widen via import multiplier effects. When an economy is stimulated at full employment the only way to absorb domestic demand is higher imports. Under conservative assumptions the US twin deficit is set to deteriorate by well over 3% of GDP over the next two years.

The mirror image to all of this is that the flow picture into both Europe and Japan has been improving dramatically anyway. We have previously written about the positive flow dynamics in Europe as the flow distortions caused by extremely unconventional ECB policy are starting to adjust. But the Japanese basic balance has also shot up to a 4% surplus in recent years helped by a big improvement in the services balance (Chinese tourists) and a collapse of Japanese inflows into the US: treasuries simply do not provide enough duration compensation any more. To conclude, embrace dollar weakness, it has more to run.

Is A Massive Stock Market Reversal Upon Us?

This article was originally published by Brandon Smith at Alt-Market.com

I have been saying it for years and I will say it again here — stocks are the worst possible “predictive” signal for the health of the general economy because they are an extreme trailing indicator. That is to say, when stock markets do finally crash, it is usually after years of negative signs in other more important fundamentals.

Of course, whether we alternative analysts like it or not, the fact of the matter is that the rest of the world is psychologically dependent on the behavior of stock markets. The masses determine their economic optimism (if they are employed) according to the Dow and the S&P and, to some extent, by official and fraudulent unemployment statistics. When equities start to dive, society takes notice and suddenly becomes concerned about fiscal dangers they should have been worried about all along.

Well, it may have taken a couple months longer than I originally predicted, but it would seem so far that a moment of revelation (that slap in the face I discussed a couple weeks ago) is upon us. In less than a few days, most of the gains in global stocks for 2018 have been erased. The question is, will this end up as a “hiccup” in an otherwise spectacular bull market bubble? Or is this the inevitable death knell and the beginning of the implosion of that bubble?

After I predicted the election of Donald Trump, I also predicted that central banks would begin pulling the plug on life support for equities markets. This did in fact take place with the Fed’s continued program of interest rate increases and the reduction of their balance sheet, which effectively strangles the flow of cheap credit to banking and corporate institutions that fueled stock buybacks for years. Without this constant and ever expansionary easy fiat, there is nothing left to act as a crutch for stocks except perhaps blind faith. And blind faith in the economy always ends up being smacked down by the ugly realities of mathematics.

I believe the latest extraordinary dive in stocks is NOT a “hiccup,” but a sign that “contagion” is still a thing, and also a trailing sign of instability inherent in our fiscal system. Here are some reasons why this trend is likely to continue.

Historic Corporate Debt Levels

As mentioned above, artificially low interest rates have allowed corporations incredible leeway to manipulate stock markets at will using stock buybacks and other methods. However, there are still consequences for this strategy. For example, corporate debt levels are now at historic annual highs; far higher even than debt levels just before the crash of 2008.

If this doesn’t illustrate the falseness of the so called “economic recovery”, I don’t know what does. Beyond that, what happens as the Fed continues to raise interest rates and all that debt held by the “too big to fails” becomes vastly more expensive? Well, I think we are seeing what happens. Over time, faith in the corporate ability to prop up equities will erode, and a considerable decline is built directly into the farce.

Price To Earnings Ratio

In some of her final statements upon stepping down as the head of the Federal Reserve, Janet Yellen had some choice comments about the state of equities markets. These included statements that stock market valuations were high and that the price-to-earnings ratio of the S&P 500 (the ratio of stock values versus actual corporate earnings per share) were at a historical peak. This fits exactly with the policy shift I warned about in 2017, and my assertion that Jerome Powell will be the Fed chairman to oversee the final crash of the post-bailout market bubble.

The spike in P/E ratios is not only taking place in U.S. markets. For example, the same trend can be observed in countries like India. Meaning, there are equities valuation problems around the world.

The issue here is that corporate earnings do not justify such high stock prices. Therefore, something else must be inflating those prices. That something was, of course, central bank stimulus, and now that party is almost over, whether the “buy the f’ing dippers” want to admit it yet or not.

10-Year Treasury Yield Spike

Have spiking Treasury bond yields actually been a signal for an “accelerating economy” as mainstream economists often suggest? Not really. In the era of central bank monetary manipulation, it is more likely that yields were spiking because markets are anticipating the arrival of Jerome Powell as Fed chair and accelerating interest rate hikes rather than an accelerating economy.

The notion that the economy itself might be “overheating” in 2018 is a rather new and nefarious propaganda meme being used by central bankers to set a particular narrative. I believe that narrative will be the claim that “inflation” is a key concern rather than deflation and that central banks must act to temper inflation with more aggressive rate increases. In reality, what we are seeing is not “inflation” in a traditional sense, but stagflation. That is to say, we are seeing elements of price inflation in necessary goods and services and well as property markets, but continued deflation in the rest of the economy.

The Fed in particular will continue to ignore negative fundamentals because they are seeking to deliberately pop the market bubble they have created.

The spike in 10-year bond yields seems to be correlating closely to the recent volatility in stocks. This volatility increased exponentially as yields neared the 3% mark, which appears to be the magical trigger point for equities failure.  Though yields suffered a modest decline as stocks tumbled this week, I still recommend keeping an eye on this indicator.

Dollar Weakness

As I have mentioned in recent articles, there has been a strange disconnect between interest rates and the U.S. dollar. As the Fed continues its policy of hiking interest rates, generally the dollar index should rise in response. Instead, the dollar has been swiftly falling, only stalling in the past couple of trading sessions. If the dollar index continues to fall even as stocks decline and rates increase, this may suggest a systemic risk to the dollar itself.

Such risk could include a dollar dump by foreign central banks in favor of a wider basket of currencies, or the SDR trading basket created by the IMF.

Balance Sheet Reductions Accelerating

The Fed’s most recent release of data on its balance sheet reduction program shows a drop in holdings of $18 billion; this is far higher that the originally planned $12 billion slated by the Fed. Meaning, the Fed is dumping its balance sheet holdings much faster than it told the public initially.

Why is this important? Well, if you have been tracking the behavior of stocks over the past few years as well as the increases in the Fed’s balance sheet, you know that stock markets have risen in direct correlation with that balance sheet. In other words, the more purchases the Fed made, the higher stocks climbed.

If this correlation is directly linked, then as the Fed reduces its balance sheet, stocks should fall.

So, the fed announces its latest round of balance sheet reductions on January 31st, the reduction is much higher than anticipated, and within a week we witness the largest two day market drop in years. You would think this observation might just be important, but if you look at the mainstream economic media, almost NO ONE is mentioning it. Instead, they are searching for all sorts of random explanations for what just happened, none of which are very logically satisfying.

I believe that the Fed will not only continue its program of interest rate increases even if stocks begin to flounder, but that they will also unload their balance sheet as quickly as possible.

Corporate Investor Comments

Major corporate investment firms are beginning to raise their voices about the potential not only for stock devaluations, but also the amount that they might fall. Sydney-based AMP capital suggested a rather moderate 10% pullback in equities, which I think will become the talking point for most of the mainstream media over the next couple weeks. At least, until the whole thing comes crashing down much further than that.

The head of Blackstone COO expects stocks to fall at least 20% this year, a much more aggressive number but not high enough in my view.

I still believe these kinds of estimates are only applicable in the very short term. By the end of 2018, it is possible that markets will double the worst estimated declines predicted by the mainstream investment world given the fundamentals.

Central Banker Comments

Comments by agents of the Federal Reserve reinforce the notion that the central bank is about to crush the bull market bubble. San Francisco branch head Robert Kaplan has been quoted as saying the Fed may be required to hike interest rates MORE than the three times expected by mainstream economists in 2018.

As noted above, Janet Yellen’s exit statements were decidedly “hawkish,” suggesting that property markets and stocks are overpriced. On top of this, Jerome Powell, the new Fed chair, has been quoted in Fed documents from 2012 (finally released this past month) discussing the market bubble the Fed had created and the need to temper than bubble. In other words, Powell is the perfect man for the job of imploding stocks. Powell even predicted in 2012 that when the Fed raises rates the reaction by stock markets might be severe. Interesting that markets would plunge the very first day Powell assumes the Fed chair position.

I suppose finally a Fed agent and I have something in common. We’ve both been predicting the same exact market outcome caused by the same trigger event for around the same number of years.

I outlined in great detail the plan for the “global economic reset” and Powell’s role in overseeing the next stock crash in my article Party While You Can – Central Bank Ready To Pop The Everything Bubble. In that article, I predicted exactly the results which seem to be developing today in equities.

In essence, Powell is being portrayed by the mainstream media as “Trump’s guy,” and the change in Fed leadership is now being referred to as “Trump’s Fed.” This is not random rhetoric. I can’t think of ANY other president in the past that was given credit by the mainstream media for the activities of the Federal Reserve. Trump’s control over the Federal Reserve is zero. But, the actions of the Fed over the course of this year will undoubtedly crash the very equities markets that Trump has been foolishly taking credit for since his election.

The real issue here now is, how fast will this ugly festering sore explode? That’s hard to say. I would not be surprised if markets fall about 20% below recent highs in the course of the next couple of months and then stall. We may even see a couple spectacular bounces in the near term, all set to trumpets and fanfare by the mainstream economic media who will proclaim that the latest shock-drop was nothing more than an “anomaly.” Then, the crash will continue into the end of 2018 and panic will ensue.

That said, if there is some kind of major geopolitical crisis (such as a war with North Korea), then all bets are off. Stocks could crash exponentially over the course of a few weeks rather than a year. As the past few days have proven, stocks are not invincible, not in the slightest. And all the gains accumulated in the span of years can be wiped away in an instant.

***

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

The Economic End Game Continues

This article was originally published by Brandon Smith at Alt-Market.com

In November of 2014 I published an article titled ‘The Economic End Game Explained’. In it I outlined what I believed would be the process by which globalists would achieve what they call the “new world order” or what they sometimes call the “global economic reset.” As I have shown in great detail in the past, the globalist agenda includes a fiscal end game; a prize or trophy that they hope to obtain. This prize is a completely centralized global economic structure, rooted in a single central bank for the world, the removal of the U.S. dollar as world reserve currency, the institution of the SDR basket system which will act as a bridge for single a global currency supplanting all others and, ultimately, global governance of this system by a mere handful of “elites.”

The timeline for this process is unclear, but there is some indication of when the “beginning of the end” would commence. As noted in the globalist owned magazine The Economist, in an article titled “Get Ready For The Phoenix,” the year of 2018 seems to be the launching point for the great reset. This timeline is supported by the numerous measures already taken to undermine dollar dominance in international trade as well as elevate the International Monetary Fund’s SDR basket. It is clear that the globalists have deadlines they intend to meet.

That said, there have been some new developments since I wrote my initial analysis on the end-game strategy that I think merit serious attention. The end game continues, faster than ever before, and here are some of the indicators showing that the “predictions” of the globalists at The Economist in 1988 were more like self-fulfilling prophecies and 2018 remains a primary nexus point for a re-engineering of our economic environment.

Using The East To Dismantle The Petrodollar

As I mentioned in last week’s article, ‘Lies And Distractions Surrounding The Petrodollar,’ there has been silence and often disinformation in the mainstream when it comes to the quite open and obvious international pivot away from the dollar as the defacto purchasing mechanism for oil. This trend is only set to accelerate in two months as China begins fulfilling oil contracts in the Yuan instead of the dollar.

The problem is that even in the alternative media there is a continuing myth that Eastern nations are angling to “break away” from the international order. I often see the argument presented that the loss of the petrodollar can only be a good thing for the world. I am not here to comment on whether the end of oil-denominated in dollars is a good or bad thing. I am here, though, to point out that there is absolutely no indication whatsoever that major eastern powers like Russia and China are acting to undermine the existing globalist system.

On the contrary, China and Russia remain, as ever, heavily partnered with the IMF as well as the Bank for International Settlements, and their ties to international banking monoliths like Goldman Sachs and JP Morgan are long established.

Eastern political and economic officials have consistently called for a new reserve system supplanting the dollar, this is true. But what so many analysts seem to overlook is that they ALSO call for that new system to be dominated by the IMF.

The delusion that the financial world operates on is that the IMF is “controlled” by the U.S. It is not. It is controlled by international bankers, who have no loyalties to any specific country. Once one understands this fact, the systematic sabotage of the U.S. makes perfect sense, as well as the collusion between China, Russia and the IMF. America is a sacrificial appendage of the globalist edifice and is being torn down piece by piece in order to feed the creation of something new and perhaps even more sinister.

As George Soros proclaimed back in 2009, the “new world order” would rely in part on China as a replacement economic engine for the globalist machine and depend far less on a diminishing United States. China would serve as a smaller engine, but a replacement engine none the less.

China is more than happy to oblige the globalists with a concerted and incremental program of de-dollerization. But this does not mean that the end-goal is a “petroyuan.” No, the goal is for the IMF to assert the dominance of the SDR basket system as a reserve hub. And, China is now the flagship market for the SDR after its recent induction into the fold. There will be no single reserve currency after the dollar is brutalized. At least, not until all currencies are homogenized through the SDR basket and finally replaced with a single global currency unit. Until then, the IMF or the BIS will dictate nation-to-nation trade and monetary exchange.

It only follows that this highly-volatile rebirth of the global financial order would begin in part with the dollar’s loss of petro-status. The oil trade is the one defining element that gives the dollar a fundamental edge over all other currencies. It is the closest thing we have to commodity backing for the dollar and it is an advantage no other currency in the world can yet boast. There are many ways to destroy the dollar, but the BEST method would be to end its petro-status.

The Global Currency Unit Is Already Here

One argument I used to hear often from naysayers on global currency was that there “is no monetary unit with enough liquidity to replace the dollar.” Of course, these people have no understanding of the SDR basket and how it could be used to envelop and absorb most if not all currencies into a single reserve mechanism. That said, I understand the confusion. When people think of currencies, they think of physical tickets of measurement; they want to see a piece of paper with symbols, or, they want to at least see a brand name for the product, which is what all currencies really are.

When The Economist in 1988 called for a global currency to launch in 2018, they were perhaps not aware of the exact form the destructor would take. Even in 2014 I was not fully convinced we had enough evidence on what that unit of measurement would be or look like. Today, it is clear as crystal — the one world currency system will not only be a cashless system, but it will also be based on digital blockchain technology.

As I examined in my article ‘The Globalist One World Currency Will Look A Lot Like Bitcoin,’ while some politicians and banking moguls publicly attack blockchain-based products like Bitcoin or Etherium, in the background they are actually heavily invested in these systems and are even building their own. With central banking mascots like Ben Bernanke becoming keynote speakers at blockchain conferences, it is not exactly an elusive secret that the global banks love blockchain tech.

Even major elitist corporations like Amazon appear ready to adopt blockchain products as currencies. So, one needs to ask the question: If the blockchain and Bitcoin are such a dire threat to the centralization of the establishment, why are they rapidly laying all the groundwork necessary for blockchain systems to replace paper currencies?

What is interesting to me is that even in the highly vigilant world of alternative economics, which is well aware of the trend towards a global currency system, blockchain systems are still revered as if they will save us from central bank tyranny. Very few people have noticed that The Economist call for a 2018 one world monetary framework has arrived slightly early; it has been right under our noses for several years. With blockchain-based methods of exchange, a replacement structure for the dollar and all other national currencies is not very far away.

The Federal Reserve Implosion Program Continues

I remember back before 2008 when the media almost never treated actions at the Federal Reserve as major news.  In fact, I remember back when the average American had never even heard for the Federal Reserve, and some believed the very existence of the institution was a “conspiracy theory”. Now, the nomination for the new Fed chair is at the top of the news feeds, but for all the wrong reasons.

The changing of the Fed chair is absolutely meaningless as far as policy is concerned. Jerome Powell will continue the same exact initiatives as Yellen; stimulus will be removed, rates will be hiked and the balance sheet will be reduced, leaving the massive market bubble the Fed originally created vulnerable to implosion. Equities in particular display the behavior of an out of control bullet train similar to the 2006/2007 bubble, or even the delusional exuberance prominent before the crash of 1929. All of this optimism is dependent on two things – dumb blind faith that all investors will continue to act in perfect concert to always “buy the dip”, and, continued faith that central banks will forever step in to obstruct and reverse any market correction.

An observant person, however, might have noticed that central banks around the world seem to be acting in a coordinated fashion to remove stimulus support from markets and raise interest rates, cutting off supply lines of easy money that have long been a crutch for our crippled economy. The Bank of England raised rates this past week, as the Federal Reserve indicated yet another rate hike in December. The Europeans Central Bank continues to prep the public for coming rate hikes, while the Bank of Japan has assured the public that “inflation” expectations have been met and no new stimulus is necessary. If all of this appears coordinated, that is because it is.

Fed policy is not dictated by the Fed chair, and it is certainly not dictated by Donald Trump. As former chairman Alan Greenspan openly admitted, the central bank does NOT answer to government, it is an autonomous policy making machine. Fed chairs are as easily replaced as lawnmower parts; they are mascots for the banking system, nothing more. Once they are “nominated” by the president, they take their orders from another source entirely, and I would even question the validity of the nomination process and how the original list of candidates is chosen. For the real puppeteers at the Fed, one would need to look to an organization outside the U.S., called the Bank for International Settlements.

Many Subtle Changes Add Up To Unprecedented Instability

I think it is vital for people to consider time when it comes to economics. Changes we think were abrupt during historic moments of crisis were often not abrupt at all. Almost all financial crisis “events” were preceded by years if not decades of growing but subtle cracks in the foundation. If you were to travel back 10 years ago and explain to the average person (or the average mainstream economist) what is happening today, he would probably scoff indignantly. Yet today these things are accepted as commonplace, or ignored as unimportant. Time and short attentions spans are the bane of free societies.

The skeleton of the “new world order” economy is right in front of us. The triggers for explosive change have already been planted. What concerns me is, when these changes come to fruition and crisis follows, will the masses even notice?

 

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at brandon@alt-market.com

With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.

Lies And Distractions Surrounding The Diminishing Petrodollar

This report was originally published by Brandon Smith at Alt-Market.com

There are a few important rules you have to follow if you want to join the consortium of mainstream economic con-men/analysts. Take special note if you plan on becoming one of these very “special” people:

1) Never discuss the reality that government fiscal statistics are not the true picture of the health of the economy. Just present the stats at face value to the public and quickly move on.

2) Almost always focus on false positives. Give the masses a delusional sense of recovery by pointing desperately at the few indicators that paint a rosier picture.  Always mention a higher stock market as a symbol of an improving economy even though the stock market is irrelevant to the fundamentals of the economy. In fact, pretend the stock market is the ONLY thing that matters. Period.

3) Never talk about falling demand. Avoid mention of this at all costs. Instead, bring up “rising supply” and pretend as if demand is not a factor even worth considering.

4) Call any article that discusses the numerous and substantial negatives in the economy “doom porn.” Ask “where is the collapse?” a lot, when the collapse in fundamentals is right in front of your face.

5)  Avoid debate on the health of the economy when you can, but if cornered, misrepresent the data whenever possible. Muddle the discussion with minutia and circular logic.

6) When a crash occurs, act like you had been the one warning about the danger all along. For good measure, make sure alternative economic analysts do not get credit for correct examinations of the fiscal system.

7) Argue that there was nothing special about their warnings and predictions and that “everyone else saw it coming too;” otherwise you might be out of a job.

Now, if you follow these rules most of the time, or religiously, then you have a good shot at becoming the next Paul Krugman or one of the many hucksters at Forbes, Bloomberg or Reuters. A cushy job and comfortable salary await you. Good luck and Godspeed!

However, say you are one of those weird people cursed with a conscience; becoming a vapid mouthpiece for the establishment may not sound very appealing. Or, maybe you just have OCD and you can’t stand the idea of “creative math” when it comes to economic data. Whatever the case may be, you want to outline the deeper facts of the economy because the economy is life — it is the structure which holds together our civilization, and if we lie about it in the short term, then we only set ourselves up for catastrophe in the long run. Welcome to another dimension. Welcome to the world of alternative economics.

Every aspect of the U.S. economy or the global economy can be presented two very different ways depending on whether you “interpret” the data to fit a preconceived conclusion, or simply relay it to the public as it really is. Let’s use oil and the petrodollar as an example…

To illustrate the mainstream establishment reaction to legitimate economic concerns on oil, I highly suggest going back and reading an article by Foreign Policy, the official magazine of the Council On Foreign Relations, titled “Debunking The Dumping-The-Dollar Conspiracy,” published in 2009. The idiocy of this article was truly bewildering at the time it was released, but even more so now in retrospect.

First, it is important to note that Foreign Policy refused to even acknowledge the issue of the dollar losing petro-currency status until Robert Fisk of The Independent, someone closer to mainstream exposure, dared to broach the topic, warning that a trend was in play to dump the dollar as the petro-currency by 2018. The alternative economic community had been warning about the world moving away from U.S. oil dominance for some time beforehand.

Second, the CFR uses a typical circular fallacy when confronting the potential end of the dollar’s world reserve status; the fallacy that the dollar is the world reserve currency because “the U.S. is the preeminent world economic power.” Actually, the reverse is true — the U.S. is the world’s preeminent economic power only because the dollar has world reserve status. It was also once an industrial powerhouse after WWII, but this was ONLY because the U.S. was one of the few manufacturing hubs in the world that wasn’t demolished by years of kinetic destruction. When you are the only game in town, of course you reap huge economic benefits including massive international investment, but not forever.

Today, obviously, the U.S. is far surpassed by other nations in the area of manufacturing and production, and has also been surpassed as the largest global importer and exporter. The “preeminence” argument is unmitigated garbage.

Third, almost every danger Foreign Policy dismissed as “conspiracy” back in 2009 is now coming true. Just as Robert Fisk warned, and just as the alternative economic community warned long before him, numerous shifts in the world of oil as well as geopolitical relationships have created a spiraling nexus of anti-dollar sentiment. Is it possible that the dollar will lose petro-status by 2018? Absolutely, and here is why…

While the U.S. remains the world’s largest oil consumer according to the Energy Information Administration (EIA), American consumption of petroleum products has greatly diminished over the past few years; falling demand by increasingly destitute U.S. consumers has left oil producers searching for buyers elsewhere. The World Economic Forum noted in 2015 the drastic fall in U.S. demand since the 2008 debt crisis, but this admission went largely unnoticed in the mainstream media. Interestingly, while demand was crashing, the price per barrel continued to skyrocket because of the Federal Reserve’s inflationary QE policies. Almost immediately after the Fed began tapering QE, oil prices drastically declined in line with the lack of existing demand.

In 2017, the EIA claims there has been a rise in global demand since the second quarter.  And has “projected” increasing demand including higher U.S. demand going into 2018, outpacing supply.

Yet, at the same time the EIA admits a frustrating stagnation in global oil demand, with the U.S. being the primary drag on consumption since 2010.

So, which trend are we supposed to believe? The one that is right in front of us, or the one that is optimistically projected? It is clear, even according to “official” statistics on crude oil imports, that the U.S. market began sinking in 2009 to levels not seen since the 1990’s and has not recovered since. Everyone knows that each new year is supposed to bring exponential demand, like clockwork. But this has not been the case at all in the U.S.

Meanwhile, China has recently surpassed the U.S. as the world’s largest oil importer, even though the EIA lists the U.S. as the world’s largest oil “consumer.”

The argument mainstream analysts would probably make here is that imports of oil are diminishing because U.S. shale oil is filling demand domestically. This argument overlooks the overall process of declining demand, though.  The US is the largest consumer of oil NOW, but will that pace continue? According to the data, the answer is no.   Americans are buying less petroleum products since the 2008 credit crisis, regardless of where they come from, and oil producers are seeking to diversify into other markets, and other currencies.

On top of that, even if it were true that imported oil is crumbling because US domestic oil is filling rising demand, this still begs the question – Why would oil producing nations stick with the dollar as the petrocurrency when the US has decided to take its ball and go home?  The US has now become a COMPETITOR in the oil market with shale, so why would OPEC nations and others also continue to give the US the enormous advantage of owning petrocurrency status?

In the meantime, the geopolitical situation grows more unstable. I believe the Iranian sanctions issue has gone ignored far too long, and this has direct repercussions on the dollar’s petro-status. How? Well, consider this — Europe continues its appetite for Iranian oil, with 40 percent of Iran’s oil exports going to the EU. With the very oddly timed U.S.-led effort by the Trump administration to renew sanctions, Europe has been caught in a catch-22; either defy sanctions and upset relations with the U.S. or lose a significant source of petroleum imports. For now it appears that the EU will support sanctions, but this time solidarity on the issue is nowhere near as strong as it was back in 2012.

With Iran as a major supplier for Europe as well as China, and overtaking Saudi Arabia as the top oil supplier for India, Trump’s latest call to put economic pressure on the nation may add more fuel to the accelerating rationale against the dollar as the primary trade mechanism for oil. The question becomes, who benefits from American influence in oil, and who suffers? The more countries that suffer because of a world reserve dollar, the more likely they will be to look for an alternative.

China has deepened ties to Russia for this exact reason. With Russia supplanting Saudi Arabia as China’s largest petroleum source, and bilateral trade between Russia and China cutting out the dollar as world reserve, this is just the beginning of the shift.  In the past week it has been hinted that China will be shifting in the next two months into using its OWN currency, the Yuan, to price oil instead of using the dollar.

Saudi Arabia, America’s longtime partner in the oil dominance chain, is now moving away from the old relationship. Tensions between the Saudis and the U.S. State Department over the rather surreal Qatar embargo are just part of a series of divisions. With China’s influence in the region increasing, the mainstream has finally begun to acknowledge that Saudi Arabia may be “compelled” to trade oil in currencies other than the dollar.

Why is oil so important? Because energy, along with currency, is the key to understanding the state of the economy. When demand for energy goes stagnant, this usually means the economy is stagnant. When a nation has maintained a monopoly on global energy trade by coupling its currency to oil, an addiction can be formed and its financial structure becomes dependent in that addiction being continuously satiated.

Foreign Policy argued in 2009 that oil trade in dollars is “nothing more than a convention.” I would actually agree with that in part; it is indeed a convention that can change dramatically at any given moment. But, Foreign Policy asserts that there would be no consequences for the U.S. if and when the change takes place and the dollar loses petrostatus. This is absurd. Trillions in dollars are held overseas and the singular function of those dollars is to fulfill international trade based on the “convention” of the dollar’s world reserve status. What purpose do those dollars serve if world reserve status is abandoned? The answer is none.

All of those dollars would come flooding back into the U.S. through various channels. Market psychology would immediately trigger a massive loss in the dollar’s international value, not to mention incredible inflation would be spiking here at home. This process has already begun, and it is looking more and more like the next couple of years will bring a vast “reset” (as the IMF likes to call it) in the hegemony of certain currencies.

Some people believe this will be a wellspring, a change for the better. They think the death of the dollar will lead to “decentralization” of the global economy and a “multipolar world,” but the situation is far more complex than it seems. I will go into greater detail in my next article as to why the dollar and the U.S. economy in general has actually been slated for deliberate demolition and how this will likely come about. As far as oil and petro-status are concerned, the mainstream media is perfectly willing to report on the developments I have mentioned here in a fleeting manner, but at the same time they are completely unwilling to account for the effects that will result or the deeper meaning behind these events. They will report on the smaller stories, but refuse to acknowledge the bigger story. It is quite a contradiction, but a contradiction with a purpose.

 

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.