The Problem With "Green" Monetary Policy

As an alarming new United Nations report shows, climate change is probably the biggest challenge of our time. But should central banks also be worrying about the issue? If so, what should they be doing about it?

Central-bank representatives who do decide to make public speeches about climate change cannot deny the scale and scope of the problem; to do so would be to risk their own credibility. But the same is true when central bankers feel obliged to discuss the distribution of income and wealth, rising crime rates, or any other newsworthy topic. The more that central banks’ communications strategy focuses on trying to make themselves “popular” in the public’s eyes, the greater the temptation to address topics outside their primary remit.

Beyond communicating with the public, the question, of course, is whether central banks should try to account for environmental considerations when shaping monetary policy. Obviously, climate change and corresponding government policies in response to it can have powerful effects on economic development. These consequences are reflected in all kinds of variables – growth, inflation, employment levels – that will in turn affect central-bank forecasts and influence monetary-policy decisions.

Likewise, natural disasters and other environmental events – actual or potential – can pose implicit risks to entire classes of financial assets. Regulators and supervisors charged with assessing risk and associated capital needs must take this environmental dimension into account. At a minimum, the high uncertainty stemming from these risks implies a huge challenge for assessing the stability of the financial system and corresponding macroprudential measures. And these risk factors are also increasingly relevant for monetary-policy decisions, such as when central banks should buy bonds or (in some cases) equities.

But the growing public demand that central banks contribute more actively to the fight against climate change leads to a different dimension. In theory, central banks could introduce preferential interest rates for “green” activities – thus driving up the prices of “green bonds” – while adopting a more negative attitude toward noxious assets, such as those tied to fossil fuels. And yet, assessing whether and to what extent an asset is environmentally harmful or helpful would be extremely difficult.

Putting aside these more technical issues, the broader question remains: Should central banks assume responsibility for implementing policies to combat climate change? A number of prominent central bankers have already argued that they should. And current proposals for extending central banks’ mandate have come on top of growing concerns about income distribution and other issues tangentially related to monetary policy.

One is reminded of an ironic comment by the great Chicago School economist Jacob Viner.

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Nationalizing The Federal Funds Market

Last week's volatility in the market for fed funds gave a lot of equity managers an opportunity to brush up on their understanding of the workings of the short-term money markets.  The Fed of New York was forced to offer cash to the Street in the form of forward repurchase agreements all week. These activities are likely to continue.

Nathan Tankus posted a good discussion of the mechanics of adjusting bank reserves on Twitter last week.  He particularly highlights not only the Liquidity Coverage Ratio or LCR, but also the additional liquidity stash meant to fund a resolution of an insolvent money center bank.

Given that we would never actually resolve a bank over $100 billion assets, we wonder why this rule exists: What is the point of the “resolution liquidity” for a G-SIB if we’re likely to just put the bank into an FDIC conservatorship a la Indy Mac and then sell it after a bad asset cleanup?

We appreciate the kudos on our call this past July on CNBC regarding liquidity problems in the markets, but we erred in thinking that merely ending the runoff of the Fed’s portfolio was sufficient. When our colleagues who trade TBA, and agency and whole loan repo, saw cash tightening up in the middle of August, that was a sign that problems lay ahead.  Even with the Fed’s operations, the repo market is still displaying a lack of liquidity.

A lot of people asked: what is going on?  The best primer we can suggest is the 2018 book “Floored” by Dr. George Selgin of Cato Institute, who has been producing excellent research focused on the mechanics of monetary policy for years. Selgin describes “How a Misguided Fed Experiment Deepened and Prolonged the Great Recession.”

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Why The Dollar Rules The World - And Why Its Reign Could End

President Donald Trump wants a lower US dollar. He complains about the over-valuation of the American currency. Yet, is he right to accuse other countries of a “currency manipulation”? Is the position of the US dollar in the international monetary arena not a manipulation in its own right? How much has the United States benefitted from the global role of the dollar, and is this “exorbitant privilege” coming to end? In order to find an answer to these questions, we must take a look at the monetary side of the rise of the American Empire.

Trump is right. The American dollar is overvalued. According to the latest version of the Economist’s “ Big Mac Index,” for example, only three currencies rank higher than the US dollar. Yet the main reason for this is not currency manipulation but the fact that the US dollar serves as the main international reserve currency.

This is both a boon and a curse. It is a boon because the country that emits the leading international reserve currency can have trade deficits without worrying about a growing foreign debt. Because the American foreign debt is in the country’s own currency, the government can always honor its foreign obligations as it can produce any amount of money that it wants in its own currency.

Yet the international reserve status comes also with the curse that the persistent trade deficits weaken the country’s industrial base. Instead of paying for the import of foreign goods with the export of domestic production, the United States can simply export money.

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Middle Class Death Spiral: Consumers Have Never Been In More Debt, And Bankruptcies Are Surging

This wasn’t supposed to happen.  During the relative economic stability of the past few years, the middle class was supposed to experience a resurgence, but instead it has just continued to be hollowed out.  The cost of living has risen much faster than wages have, and as a result hard working families all over America are being stretched financially like never before.  Even though most of us are working, 59 percent of all Americans are currently living paycheck to paycheck, and almost 50 million Americans are living in poverty.  In a desperate attempt to continue their middle class lifestyles, many Americans have been piling up mountains of debt, and it has gotten to the point where we have a major crisis on our hands.

According to the New York Post, the total amount of debt that U.S. households have accumulated is about to cross the 14 trillion dollar mark for the first time ever…

Meanwhile, record American household debt, near $14 trillion including mortgages and student loans, is some $1 trillion higher than during the Great Recession of 2008. Credit card debt of $1 trillion also exceeds the 2008 peak.

Americans are spending heavily, again — and often recklessly, say analysts.

This is the exact opposite of what U.S. consumers should be doing.  We can see signs of a fresh economic slowdown all around us, and consumers should be feverishly trying to get out of debt as fast as they can.

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The Workings Of The Gold Standard

A gold standard is a monetary regime where the monetary unit, the base money of the banking system — the outside money or the high-powered money — consists of a defined amount of gold. 

Gold standards can come in all manners and versions and with particular institutional and historical quirks that affect their operations. The key characteristic that unites them is that an economy’s underlying money is ultimately based on an amount of gold. 

Using the language and the classification in the first reading session of our Harwood Graduate Colloquium, commodity monies such as a gold standard consist of objects that have alternative nonmonetary uses (for instance in production or ornament) and are absolutely scarce. That is, their scarcity is a fundamental aspect of the good itself — as opposed to fiat money, which can be expanded at the discretion of a central bank. 

When money is gold, it can be increased only by extracting more gold from mines and minting it into monetary circulation. This process, expanding supply through the incentives provided by the price mechanism, subjects the supply of money to market forces rather than to discretionary policy making as is the case under our current monetary regime. That carries with it a few remarkable characteristics:

The opportunity for price inflation is — by present standards — very limited, as the total amount of money in the economy is limited by the amount of gold. This need not be strictly so, as monetary theories going back at least to Wicksell’s pure credit economy have bank credit (and money velocity) remedying the scarcity of a commodity money. Free banking under a fractional-reserve gold standard, can, in other words, mitigate this strict supply schedule somewhat. 

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Goodbye Dollar, It Was Nice Knowing You!

Well the worm has finally turned, maybe. Even the feckless Angela Merkel’s Germany now understands that national interests must prevail when the United States is demanding that it do the unspeakable. At the recently concluded G20 meeting in Tokyo Britain, France and Germany announced that the special trade mechanism that they have been working on this year is now up and running. It is called the Instrument in Support of Trade Exchanges (Instex) and it will permit companies in Europe to do business with countries like Iran, avoiding American sanctions by trading outside the SWIFT system, which is dollar denominated and de facto controlled by the US Treasury.

The significance of the European move cannot be understated. It is the first major step in moving away from the dominance of the dollar as the world’s trading and reserve currency. As is often the case, the damage to US perceived interests is self-inflicted. There has been talk for years regarding setting up trade mechanisms that would not be dollar based, but they did not gain any momentum until the Trump Administration abruptly withdrew from the Joint Comprehensive Plan of Action (JCPOA) with Iran over a year ago.

There were other signatories to the JCPOA, all of whom were angered by the White House move, because they believed correctly that it was a good agreement, preventing Iranian development of a nuclear weapon while also easing tensions in the Middle East. Major European powers Germany, France and Great Britain, as well as Russia and China, were all signatories and the agreement was endorsed by the United Nations Security Council. The US withdrawal in an attempt to destroy the “plan of action” was therefore viewed extremely negatively by all the other signatories and their anger increased when Washington declared that it would reinstate sanctions on Iran and also use secondary sanctions to punish any third party that did not comply with the restrictions on trade.

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Putin Sets The Table To Leave The Dollar Behind

This is twice that Russian President Putin has said on the global stage the Federal Reserve Note no longer deserves the status and privilege of “world reserve currency” that allows unlimited printing of the currency.

The first time he made mention he actually said that it was a threat to Russia’s national security.

In a speech at the International Economic Forum, in St. Petersburg, Russia, “Russian Davos”, President Putin reaffirmed his position regarding the Federal Reserve Note and it’s international role. For the record, we see the abuse of the Federal Reserve and the Federal Reserve Note, U.S. dollar, in similar light as President Putin. The current status of “world reserve currency” should not be allowed in this day and time. The absolute abuse of power, excessive power granted and the ability to shackle entire nations through the use of a currency that is not even their own should have never been allowed but it is way past time for this system to be dissolved.

In a speech at a plenary session, Mr Putin accused Washington of seeking to “extend its jurisdiction to the whole world.”

“But this model not only contradicts the logic of normal international communication. The main thing is, it does not serve the interests of the future.”

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Why Chinese Banks Are Running Out Of Dollars

Following the biggest quarterly credit injection in Chinese history, it is safe to say that China's banks are flush with yuan loans. However, when it comes to dollar-denominated assets, it's a different story entirely. As the WSJ points out, in the past few years, a funding problem has emerged for China’s biggest commercial banks, one which is largely outside of Beijing’s control: they’re running low on US dollars so critical to fund operations both domestically and abroad.

As shown in the chart below, the combined dollar liabilities at China's four biggest commercial banks exceeded their dollar assets at the end of 2018, a sharp reversal from just a few years ago. Back in 2013, the four together had around $125 billion more dollar assets than liabilities, but now they owe more dollars to creditors and customers than are owed to them.

The reversal is the result of just one bank: Bank of China, which for many years held more net assets in dollars than any other Chinese lender, ended 2018 owing $72 billion more in dollar liabilities than it booked in dollar assets. The other "top 3" lenders finished the year with more dollar assets than liabilities, even though their net dollar surplus has shrunk substantially in the past five years.

And yet, as everything else with China, there is more than meets the eye: as the WSJ reports looking at Bank of China's annual report, the bank's asset-liability imbalance is more than addressed by dollar funding that doesn’t sit on its balance sheet. Instruments like currency swaps and forwards are accounted for elsewhere.

This is reminiscent of the shady operations discussed recently involving Turkey's FX reserves, where the central bank has been borrowing dollar assets from local banks via off balance sheet swaps, which it then used to prop up and boost the lira at a time of aggressive selling of the local currency. It is safe to assume that the PBOC has been engaging in a similar operation.

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Dollar Poised To Soar As China Refuses New Plaza Accord

The Federal Reserve monetized debt. It took existing debt and swapped it for Federal Reserve notes. The effect was not a resumption of credit growth to pre-crisis levels because banks create new money when they create new credit. Even with massive federal deficits in the wake of the 2008 crisis, deflation in the financial and household sector overwhelmed credit growth. As the federal government eased its credit growth, the economy barely picked up the slack. Credit growth remains at levels associated with recessions prior to 2008.

The Federal Reserve did achieve a transformation of debt into equity. Instead of making new loans, money flowed into stocks. The wealth effect caused by rising stock prices is a fraction of the wealth generated by productive credit creation. How much money flowed into stocks? Until the 2016 presidential election, the U.S. stock market moved in lock-step with the Federal Reserve's balance sheet, so much so that the chart below only has one axis. The percentage changes in the Fed balance sheet and S&P 500 Index are too close to be a coincidence.

How did market participants behave in response to Fed policies? First they expected hyperinflation. Commodities ran up into the first inflation hysteria of 2011. Then it all fell apart. Inflation was forecast again in 2014. Then it all fell apart. Inflation was forecast again in 2017/8 and we don't have the full results yet, but the gold market is telling me it's all falling apart again.

Aside from betting on inflation, hot money poured into emerging markets. Money flowed into China. The Chinese growth story fell apart in 2011, 2014 and again in 2018. Resource exporter Brazil saw its currency tumble and it may be headed lower still as another EM crisis forms.

Most importantly, emerging markets inflated like crazy and in countries such as China, if the private economy wasn't willing to lend and borrow, the government forced state-owned banks and companies to do it. China's M2 money supply growth matches that of Turkey. The first chart shows GDP + CPI growth in Turkey along with M2.

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3% Treasuries, Say Hello To Trillion Dollar Deficits

In two months we will be in fiscal 2019 for the US government, and the OMB projects +$1 trillion/year deficits until 2021. Ten year Treasuries nosed over 3% today on news of some small but unexpected issuance, so where will rates go once deficits kick into high gear? And how will stocks discount higher rates, regardless of reason? Our answers below.

If the 10 Year Treasury were 4.0% at the end of 2019, would you expect US equities to be higher or lower then? It is easy enough to tell a story either way:

Bullish for stocks. Rising inflation caused by economic growth lifts both bond yields and corporate earnings. Companies push for greater efficiency to offset labor/materials costs, limiting margin erosion and (finally) increasing workforce productivity. PE multiples contract, but earnings growth more than offsets the decline and stocks rise.

Bearish for stocks. Rising inflation caused by escalating trade frictions lifts interest rates, but has a chilling effect on the economy and corporate earnings. The Federal Reserve likely avoids going full Volcker, and simply keeps rates constant in 2019 knowing an inflation-induced recession will take inflation lower without their having to become a political pariah. Multiples contract due to higher rates, but earnings are down 10% rather than the current forecast of +10%. The combination pushes US stocks lower.

Capital markets currently see the bull case as much more likely, and the other end of the yield curve – 2 Year Treasuries – supports that interpretation. It sits at 2.68% today, just 1 basis point off its post-Financial Crisis high, and has been moving upward all year. This is entirely consistent with the view that the Federal Reserve will respond to a strengthening US economy with higher rates through 2019. A trade war recession isn’t priced in at all.

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European Powers Prepare To Ditch Dollar In Trade With Iran

While the White House’s frenzied anti-Iran campaign has entailed unprecedented attempts to twist the arms of the United States’ traditional European allies, the pressure may be backfiring – a reality made all the more clear by Russian Foreign Minister Sergei Lavrov’s claims that Europe’s three major powers plan to continue trade ties with Iran without the use of the U.S. dollar.

The move would be a clear sign that the foremost European hegemons – France, Germany, and the United Kingdom – plan to protect the interests of companies hoping to do business with Iran, a significant regional power with a market of around 80 million people.

Lavrov’s statement came as Trump insisted that European companies would “absolutely” face sanctions in the aftermath of Washington’s widely-derided sabotage of the six-party Joint Comprehensive Plan of Action (JCPOA).  On May 8, the former host of NBC’s “The Apprentice” blasted the agreement and said that the U.S. would reinstate nuclear sanctions on Iran and “the highest level” of economic bans on the Islamic Republic.

Speaking in Vienna at the ministerial meeting of the JCPOA, Lavrov blasted the U.S. move as “a major violation of the agreed-upon terms which actually made it possible to significantly alleviate tensions from the point of view of the military and political situation in the region and upholding the non-proliferation regime.”  He added that “Iran was meticulously fulfilling its obligations” at the time that Trump destroyed the U.S.’ end of the agreement.

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Central Banker Observes Sudden "Evaporation" Of Dollar Funding, Warns Of Global Turmoil

Last October, just as the Fed started shrinking its balance sheet, we published yet another article on what is arguably the biggest threat to not only risk assets, but also the global economy: "The Dollar Funding Shortage: It Never Went Away And It's Starting To Get Worse Again."

While hardly a novel problem, we first discussed the return of the dollar funding shortage in March 2015, the fact that global stocks kept rising, and that overall funding conditions remained relatively loose keeping the global economy well-lubricated, prevented said dollar funding shortage from becoming a major concern to policymakers, despite occasional recent hiccups such as the Libor-OIS spread blow out, which both we and Citi explained w as a symptom of the creeping shortage of the world's reserve currency.

Until now.

In an op-ed published overnight in the FT, a central banker writes that when it comes to the turmoil gripping the world's Emerging Markets, whether it is the acute, idiosyncratic version observed in Argentina and Turkey, which according to JPM may be doomed...

... or the more gradual selloffs observed in places like Indonesia, Malaysia, Brazil, Mexico and India, don't blame the Fed's rate hike cycle. Instead blame the "double whammy" of the Fed's shrinking balance sheet coupled with the dollar draining surge in debt issuance by the US Treasury.

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Blowback Begins: EU To Ditch Dollar In Payments For Iranian Oil

The dollar’s collapse is nearing.  The European Union is planning to switch it’s payments to the Euro for its oil purchases from Iran, eliminating United States dollar transactions.

Just one more nail to the US dollar’s coffin.  Its collapse is all but imminent at this point. The EU has successfully found a way to scoff at potential future sanctions on Iran by openly defying the US; and as an “added bonus,” they’ve helped seal the dollar’s fate.  According to RT, a diplomatic source with the EU has told a news outlet of the decision. 

“I’m privy to the information that the EU is going to shift from dollar to euro to pay for crude from Iran,” said the diplomatic source. 

Brussels has been at odds with Washington over the US’s decision to withdrawal from the Iran nuclear deal, which was reached during the administration of Barack Obama. President Donald Trump has pledged to re-impose sanctions against the Islamic Republic as soon as he is able to do so. The Trump administration also has had plans to topple the current regime in Iran, according to leaked documents, and it looks like they’ve just given themselves the go-ahead:

The Washington Free Beacon has obtained a three-page white paper being circulated among National Security Council officials with drafted plans to spark regime change in Iran, following the US exit from the Obama-era nuclear deal and the re-imposition of tough sanctions aimed at toppling the Iranian regime.

The plan, authored by the Security Studies Group, or SSG, a national security think-tank that has close ties to senior White House national security officials, including – who else – National Security Adviser John Bolton, seeks to reshape longstanding American foreign policy toward Iran by emphasizing an explicit policy of regime change, something the Obama administration opposed when popular protests gripped Iran in 2009, writes the Free Beacon, which obtained a leaked copy of the circulating plans. –Zerohedge

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Orphan CDS, Manufactured Credit Events, Insufficient Deliverables: What The Hell Is Going On In The CDS Market?

Long gone are the days when the CDS market was naively seen as merely a simple hedge to long cash bond positions for vanilla investors (negative basis), or more conspiratorially, a means to naked short the bonds of distressed companies (as many alleged happened during the financial crisis) without being subject to squeezes, margin calls, or regulatory scrutiny courtesy of (what was once) a far more liquid and deep CDS market.

Of particular note in recent months has been rapid, and often confounding, propagation of manufactured credit events in which a CDS is triggered - usually after some collusion between the issuing company and one or more hedge funds - without causing an acceleration in the issuer's debt obligations, as discussed recently in the case of Hovanian, in which the CDS surges benefiting one or more hedge funds and/or the company while impairing others, or a manufactured CDS "orphaning", as was the case more recently with McClatchy, in which a CDS suddenly found itself with no reference securities and plunged to 0, in the process sparking a profit bonanza for hedge fund Chatham which had sold the CDS.

And while manufactured credit events remain niche events for a very select group of highly sophisticated investors, several recent events have prompted Barclays to write an extensive analysis looking at the details and motivations for such events, while addressing potential changes to the ISDA Definitions to reduce their likelihood, including adding a multiple holder requirement and excluding missed affiliate payments from the definition of a Failure to Pay credit event. Furthermore, in the context of the McClatchy event, Barclays' credit analysts also examined the latest, most recent development in the CDS marketplace – a potential manufactured orphaning – and how this may be more difficult to address from a definitions perspective.

Why the sudden focus among some of Wall Street's most active CDS trading desks? Because as Barclays says "we believe that failure to address these issues could lead to a loss of confidence in the CDS market, particularly as an indicator of fundamental credit and default risk, and ultimately to lower levels of trading activity."

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Another Step Towards Collapse Of The Petrodollar

For the past year and half a major topic throughout the alternative press has been the new Chinese oil futures contract settled/priced in yuan. The fact that China is directly challenging the Federal Reserve Note, U.S. dollar, is quite a significant change. For those that have been paying attention this new futures oil contract is nothing more than the next step in China moving completely away from the Federal Reserve Note, and the “world reserve currency” system and towards a multi-polar world with several currencies being used for international trade.

Ken Schortgen, Jr., The Daily Economist, recently penned an article about Nigeria approving a currency swap agreement with China, stating,

It has been a little more than a month since China officially began offering oil futures contracts denominated in the Yuan currency, but early results continue to be positive for this contract to over time take more and more market share from the West and the Petrodollar.  And with Iran, Qatar, and even Venezuela having already agreed to buy and sell their oil in currencies other than the dollar, a new currency swap agreement signed on May 3 between Nigeria and China could mean that a fourth OPEC nation could also soon be leaving the Petrodollar.

The Central Bank of Nigeria (CBN) has signed a currency swap deal worth about $2.5 billion with the People’s Bank of China to provide adequate local currency liquidity for transactions between national businesses, The Punch newspaper reported on Thursday, citing a high-ranking official from the Central Bank of Nigeria (CBN). Sputnik News.

While China pursued currency swaps as far back as 1997, during the “Asian financial crisis”, none of the agreements were ever activated. That all changed with the global financial meltdown in 2008. China began actively pursuing, and instituting, direct currency swaps and even went so far as to open “Renminbi Clearing Centers” around the world including Canada, the backyard of the U.S..

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The Pension Crisis Gets A Catchy Name: "Silver Tsunami"

Pensions really are in crisis, but the story is so full of large numbers, obscure projections, and dry terms like “unfunded liabilities” that not many people are paying attention.

The same is true for a lot of other big trends out there, which is why those sounding the alarm eventually settle on pithy/scary (if not always accurate) terms to get people’s attention. Global warming, for instance, or nuclear winter.

Now the pension crisis may have found its hook:

With 10,000 or so baby boomers – many of whom are public sector employees – turning 65 every day, pension imbalances will explode in the coming decade. That means life gets harder for pretty much everyone who drives, needs police protection or has kids in school. Which in turn makes politics even more unstable and unpredictable than currently.

At the same time, the weakest pension plans and their cities will be forced into bankruptcy, leading to panic among the not yet bankrupt and – now we’re getting to the systemic risk – the owners and potential future buyers of the bonds cities and states issue to keep afloat. When the muni market dies, so does much of the rest of the US financial system.

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The Dollar's 70-Year Dominance Slowly Coming To An End

Republican Congressman Alex Mooney is proposing that the US once again place value on the dollar by backing it with physical gold. The problem is, the Federal Reserve has been printing money with the abandon of a drunken copy machine, and the 147.3 million ounces of gold being held in Ft. Knox may not be enough to cover the out-of-control fiat currency currently in circulation.

According to Alex Mooney’s bill, the dollar has decreased 30 percent in purchasing power since 2000. It has lost 96 percent of its value since 1913. On an average, the US is devalued by 50 percent every generation.

If the gold standard were to be reinstated, control of the dollar would revert to free market forces instead of the whim of the Federal Reserve. It would mean that each dollar would have its equivalent in gold, as it did prior to 1913. At that time, the US economy grew at a robust annual rate of 4 percent compared to an average annual growth of 2 percent since 2000.

Officially, the US has 8,133.5 tons of gold in reserves, although the government won’t confirm that number. No one is permitted inside the various vaults to verify. Even the purity of the available gold bars is in question, as many may not conform to industry standards. As other countries contemplate the return to the gold standard, unless the US catches up, the dollar will lose its dominance as the world reserve currency.

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Trader: Why Trump Is On Track To Win The "Currency Devaluation Game"

Yesterday morning, Trump raised may eyebrows with his tweet accusing China and Russia of "unacceptable" currency devaluation: after all it was Trump's own policies that sent the ruble reeling in the past month, while the Chinese yuan was as its highest against the dollar since the August 2015 devaluation.

Still, for at least one trader - former Lehman employee and current Bloomberg macro commentator Mark Cudmore - Trump's FX tweet was more 4D chess and less clueless economist, and suggests that Trump is, in fact, on track to win the currency devaluation game. He explains why in his latest macro view note:

Trump on Track to Win the Currency Devaluation Game

Trump’s confusing Monday FX-related tweet emphasized his desire for a weak dollar. He’s likely to get his wish in the long run, even if he’s already seen more greenback depreciation than growth and interest rates would have warranted in isolation.

President Trump tweeted that “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising rates. Not acceptable!”

The yuan has climbed 9.5% against the dollar in the past year. The ruble has fallen 7.5% versus the dollar this month, but only because of U.S. sanctions. Despite that violent Trump-prompted correction, Russia’s currency has still gained versus the dollar since he won the presidential election in November 2016.

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How Much Longer Can The American Empire Run On Fake Money?

Gold rocketed to nearly $1,365 on Wednesday in New York, which is well above the $1,350 that Michael Oliver suggests is when technical price watchers will finally start to head into the yellow metal and related investments like gold stocks. But alas the banking cartel had other ideas and exercised a 100-tonne “pretend gold” smackdown in the gold paper futures markets starting at about noon that day, just to make sure the greatest competition in the world to the dollar didn’t start to lead to a loss of confidence.

This of course is nothing new. The Gold Anti Trust Action Committee (GATA) has been documenting paper market manipulation of the gold markets now for decades. Isn’t it interesting that more virtual gold trades in one day on the LBMA than is mined in an entire year.

Whatever it takes, including endless wars to try to keep the petrodollar alive and trillions of dollars spent on blood and treasury. I truly believe Eisenhower’s fears of the endless power of the Military Industrial Complex are now playing out.

It should be eminently clear now that “the President is not really the President of the United States.”

That was established by the “Deep State” under Kennedy. If you have doubts about that, you might do well to read “Unlike Trump, Kennedy never bent a knee,” by Jacob G. Hornberger, the founder of The Future of Freedom Foundation and a former trial attorney in Texas.

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Is China Days Away From Killing The Petrodollar?

Not long ago, there was a popular joke in China that went something like, “Who is Xi Jinping?”

The answer was, “The husband of Peng Liyuan,” the famous singer Xi is married to.

Today, Xi is China’s president. He leads 1.4 billion people. And he’ll likely be the most powerful person in the world soon.

As I mentioned last Wednesday, Trump’s new steel and aluminum tariffs are part of a larger, escalating battle between the US and China.

China is rapidly displacing the US as the dominant global power. This shift is inevitable. China’s economy will be twice as large as the US economy by 2030.

This leaves the US with limited options…

It could kick back and let China displace it as the most powerful country in the world.

It could start a military war with China.

And it could push the current trade battle into an all-out economic war against China.

I think a full-blown economic war is the most likely. Under President Trump, it’s all but certain.

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