US Dollar Hegemony and the Anglo-American Empire

The current global monetary-financial-economic paradigm we operate within, is fast reaching a conclusion. The United States reserve currency hegemony, essentially created by a petrodollar relationship established in the 70’s between the United States and Saudi Arabia, is being tested on multiple fronts. If China and Russia manage to create a viable alternative to the USD in global trade, then the Anglo-American empire is dead. Therefore, it must maintain USD hegemony to continue to finance its war apparatus.

It shouldn’t come as a surprise to learn the U.S. is running budget deficits financed by the creation of U.S. treasuries. Additionally,¬† investors bought these ‘safe’ assets, as they are backed by the U.S. taxpayer. However, China and other major purchasers are tiring of these debt-securities. Cheap finance may soon end, along with the secular bull market in bonds. If investors liquidate their holdings, and create massive downward momentum, it would spell the end. Therefore, the Federal Reserve would likely step in and expand its balance sheet.

The FED already has roughly 4.5 trillion dollars of nominal value on its balance sheet, and there is no reason why it couldn’t start directly monetizing the debt of the U.S government. The U.S. government debt ceiling has been raised to twenty trillion, not to mention the unfunded liabilities that are estimated to be around 40-60 trillion. The empire is facing major challenges, some it created itself. On one hand, it slowly gutted its manufacturing sector by taking advantage of liberal trade policies and invested in low-wage economies to generate value for stockholders. This moved jobs, GDP, human capital, and other positive externalities offshore. And on the other hand, it used substantial resources to dominate and subjugate various economies and countries with its enormous military and influence. The opportunity cost of maintaining the futile empire is unimaginable. The rent-seeking parasites and their myopic obsession with wealth aggregation has drained the fabric of society. All the empire has, is it’s ability to push its debt onto others. It must keep the USD favorable or implode.

The colossal derivatives quagmire, leveraged from U.S treasuries etc, is used to manipulate and play the futures markets. The price of gold is being manipulated by naked short selling paper gold contracts onto the market. Suppression of the gold price is favorable, however, to China, Russia, India, etc. They are importing on a large scale and keeping internal production. They are hedging for a collapse. They don’t want to be just holding paper and worthless claims to paper when the music stops. Gold is liquid and has no counter-party risk. It is superior to other commodities.

With the Federal reserve rate at essentially 0%, the ending of the secular bull market in bonds, QE(x), ZIRP, NIRP, malinvestment, worsening demographics, peak private debt and consumption, war, hyper-leveraged zombie banks, intellectually dishonest and corrupt leadership, bloated incoherent bureaucracies, it is only a matter of time before the USD is put on the pile of other failed currencies. There is no other way. They could let the financial/monetary system and the empire collapse, along with their precious paper wealth, employment rates, and initiate an epic depression, or they can inflate the debt away and eventually kill the dollar and the empire. Bad news either way. So, kicking the can will be the option taken. With the FED jaw-boning the market, and having not raised rates for seven years, it is a dubious idea to think they would suddenly become responsible. Neo-Keynesian economic thinking is reaching the end of the line. The FED will expand its balance sheet, NIRP will likely be initiated, savers will be killed. It is an illusion. One day soon, the great deleveraging will happen. No amount of easing or manipulation can continue into perpetuity. For every single action, there is an equal and opposite reaction.

A geopolitical transformation is taking place. Will the U.S. throw in the towel, or will it rampage into oblivion? I can’t forsee. But I get the feeling the whole world will receive a free lesson in economics that they won’t be able to ignore.

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Economic Reality: Neo-Keynesian Experiment on Death Bed

“Ignorance is refuge from reality. Willful ignorance is refuge from reason”. – Anonymous

INFANTILE OBSESSIONS WITH FAIRNESS

Wealth and income inequality are neither abnormal nor abhorrent. The tug of war between labor and capital is normal and equilibrium seeking. Excessive regulation distorts the mechanism.

CAN YOU SAY ZIRP, NIRP?

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1997-2014

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2008-2014

The Federal funds rate has been set at 0.25% for over the past 5 years. When the current bubble bursts, the interest rate can’t go down much further and still be positive. The ECB is currently at 0.05%. Hmmm, who will win the race? The Bank of Japan is already at 0.00%. I guess it is the winner. I foresee potential for negative interest rates. This is when you pay the bank interest to look after your money, which only exists in physical form at around 2% anyways. The rest is just data stored on a computer. They don’t need to rent warehouses or have massive vaults to store cash. It doesn’t exist in that form. It’s digital now. Perhaps some deposit haircuts are around the corner. Bail-ins are supposedly the next big thing. The banks close for a bank holiday, and open up with less of your money. Sound good?¬† ZIRP and NIRP, they are acronyms of the hard working saving class, right?

Now lets look at the S&P 500. Has that reached nominal values higher than the last two previous bubbles? Oh good it has. The current bubble is quite ambitious. I guess now is really a great time to sell if you haven’t just entered the market.

S&P500_20141102

Perhaps the Dow Jones Industrial Average hasn’t fallen victim to the interest rates. Nope, it appears it is just as ambitious as the S&P 500. How far will it go? It will continue to rise and make us all rich right? CEO’s must be loving their executive compensation. Stock buy backs are so in right now.

DOWJONES

The NASDAQ took quite a beating when the Dotcom bubble burst. But don’t worry, it is trying hard to get back to where it once was. It’s all about market capitalization right?

NSDQ

China doesn’t really have a stock market. I think its citizens don’t trust it. Instead, they like real estate bubbles. Japan likes QE. Europe isn’t even bothering to replace its citizens anymore. Demographics have gotten ugly. The U.S prints money and lives off its exorbitant privilege to pay its bills. Nothing quite like having the worlds reserve currency. Thank you House of Saud! But the tide is turning. Gold is being sucked into a giant vortex in Asia. It stops off at Switzerland though to be processed before making its final stop in Asia. Yes, the world is about to experience another financial crisis. But when?

Look at the trend for 10 year treasury notes. They have been trending downward for sometime huh. No wonder the U.S government has been able to spend $100’s of billions on war every year. Force projection doesn’t come cheap. Still, better to destabilize the Middle East than to invest in your nations infrastructure. Actually, just print more food stamps. Go hard or go home!

10Yearbondss

Allow me to make some predictions. At least then I can gauge how accurate I was at the time of writing this blog. In a years time, so, by the 2nd of November, 2015, GMT, the next global financial crisis will have hit.

Sell sell sell!

– U.S stock markets take a tumble. S&P500 at 700, DJIA 6000, NASDAQ 1400

– US Federal funds rate. Damn, umm, take it to NIRP. Bail ins. Gotta kill the savers right!

Bull

What?

Gold, Silver, Bitcoin, Litecoin, Water