Category Archives: Currencies

The Entire World Order Has Changed, by Raúl Ilargi Meijer

Are we seeing the death knell of the West and the emergence of a multi-polar order? From Raúl Ilargi Meijer at theautomaticearth.com:

It was Jim O’Neill, Goldman’s chief economist at the time, who coined the term BRICS in 2001 for Brazil, Russia, India, China, and South Africa. Little did he know. He was talking about emerging economies. 13 years later, they no longer are. They are good for about 40% of the world population, and some 25% of global GDP. The world has not stood still since 2009, and it’s moving faster now.

Ironically, the BRICS countries never looked to be as prominent economically as they are today, they were happy to build up one step at a time. But then NATO decided to move east at a pace that Russia found intolerable, and now the BRICS have taken on a whole new meaning. 25% of global GDP may not seem that much, but the 5 countries hold a much bigger share of -essential- global resources and/or raw materials than that, and China moreover delivers an outsize part of finished products.

And we now know that they won’t be BRICS for much longer. Many countries choose to be affiliated, in one form or another, with the BRICS rather than the “west”. They see that Russia is winning in Ukraine, and they see the damage the sanctions do. It’s just practical considerations. Saudi Arabia and Argentina are interested in joining BRICS. So are Uruguay, Iran, Egypt, Thailand, and a number of post-Soviet States. They see where the real economic power resides.

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The Global Power Shift Isn’t West to East–It’s Not That Simple, by Charles Hugh Smith

The power shift is going to be from those who borrow or beg to those who produce. From Charles Hugh Smith at oftwominds.com:

The mercantilist dependence on exports for growth, a winner for the past 70 years, has reached diminishing returns. Rather than be a source of growth, it’s a source of stagnation.

Conventional wisdom holds that geopolitical power is inevitably shifting from West to East. It isn’t quite this simple. The real shift is occurring between three sources of power that are not so neatly geographic:

1. The commodity exporters

2. The mercantilist exporters of products

3. The consumer-importing nations

Gordon Long and I tease apart the many dynamics in this complex power shift in Tectonic Shift of Mercantilism Revalued (42 min). There are three starting points: neocolonialism, mercantilism and importer by choice.

In classic colonialism, the colonial power expropriated commodities by force. The invaders took control of commodity-producing nations via military force and then oversaw the extraction of low-cost raw materials to provide the home markets with cheap materials to feed the colonial power’s valued-added manufacturing. The manufactured goods were then sold in the captured markets of the colonial states.

In what I call the Neocolonial Model, the control mechanism isn’t military force, it’s financialization and globalization. The Neocolonial Power extends cheap credit to the commodity exporting nation, and the state and its citizens gorge on this heretofore unavailable banquet of debt. Soon the state and its enterprises are creaking under unsustainable debt loads, and the Neocolonial Power swaps assets for debt, buying up the most valuable resources on the cheap or extracting the wealth via interest payments and refinancing.

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The European Union Is Again Close To A Meltdown, by Bruce Wilds

Europe is looking at an ugly combination of rising prices, a faltering euro, contracting economies, and they’re taking their biggest supplier of energy off-line. From Bruce Wilds at brucewilds.blogspot.com:

The Ukraine conflict is taking a toll on the Euro-zone and it could result in finally pushing it over the edge. Everything flowing from Russia’s incursion poses a big negative for the region which is already struggling. When you couple soaring energy prices with stagnate growth and a growing trade balance with China you have the recipe for disaster. This is also apparent on the inflation front.

According to Reuters, the Euro-zone inflation rate surged to yet another record high in May. Inflation accelerated to 8.1% in May from 7.4% in April. A big part of the problem is that  it is no longer just energy pulling up the headline figure. Looking past the headline figure, we find excluding food and energy prices, inflation rose to 4.4% year-on-year from 3.9%. This puts pressure on the European Central Bank to increase rates further. The timing of such a move is horrible in that Europe’s dust-up with Russia has brought to the forefront just how weak Europe is.

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David Stockman on Why the Great Reckoning Has Begun

The Federal Reserve has suppressed interest rates for decades, such that the economy can only function on what are historically very low rates. Now inflation is raging and interest rates are spiking. The Great Reckoning has arrived. From David Stockman at internationalman.com:

Well, that should have been a wake-up call. The 30-year mortgage rate soared by 24 basis points recently to 6.18%. So the latter now stands at well more than double the 2.65% rate which prevailed just 18 months ago in January 2021, and at the highest level since the tail end of the Great Financial Crisis in 2009.

In a word, the Fed’s fake economy based on ridiculously unsustainable ultra-low interest rates is coming to a thundering end. And far more abruptly and violently than the Fed and its Wall Street megaphones ever remotely imagined.

Not surprisingly, the eruption of the mortgage rate depicted above has sent housing “affordability” into the drink. In fact, housing affordability is now at the lowest point on record going back to the late 1980s.

Needless to say, household budgets are about to get hammered and the housing market is fixing to experience another great implosion. It would actually take a 30% drop in average home prices to reverse the affordability plunge just since the pre-Covid levels.

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Concurrent Deflation and Hyperinflation will Ravage the World, by Egon von Greyerz

FLATION is the suffix for the various phenomena that occur in fiat-debt systems. From Egon von Greyerz at goldswitzerland.com:

FLATION will be the keyword in coming years. The world will simultaneously experience inFLATION, deFLATION, stagFLATION and eventually hyperinFLATION.

I have forecasted these FLATIONARY events, which will hit the world in several articles in the past. Here is a link to an article from 2016.

With most asset classes falling rapidly, the world is now approaching calamities of a proportion not seen before in history. So far in 2022, we have seen an implosion of asset prices across the board of around 20%. What few investors realise is that this is the mere beginning. Before this bear market is over, the world will see 75-90% falls of stocks, bonds and other assets.

Since falls of this magnitude have not been seen for more than three generations, the shockwaves will be calamitous.

At the same time as bubble assets deflate, prices of goods and services have started an inflationary cycle of a magnitude that the world as whole has never experienced before.

We have seen hyperinflation in individual countries previously but never on a global scale.

Currently the official inflation rate is around 8% in the US and Europe. But for the average consumer in the West, prices are rising by at least 25% on average for their everyday needs such as food and fuel.

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Doug Casey on Crashing Markets, Commodities, and What Happens Next

A quick preview of what happens next: nothing good. From Doug Casey at internationalman.com:

Crashing Markets

International Man: In addition to stocks, it seems that almost every asset class is also crashing.

What’s your take on the markets, and where do you think it’s headed?

Doug Casey: Let’s take them in order of size and importance.

The biggest market is bonds. It’s especially dangerous because it’s the most overpriced. Bonds are a triple threat to your capital. First, because of the inflation risk, which is huge and growing. Second, is the interest rate risk; I expect rates to double, triple, or quadruple from here, going back to or above the levels of the early 80s. The third is the default risk, which applies to everything except US Government debt. AAA corporate debt hardly exists anymore.

Interest rates have skyrocketed in the last year, with mortgage rates going from under 3% to over 6%. 30-year treasury bonds still only yield 3.25%. But with inflation running 10, 12, or 15% and going higher, long-term Treasuries have a lot further to fall. I remain short T-bonds.

Everybody’s paying attention to the stock market because they’re fully invested. The meme stocks, SPACs, and tech stocks have all collapsed. The big ones are down 25%, and many are down 80 or 90%. It’s not over yet. People still feel that they can buy the dips. They’re hurting, but they’ve been paper-trained over a couple of generations to believe the Fed will kiss everything and make it better.

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Politicized Money and the Death of Capitalism, by Matthew Piepenburg

Technically speaking, money (“Real Money“) cannot be politicized; only debt can be politicized. From Matthew Piepenburg at goldswitzerland.com:

As far as we are concerned, it is no great secret nor any great surprise that our faith in fiat money (in general) and the central bankers who have debased it (in particular) and precipitated the death of capitalism is anything but robust.

To the contrary, our astonishment with the open mismanagement of global currencies as a whole, and the world reserve currency (i.e., the USD in particular), grows daily.

In fact, to fully un-pack the long series of comical errors and the failed experiment of politicized central bankers seeking to solve a debt crisis ($300T and rising) with more debt, which is then monetized by mouse-click money, would take an entire book rather than single article to address.

Hence our recent release of Gold Matters.

Learn more about the death of capitalism in Gold Matters, now available on Amazon.

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The Engineered Stagflationary Collapse Has Arrived – Here’s What Happens Next, by Brandon Smith

The Fed intends to blow things up to pave the way for a globalist monetary system. From Brandon Smith at alt-market.com:

In my 16 years as an alternative economist and political writer I have spent around half that time warning that the ultimate outcome of the Federal Reserve’s stimulus model would be a stagflationary collapse. Not a deflationary collapse, or an inflationary collapse, but a stagflationary collapse. The reasons for this were very specific – Mass debt creation was being countered with MORE debt creation while many central banks have been simultaneously devaluing their currencies through QE measures. On top of that, the US is in the unique position of relying on the world reserve status of the dollar and that status is diminishing.

It was only a matter of time before the to forces of deflation and inflation met in the middle to create stagflation. In my article ‘Infrastructure Bills Do Not Lead To Recovery, Only Increased Federal Control’, published in April of 2021, I stated that:

Production of fiat money is not the same as real production within the economy… Trillions of dollars in public works programs might create more jobs, but it will also inflate prices as the dollar goes into decline. So, unless wages are adjusted constantly according to price increases, people will have jobs, but still won’t be able to afford a comfortable standard of living. This leads to stagflation, in which prices continue to rise while wages and consumption stagnate.

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How Low Can You Go? By James Howard Kunstler

The challenge stands: name one thing the Biden administration has done right. From James Howard Kunstler at kunstler.com:

Lots of things are going south all at once….

Remember the limbo? It was a dance fad kind of like the Olympic high jump in reverse: instead of leaping over a horizontal bar, you duck-walked under it to calypso music, with the crowd squealing, “How low can you go?” As it happens, in the culture of Western Civ, Limbo is also the name of a place on the edge of Hell. Either way, you have an apt metaphor for the spot that the USA is in as we enter the summer of double-deuce.

Lots of things are going south all at once: the stock markets and bond prices, Bitcoin is doing a vanishing act. The Colorado River reservoirs, Lake Powell and Lake Mead, are so low that, by September, both water and electricity may run out for a vast region that includes Phoenix, Las Vegas, and Southern California. The housing market is tanking (suburbia’s business model is broken). Whole herds of beef cattle roll over and die out on the range. Fertilizer is scarce. Food processing plants get torched by the dozen. Shortages loom.

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No, Inflation Is Not A Product Of Corporate Greed, by Ranen Aschemann

Strictly speaking, “inflation” means expansion of the medium of exchange. That’s the province of the government, the central bank, and the banking system. Everyone else, and that includes mega-corporations, are just along for the ride. From Ranen Aschemann at mises.org:

Seventeen months ago, as the keys to the oval office changed hands, for all of the political animus and theatrics, one thing seemed a given: the US economy would roar back to vitality in historic fashion, a point of optimism in a nation of discord and incertitude. Yet hope would give way to ambivalence, which, in turn, gave way to serious doubt. Today, a pathetic 23 percent of Americans feel economic conditions are even “somewhat good.” The primary reason for such abysmal economic sentiment? Inflation.

As consumer prices have accelerated out of control over the past year, a new political narrative on inflation has emerged, one that alleges corporate impropriety as the primary catalyst. The motive for such a messaging shift from select members of the political apparatus is clear: a need to shirk accountability for evidently inflation-inducing policies. Unfortunately, the corporate greed narrative has apparently paid dividends to its progenitors, garnering increasing acceptance among the body politic at large. Indeed, according to one poll from Data For Progress, a majority of likely voters now believe price-gouging is a major contributor to heightened inflation. However, that inflation is brought about by corporate greed is a sophistic political lie in every respect.

Yes, corporations are greedy. People are greedy. It turns out that greed is a natural characteristic of the human condition. It always has been. Why, then, has inflation only recently exploded after 40 years of calm, now clipping along at better than four times the Federal Reserve’s target annual rate of two percent?

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