Why It Really All Comes Down To The Death Of The Petrodollar

Last week, in the global currency war’s latest escalation, Kazakhstan instituted a free float for the tenge causing the currency to immediately plunge by some 25%. The rationale behind the move was clear enough. What might not be as clear is how recent events in developing economy FX markets stem from a seismic shift we began discussing late last year - namely, the death of the petrodollar system which has served to underwrite decades of dollar dominance and was, until recently, a fixture of the post-war global economic order.

No Greatly Anticipated RRR Cut From China, Just More Jawboning: Will It Be Enough

In the aftermath of China's worst manufacturing PMI since the financial crisis, which in turn sent the Shanghai Composite crashing to the "hard floor" level of 3500, below which the PBOC and Beijing officially are seen as having lost control, virtually every China expert and strategist rushed to defend China's policymakers (and its stock market) with predictions that an RRR cut as large as 100 bps is imminent, and would take place as soon as this weekend, a much-needed move to calm nerves that China is in control. it did not.

Is This Where The Long Lost Nazi "Gold Train" Is Located

Earlier this week, two people, a Pole and a German, said they may have found the legendary, long-lost Nazi train rumored to be full of gold, gems and guns, i.e., the prize possessions of years of Third Reich plunder, that disappeared just before the end of World War Two. As BBC first reported, the train was believed to have gone missing near what is now the Polish city of Wroclaw as Soviet forces approached in 1945.

China Chooses Her Weapons

China believes, with good reason, that she is more politically and economically robust, and has a better grasp over the actions of her own citizens, than the welfare economies of the west in the event of an economic downturn. Therefore, she is pursuing her foreign exchange policy from a position of strength. And the increments that will now be added to gold reserves month by month are a signal that China believes she can destabilise the dollar through her control of the physical gold market, because it gently reminds us of an unanswered question always ducked by the US Treasury: what evidence is there of the state of the US's gold reserves?

Productivity In America Now On Par With Agrarian Slave Economy

Adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold. The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

"The Seven Year Glitch" - Has The Time Come

The table below, courtesy of State Street's "Mr Risk", looks at key events occuring in 7 year cycles, finds that every recent multiple of the year 2015 going back in 7 year increments brings with it some major adverse market event, and asks: is it 2015's turn?

What Does The Fed Do Now? The FOMC Decision Tree

The $64,000,000,000,000 question: what does the Fed now do? One attempt at an explanation taking into account last week's market plunge comes from Nomura, which provides a "2015 Scenario Analysis" in which it "breaks down various monetary policy (rate hike options) and rates market implications ahead."

A Modern-Day Shoeshine Boy Moment

The current bubble is not comparable to the mania that culminated in the year 2000. At the time, one could actually watch out for very close equivalents to the shoeshine boy, given the huge participation of retail traders in the market. Nowadays we have a “bubble of professionals”, so we must look for something slightly different. And we have found it – or rather, it actually fell into our lap yesterday, or rather, suddenly appeared in our inbox.

Making Sense Of The Sudden Market Plunge

The eventual outcome to all this is captured brilliantly in this quote by Ludwig Von Mises, the Austrian economist: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." The credit expansion happened between 1980 and 2008, there was a warning shot which was soundly ignored by ignorant central bankers, and now we have more, not less, debt with which to contend.

Venezuela Announces Martial Law In Border State, Dispatches 1500 Soldiers

When it comes to the complete economic and social devastation of Venezuela, lately the only thing readers seem attuned to is when will the social implosion lead to renewed political tensions which will likely result in another violent political overthrow, one which may or may not involve the local military. Today Venezuela took a step in that direction when its president Maduro declared a state of emergency in a border region near Colombia following an attack by smugglers in which three soldiers and a civilian were injured, resulting in 60 days of martial law in five municipalities of the state of Tachira. He also said the closure of the border, announced on Thursday, will be extended until further notice.

Is It Time to Get into Crash Positions, Or Will The Market Just Enter A Glide Path Rather Than A Tailspin

After a dizzying 500+ point drop in the Dow on Friday, should we brace for impact? There are plenty of fundamental and technical reasons to view the swoon this week as the initial downturn that presages a crash landing.  But if we look at the last equivalent spike down in October 2014, we're not so sure. Both spikes (October 2014 and August 2015) smashed through the lower Bollinger band, but the volume in last week's plummet was nothing special compared to the 2014 swoon.

Introducing The Gigantic And Dangerous Wall Street Loophole You’ve Never Heard Of

The following story is guaranteed to make you sick. Once again, we’re shown that following trillions in taxpayer funded bailouts and backstops, TBTF Wall Street banks immediately went ahead and focused all their attention obtaining loopholes in order to transfer risk and make billions upon billions of dollars in the financial matrix, as opposed to adding any benefit whatsoever to society.

7 Million People Haven't Made A Single Student Loan Payment In At Least A Year

How bad is America's $1.3 trillion student loan problem, you ask? As WSJ reports, "nearly seven million Americans have gone at least a year without making a payment on their federal student loans, a staggering level of default that highlights how student debt continues to burden households despite an improving labor market."

Who Would Win A War In The South China Sea: The Pentagon Infographic

Should the dispute between China and its neighbors over Beijing's land reclamation efforts in the South China Sea escalate from a war of words to a war of missles and bullets, how do the potential combatants match up from a maritime military perspective? The Pentagon explains.