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Why The Dollar Is Rising As The Global Monetary Bubble Craters
Submitted by David Stockman via Contra Corner blog,
Contra Corner is not about investment advice, but its unstinting critique of the current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!
Yet I am constantly braced with questions about the US dollar and its impending demise. The reasoning seems to be that if America is a debt addicted dystopia—-and it surely is—- won’t the US dollar sooner or later go down in flames as the day of reckoning materializes? Won’t you make money shorting the doomed dollar?
Heavens no! At least not any time soon. The reason is simply that the other three big economies of the world—Japan, China and Europe—are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic—–meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead.
Indeed, Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober. So as trite as it sounds, the US dollar is the cleanest dirty shirt in the laundry. And on a relative basis, its is going to look even cleaner as two decades of monetary madness around the world finally hit the shoals.
You have to start with a stark assessment of the other three major economies.To hear the Wall Street analysts and economists tell it, Japan, China and Europe are just variants of the US economy with different mixes of pluses and minuses, experiencing somewhat different stages of the economic cycle and obviously shaped by their own diverse brands of domestic politics and economic governance. Yet despite these surface difference, the non-US big three economies are held to be just part of a global economic convoy heading for continued economic growth, rising living standards and higher stock market prices.
Actually, not so. Japan is a bankrupt old age colony. China is the most monumental credit and construction Ponzi in human history. Europe is a terminal victim of socialist welfare and statist dirigisme. All three are attempting to defer the day of reckoning via resorting to a final spasm of money printing and central bank manipulation that is so desperate and crazy that it can only end in disaster.
So there is no global convoy of inexorable economic growth and progress. Instead, we are entering a new era of spectacular financial disorder and credit fueled booms turning into unprecedented deflationary busts. And it is the three big economies outside the US which will hit the wall first, causing the US dollar to thrive on a relative basis.
Consider the absolute monetary madness in Japan—-where the current policy of the BOJ is to expand its balance sheet each month by what would amount to one-quarter trillion dollars on a US scale GDP. Yet this madcap money printing cannot possibly help the Japanese economy because it already has essentially zero interest rates and has had them for nearly two decades. So Kuroda can’t possibly induce Japanese households and business to borrow more money and stimulate growth because they have long been at “peak debt” and couldn’t borrow more if you paid them.
At the same time, the BOJ’s massive bond buying campaign is sucking up 100% of the supply of new government debt—–and Japan’s fiscal deficit is still massive—-and actually eating into the existing float. As a result, the Japanese government bond market is dead as a doornail; the only “bid” comes from the BOJ.
Here’s the thing. The Japanese government is hands-down the largest debtor in the world, with its gross public debt currently at 240% of GDP. Accordingly, it needs a healthy public debt market more than anything else, but its monetary policy has actually killed what remained of it on the eve of Abenomics.
The consequences for fiscal policy and Japan’s ability to finance its immense public debt as its collective old age home steadily fills up is simply mind-boggling. If it continues to monetize the public debt at current rates, it will destroy the yen—sending into free-fall from today’s 121/ dollar to 200, 300 or even worse.
By contrast, if it sends the madmen who are currently running the BOJ packing, installs new central bankers and allows interest rates to normalize, debt service on Japan’s public debt will skyrocket. As it is, more than 40% of Japan’s current tax receipts go to interest on the public debt and that’s with the 10-year bond yield at 0.4%. Under normal rates, debt service would absorb all of Japan’s current tax revenues, causing welfare and retirement spending to be slashed on upwards of 40% of its population, which will soon be retired, while raising tax burdens on its shrinking labor force to truly brutal levels.
So Japan’s fiscal equation is calamitous and terminal. Its governments will resort to increasingly dangerous and destructive expedients as they wrestle with its impossible nature. Indeed, the built-in financial, fiscal, demographic and economic trends are so powerful that there is virtually no set of policy measures that could reverse Japan’s headlong tumble into old age bankruptcy.
As shown below, its debt to GDP ratio and the size of the BOJ balance sheet have been exploding for decades. Yet these maneuvers have only made matters worse. As also shown below, Japan’s nominal GDP in dollar terms is no higher today than in was in 1996:



Notwithstanding the perennial bullish expectations of Wall Street Keynesians, the BOJ’s mad money printing campaign has accomplished nothing. In fact, after the downward revision to Q4 GDP it is absolutely evident that its economy is still sputtering. Real GDP is barely higher than it was in December 2012 before Abenomics launched its truly monstrous money printing spree
Yet, the Abe government and BOJ does not hesitate to threaten even more monetary carnage—even as the abysmal failures of current policies are reported month after month. So the yen is heading down, down, down. Not because the dollar is inherently strong, but because it is currently being traded against a slow-motion trainwreck.

In China the scene is even more tortured. As McKinsey’s charts so dramatically document, the overseers of red capitalism in Beijing have driven China into a monumental debt trap.
Its massive spree of construction and fixed asset investment has created an utterly deformed economy that will literally implode unless its keeps building empty luxury apartments, phantom cities, silent shopping malls and hideously redundant roads, bridges, subways and airports. Yet whenever the short-term indicators stumble, the government finds some new, convoluted way to release more credit into the system.
This too is reaching the farcical stage. During the six-short years since the financial crisis, China has boosted it credit market debt outstanding by the staggering sum of $20 trillion or by 4X the growth of GDP during the same period. How in the world could any one believe that China’s tottering house of cards can be rescued by piling on even more debt financed construction and fixed asset acquisition?

The rate at which the China Ponzi is falling apart is now accelerating. In a nearby post this morning, Mish Shedlock provided a devastating survey of the excess capacity which looms in nearly every industry and the massive overbuilding of public infrastructure and housing based on debt that cannot be serviced and customers and users who are non- existent.
But now things are heading into the theatre of the economic absurd. Government officials are forcing the restart of idle steel and aluminum plants so that the can produce unwanted supplies to dump on the world market in order to generate enough cash to pay interest.
In a similar vein, the whole phony bullish thesis about the growth wonders to come from China’s highly touted “urbanization” campaigns are being revealed for what they are—-a monumental Ponzi of borrowing from Peter to pay Paul.
Millions of peasants have had their land taken over by local governments which borrowed huge sums to pay inflated compensation for the land—-so the displaced farmers could buy newly built high-rise apartments, also built with borrowed money. That was called “urbanization”, but what it means is that former peasants have been stranded literally high and dry without incomes and without farms, while the local development agencies which borrowed all this money have no possible way to repay it.
Needless to say, as China veers ever closer to a crash landing, the China-dependent EM economies are rapidly faltering. It now appears that Brazil will suffer back-to-back years of GDP decline for the first time since 1930-1931. Indeed, the China-led global commodities and industrial production boom is cooling so fast that global CapEx in mining and energy, materials processing, manufacturing and shipping is on the verge of a huge downward correction. And that will hit the high end machinery and engineering exporters like Germany and the US, creating a further negative loop in the gathering deflationary crisis.
And these ricocheting impacts from the China implosion will drive the dollar higher as well. That’s because Chinese companies have borrowed something like $1.5 trillion in external dollar markets, and the EM economies which boomed from the China trade also borrowed trillions in dollar markets—– owing to the cheap dollar interest rates manufactured by the Fed, and the global scramble for “yield” by dollar based money managers.
While it lasted, the tsunami of cheap dollar based capital which flowed into China and the EM appeared to fuel economic miracles. The socialists of Brazil, the crooks of Indonesia and corrupt crony capitalist of Turkey all feasted on the capital markets deformations emanating from the Eccles Building.
But now the financial boomerang is flying back at them at devastating speed. As China and the EM struggle against global deflation, their economies are faltering and exchange rates are sinking. Accordingly, they are desperately trying to hedge their immense dollar exposures—a process which drives the greenback steadily higher.
Finally, the madness in Europe speaks for itself. The ECB is now literally destroying the Euro in a disastrous quest to restart economic growth by monetizing $1.2 trillion of mostly European government debt. But Europe’s stagnation is not due to insufficient private sector borrowing or interest rates that discourage it.
The problem is a state sector that has reached nearly 50% of GDP and is thereby smothering entrepreneurs and investment everywhere on the continent. And it also means a public debt burden so high that prohibitive levels of taxation are unavoidable.
Stated different, Europe’s economic growth problem is structural and was the result of statist policies over many decades. The only thing Draghi will accomplish with his massive bond buying campaign is to drive the Euro to par and below; and enable Europe’s government —–all of which can now borrow long-term money at 1% or less—-to kick the can down the road, thereby insuring that Europe’s eventual day of fiscal reckoning will be cataclysmic.
Euro Area Government Debt As % of GDP

So there is a reason why the dollar is soaring. The other shirts in the laundry are not just dirtier. They are actually disintegrating.
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Hooray, oh wait
And US policies are not lunatic?!
>Collapse has begun
>Not yet
"Japan is a bankrupt old age colony. China is the most monumental credit and construction Ponzi in human history. Europe is a terminal victim of socialist welfare and statist dirigisme."
I know we hate everyone here, but I still like reading Stockman. I'm sorry, I just do.
So how can I HELP this global ponzi to implode? Or do I just sit back and watch?
Stop buying optional insurance and raise deductibles on mandatory as high as possible.
Use only Cash. Cash every cheque given to you. No credit cards no debt cards. Opt out of direct deposit and withdrawl schemes.
Stop all discretionary spending.
Simmer for 3 months.
Someday the USD is going to go down like a 747...for the same reasons, too. When shit breaks loose, it's over.
https://www.youtube.com/watch?v=lksDISvCmNI
david is being a fucking idiot here.
Europe is a net creditor with no trade deficit yet he says that the USD is in better shape ? Get off the crack david.
Search 'us dollar spikes before collapsing' and 'Empires collapse from the centre, not the outposts'. Jim Willie floated this concept. Can't find the link I was reminded of, but this is the guts of it:
Jim Willie: Swiss De-peg Triggers Massive Derivative Crisis, Potential END OF THE EURO!https://www.youtube.com/watch?v=NHanymw3mW8
Collapse of an Empire: Why America Fell So Far … So Fasthttp://www.globalresearch.ca/collapse-of-an-empire-why-america-fell-so-f...
If you read Stockman's other articles he is very well aware of the terminally ill ponzi dollar. All this article is doing is showing the fallacy of dollar strength being based in a system of comparative currencies. It is the system of valuing currencies which is being critiqued. In no way is Stockman claiming the dollar is a "strong" currency.
Strong compared to what? The dxy is up 25% since last summer. Like it or not, the usd is still the safe haven currency. When it fails only gold, high end real estate, fine art and productive farmland are left.
He has that "exceptional' blind spot concurently to ripping into the US policies.
The hard truth is no one is going to get paid, except maybe in curies, and when ones implodes,
we all will within a month.
The whole fucking laundry is on fire, and he's talking about the cleanest shirt.
Me, too......."dirigisme"
Someday I'M gonna use that word.
Be careful not to over inflate it.
In every one of his articles there is one word I have to look up. Without fail. Not two, just one. I think he does it just to fuck with me.
i do too. i'm trying to read his 10,000 page book right now.
Of course polices in the U.S. are lunatic, just not quite as lunatic as the rest of the planet.
What is being overlooked (once again), is that the sovereign Debt of certain nations has been fine for many, many decades, and has suddenly exploded in the last 2 years.
E.g. Canada. It's debt was in the 40-60% range for a very long time, and now (out of the blue) it's sky high? Same for many (central) EU countries which previously were economically responsible.
WTF? Why is nobody calling "BS!". I am. I think that this is Wall St dragging everyone else down with them, so they won't be alone, going down the shitter. And, no I am not getting distracted by the ECB or BOJ debt, which is being used to help prop up the US (Fed) debt.
Moral: EVERY goddam paper asset that Wall St creates is TOXIC. Caveat Emptor, or suffer the consequences.
What do you expect from the moneychanger cliques designed to defraud the Christians and their companies.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
patience, transitory, irrational exhuberence, Bullish!!
Let me save you some time:
Dollar sucks
Everyone elses currency sucks worse.
Therefore, Dollar doesn't suck.
That is the most lopsided trade in the world right there.
You don't know what the fuck you are talking about.
Europe is a net creditor with no trade deficit. Greece is the most bankrupt state in the EZ but at least it is the smallest state. California is the most bankrupt state in the dollar bloc and its the biggest.
EZ has more gold then the US
EZ is Chinas biggest trade partner
Euro is used by more ppl in the world then the dollar.
Get your head out of your dollar ass please.
The reasons you just stated is why the Euro zone / EU will splinter. Not because they want to but because they will be pushed to.
My comment wasn't necessarily meant to parrot the truth, but rather amuse myself with ridiculouslness of it all. (I've been waiting for a collapse for 7 years now, and we just keep on trucking, don't we?)
The veracity in which you replied to my meaningless post tells me that the New Spitzer is just as big a dumbass as the Old Spitzer.
You sir, are a fuckbag. Congratulations.
Better overview of the system here: http://debtcrash.report
Long USD is such a crowded trade. Watch Yellen walk back the rate hike next week and torch all the Longs. The idea of a rate hike is all the Fed had to employ. Retraction of ideas is now a policy weapon in and of itself in this HFT-driven, low volume market. Short the US equity markets at your own peril.
NIRP
or even "less than NIRP."
King Dollar going nowhere anytime soon
i, uh, bet not to many S&P corps had dxy > 100 in their revenue/profit forecasts
Which is precisely why Yellen cannot add fuel to the fire with an actual rate hike in June or even September. She's going to delay in order to weaken USD
Another one connecting USD strength to a proposed or potential rate hike.
Uh guys, the USD would be as strong if rates were guaranteed to remain the same for the next 10 years.
Very true. Good points. I'd like to add that Yellen is using the rate hike ploy to blackmail other countries into continuing to use the U.S. Dollar.
Stockman is supreme in his command of the facts. Too bad he does not have an editor to restrain his verbiage.
"The only thing Draghi will accomplish with his massive bond buying campaign is to drive the Euro to par and below"
All fiat ends at par...
The finest turd in the pile.....
You don't know what the fuck you are talking about.
Europe is a net creditor with no trade deficit. Greece is the most bankrupt state in the EZ but at least it is the smallest state. California is the most bankrupt state in the dollar bloc and its the biggest.
EZ has more gold then the US
EZ is Chinas biggest trade partner
Euro is used by more ppl in the world then the dollar.
Get your head out of your dollar ass please.
So that is why stocks and bonds are at record highs. We aren't at the center of the nuclear blast, we are 10 feet away.
Im sorry, but all these years i've been reading ZH, i've been thinking we would see the dollar crash..
Whats up??
You are young. You will live to see this happen.
Read the article. All the other fiats are crashier.
You don't know what the fuck you are talking about.
Europe is a net creditor with no trade deficit. Greece is the most bankrupt state in the EZ but at least it is the smallest state. California is the most bankrupt state in the dollar bloc and its the biggest.
EZ has more gold then the US
EZ is Chinas biggest trade partner
Euro is used by more ppl in the world then the dollar.
Get your head out of your dollar ass please.
That must be why the Euro is in free fall.
Good thing you don't have two nickels to invest.
The EU is, indeed, in fabulous shape.
1. The bailouts of the PIIGS in 2010 were a great success.
2. The haircut given to depositors in Cyprus was another great success.
3. The bailout of Greece in 2010 saved the German, French, and Italian banks that had lent foolishly on Greek sovereign bonds and bank IOUs. The Greek taxpayers were put on the hook, and have lived prosperously on enforced austerity ever since. Ditto for Ireland.
4. The 2010 Greek bailout was such a success that it was repeated in 2012. And Greece has been surviving on further loans from the Troika ever since. Greek debts keep rising. Extend and Pretend is the rule of the day and the chosen stratagem of the Troika.
5. Spain, Portugal, and Ireland continue to experience fantastic rates of real growth under austerity as well, having set records for unemployment rates (youth unemployment rates over 50% are typical). Suicide rates are high as well, removing excess population. Greeks often enjoy outdoor living as they sleep on the streets and under bridges.
6. Voters in the PIIGS nations, and France, are happy with continued austerity rules that are supposed to limit government deficits to 3% of GDP, and are voting for radical politicians who promise relief from austerity. France and Italy have been granted higher deficit rate limits recently, but Greece is being told that no relief from austerity is allowed.
7. Faced with the new Syriza government of Greece demanding relief from austerity, the Troika and Germany have responded with absolute refusals and the demand that Greece accept more loans under Extend and Pretend. Some people fail to understand how Extend and Pretend will solve the debt and deficit problems of Greece, the EU, and the other PIIGS nations, but these people obviously do not understand how lending more money to a bankrupt nation will allow that nation to become more economically sound.
8. The governments of Spain and Portugal have very wisely refused to countenance any relief for Greece, although Spain and Portugal are in equally bad shape under austerity, since the politicians in power in Spain and Portugal recognize that any success by Greece in gaining relief from austerity would encourage opposition politicians in Spain and Portugal to seek the same relief, and would increase their appeal to local voters. Spain and Portugal soldier on with preferences for their elites and disastrously high unemployment rates for ordinary citizens.
9. Germany continues to enjoy the export advantages the Euro gives them over the other members of the Euro zone, who cannot adjust the value of their currency to counter trade deficits with Germany.
10. The European Commission continues its efforts to issue all-encompassing regulations over all aspects of economic, political, legal, and social life in the EU. The elimination of local autonomy in all aspects of life, and concentration of power in Brussels, may be bad for local democracy, but it is wonderful for expanding bureaucratic fiefdoms in Brussels.
11. The widening gulf in income disparity between elites and common people is advancing in the EU, though not as quickly in the USA. Wages, benefits, working conditions, and social program spending in the EU are under pressure by demands for reform to increase international competitiveness, and as governments realize they cannot afford their current levels of spending. Taxation levels are already exorbitant, and demographic trends indicate future budget calamities.
12. Debt to GDP levels are very high in Public, Private, and Domestic categories. Perhaps so high that they are already beyond hope of eventual paying off, but they keep rising. Rising is good, no?
13. The EU is a net importer of oil and natural gas, and is engaging in political, financial, trade, and military warfare with Russia, its most important supplier of oil and natural gas. The EU approach to Russia is sure to end well. The EU is enjoying surpluses of food products that would have gone to Russia since Russia counter-sanctioned the EU sanctions by refusing to import food from the EU. EU farmers are enjoying low producers prices and low food prices that are now denied to the Russians.
14. The international banking and financial centres of the EU are paragons of transparency, propriety, and compliance with sound financial principles - with the exception of London's City (World Central for money laundering and tax avoidance), Luxembourg, Lichtenstein, Monaco, Switzerland, and Austria (which now may be embarking on another Credit Anstalt, with the meltdown of the Hypo Alpe Adria bad bank). So all is well in the EU bankster world. Occasionally, banksters are suicided in Europe, sometimes leading to life insurance payouts to their employers. It's all good.
15. Auto manufacturers in Europe have seen auto sales remain at low levels, resulting in more workers having time away from tedious jobs. Reduced auto use reduces levels of pollution.
16. Government subsidies for "Green" and "renewable" energy programs have been a huge success, as shown by the vast amounts spent in installing wind and solar energy farms. Such a success that governments across the EU have been able to switch subsidies to fossil-fuel plants to ensure that power remains available on dark, windless days in winter. Germany has recently approved the building of many new coal-fired electricity generation plants, fueled by low-quality but cheap local lignite coal.
17. Alarming news broadsides by NATO and US hawks are leading to increased deployment of armed forces in eastern Europe, and threatening displays of military force along the borders with Russia. This will stimulate military spending and put some unemployed young people to good use in the armies. J.C. Junkerr has even called for the EU to set up its own army, moving Brussels into the big leagues in military spending.
18. The Minsk 2 Ukraine ceasefire agreement is not interfering with the Kiev government’s attempts to subdue the separatists in east Ukraine, with shelling of the Donetsk airport and other separatist-held areas continuing.
19. The IMF has approved another $17.5 Billion loan to the Kiev government, now that Kiev has enacted the repeal of consumer subsidies that allowed the impoverished citizens of Ukraine to survive in spite of the looting of the Ukraine economy by its ruling Oligarchs. The IMF has overcome its concerns about lending to Kiev even though 90% of its first advance to Kiev in 2014 ($2.7 Billion out of the advance of $3 Billion) went into Oligarch’s bank accounts in Switzerland. The IMF has also overcome its concerns about Ukraine’s gold reserves mysteriously disappearing, and also its concerns over the disastrous prospects for the Ukraine economy. It’s all good.
20. Super Mario Draghi has recently achieved his great dream of the ECB being allowed to embark on over a Trillion Euros worth of Monetary Expansion by buying up sovereign and corporate bonds. Bonds were already bid up so high that yields on some were negative NIRP! YES! Even the bonds of some of the PIIGS (Shhhh. Don't even think the word "bankrupt") have been pushed down to the 2% or lower level. Draghi's QE will allow him to recapitalize the broke banks of Austria and the neighboring banks that will catch Austrian contagion.
21. ZIRP has now been exceeded by NIRP, both of which are well-recognized signs of a healthy economy and sound banking system. The Euro is falling quickly, which must be another good sign.
22. The Euro zone nations entered into the Fiscal Stability Treaty, which came into effect, propitiously, on April Fools’ Day, 2014. The FST makes each EZ state the guarantor of the debts of every other EZ state, so all are completely safe and secure and all EZ taxpayers can sleep safe and happy in their beds knowing that all their financial burdens have been provided for. If one state defaults or goes bankrupt, the others will happily share the burden of paying their debts. Greeks have been delighted to hear that they may contribute to an EU fund used to help the Ukraine government in Kiev keep their lights on and their artillery firing for another few weeks.
23. Europeans continue to live in peace and harmony as immigrant communities are effortlessly woven into the social fabric, with smiles and happiness all around. Open immigration and labor mobility are great successes. Floods of immigrants from North Africa are eagerly welcomed.
20. I am tempted to go on, but time and energy fail me.
In summary, EVERYTHING IN THE EU IS AWESOME. Unless it isn't.
"we would see the dollar crash"
Perhaps "crash" should be viewed with a long-term perspective. In 1940, a person could buy a pack of cigarettes with a matchbook and still get 8 cents change.
WTF?? AS a teener in 1950 a pack of cigs in a vending machine cost a Quarter and you got 3 cents back inside the cellophane. Milestones
Yes. I left out of my post that the purchase money in question was a quarter.
Our American fiat has crashed--so far, only in slow motion. The pace could quicken faster than most can reach the exits.
I think ZH might be more wrong than we think. Maybe USD will be global currency, it almost is after all. English is already world language.
Person not speaking English is almost considered retarded. Russia is selling oil for USD, RT is in english. USA is kicking every ass that it wants.
Once russia gets ass kicked, so will china, euro will fall of its own, and USD will rule the world. "One currency to rule them all" :P
You might think but but :China has huge gold reserves. They had huge reserves before wwII and didn't help em much. Jupan took/stolen 6000 tones of gold becouse had bigger army.
As an American, I am more optimistic. We are not cut out for world domination. We should return to being the Republic we once were.
The greatest enemy of the American people is the American government. The opposite is also true. The greatest enemy of the American Empire can be, will be, the American people.
I see someone who has started St Paddy's Day early....
Finally someone references gold in a comment.
Depends on what you mean by "dollar crash". I would argue this has continued to occur since the inception of QE. If you mean "crash relative to other currencies", that's a crash of a different type.
" the other three big economies of the world - Japan, China and Europe - are in even more disastrous condition."
Finally, some good news about the US.
Good thing we have satrapies in Japan and Europe!
I need the dollar to hold up long enough to pay off my second house so I can keep all the $$ from my rental prop.
Keep stackin'
Entire monetary system Corzined. Lew Temporary funding measures started.
funny how the shift away from honest money and free markets led
us to paying for social systems and votes that were unsupportable financially.
the debt creators im sure have always been fully aware of this change and favor it,
because it is how the rothschild model enslaves the population to debt and confiscates
eventually all productive assets during the booms and
busts it creates with the worthless notes it prints out of thin air.
the system called federal has been working to perfect effect for 100 years, hurrah?
How much USD for a Toyota with the Yen at 200, 300? Deflation much? How will Ford cope (forget GM, they already can't cope). Caterpillar?
Honda,Toyota, Huyndia, Mitsubishi, Nissan, hell, all of them do final assembly here,
but that may change;)
ok, so I should cash out all investments and turn them into dollars that I put in my mattress?
Or, I should short all other currencies?
The first one. Until Yellen announces the next round of QE, then pile back into stocks.
There is no business cycle any more. There is only the Fed cycle.
If it's gonna rain money, believe me, you want to get wet. If it's not gonna rain money, stay out of the sun- it'll fry you like a potato chip.
there is still a business cycle
the recession we're entering now will prove that point ... clearly
OK, fair enough. You may be right. But it's gonna be a little tough to figure out WHY this downturn happened (if it happens). Natural business cycle or the (temporary) hault of the Fed's money printing/debt monetization policies (QE3) followed shortly thereafter by a rise in rates?
Either way, when they turn the tap back on (and they will eventually), that's probably a good time to have at it again.
I think the rise is mostly due to expectations of rising interest rates. (Which will never come until the wheels fall off)
There's a definite shake in the steering wheel now.
lol,, your Delsal comment was on point too.
but but Krugman is "advising" japan ...
Krugman belongs in a carnival dunking chair . . . wait . . . I think Banzai7 already did that one.
I disgree with David Stockman's view. Japan and Europe are tied to the dollar since it is the world's currency reserve.Even with the Euro or whatever, most of these nations do trade in US dollars. That is the reason for a strong dollar. Business and debts must be serviced in US dollars just like you and I must have dollars to pay a day to day living expenses in the US.
China, like Russia, is trying to delink that US dollar tie. China, like Russia has tons of gold and continues to buy gold. Their bet is that eventually the dollar will fail and nations with high gold reserves will fair better then others. That is their gamble which they may be right, if they can handle the internal turmoil in the meantime. We already see this with Russia cutting their interest rates 1% recently.
I suggest you will continue to see a continued pressure from Russia and China to de link from the US dollar. I also suggest that other nations, such as in the EU, will continue to play the currency battle with lower rates for a bit.
So far I have been right about PMs, the dollar and most everything else. I am still trying to figure out the triggering event that will change things. It might be WWIII itself.
Somebody said something similar on ZH a couple of weeks ago.
China's buying shit loads of gold while it's linked to the dollar.
Decouple and a freefall in its currency and the world will beat a new path for even cheaper shit, putting their ghost cities and factories to work.
China's also got all that US debt. Which is like cornering the market in ice cream on a really hot day; if you can move it all, great. If there's any kind of delay, you've got sticky goop all over. So anything tangible they can buy with that US debt they'll hoover up as fast as they can.
Curious how all those statist Scandinavian countries rank near the top of the OECD in health, happiness, life expectancy AND social mobility . . .
It's a long time I didn't read such a monumental pile of idiocies. At least, speaking about "Ponzi", a mist of shame should appear, since the last "Ponzi" we have seen is the US crash of 2008.
Dollar is "soaring" because US prepares to war. Hoping others will die - in the best anglosax tradition. A dream of an idiot.
We hate it when our Friends become succesful......
dollar simply has a better propaganda behind it. Too many people still believe dollar is a safeheaven during the crisis.
"What as have here is a failure to communicate."
I mean seriously...in the 80's we talked with our friends and allies (the Plaza Accords) and now we destroy them.
QE was a GREAT idea...for the United States! QE is DEFINITELY NOT the one size fits all plan.
Why the dollar is going through the roof now...I really have no clue. Right up there with equities. "No idea."
That's two years running I might add. I do "feel" I've missed out on something...but I simply can't afford a 40% "reversion" and have sat tight while watching one price collapse after another pop of.
I don't feel like I'm losing and have been looking forward to someone explaining to me in a FINANCIAL sense that I am.
The banksters know the jig is up. That's why there's QE. It's a thin excuse to allow the important to cash out and get out of harm's way before what they know is an inevitable catastrophe.
For example, the banksters' ultimate plan for Europe is to level or irradiate its real capital stock to stop it falling into Russian hands, and let those among the ancestral populations of Europe who are unable to flee die of hunger or plague, if radiation poisoning doesn't get them first. Nobody is his right mind would lend money to the Fourth Reich in a free credit market, least of all the banksters themselves.
I own my house n newer car. Give me a reason NOT to max out my cc's and tell the bank/collection agency to f*uck off. I can't think of any. BTW I am 69 n retired with a mental map of just precisely where I lost my stack of coins while crossing the river
First, deflation via a strong dollar. After deflation takes it's toll resulting in collapse, inflation after collapse.
Classic dissection via Bob Precter. I think Bob is right. So is Mr. Stockman.
The strong dollar is gonna hurt (some.) Low oil is the first strong leg into deflation as it affects the price of everything downward. Results already coming in.
EXCELLENT observations Mr. Stockman...
Thanks Davey boy ... you forgot to mention the US military...., cause then you coulda stopped there.
I find it hard to believe that the market priced in Eurozone QE so weakly and at some point EURUSD should roar back. Even if it's a dead cat bounce.
Today was a notable day of hammering GBP then EUR. The bottom is somewhere.
The Chinese have been buying (Gawd only knows) how much gold for the past (6) years. And this key 'element' of the discussion is lost on a currency that is backed by nothing - unless the U.S. is preparing for a Fort Knox/33 Liberty St. news conference...? Somehow I doubt that this is being done to festoon HK jewelry shops, or for a media event while Chinese GDP growth is 10% and rising... 'Stated differently' (as DS is wont to say), China knows what time it is on the global stage, regardless the news of impending crash-landings & the like, and they have 'put away' for just such a drastic global shift away from 'U.S. hegemony' (as DS's one time associate, PCR is wont to say...)
Looking at this chart and going by you analysis,
all those "shirts" may be disintegrating, but the US$ isn't
the cleanest one by a long shot.
Canada is !!!
< >
This could take 40 years... like the jews wandering around the desert... by the time they found anything other than sand..of course it looked like the promised land...at that point anything would. In the meantime, while we all wander around the financial desert, they ball-gagged gold... which is the only canary-the-coal-mine... So, do you sit on gold for an undetermined amount of time? Hoping for true price discovery? Or do you say "fuck it, if you can't beat em, join em... so far I have sat tight with metals.... but I'm coming to the conclusion that this is all perception based and the public is too stupid or lazy to wake up....so we could be wandering the desert for a loong time.
I think you're right; it could take a long time. Or it could happen next week. How to prepare? I'm not willing to make like a Millerite, but knowing what we know, it seems crazy-foolish to not prepare.
So, I do what my grandfather did through the Depression. I save money, and use debt only as a last resort and pay it off as fast as possible. I buy things I will need, if they will store well. Some money I turn into gold and silver. I'm not looking to come out of whatever happens, whenever it happens, rich. Not looking to game the collapse. Just looking to have tools (electric and manual) in good repair with extra parts. Getting the house in good shape, paid off in advance, with a couple different ways to heat it. I do use credit cards, but pay them off every month as an easy analogy for cash.
I'm not going to say "If you can't beat 'em, join 'em," though. I know a few people who just got laid off by Target Corp. this week, who had been living up to and above their means. They have a few months to figure out what to do with a house and cars and credit card bills they can't afford any more. That's not "The Big One" we're talking about, but for them it might as well be.
I honestly think this is how humanity will end and his era be entombed in rubble forever. Total utter chaos, desperation, and ultimately destruction wreaked by a desperate, narcissist leadership on a global scale as a result of the panic to preserve the fantasy. There will be no "Round Two" this time. It will be over. Literally. Thanks guys. You will answer for your utter failure to help the beggar at your gate content with crumbs from off your table. He is not a respected of persons. You will suffer for all eternity in incomprehensible misery as you ponder what you should have done while you had the power in your hands.
The endgame our masters have in mind is the Singularity, a sort of Rapture without all the God stuff. If, and when, they develop robots and AIs that can do anything a human can do and do it better, all human labour can be computerized---and the elites can order their new robot servants to exterminate the lower orders of humanity, who will no longer be useful even as slaves. The robots will make far better socialists than humans were ever likely to---willing to supply according to their ability and content with receiving fuel and maintenance according to their needs.
Meanwhile, the elites plan to upload the information encoded in their brains---their souls, as it were---to computers, and live forever, or at any rate for as long as the laws of thermodynamics allow their computer hosts to be maintained, upgraded and replaced as necessary.
And that's the happy ending. Our robot progeny, even if they do not exactly mourn us, will remember us after a fashion, if only because human research will be the base they'll build on as they work on settling and conquering the galaxy.
Our failure to successfully contact other civilizations and lack of any verifiable attempts so far to contact us suggests that what is far more likely is the destruction of humanity by their masters, if not all life on earth, long before the robotic New Socialist Man gets off the drawing board (by accident, possibly, just as possibly by design). Then nobody will mourn us at all, least of all any lower orders of animal life who will replace us as the masters of the earth after the holocaust.
There is hope. Just not for us.
“We’re” in shit but “they’re” in a much shittier shit.
http://bit.ly/18jLYl9 <-- ;0)
insanity has always been a relative term
The Roman empire was fiat based, people said "it couldn't go on" for over 900 years, we've really only been playing this debasement game for 40.
FALSE.
The Denarius was not fiat.
It was a silver coin.
But the Romans shaved the edges of the coins when paid in taxes, and melted the results into new coins.
Then when people got wise, they changed the composition of their money. Gresham's Law took over. Silver and gold coins disappeared (because people saved them), while the government's coinage experienced rapid inflation (because people knew they were worthless and so preferred to trade them for real goods as soon as possible).
This continued until finally, the government demanded everyone pay in precious metals while the government itself would issue only debased coinage. This had the result that only the very wealthy could pay their taxes. So then the Romans passed a Law making it illegal for those with tax bills to travel. They were 'tied-to-the-land'. Next they made the tax debts hereditary.
In short Feudalism was born.
But it made for such a weak society that Non-Roman's moved in, and PRESTO! were in control. Why? Because no one wanted to deal with the Romans anymore. So the 'barbarians' took over the fledgling feudalism and thus became the ancestors of today's monarchs.
Overall Stockman is right but he did not emphasized enough that core of the issue is utter collapse of demand for anything throughout the world due to massive over-leveraging of business of all sizes and households often in US dollars/Euro/Yen not in domestic currencies leaving CBs helpless.
People simply paying off their loans and obligations and have nothing left for consumption or investment, This catastrophic collapse of world demand (pointed out by Russia and China) causes dramatic flight of capital resulting in recalling massive amounts of speculative capital back to US. Japan and Europe refused to accept returning yen and euro assets desperately seeking shelter in panic. They are trying to accomplish it via QEs and NegIRP as a barrier to capital inflows in order to avoid surging of their currencies and killing their economies, meaning reminder of industries capable to export since domestic demand is dead.
This leaves emerging markets (commodity driven) in conundrum. Their currency is weak vs. dollar but they do not trade that much with US to have any advantage (US is a significant exporter of commodities itself), but if currency of a country to which they sell is weaker, then their sales collapse. And that’s really the case. So they fight a currency war indirectly, through FX dollar among themselves by collapsing their CB interest rates while facing collapse of their own currencies vs. dollar due to capital flight. All that against common wisdom, which would suggest rate hikes instead.
That’s why while 75% of world currencies lost to dollar, 75% of all worlds CBs lowered interest rate within in last 12 months and they keep lowering to out-export each other giving up on domestic demand and growth or even preventing any significant growth in first place to avoid their currency surge. Even China accepts much lower growth, to talk yuan down, and Russia lowered the interest rates twice while under FX attack and massive capital outflows, happy with rubel half of its values 12 months ago.
To defend themselves countries abandon FX market and set up huge currency swap lines to limit this spiral of death which actually boosts dollar since in addition to non-US$ denominated capital flight into US$ assets, there is, shortage of FX dollar funding since nobody needs to sell dollars to buy other currencies if they have swap lines, with “fixed” exchange rate, open. In strange ways globalization makes de-dollarization inevitable. Dollar strength is a result of dollar shortage at FX but not because everybody wants dollars but because nobody needs it any more as intermediary in FX exchange because it is overpriced to its value. It is classical FX market failure, similar to that of 2008 when FED open massive swap lines wit worlds CBs to squash dramatic raise in dollar.
See post and my coment at: http://www.zerohedge.com/news/2015-03-08/global-dollar-funding-shortage-...
But why? What’s going on?
The general answer is that national economies and sovereign states (with few exception) are illusions. Their domestic markets are illusions, their economic and social policies are illusions maintained for domestic political audience. Global integration has been accomplished. Only global economy exists now. And unified global capital rules.
Production is distributed so much all over the world that no country controls production of nothing but some small subsystem one of thousands parts from all over the world assembled in final product with no ownership and no country of production.
This serves purpose to practically eliminate any political leverage that country may have over world production. But now with ZIRP nobody has any leverage over global elites. In other words countries (with few partial exceptions) cannot reestablish control over their economies and social policies by imposing tariffs, trade barriers and capital and labor controls or specific social policies in any way that would not result in collapse of their “hollow” economies and political turmoil at least in transition.
Even countries at war cannot stop cooperating economically, close borders or limit civilian trade, thing unheard off 50 years ago. This has most corruptive influence of national politics. That’s why all politicians that promised economic growth, betrayed the people as soon as they got in power since they know the only way to growth in global economy is to export if not it is cutting expenses, collapsing governmental and private social programs and dismantling democratic institutions that still left, to pretend to pay un-payable debt.
The fallacy of debt based global economic system is only to apparent.
There is no way out of world pauperization and death spiral except to break through globalism in very painful ways. Unfortunately, people rather believe in illusion than face pain of reality and turn around to stop this genocidal system of alien class of global oligarchy directed towards extermination, all other priorities rescinded.
For some more background on Japan situation:
https://contrarianopinion.wordpress.com/2015/02/20/japan-miracle-that-wasnt/
Scatha,does that mean that this lady is telling the truth until the present system is permitted to collapse?
http://presswire.com/content/1324064/board-governors-world-bank-and-imf-...
https://www.youtube.com/user/KarenHudes
If true,when will a higher power pull the plug on paper fiat fractional banking?Andwho really is in control?
At least china has gold to start over with, what does the west have? Obama's good looks?
Stockman missed the point. China has all of the west's leased gold 25,000 tonnes. And they want to create a trading block that includes Asia, Russia. CIS, and some EU.
The west's gold is gone and has no assets on their balance sheet other than paper dollars and Euros.
So China doesn't care about the west as westerns won't be a market for them as westerns won't have money anyway. They want to develop their own borrowers in their new block and lend them money and get them to buy their products.
The west is useless and will be destitute. If you have gold and silver, you will have a mansion in the slums.
All prices are ratios. The price of USD is, as is most often cited, the ratio of USD to a trade-weighted basket of other currencies. It would be more accurate, using gold as a standard of value, to say that the other currencies are weak rather than the USD is strong. Last year, gold was up in all major currencies other than the USD.
The solution or catastrophe, depending how you want to look at it, appears to be cast in stone. Governments everywhere have to print their own money and stop paying interest on debt. Interest rates for everybody else has to be found in a free market of rates.
Simplifying the system greatly by limiting leveraging opportunities, eliminate short selling, to end the huge remuneration skimmed off to pay insiders.