It's The Dollar, Stupid!

Tyler Durden's picture

Submitted by Paul Brodsky via Macro-Allocation.com,

We think the markets have it fundamentally wrong. US investors are anticipating a cyclical shift towards economic expansion via new tax incentives, business de-regulation and Keynesian government spending that promise to increase output, demand and asset prices. However, there is a far more influential driver of future asset prices – a structural shift that has begun but has yet to be acknowledged by economic and political authorities, and, judging by financial asset markets, by most investors. We expect weak equity markets and a strong treasury market beginning in 2017.

It’s the Dollar, Stupid.

The financial model used by advanced economies since 1971 is quickly losing its ability to support economic growth and rising asset prices.1 Western economic policy, which had previously relied heavily on credit creation from 1971 to 2008, was replaced in 2009 by monetary policy that relied heavily on base money creation through asset purchases. The structural shift in central bank focus from credit to monetary creation marked a paradigm shift in the decades-long finance-based economic model - from the leveraging phase to the de-leveraging phase.

The Fed shifted to relying on a communications policy in 2013, which focused on renewing the broad perception that by “normalizing” US interest rates the economy would again begin to react to credit incentives it could manage. It also emphasized the need for fiscal stimulus, which would ostensibly create demand and stimulate production growth. Last month the Fed hiked overnight rates for the second time in two years and the markets expect it to hike rate three times in 2017.

Fed rate hikes tighten credit conditions in the US and, given the continued execution of QE by other major global central banks, increase the exchange value of the dollar. A stronger dollar theoretically increases other economies’ exports into the US, provided that US consumers and businesses are able to maintain the same level of demand for foreign goods and services. This is an open question.

Donald Trump’s election raised hope that new tax incentives, business de-regulation and Keynesian government spending will create sufficient demand. The dollar and US financial markets have reacted in sympathy with stock prices rising and bond prices falling…despite the Fed’s renewed credit tightening. A strong dollar would tend to attract global wealth to the US, wealth that theoretically could find its way into US risk assets including US equities. Thus, US equity strength since the election reflects a strong dollar, which is based on the combination of Fed rate hikes and renewed hope for US government stimulus.

This is not the first time the Fed has had to actively increase the exchange value of the dollar. Paul Volcker’s Fed had to hike overnight rates to 20% in 1980-81 so the dollar would be reaffirmed as a store of global value for US trading partners, including OPEC. We believe the Fed is doing the same today, in spite of its de-stimulative impact, because it wants to attract global capital to US banks and asset markets. Doing so would ensure USD hegemony, which would be necessary if/when global leverage leads to hyperinflation and multilateral trade and currency wars. Once substantial wealth is held in dollars and dollar-denominated assets, the US political dimension and the Fed, through the BIS and IMF, would be able to control the terms of a global monetary reset, which in turn would de-leverage balance sheets across currencies and economies in a controlled manner; in effect, a pre-packaged bankruptcy in real terms.

Nothing has changed structurally (or cyclically) since the US election. Global central banks are de-leveraging their banks through QE, with the exception of the Fed, which already did. Commercial bank liquidity and solvency is a precondition for a global monetary reset. The table is being set for more, not less, central bank intervention in the form of monetary inflation, and more intervention from the political dimension, which would choose which non-bank creditors (and debtors) will experience credit deflation.

The markets have it wrong

We believe fiscal measures like those being speculated about now in the US, even if successfully executed, would fail to generate meaningful new production and demand within the US and global economies. Financial markets are vulnerable to a reversal of their recent trends.

We cannot place specific figures or exact times when benchmark equity and fixed-income indexes will reverse current trends; however, we are increasingly confident that US and global economies have begun to experience necessary structural changes that directly impact: 1) incentives to produce and consume, 2) the fundamental manner in which the political dimension approaches monetary and fiscal policies, and 3) the way in which investors think about assets, liabilities, economics and capital markets.

The secular US fixed income bull market, which began in 1981 when the Fed embarked on what would become a forty five-year credit easing regime that benefitted, treasury, mortgage, corporate, municipal, small enterprise and consumer borrowers, and would eventually spread globally to other advanced and emerging bond markets; which allowed the US government to deficit-spend (eventually without the expectation of recourse) its way to unrivaled military might that defeated and then contained potential hostile threats abroad; which provided primary funding for bank and shadow bank lending that gave the US dollar and financial markets status as the ultimate sanctuary of global wealth; which provided a platform on which global bank and non-bank counterparties could swap contingent liabilities amounting to many times the size of underlying cash markets without fear of regulatory interference; and which provided speculators across other asset markets (including real estate) to continually sponsor unsustainable valuations, no longer produces capital or serves an economic purpose, and is almost over.

The secular US equity bull market, which not coincidentally also began in 1981 and served as the principal funding mechanism for great advances in digital technologies, communications, finance, logistics, health care, energy, retail, and other industries; which helped raise and maintain competitive trade advantages for the US and its allies; which expanded capital expenditures, productive output and consumer demand; which helped collateralize expansive public and private credit issuance and debt assumption, in turn creating a positive feedback loop that further increased nominal production, consumption and asset prices, and which created nominal wealth for US and non-US asset holders, is also in its evanescence.

Stock and bond markets in advanced, financially-oriented economies, have devolved more into political imperatives necessary to maintain social services and the perception of wealth, rather than serving as the traditional means to build and price wealth and capital. They no longer serve societies or global trade.

In over-leveraged economies, stock and bond markets become co-dependent. To sustain market prices, debt and equity require nominal output growth. To sustain market values, they require real output growth. The only way to increase nominal output growth and raise nominal equity prices in a highly leveraged economy with leveraged currency is to raise the quantity of credit, which must eventually reduce real output and asset values. The question before us is whether “eventually” is occurring now.

The primary reason we think stocks are peaking is scale. Aggregate market caps, valuations, revenues and earnings of public companies cannot be sustained by the level of real production in the underlying US and global economy. We think bonds are on the eve of reconciliation for the same basic reason: the scale of systemic leverage has already begun to reduce incentives to expand credit for capital formation, which, in turn, promotes debt deflation.

We expect debt deflation coincident with central bank monetary inflation, which would offset the deflation…on paper (like feet in the oven, head in the freezer producing a reasonable average). Before this occurs, we expect a financial or economic event that focuses public attention on the leverage problem.

Drilling Down

The incentive to invest in the stock market is to build wealth, which is accomplished by generating positive real (inflation-adjusted) returns. This presents a problem looking forward. Many of the companies the market rewards most in terms of market cap drive goods and service prices lower by innovating and connecting buyers and sellers (e.g. Amazon, Facebook).

Against this backdrop, the Fed’s economic mandate from Congress is to work towards stable prices and full employment. To do so, it has a specific annual inflation target of 2%. If the Fed is successful in this target, then it will reduce the purchasing power of US dollars by more than 64% over the next 25 years:

As the table above makes clear, through its specific economic mandates and acceptance of the Fed’s 2% inflation target, the US Congress effectively promotes a decline in the value of ongoing savings earned and amassed by American labor. For investors, the policy also acts as a hurdle over which investor returns must rise to create positive real returns (i.e., wealth).

On one hand, commercial competition is naturally driving prices lower, making goods and services more economical for producers and consumers, and equity markets are inflating the asset values of businesses that deflate prices. On the other hand, the Fed is trying to drive goods, services and asset prices higher, which would drive the purchasing power value of savings lower.

Since 1998, asset prices (portrayed by the Wilshire 5000 on the graph above) have been supported in great part by Fed liquidity and debt-driven buybacks while US economic activity, (portrayed by monetary velocity), has been in secular decline. It is tough to sustain 2% inflation for very long through financial maneuverings when domestic economic activity continues to weaken. Any further inflation the Fed might help create (as it hikes rates!?) will not be demand driven, but rather the result of more financial leverage.

It can’t persist much longer

The current excitement among US equity and credit investors over the promise of a best-case stimulative mix of deregulation, tax cuts, and Keynesian government spending has created a very optimistic market tone. The Fed has further intimated December’s rate hike was the start of a new regime of interest rate normalization. Together, these dynamics have caused treasury yields across the curve to rise. Rising treasury yields in past business cycles have further signaled economic recovery, which has seemed to confirm to most investors that economic and equity market optimism are warranted. We disagree.

Any fear of demand-driven goods and service inflation is un-warranted given 1) the already-leveraged nature of public and private sector balance sheets, 2) the need to perpetuate the relative strength of the dollar, and 3) the expectation of further Fed rate hikes. Even a successful multi-trillion dollar US government spending program that provides a few jobs and necessary American capital improvements could not provide sufficient consumer demand to overcome US and global balance sheet leverage and the attendant necessity to maintain US dollar strength to sustain the current monetary system.

The graph below plots the secular decline in long-duration treasuries against the year-over-year rate of US goods and service inflation. (The gap in 30-year treasuries is due to the elimination of Long Bond issuance from August 2001 to February 2006.) We believe the rise at the extreme right of the graph representing their most recent trends is not indicative of the next big move for long-duration treasuries.

Given the need to maintain the US dollar as the fulcrum of the US monetary system, the most influential input for future treasury yields has become global output, which is in secular decline. This trend is logical, established and seems to be accelerating. It is logical because the secular post-War decline in global output growth was only interrupted by the emergence over the least twenty years of large new economies like the BRICs. The continuation of that secular downward trend would make sense once those emerging economies are established. The graphs below confirm that balance sheet leverage within emerging economies have surpassed those in developed economies and that, not surprisingly, global output growth is truly struggling. As a result, we expect one last spasm that takes long-term treasury yields to new lows.

Relevant Economics for Equity Investors

Investors will soon be forced to better understand the macro world around them. The perception of the deflation/inflation metric should determine near term and secular debt and equity market directions.

Prices are determined by supply/demand equilibriums – where the supply of goods, services, labor and assets meets the demand for each. This is theoretically true in classical economics. However, in the current flexible exchange rate monetary system administered by banking systems and the political dimension (i.e., a fiat regime), both supply and demand are determined by the prevailing quantity of credit available to producers of supply and the quantity of credit available to consumers who create demand. (Credit is simply a claim on base money, which is created by central banks.)

The most insipid structural problem threatening economic vitality and equity market returns is public and private sector leverage. High and rising debt-to-GDP ratios, which threaten economic liquidity, and high and rising debt-to-base money ratios, which threaten balance sheet solvency, must eventually be reconciled. Aging demographics within the world’s largest economies is accelerating the timing of the necessary reconciliation, which must occur through debt deflation, monetary inflation, or both.

Thus, investors seeking to create wealth by investing in broad equity markets face a fundamental structural problem caused by the irreconcilability of 1) naturally occurring commercial deflation, 2) economies and political systems that rely on inflation, and 3) the crowding out of consumption and investment by necessary debt service.

Consider the 2% inflation target established by the Fed and accepted by most political economists. See table, page 4.) The target ostensibly limits the annual loss of purchasing power to 2%, and therefore it is generally thought that having such a target is in the best interest of American workers. Such an argument is inaccurate, naïve and disingenuous. As the graph on the previous page shows, the Fed was unable to cap goods and service inflation when energy prices spiked from limited supply in the 1970s, and unable to cap inflation at 2% throughout the credit-led secular bull market in corporate and property equity in the 1980s, 1990s and 2000s.

Goods and service inflation more recently has struggled to rise to 1.7%, where it stands today. A 2% inflation target has shifted from a target to preserve the purchasing power of the dollar to a target to ruin it. Nowhere in the public discussion has this been mentioned. As discussed above, we think the Fed’s “fear of inflation”, which is ostensibly driving the new rate hike regime, is a necessary public narrative that will let the Fed pursue its true objective – a stronger dollar and deflation amid a contracting real economy.

Even if US domestic economic activity were to somehow reverse its secular downtrend enough to warrant current equity valuations, it is difficult to conceive how much more asset prices could rise – especially in real terms. Simple math, anachronistic economic policies and poor demographics pose insurmountable barriers for creating wealth through public share ownership. (We further discussed the current negative implications of over-valuation and the negatively convex nature of equity markets in The Grift.)

Can the Establishment really be that wrong?

In classic economics, both employment and inflation are derived from production. Political economists, a moniker that defines the academic discipline from which the great majority of contemporary economists spring, argue that a fully-employed labor force suggests that rising labor inflation will lead to rising goods and service inflation. Thus, the Fed is trying to raise rates currently, citing the second Fed mandate - full employment - which threatens stable prices. The ultimate policy goal is to protect the US (and global) economy from shrinking.

According to logic and classic economics, there is nothing wrong with a shrinking economy. Why? Because an economy should shrink commensurate with a rise in leisure time. Seriously. An economy is theoretically supposed to serve its factors of production. The more economical it is, the more leisure time it produces for its participants. (We suspect economies are called “economies” because they were formed naturally as systems that actually economized.)

In such an economy, only theoretical today, deflation would be a good thing because it would increase the purchasing power value of savings produced from past labor. In fact, an increase in deflation (i.e., an increase in declining prices) would actually raise real (inflation-adjusted) GDP because the gain in the dollar’s purchasing power from deflation would offset the declining volume of goods and services (nominal GDP). (We suspect this fundamental economic truth is the reason Congress’s mandate to the Fed includes only stable prices and employment, and not economic growth.)

The graph below shows the decline in the American work force since 2000. It should not strike you as alarming, given 1) all the great new innovations and technologies replacing human capital and 2) the expansion of global human capital from emerging economies. Tell us again, we ask sarcastically, what “full employment” is?

Market cap-weighted indexes notwithstanding, it may be worthwhile here to ask yourself again why an increase in the majority of US equity shares is generally perceived as a given as the US economy becomes more efficient.

Why it is all about the Dollar Now?

In today’s global monetary system, currencies are tranched liabilities of: 1) commercial banks that create deposits through the lending process; 2) central banks on the hook to collateralize member commercial banks that create deposits and credit without commensurate reserves or circulated currency (base money), and; 3) treasury ministries that ask constituent factors of production to have faith that its taxing authority and, as has been demonstrated throughout history, its ability to wage war to loot enough resources outside its taxing domain to protect its currency’s purchasing power value.

As liabilities without directly-linked offsetting assets, the purchasing power value of currencies are always susceptible to dilution. Dilution comes in the form of credit issued by banks (and, potentially, non-bank lenders) that is either not collateralized by assets or collateralized by assets that themselves are liabilities (like Treasury notes). The wider the gap separating the amount of un-collateralized credit denominated in a currency from that currency’s base money (bank reserves and currency in float) – the ratio that determines monetary leverage - the greater the amount of future monetary de-leveraging will have to occur. (De-leveraging must ultimately occur so that debtors can service or repay their obligations and so producers have incentive to continue to supply goods and services in exchange for that currency.)

We expect global monetary authorities to protect the dollar as long as they can and we expect them to fail. Stocks and bonds will react violently; stocks and weak credits falling, treasuries prices rising (at first). That failure will lead to hyperinflation – not driven by demand, but rather by central bank money printing. A new global monetary understanding will then emerge.

We expect weak equities and a strong treasury market in 2017, as they begin to discount this fundamental structural shift.

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DarkPurpleHaze's picture

Yep, the collapse of the dollar was a completely overblown salespitch to some extent.

How can anyone deny that? It won't be that way forever, of course, but it can stay this way a lot longer than anyone might've imagined.  That's what were seeing.

Just imagine what'll happen once the EU splinters and the yen isn't as strong  as it currently is thought to be. The USD will keep rising.

Seems logical at this point.

The Saint's picture
The Saint (not verified) DarkPurpleHaze Dec 28, 2016 8:55 PM

When it comes to the fate of the U.S. Dollar the story is the same as the story of two friends coming upon an angry bear on the trail.

To avoid being attacked by the bear friend one doesn't need to be able to out run the bear.

He just needs to be able to out run friend 2.

i.e. The Dollar doesn't need to be perfect.  It just needs to be more perfect than the other currencies.

 

Troy Ounce's picture

 

That's all very logical in a post Keynesian manipulated world where bankers, politicians and PhD economics parrot each other and rule the narrative.

Now I want you to meet "trust". Hello reality!

 

monk27's picture

The main reason why the USD stayed so strong is the fact that, despite media noise, the truth remains that US Notes, Treasuries & Bonds are offering (and always had) a much higher interest rate than any other significant currency in both nominal AND real terms !

The moment somebody else (say China) will come along with a better offer, a tidal wave of money will migrate into the new heaven.

DarkPurpleHaze's picture

I can't disagree with that but it might take a very long time for that to occur.

The yuan and China are feeling the pressure. It'll get worse before it gets better.

Mountainview's picture

China is preparing for the (Trump) trade war. What is declared capital flight out of China is de facto a switch from Treasury bonds into real assets worldwide ( from French wine yards to African farmland). The after 20th of January will be interesting for currency traders.

monk27's picture

Indeed ! The Chinese have been leading this dance since their admission into WTO. I'm not convinced that we'll be able to regain the initiative, even with Trump at controls. He is smarter than his pathetic predecessors, on the other hand though the Chinese do have a real economy while we don't anymore...

AUD's picture

'Base money' is credit, at least nowadays. The premise of this article is wrong.

OpenThePodBayDoorHAL's picture

True statement. Until it isn't. The CBs forced people desperate for yield out into stocks and real estate. Those became quasi-money, substitutes for bank money. New credit creation can keep those elevated for a good while longer, to fund buybacks, chase RE bubbles. 

Archibald Buttle's picture

i have no idea how this will all turn out, but at some point i think there will be a chance that a significant amount of sheeple will realize, finally, that debt as money is a scam. most likely, some sort of privatized corporation will come along with a "more efficient" idea that is also "profitable," to save the day.

my prediction for 2017? we collectively come up with the wonderful idea that scavenging pieces from the ladders that are laying around, in order to replace the handles of the shovels that have been breaking with increasing frequency, due to the depth of the hole we have been digging, will solve all our problems and, at long last, allow us to dig ourselves out of the hole.

happy new year, bitchez

Escapeclaws's picture

Debt as money only has value when there are borrowers and a promise to pay back money borrowed. If borrowers become scarce or unable to repay loans, how can debt-based money retain value?

lucitanian's picture

Add to that the absence of real growth. My understanding is that presently real growth has entirely depended on the expansion of debt, and has now stalled more or less globally despite massive QE which finds its way to speculative paper.

General Titus's picture

Eustace Mullins was fired from worjking at the Library of Congress for writing 'The Secrets Of The Federal Reserve", which exposes the ponzi scheme by the Babylonian Talmudists of the FR

DarkPurpleHaze's picture

Time is ticking away on this laughable 2016 prediction...

“Gold Market Will Break This Year!”

Andrew Maguire, Craig Hemke, & Max Keiser Break Down GOLD MANIPULATION


In the latest Keiser Report, Max and Stacy interview two precious metals analysts – Craig Hemke and Andrew Maguire.  The two give their forecasts for the gold market...


http://www.silverdoctors.com/gold/gold-news/andrew-maguire-craig-hemke-m… 

DarkPurpleHaze's picture

Another year end prediction. He couldn't have been serious, right?

 

“A Timeline For The Next Rally In Gold”

“It’s still possible that gold could trade AS LOW as $1285 and back near its 50-day moving average before bottoming. This area has proven as support all year.”

“Then, finally, a breakout to new 2016 highs in October and November.”


“This year-end rally should take gold all the way back to near the April 2013 manipulated breakdown level of $1525. Let’s call it $1475-$1525.”

“So there you go. That’s what WE expect.
If I’M proven correct, I’LL gladly take all the ADULATION that comes this way."

http://www.tfmetalsreport.com/blog/7751/timeline-next-rally-gold

 

 

Bay of Pigs's picture

We ZHers get it on gold Hazey. Turd hasn't been seen around here for several years. He didn't like it when many of his predictions fell flat on their face and people called him out. I personally warned him gold could get pounded on way back in 2012, and that it might be a long hard slog back up. That has certainly been the case in the USA. Venezuela not so much.

DarkPurpleHaze's picture

I seem to recall you mentioning such a thing and you were right.

Turd had a pretty good thing going until he became emotionally invested  (greed) and started seeing dollar signs (irony?) and started shilling and making stuff up and taking himself way too seriously.

Does he not yet realize he shredded his own credibility into the dirt? I don't think he cares and he's on auto pilot into a black hole of obscurity.

Happy New Year, stay safe.

 

Consuelo's picture

 

 

+100

 

The problem these guys have is that we're all just remembering better...   The same old story, hoping that previous year's Flops will simply be forgotten in favor of the latest giddy predictions, just isn't having the same effect as it used to...   Holy shit, what to do if you're a newsletter/blogger type who makes his nut on giddy predictions...???!!!

 

 

OpenThePodBayDoorHAL's picture

Start two monthly newsletters, one says stocks will go up, the other says they will go down. Send to 10 million people. Whichever way they go, you will be right for 5M people. Repeat. You'll be right for 2.5M people. Repeat. Repeat. Repeat. Repeat. At the end you'll have 10,000 people who think you are an absolute guru. Announce that you're going subscription only, $1000 per year. 10,000 times $1000 = $10,000,000. Retire after one year.

wisehiney's picture

Highly deflationary.

rent slave's picture

All of those gold bulls don't realize that if the Phillies are going nowhere,neither is gold.Since gold's re-legalization in 1975,you could superimpose a chart of the fortunes of both.When Ryan Howard fell to the turf making the last out in 2011,I told all of my well off friends to dump all of their gold.Some did and some didn't.

Yen Cross's picture

 Awesome article. Totally agree. :-D

philipat's picture

Which is NOT good for Gold, especially as JPY falls to its real value after BOJ is forced to stop buying everything not nailed down. On my first trip to Japan in 1976 JPY was at 230/$ and there is no reason why it can't return to that sort of level given Japan's economic fundamentals? The algos influencing Gold remain locked on USD/JPY.

Yen Cross's picture

  The BoJ sells paper gold to give the impression Yen is strong when it's falling against $usd. Japan is a huge gold manipulator.

 Gold bounced nicely today, and is forming a base over the last week.

philipat's picture

All true but I was commenting on the content of the article. IF the Dollar continues to strengthen, then by definition the Yen will continue to fall and the algos will sell Gold. Don't ask me WHY, it just is. And given the fundamentals in Japan, the JPY MIGHT fall am awful long way. Most folks don't remember the days of USD/JPY at around 250. Just sayin...

Jtrillian's picture

It's the CENTRAL BANKS.

We Are The Priests's picture

Wouldn't it have been easier just to say, thus saving several thousand words, equities are over valued and due for a correction, the bull market in bonds is over, and the Fed will hyperinflate the USD through QE to inifinity and massive fiscal policies to avoid the pain of a massive deflation?

Consuelo's picture

 

 

 Yeah, but you gotta make it sound 'New & Improved!!'...

ebworthen's picture

"DOW 20,000!"

Except when you take away 50%-75% for FED gravy, stock buybacks, and CALPERS.

WTFUD's picture

What about changing the name of the dollar to doolar and hope nobody catches on?

sdot54's picture

We're literally living in the throws of economic evolution (or maybe develution) The more we try to understand what has led us down to this economic morass the more lost we get. The more we try to adjust and change course the more it seems like we're stuck in quicksand. Literally no solution or strategy moving forward seems plausible much less palatable.

Escapeclaws's picture

Funny how manufacturing and production count for nothing.

Wild Theories's picture

just want to point out, for the FRED chart of 30yr treasuries maturity rate vs personal consumption expenditures

the personal consumption expenditure rates has actually already bottomed from 2000 to 2010, and is now at the start of a possible upswing

it should be apparent to anyone capable of reading a chart

 

using that comparision chart for the assumption that treasury rate will continue lower will be quite dangerous

sure it still might(due to many factors), and that benign upswing in pce rates might go down again too, but ignoring the fact pce has seemingly already bottomed and is in a possible upturn is hella dangerous if that comparison is an important part of your argument

Let it Go's picture

The definition of relativity is based solidly on the relationships or values determined by the laws of nature. Often we find the qualities of relativity extend to other parts of our lives and the universe as well such as the markets and economics.

It is impossible to deny the unrestrained growth of intangible assets over the last few decades. The article below warns of how a failure of faith in these intangible "promises" could cause wealth to suddenly shift into tangible goods seeking a safe haven causing inflation to soar.

 http://brucewilds.blogspot.com/2016/12/economic-relativity-in-relationship-to.html

rlouis's picture

In the 1970s, Milton Friedman said that “inflation is always and everywhere a monetary phenomena.”  By many items I've followed the inflation rate since the mid 1990's has been over 5% - not the 2% Fed "target." 

Silver Savior's picture

My costs rise about 10% a year and I am not even a big spender I am modest to really cheap.

Econogeek's picture

He's saying there'll be one last gasp before the hyperinflation.  The last gasp will be equities and bond yields dropping, dollar strong.  I agree.  

But I think the dollar and gold both will strengthen.  It'll look like a dollar-gold reset.  They're both money, they will be the safe havens.  That's when the confiscation efforts will really start, so the Fed can inflate.

Brodsky comes up with some good malapropisms, e.g., insipid, when he means incipient.  A few others.  Creative and funny.

Silver Savior's picture

Naw I think the dollar will rise some more then nose dive to the point of no return. It's not money its debt. Debt charts are nearly going vertical. There is only so much. I think gold and silver will be the investments of the millennium. Physical of course. No paper bs garbage.

Jim Shoesesta's picture

ho hum, "sell, run for the hills, the world is ending." ~ 2009

Silver Savior's picture

It nearly did. 2009 was a rotten year. Even 2008 was better. I would not wish 2009 on anyone!

Silver Savior's picture

The dollar is pretty stupid. Think about how many dollar bills it takes to pay a mortgage, pay utilities, buy groceries etc. Oh wait you don't know what that looks like because most likely you got duped by the elite to pay with a card or e-transfer so you don't even look at the money. You never see the actual money. Its not even money. Everything is fake but you are told it's real.

 

I have really only one phrase to say "post dollar paradigm" the sooner the better! 

hedgiex's picture

Good analysis. The global leverage is broad based across economies. All in need of the elixir of rising global demand to be on the path of a LONG landing (no free lunch). Only Creditor nations like Germany within the Euro Zone and China can help in spurring global demand. (They help themselves in the long term). it is unrealistic that debtor economies expect aids without the surrender of sovereign resources (collaterals ). All these are not likely to happen.

Global stability will return but at what price. The price  is dependent on taking the least tortous route by global leaders. There is no global leadership so the route has to be a free for all economic war in the immediate future. All spins about the long term is irrelevant when you have no consensus on the short term. It is Dicken's best of times and worse of times and is not dependent on where you inhabit. There are mitigants to all the economic woes so long as global markets exist to hedge them. (Global markets are not global when they are controlled by agendas, these are oxymorons). 

supermaxedout's picture

But where is Donald in your forecast? With the Dollar rising how can the US be competitive. When the Dollar is rising against all currencies how can Donald blame China as the "currency manipulator" ?

What is missing in the article is the fact that the world has changed insofar, that the US are not anymore the "makers" of the commodity prices. The Russians are now in the drivers seat.

Beeing the biggest oil producer as well as controlling the biggest land mass on earth together with beiing in bed with China, which is the market dominating importer of raw materils and energy.

The fact that Russia is now the king of the energy prices is shown as clear as glass by the fact, that the US just lost its latest energy war in Iraq/Syria and has lost Turkey as a vasall state doing the dirty work for them. The new safeguarders of energy prices are now: Russia, Iran -which is also dominating Iraq- with Turkey at their side. The US is not even capable to enforces the construction of a single pipeline from Quatar to Europe. Not to mention the fact, that the Kurdistan and Syrian oil riches do also not find their way to the big markets despite all efforts of the US military machine.

I expect that in case the Dollar system is trying to force the rest of the world again under its yoke then China, Russia, Iran and maybe India as well as other players (including Turkey)are leaving the US Dollar boat in the coming year. There exists an alternative banking/currency system controlled by Russi and China and there is no reason why it should not work fine for its members.

Or to alter a phrase from Donald Trump in a speech minted for the Black Community in the US: What the heck do these countries have to loose when they are going away from the US Dollar.

Of course there is a lot to loose but there is more to win. To break the US Dollar dominance is the declared goal of Russia and China as well as some other states.  Because it is this dominance enabling the US to be engaged limitless in nation building, regime change, colored revolutions, wars, terrorism and so on and so on.

Rusia and China might think that way:  better an end with horror than horror without an end

As long its just money and capital markets collapsing but not WWIII I'm sure they will give it a try. The timing depends of course on the movements and actions of the US. It just needs a trigger then well prepared bold reactions by all sides will change dramatically the economic landscape of the wolrd.

Escapeclaws's picture

Nice to see someone considering geopolitical factors. The only real asset the US has is dollar dominance. When that goes that goes the US is toast. That's is why the US needs military dominance and why the biggest threat against the US is the Russia-China economic union.

The neocons will continue to foment wars all over the globe and to provoke Russia and China, even at the risk of WWIII. It is hard to see a happy ending to this. Will DT continue to listen to the phenomenally high IQ clan of Wolfowitz, Feith, Summers, etc, and their creepy public minions of Kristol, Krauthammer, etc?

GET THE (HIGH IQ) NEOCONS OUT OF GOVERNMENT!

Silver Savior's picture

They should break away from the dollar. I hope the dollar just crashes. It does not buy much of anything here. Emotions aside it would be good to see other currencies hopefully backed by gold taking over the scene.

marcel tjoeng's picture

 

 

 

With the costs of money, as everyone and anybody should realize by now,

amounting to - rounded up - to 0.00 %,

then what about these annual debates within the central banking system’s countries worldwide concerning the government budgets?

When all Parliaments supposedly and doctrinally are in possession of the Power of the Purse,

what are these political schemes other than the Kabuki Theatre of charlatans, racketeers and dumbed down quite idiot - mostly academic no less - faux politicians and other riff raff?

 

 

 

SomethingSomethingDarkSide's picture

It's the Yen, Faggetz.  No one carry trades with the Dollar, what are we, backwater tribesman?  All abt the Yen Carry Trade falling to pieces, it's the CB's and HFT's little pump and dump whore making this rally get up and drop bills.  NO DANCEY, NO BILLY!