## TRIGGERS FOR SYSTEMIC BREAKDOWN
◄$$$ USGOVT IS SPENDING AT A RATE TWICE THE RATE OF CURRENT TAX RECEIPTS… THE SITUATION IS NOT SUSTAINABLE… A DEBT DEFAULT LOOMS, OR A DEBT SECURITY BUST UNDER THE FLOORBOARDS. $$$
It is being kind and gentle to say the spending rate is unsustainable. The spending is absolutely insane, totally unchecked, with war the major emphasis. Not just waging war, but creating war is the high priority. For the tax receipts to increase in keeping pace, the USEconomy must be extremely strong and in robust growth mode. It is not. The last year or more on the tax receipts series (shown in blue) shows a stall. There is no growth in the economic landscape, only capital gain taxes off the stock profits, which perversely are owing to the USFed support with funny money. The formula evident is for a disaster. The test for disaster comes with the spending limit debate and possible sabotage by the fascist USCongress. Ignore political parties, and pay attention to fascist agenda shared by both sides of the political aisle. The debt default is overdue for the USGovt debt. It can never even remotely be paid back, let alone halt in its cancerous growth. Look for evidence of a bust with the bond market under the floorboards where the derivatives run day and night, with a computer staff. In some respects, a debt liquidation has been taking place, with central banks around the world dumping USTreasury Bonds at the USDept Treasury window at a 35% discount on value, a practice going on for over three years.
◄$$$ THE USGOVT DEBT LIMIT MIGHT NOT BE EXTENDED, OUT OF POLITICAL MOTIVE TO FORCE PRESIDENT TRUMP TO DEAL WITH THE UNFOLDING CRISIS… THE DEBT IS AT $20 TRILLION, WHICH ACTS LIKE A TSUNAMI WHEN THE HOUSE IS NOT MOVED FROM ITS PATH. $$$
The USGovt debt stands at $19.970 trillion and counting. It represents $61,350 per US citizen. It is not payable, as default is inevitable. The debt exceeds the US GDP at $19.370 trillion, which is surely exaggerated since it counts all the debt paper in movement across desks as production. The total admitted bank derivatives amount to $538 trillion, which is probably under-stated by half. The personal debt at $18.430 trillion is also not payable, given the horrendous condition of the USEconomy, stuck in its eleventh consecutive year of recession (if truth be told). The Jackass utterly despises the Reich Economics doctrines and practices, preferring the truth. The comedy theater will be interesting to watch at the September 30th deadline approaches. See Debt Clock (HERE). In past HTLetter reports, the incredible size of just $20 trillion has been shown as several football fields with stacked $100 bills as high as the Statue of Liberty. It is difficult to conceive of the volume. It is unpayable. The main question is how the USGovt will default on the debt, who the losers will be, and the effect on the USEconomy? China stands as the biggest bagholder.
The Congressional Budget Office recently reduced its projections for when Treasury might run out on money, if the USCongress does not raise or suspend the country's debt ceiling. The CBO estimates that the USDept Treasury might risk defaulting on some payments in the first half of October. The new fiscal year begins on October 1st. Treasury Secretary Steven Mnuchin had predicted the so-called X date, the point when the USGovt will no longer have enough cash and revenue available to pay all bills in full and on time, would come sometime in the autumn months. Currently the legal borrowing limit is set at $19.81 trillion for the USGovt. Since mid-March, when the most recent debt ceiling suspension ended, the USDept Treasury has been using special accounting measures to allow the government to continue borrowing as needed. They basically borrow from numerous trusts and pension funds, expecting to repay later. But those measures will be tapped out between early and mid-October, according to the CBO estimates. Bear in mind that in 2012, the Obama Admin suspended all budget limits, and set a timetable for the debt limit to take effect in the first year of the current presidential term. It was clear sabotage, with a pass given to the Obama gangsters.
Deadlines for both are fast approaching, actually linked to the beginning of the new fiscal year on October 1st. Neither the House nor the Senate has passed any of the 12 spending bills that are needed to keep the federal government running. Budgets for the various federal agencies are divided among those 12 bills, and thus each must receive special scrutiny (expect obstruction) from congressional committees before passed by the USCongress. But it has been more than a decade since the august corrupt legislative branch has conformed to the regular budgeting process. The result has been an embarrassing cobble of comprehensive stop-gap spending bills like that one approved in May that covered the remainder of the current fiscal year. The USGovt truly is well along in acting like a Third World nation.
The final word on when the debt ceiling must be raised will come from Treasury Secretary Mnuchin. Earlier this month, he told a House Appropriations subcommittee, “I am comfortable saying we can fund the government through the beginning of September. I would prefer not to give a range at this time. I think that Congress should act quickly, raise the debt ceiling, and we should pay our debts on time.” In particular, Mnuchin has urged lawmakers to take action before they leave for their August recess. See CNN Money (HERE) and USA Today (HERE). The factor not adequately reported in the US press is that the Congress, comprised by great majority fascist NeoCon with red and blue coats, might wish to force a debt default on Trump’s watch. They might work to combine a debt default with other contrived factors so as to force a Trump resignation. Instead, they will simply cause duress for hundreds of thousands of federal workers and citizens.
◄$$$ SOCIAL SECURITY BOARD OF TRUSTEES HAS APPEALED FOR AID AS THEY ADMIT THE FUND IS BROKE… IT HAS A $46 TRILLION SHORTFALL… NO PRESS COVERAGE. $$$
A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning. They warned that Social Security is running out of money. Given that tens of millions of Americans depend on this public pension program (soon the Jackass, haha) as their sole source of retirement income, one might expect the story to be front page news. Every newspaper in the country pays close attention to the pension crisis shared by many states and even cities. They should have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone. But that did not happen. The story was hardly picked up. Just like the Clinton murders of those ready to testify before the USCongress against the Democratic National Committee. The list of murders is about five or six for just this motive in DNC protection since early 2016 with Seth Rich the most recent kill. No press coverage.
It is astonishing how little attention the Social Security issue receives, considering the US demographics are shifting toward the higher age groups. The shortfall, just like for the Central States Pension for teamsters (truckers), could blossom into being one of the biggest financial crises in US history. Such is not hyperbole either, since the numbers are very clear. The USGovt itself calculates that the long-term Social Security shortfall exceeds $46 trillion, and that does not count Medicare which bears even more red ink. (The Jackass might order at Medicare cost a left knee replacment, haha.) The basket case known as Social Security needs a $46 trillion bailout. It has served for decades as a free lunchbox to raid by every single presidential administration. The amount is over twice the national debt. Moreover, it is over 60 times the size of the bailout that the banking system received back in 2008, whose TARP Fund by the way, was stolen by the Wall Street banks for benefit of their preferred stockholders. The USGovt official budgets and spending are a story of reckless spending, endless thefts, a gargantuan welfare state, and staggering war costs. See Zero Hedge (HERE).
◄$$$ WORLD GDP IN CURRENT USDOLLAR TERMS HAS PEAKED… BLAME IS GIVEN TO THE DECLINE IN OIL PRICE, BUT ANOTHER BIG FACTOR IS THE MASSIVE FAILURE OF CENTRAL BANK POLICY REGARDING QE BOND MONETIZATION… IT DESTROYS CAPITAL… ALSO THE PREVALENT WARS ARE HIGHLY DISRUPTIVE TO THE GLOBAL ECONOMY, WITH CAPITAL DESTRUCTION VERY VISIBLE AND CAPITAL DIVERSION OBVIOUS… THE UNITED STATES IS RESPONSIBLE FOR BOTH KEY FACTORS. $$$
World GDP in current USDollars is a simple concept. It is calculated by taking the annual GDP for each country in the local currency (for example, Euro, BPound, Yen, Yuan) and converting these GDP amounts to USDollars using the FOREX conversion rates. Then just add together the GDP amounts for all of the individual countries, with no need for inflation adjustment. A basic comparison of nominal GDP growth amounts gives an indication regarding how the world economy is growing, inclusive of inflation. Calculation of GDP on this basis is also inclusive of changes in relative shifts in currencies to the USDollar. It is basic. But the result is alarming. For the last couple of years the World GDP on this basis is no longer growing robustly. In fact, it has begun to decline, with 2014 being the peak year. Below is shown the World GDP on a current USD basis, in a chart produced by the World Bank.
The downturn in Current USD-based GDP is very much related to the fall in oil prices since mid-2014. A similar problem is affecting natural gas and coal, as well as some other commodities. These low prices across the commodity board, and the deflation that they are causing, seem to be flowing through to cause low world GDP in current USDollars. Many nations are suffering from lower commodity income generally, adding to deficits, harming their economies. While energy products seem to be a relatively small component compared to world GDP, in fact, they play an outsized role. The usage of energy products makes GDP growth possible from a wide spectrum, like industrial processes, transportation systems, farm fertilizer programs, lighting of buildings, and more.
The Jackass adds that two other factors play a very big role in the global recession. The QE bond monetization initiative has been running for over five years. With it comes capital destruction in a sequential manner, from higher cost structure, lower profitability, and retired capital equipment. This is not well understood by the masses who follow the false dogma pumped by Wall Street and the USGovt minions. The second factor is the prevalent wars that the United States has waged, like in Ukraine and Syria. It is hard to say that our sweet savored wars in Afghanistan and Yemen harm the global economy, since they are the deepest most remote backwaters on the planet. The Afghan heroin surely interferes with US workers and their ability to function. However, the war factor is important from a secondary standpoint. Money invested in war is not invested in business promotion and plant investment and product development, not in commerce generally. The US has lost its way with capitalism, and prefers bond fraud, market rigging, welfare programs, and endless war. The result is that the once leading economic power is diverted by destructive endeavors and corrupt goals, with a putrid outcome and harsh economic influence.
Other oil producing countries are clearly having problems, which fortify the energy factor as a negative argument. It is a real negative factor, not denied. The following graph shows similar ratios versus the global base, done for a number of other commodity producing countries. A comparison shows that the GDP patterns for these countries are similar to that of Saudi Arabia, with a recent peak and current decline. Because resources (including oil) do not account for as large a share of GDP for these countries as for Saudi Arabia, the peak as a percentage of 1990 GDP is not quite as high as for Saudi Arabia. But the trend is still downward, with 2014 typically the peak year. See Our Finite World (HERE).
◄$$$ THE VALUE OF SOVEREIGN BONDS WITH NEGATIVE YIELDS CONTINUES TO GROW, INDICATING A BROKEN BOND MARKET STRUCTURALLY ACROSS SEVERAL MAJOR NATIONS. $$$
The depth of the global financial crisis and the weakness of the ensuing recovery (as in continuous fierce recession) has led to new ways to implement monetary policy. With attempts at resolution for the crisis in 2009, central banks in several advanced economies quickly moved policy rates to the zero bound (not really a bound) and initiated large scale asset purchases which monetized official deficits (much like African nations). In more recent years, with price inflation still below the official targets (upon incredible accounting fraud) and limited support from fiscal policy, several central banks lowered their policy rates below the previous zero lower bound, embarking on negative interest rate policies. Savers are given nothing for their money lent to the banks. The practice was so widespread among the (hardly industrialized anymore) developed nations, that the term NIRP arose. The growth of negative yielding bonds indicates a truly broken system. They total around $8.5 trillion, set to break new records, shown in the graph below. If the best economists in the 1970 decade were asked if they expected multi-$trillion debt monetization and negative bank rates in the following decades, they would be laughed out of the conference room. But here and now, they are standard, and for a very good reason: the Western financial system is bankrupt and its structures are fully broken. Neither government officials nor central bankers admit openly that the wrecked structure from ZIRP and QE is even a problem. See IMF (HERE).
◄$$$ THE MASSIVE BANK DERIVATIVE MACHINERY IS A DISASTER WAITING TO HAPPEN… IT IS OVERDUE… THE PRESSURES BUILD WITH EACH PASSING YEAR, AS MORE DEBT IS BALANCED IN GRAND TOWERS, STRETCHED HIGHER BUT WITH LESS FOUNDATION AS FOOTPRINT EACH YEAR… THE PATH THEY CHOSE CANNOT BE MANAGED… THE LOSERS ARE THE REMAINING USTREASURY BONDHOLDERS… THE DERIVATIVE MACHINERY CANNOT CONTINUE TO CONTINUE THE BALANCING ACT WITH FABRICATED BOND DEMAND. $$$
Bank derivatives are the glue that holds together the broken US financial structures. They once totaled over $1 quadrillion a few years ago, but with lies and redefinition and some liquidations, the total is around $750 trillion only. The losers are long-term bondholders, unless they sell out at these artificially high prices and silly low bond yields. The USGovt deficit is over $1.2 trillion per year (huge supply), when bondholders are abandoning the USTBond securities (absent demand). Yet the bond yield is kept low by means of a mountainous fortress of bank derivatives. The USTBond will lose a lot of value, but in the future. Already many nations are dumping their USTBond holdings at 35% discount, executed central bank to central bank, and done very quietly. Such transactions form a loser. The Chinese will be losers, along with Saudis. They are the designated bagholders, from the Arab alliance toward maintaining 40 years of the Petro-Dollar. The Saudis surely pitched in at least $3 trillion for the USDept Treasury’s Exchange Stabilization Fund, probably as agreement from the start in 1973. They will never see that gargantuan stack of money. It is difficult to conceive, but another big loser is the derivative machines and their owners, the USGovt. They are not people but they do represent the sovereign nation of the United States. The nation will default on its debt, which is likely an event ensconced in secrecy and duplicity and deception, as part of the Global Currency RESET. The fallout from default on the global reserve currency will be tremendous, and cause a global catastrophe. Those nations who swap to Gold bullion will avoid the calamity.
The loser is owner of the derivative machinery, at the USDept Treasury. They not only print more hot money to cover the losses, but they increase the leverage to dangerous levels. This is African hyper-inflation in a tall casino. With each new quarter, the leverage increases since the big banks resist in placing more reserves in their core asset structure. So they leverage higher. The ultimate problem is that they increase the leverage every so often in order to manage the greater volumes. They will eventually hit a storm that knocks over their tower built with stained toilet paper. The deluge will cause a tsunami of fecal waters. The default is inevitable, and any criticism that such an event is impossible is purely patriotic stupidity and morons shouting. The reality of default is screaming. The USGovt cannot repay $20 trillion in debt, and can barely redeem the massive dumping of USTBond in progress. Worse, the debt rises by over a cool $1 trillion per year. And this figure does not count future obligations, which will also default. If the Jackass, who turned 65 years of age in May, receives more than two years of Social Security income, it will truly be a miracle.
◄$$$ DEEP SUBPRIME CAR LOANS HIT CRISIS ERA MILESTONE… ALL THE SYMPTOMS AND FAULTY LENDING STANDARDS REPEAT THE HOME LOAN SUBPRIME BUST FROM 2007, THIS TIME IN THE CAR MARKET… THE DELINQUENCY RATES ARE RISING ACROSS THE SPECTRUM, WITH A REDUCTION IN LOAN VOLUME OVER LAST YEAR… THE NEWCOMER DEBT ISSUERS ARE TAKING NASTY HITS. $$$
Amid all the reflection on the 10-year anniversary of the start of the subprime home loan crisis, an area of the auto loan market is in deep trouble. It is known in industry parlance as deep subprime. It has seen the delinquency rates tick up to levels last seen in 2007, according to Equifax. The credit bureau wrote, “Performance of recent deep subprime vintages is awful.” Analysts have been warning for years that subprime car loans pose a threat to lenders, manifested by rising delinquency rates. They have edged higher since reaching a post-recession low in 2012. But it was not until last quarter that the least creditworthy borrowers started to show the kinds of late payment profiles that accompanied the start of the financial crisis in 2007. Witness a subprime redux, but in the car market. In an identified twist, the newcomer debt issuers for automobiles are faring much worse in delinquency and bad loans.
The reason for the increase is loosened lender underwriting requirements, as more firms tap into a declining market for car loans. The key factor is not that there are more customers with worsening credit profiles. Such is the opinion of their chief economist Amy Crews Cutts. She believes it is not a case of chasing a larger subprime share by lenders, noting almost no change in median credit scores. Lenders are clearly permitting other underwriting standards to slide. Her comments were directed at the monolines, which issue the bulk of subprime loans. They specialize in one area of the credit market and dealer finance companies, with links to their car dealerships. Consider that they have a vested interest in moving inventory at their dealer showrooms. In a cowardly or ignorant display, Cutts claims that a repeat of the financial crisis is not necessarily near, with perhaps no great concern over the auto loan market. Gee whizz! She just listed all the reasons exactly why the subprime car loan market is ready to blow up, in a repeat episode of 2007, just a different location. All the symptoms, all the lax lending practices, all the delinquency data rhyme with the past event ten years ago. Maybe the car market will enter a bust in September 2018, the tenth anniversary of the Lehman Brothers bust (kill job). The Jackass gutt says the car echo event will happen sooner than 13 months from now. See Bloomberg (HERE).
Some sidebar comments. Some kind of banking, credit, insurance scam might be unfolding, with a likely site being the car market. It could be both the vehicle sales or the loan sector that light the fuse. The chances are that this large fraudulent house of cards is just waiting to collapse and be bailed out with USGovt funny money. Imagine a $300 billion CAR TARP Fund. Not very likely, when using a more critical eye. The car loan originators seem not to care, just wanting the fees. Then they shove the toxic income stream from the bad car loans into mortgage bonds, into special tranches not well examined. Many loans are with negative equity at their origination, a tribute to the insanity. Maybe some are bought by the FHA in the USGovt. Others are possibly bought by stupid pension and insurance funds, eager to earn an income stream even if with toxic layers. The big losers are bond investors and if they participate blindly, the USGovt again.
◄$$$ CREDIT CARD DELINQUENCIES HAVE BEEN OVERTAKEN BY CAR LOAN DELINQUENCIES, AS SIGNAL FOR THE NEXT FOCUS FOR THE BUST… WHAT SUBPRIME WAS TO THE HOUSING MARKET IN THE 2000 DECADE IS NOW HAPPENING IN THE CAR MARKET… UNDERWRITING IS RECKLESS… NOTHING LEARNED FROM THE LAST CRISIS, JUST A SHIFT OF NEW LOCATION FOR THE NEXT CRISIS. $$$
◄$$$ PUT CALIFORNIA IN FOCUS FOR THE PENSION CRISIS… CALPERS HAS CUT PENSION BENEFITS BY OVER HALF… THE SHORTFALL IS BETWEEN A QUARTER OF $1 TRILLION AND NEARLY $1 TRILLION… NOT FIXABLE. $$$
Meet the retirees of the CALPERS pension crisis. Retiree Patsy Jardin will see her annual income plummet from $49 to $19 thousand as the California Public Employees Retirement System cuts benefits. See YouTube (HERE). Several cities and municipalities in California are indebted basket cases with a huge pension liabilities that cannot be met. Irwindale is an example. There is the official rosy view, but also the skeptic view put forth by Stanford Institute for Economic Policy Research. The rosy view employs silly favorable assumptions not based in reality, either in the bond yields on the investment nut (if it exists) or the demographics for new retirees. Give credit to Stanford Univ, as they boldly argued with evidence that Hillary Clinton stole the primary, and stole the state election for the presidency in 2016. The rosy estimate for the Irwindale public pension liabilities equals $32,447 per household in the city. Put on the skeptic glasses to estimate the liability at $134,907 per household. Irwindale carries the heaviest pension load of more than 1000 California public agencies covered by analyses. Add Orange County, where Newport Beach, Brea, Santa Ana, Anaheim and Costa Mesa are located. Each town ranges in shortfall from (rosy) $5435 to $6653 per household, or (skeptic) $15,976 to $19,062 per household.
Stanford Univ operates the PensionTracker.org website, which launched last autumn, initially listing local agencies. Recently it provided an important update that gathered much attention and angry responses. California ranked seventh highest nationwide in debt per household when viewed through rose-colored glasses ($15,618), but third highest in the nation when viewed through skeptic glasses ($77,700). Enter Joe Nation, public policy professor at Stanford Univ and director of the data project. The unfunded pension figures shocked even him. All told, the California public pension systems are $281.5 billion short, including pension bond debt. Through Nation’s skeptical lens, with more defensible assumptions in the calculus, the state is nearly $1 trillion in the hole at $946.4 billion.
Nation, a Democrat who served in the Legislature for six years, represented Marin County (just north of San Francisco), where Democrats constitute nearly 80% of registered voters. He authored bills on greenhouse gas labeling for cars, fuel efficiency standards for tires, and tax incentives for alternative energy. Despite his solid civic efforts, Nation has earned the wrath of public employee unions, a traditional Democratic power base. His shocking analyses of public pension debt has upset the power centers in the socialist state that would qualify as the seventh biggest economy among nations in the world.
Stanford scholars have been calculating how deeply in debt its pension systems will be if they earn reasonable returns on investments, below the silly rosy estimated laden with absurd assumptions. The rosy estimates refer to the shortfalls calculated by officials themselves for their own managed funds. Lots of vested interest and bias there. They currently assume that the California’s pension systems will earn 7.5% on the core nut. The actuarial lens is ridiculous and not defensible. They claim the CALPERS fund to be only $241.4 billion short. The amount is a staggering 38 times larger than in 2003, when the shortfall was $6.3 billion. The clowns do not include bond debt. See OC Register (HERE).
◄$$$ EFFECTIVE RENT HAS BECOME A MUCH LARGER SLICE OF DISPOSABLE INCOME, AS THE FIERCE RECESSION HOLDS DOWN INCOME… SPENDING ON ESSENTIALS AS WELL AS DESIRED ITEMS MUST BE REDUCED. $$$
Across major metropolitan areas, the effective rent has risen to equal over 23% of median income. It has reached the highest level in two decades. For the past several years, rents have increased much faster than incomes. Extreme distress is evident in US households.
◄$$$ TAX & BUDGET ISSUES MAKE FOR A NASTY STORM… STOCK BUYBACKS WILL HIT THE WALL WITH FULL STOP, WHEN THE TAX BILLS ROLL IN. $$$
George of the COMEX provided a cold splash of water in the face, regarding corporate tax flows. The USGovt debt situation has hit the wall, with the renewed debt ceiling. They had quit counting, but no longer, a nice pass for Obama, but with his sabotage of Trump. The USDept Treasury is well into emergency measures, which means all their spending comes from other accounts which must be replenished. The clowns in the USCongress have only 12 working days in September, when they come back to deal with this mess. They are already saying at best they are hoping to have a budget by year end. Do not expect much tax reform during this period of deep stress. George gives warning. Wait until it is in stone the corporate tax rate cut will not be retroactive. I am 99% convinced that all 2017 corporate tax submissions are based upon expectations of a much lower tax rate, even a back-dated rate. They would get slapped in 2018 to pay 2017 taxes. This is exactly where the better stated quarterly earnings are coming from.
Just look at corporate tax submissions for 2017, which are way lower. The lie is that we are all told these companies are doing better. There is no source of greater profits from the business lines. The economy is not more robust. The raw numbers submitted have fallen considerably. By the way, no way can the USCongress complete reforms on any meaningful tax reduction, even on the corporate side. When the tax slam of reality hits, the corporations will halt their stock buybacks. Their stock share prices are at risk. One more risk besides the USFed tax hikes, even though small.
◄$$$ STANDARD OF LIVING HAS GONE IN THE OPPOSITE DIRECTION OF DEBT ACCUMULATION… THE BIG LIE BY AMERICAN LEADERS AND BANKER ELITE IS REVEALED… DEBT MAKES WORSE THE STANDARD OF LIVING IN THE LONG TERM. $$$
## TRIGGERS FOR KING DOLLAR FALL
◄$$$ THE DOLLAR EMPIRE IS FADING, WITH CHINA OVERTAKING IN GDP… HALF THE US-GDP IS SHUFFLING DEBT PAPER ANYWAY IN A TREMENDOUS EXAGGERATION OF ECONOMIC ACTIVITY… WHEN THE LEAD IS LOST, THE GLOBAL CURRENCY CHANGES (OFTEN WITH VIOLENCE). $$$
◄$$$ MAJOR DE-DOLLARIZATION TREND IS SEEN IN RUSSIAN ECONOMY… THE TECTONIC PLATES ON GLOBAL FINANCIAL STRUCTURES ARE SHIFTING, IN PREPARATION OF A GREAT REJECTION OF THE KING DOLLAR… THE EASTERN COORDINATED EVENTS OF SPITTING IN THE FACE OF THE KING DOLLAR AND KNEEING HIM IN THE GROIN ARE VERY NEAR, WHILE DECLARING HE HAS NO CLOTHES. $$$
Russian Minister of Economic Development Maxim Oreshkin said in early August that Russia's national Ruble currency should be supported as a result of a big trend toward the de-Dollarization within the country's economy. The Russian trend away from USDollar usage is growing at a steady pace. The change is seen to underscore the need to support an increased role of the Ruble in trade and commerce. He made the comments at a session on the development of transport infra-structure in Northwest Russia. Minister Oreshkin stated, “There is a big trend toward the de-Dollarization of the Russian Economy. The central bank made some very important steps so that fewer foreign currency loans were issued. [The Ruble’s increased role] is such a trend that should be fully supported. Russia should move away from, among others, foreign currency loans because we see what foreign exchange risks can lead to.“ The entire response seems two years late.
The conferences and planning sessions concerning the reduction of Russian dependence upon USD payment systems have intensified after US President Trump signed a new round of sanctions against Moscow. Valery Vasiliev, the deputy chairman of the Russian Federation Council's Committee on Economic Policy, said that the usage of the USDollar in transactions should be reduced gradually so that the Russian Economy would not be harmed while recovering from the outcomes of the crisis. Russian Deputy Foreign Minister Sergey Ryabkov said that the cutting dependence upon US payment systems has become a necessity, such as a national priority. He added that Moscow plans to intensify the work in this direction. In early July, Russian President Vladimir Putin and China’s leader Xi Jinping agreed to continue consultations on a wider use of national currencies in mutual payments and investments. Negotiations on the use of national currencies in bilateral trade have also been discussed with India, Iran, and Turkey. See Sputnik News (HERE).
The removal of the USD from trade, commerce, loans, and banking is a long gradual slow process. One is left to wonder, from a Western vantage point, why the Russians have not made the de-Dollarization a higher national priority following the 2014 Ukraine War and first introduction of the USGovt sanctions. They made it a high priority vis-a-vis Chinese trade and payment structures, even investment. The sanctions are truly baseless in stated cause, but they are essential for preventing the Eurasian Trade Zone from joining with the European mass. Refer to George Orwell’s works, of Oceania versus Eurasia. The United States, Great Britain, and Western Europe constitute Oceania, with many satellites like Australia. The de-$ movement spells the end of the King Dollar era. It will take time, but the movement seems to have risen in priority since the latest round of absurd sanctions were slapped on. This round includes sanctions against Iran, which seem in direct violation of the Iran Nuclear Accord. Usually it takes the USGovt a decade to violate a treaty, not six months.
The above is the Russian response. Next comes the Chinese response, like Asian countries buying Arab oil in RMB terms generally in great defiance. A great change is in the winds, truly deadly for the USD in banking function. The Jackass expects the European Union to exhibit defiance before too many months. They will conduct some trade with Russia in Rubles and with China in RMB, earning great anger from Washington. The event might provoke a great awakening in Washington, with alarm bells ringing and questions about US foreign policy being asked more formally. Expect the USGovt to impose sanctions on the entire community of nations, until the US is totally isolated.
◄$$$ RUSSIA IS FORMING NETWORK OF OIL PRODUCTION BY LONG-TERM CONTRACTS ON VOLUME PURCHASES… THE CONSORTIUM WILL SOLVE CERTAIN TECHNICAL OBSTACLES… IT IS DESIGNED TO OPPOSE THE PETRO-DOLLAR SYSTEM, AND TO FILL THE O.P.E.C. VOID… THE KEY FEATURE OF THE RUSSIAN OIL CONSORTIUM IS NON-USD SALES AND PAYMENTS… IT WILL THRIVE ON THE LOW OIL PRICE AND CASH FLOW PINCH… COMBINE WITH THE NATGAS CARTEL, ALSO BASED IN NON-USD SALES, TO SEE THE GLOBAL TRADE SYSTEM IS QUICKLY TURNING AWAY FROM THE USDOLLAR STANDARD… IN KEY RESPECTS, THE PETRO-DOLLAR STANDARD IS FRACTURED, BROKEN, AND DISMANTLED… IMPLICATIONS ARE VAST FOR GEOPOLITICAL SHIFT OF POWER. $$$
It is a brilliant strategy really. Russia stands as the world’s leading oil producer, yet the nation has made several key contracts to purchase oil from troubled nations. The most recent contracts are with Saudi Arabia, Iran, and Venezuela, using their Rosneft giant oil company. US neighbor Mexico is also considering to join the Russian consortium. Each story was covered in previous Hat Trick Letter reports, but the Iran story in this monthly report since a new development. With huge income stream, the Russians are in a position to be principal agents toward the construction of new production facilities, which are capital intensive. The are also ready either to construct or to assist in funding the construction of whatever pipeline needs arise. Rosneft and Gazprom should really start a bank. My bad! GazpromBank is the third largest bank in the Russian Federation. The Russian oil consortium addresses the cash flow reductions that some nations are facing. Other nations will join them, since the oil price will continue to remain down. Irony is thick that the Russian oil pool will grow and expand, as a result of the chronic low oil price, which is a manifestation of the dead Petro-Dollar. Their consortium feeds of the dead Petro-$ bones.
One might wonder why Russia would purchase oil, when a major producer. The answer is rather straightforward. They strive to create an oil network, whereby grades are mixed, but more important, whereby indirectly a Russian oil consortium is created. The oil consortium would be run by the Russian majors and not be priced in USDollars for sale. This is the primary motivation. There are also other significant motivations. Nations within the consortium could claim they work with the Russian network and are not part of payment decisions. Imagine the Kremlin designing by contracts a cartel with pooled oil resources to replace the vacant OPEC. Many technical aspects can be addressed by the consortium, like mixing grades for obtaining acceptable viscosity and contaminant levels, thus enabling sale on the open market. The Russians would manage this mixing process, and possibly the shipping process. The other advantage to members of the consortium is cash flow guarantees. The Venezuelans are desperate for this feature, and to some extent so are the Saudis. The Russians have rabid cash flow and offer to share the benefit. Other nations will surely join this pool.
In recent months, even the last two years, it has been crystal clear that OPEC has no leader, no power, no unity, no honored internal pacts, operating with tremendous strains to individual members. Its lead goats lie on reserves, as depletion is suspected. That OPEC has fractured into a meaningless gaggle of disunity is a vast under-statement. The Russians are working to create a supply network of reliable high volume suppliers, which will not be part of any USDollar agreement on the payment side. They are filling the OPEC void with a Russian Oil Consortium, which has tremendous importance yet no coverage by the West for its strategic value.
A key shift has occurred, evident of the death of the Petro-Dollar defacto standard. Something has gone into reverse of extreme importance. What most investors have not recognized since the beginning of 2016 is that Oil and USD have become positively correlated. This is inverse of a relationship which has held since the Petro-Dollar came into being in the 1970s. In previous decades, a higher USD value meant lower crude oil price and firm benefit to the USEconomy. No longer, and this is a critical shift, indicative of a dead Petro-Dollar regime. The positive correlation comes from USD rejection as a means for energy payment, as nations unload their USTBonds in order to pay their energy bills. Without the implicit oil backing that the USD has enjoyed for over the last 40 years, it no longer can serve the primary role as the global reserve currency. Hence just like any other currency, its intrinsic value is zero. The USD-based sovereign bonds are therefore at extreme risk. Gold finally is re-emerging as the global reserve asset after almost 50 years. This revolt will become evident when USTreasury Bonds are exchanged for Gold bullion within the many banking systems across the globe.
The energy market, led by crude oil, is slowly transitioning towards barter trade versus gold. The Iran Gold-Oil trade with India set the defiant standard for barter, which has erupted within the King Dollar court. Russia and China first threw in their support for Iran when they recognized Iran as the wedge which could help undercut the Petro-Dollar hegemony with severe damage. The stubborn Iranians have proved repeatedly to overcome USGovt sanctions. The Western banker cabal broadened their response against the upstart Iranian maverick, awakening to assume its former Persian Empire role in casting a big shadow in the East. The US and allies attacked Syria militarily and pursued Venezuela economically. Both desperate initiatives have been spectacular failures, as Syria has been the site of a USMilitary defeat that has surreptitiously used its ISIS tool. The US has not gained any ground in Venezuela, where Russia and China have been picking up the pieces. The need for the Eastern superpowers to support Turkey came from the geo-strategic realization that Turkey was to emerge as the energy distribution hub of the 21st Century linking Eurasia. It became an easy mission to complete, after the pathetic coup attempt led by the USGovt to topple the leader Erdogan. The Russians have firmed their grip on Turkey, and might soon deliver the ultimate insult in occupying (with rent paid) the Incirlik NATO base.
The Natural Gas Cartel is forming, on the other side of the energy arena. Permit the Jackass to repeat a short promotional clip from a July public article. The Petro-Dollar defacto standard is coming to an end, the low oil price a fatal blow. The entire Gulf Arab region is in turmoil, more evidence of the dead Petro-Dollar. The void has created an opportunity for a new energy cartel, led by the East. Entering the picture is the NatGas Cartel led by Russia, Iran, and Qatar, in a stage of current formation. A spectacular failure in Saudi Arabia will feature their bankruptcy, their lust to steal Yemen energy deposits, their fraudulent ARAMCO stock offering, and aggression within the Gulf region. The Saudi Arabian connection to the USGovt has been the basis of the Petro-Dollar for 42 years. The Gulf oil monarchies are fractured, as they individually scramble to find new partners, all unity gone. Qatar is well positioned with respect to Iran, Russia, and Europe. The Saudis have no friends, even tossed under the bus by the Washington NeoCons.
The NatGas Cartel will not be USDollar-based: IT FILLS THE OPEC VOID. The Natural Gas Cartel will feature payments in Chinese RMB, Russian Ruble, and later Gold Trade Note. The connection with Western Europe assures usage of the Euro currency eventually. The hurdles to obstruct the new natural gas cartel erected by the USGovt will fail. Enter the dawn of the new energy cartel from the East, which will introduce Gold in trade. See the Jackass article entitled “Enter the NatGas Cartel” on GoldSeek (HERE).
The strategic point is that both the oil sector and the natural gas sector are witnessing new unions in the formation. Russia is behind both the oil consortium and the natgas cartel. The oil network already has China being connected with a massive pipeline network, ironically funded by Chinese USTBonds. The natagas network will emerge when the US withdraws from the lost Syrian War, which will connect Iranian supply to Western Europe. Neither is to be USD-based in payment systems. The Petro-Dollar Standard is not only dead, but is in the process of being replaced with the oil/gas twin chambers. It is a matter of time, given the massive dumping of USTreasury Bonds, before the USDollar loses its prestigious global currency reserve. Then comes the launch of the New Scheiss Dollar. The pieces are coming together, and not one in 100 Americans sees the stages at work or the threat at the doorstep.
◄$$$ MILITARY IMPLICATIONS ARE VAST FOR THE VANISHED PETRO-DOLLAR… THE CRUDE OIL ENGINE HAS PULLED THE MILITARY MACHINE WITH UNLIMITED LICENSE… IT WILL COME TO AN END… THE ARAB OIL MONARCHIES IN SUPPORT OF THE KING DOLLAR COURT WILL LARGELY COLLAPSE FROM THE CHRONICALLY LOWER CRUDE OIL PRICE… RUSSIA & CHINA ARE THE GAME CHANGERS, BUT RUSSIA IS INVOLVED IN MORE DIRECT CHALLENGES TO THE WESTERN POWER STRUCTURE… WITNESS THE CLASH OF EMPIRES. $$$
Breaking the Petro-Dollar link which facilitates US hegemony, by means of the USTreasury Bond connection, makes growing Emerging Market (EM) economies of Asia, Africa, and Latin America subservient to the United States. This ball & chain with whip & club will go away. These mostly Eastern nations will seek alliance with Russia & China, for economic development, trade opportunities, and security protection. The process is well along.
The physical commodity crude oil is the lifeblood of any growing economy. By directly controlling the price, the United States has indirectly controlled global trade and growth. The US could use oil as a weapon to disrupt economies, by price or pipeline contracts, so as to create economic volatility within EM countries. Russia has stepped in with its military might to challenge and put an end to this brutal monopoly. With Chinese commercial development wielded in concert as a weapon, the Eastern superpowers will facilitate the peaceful growth of the EM world. Europe is also fighting for its energy independence by moving towards Natural Gas contracts, including LNG, by means of Gazprom pipelines. The USGovt is proving powerless to halt this movement.
The flow of crude oil across on the high seas requires safe passage, thus to facilitate trade and growth. By placing seven naval carrier groups spread across the globe, the US runs a protection racket by sitting at the choke points. Opposition to the US control mechanisms is grounds for war, terrorist hits, or even HAARP weather attacks. For this reason China wants the US out of the South China Sea and the Malacca Straits, each acting as major choke points. Similarly, Iran wants the US out of the Strait of Hormuz in the Gulf region.
The USMilitary runs on free oil, just like the USEconomy runs on free credit. The result is to enable the United States to operate military bases everywhere despite local opposition. Without this tribute of free oil, the USMilitary empire will collapse. The need to develop shale oil is seen as a last desperate attempt to maintain the US military hegemony, an unsustainable economically unviable option. The result has been a sustained lower oil price, and a breakdown of the OPEC allied platforms. Almost all oil monarchies will also collapse, leaving the US naked without its treasured Petro-Dollar.
Gavekal is an excellent research group. They posted an article with very adept analysis on the geopolitical shifts in progress as the King Dollar is deposed. Many are the significant changes to come soon, many already showing themselves. The disruption to the current status quo will be immense. Consider their passage on Russia, since so important with respect to energy, commerce, military, linkage from China to Europe within the Eurasian Trade Zone. The Russians are making direct open challenge to the Washington power center which has badly eroded. Their weapon is not military armaments or missiles. It is the crude oil & natural gas supply network, with the new oil consortium and gas cartel priced outside the USDollar. They are to replace the dying Petro-Dollar, which seems already dead.
Russia as a game-changer. Whatever the reason for the current anti-Russian hysteria in the US, it is now clearly in Russia’s interest for it to play a very active role in the coming Chinese efforts to reduce the power of the dominant maritime empire (US & UK). This means that Chinese and European products will be able to travel through Russia for the foreseeable future, so avoiding possible threats created by the US navy should Washington ever act to disrupt trade between the two economic centers.
The reason that the US approach to Russia is so short-sighted is that Russia’s role in the coming clash between the two empires may go far beyond it facilitating communication and transport across its territory. Indeed, Russia (along with Qatar and Iran) could already be helping China break the monopoly that the United States has on the payment of energy all over the world through the US dollar. For the past 100 years, the US dollar has been the world’s major reserve and trading currency. Needless to say, having the ability to settle one’s (rather large) trade and budget deficits in one’s own currency is a competitive advantage of huge proportions. Greater than its edge in finance, tertiary education, technology, biotech, weapons manufacturing, and agricultural productivity, this exorbitant privilege may be the US single biggest comparative advantage for the United States. See Gavekal (HERE & HERE) for their fine work on the coming clash of empires.
◄$$$ SKY CRANE OFFERED A STRONG COMMENTARY ON THE USDOLLAR AND ITS CONNECTION TO GLOBAL DOMINANCE, FAR ALONG IN UNRAVELING WITHIN THE GLOBAL PARADIGM SHIFT… IT IS LATE IN THE GAME FOR THE SHIFT, NO REVERSAL TO REPAIR THE USDOLLAR POSSIBLE… THE EASTERN ENERGY CARTEL HAS A FIRM FOUNDATION, LEAVING THE WEST WITH NO POSSIBLE RESPONSE. $$$
The following are the words of Jackass colleage Sky Crane, my minor edits and injected comments to connect points. Removing the control the King Dollar has wielded over all matters economic was a primary focus of the new energy cartel strategy emerging from the East. The goal is both to regain control of fair trade and to wrest control of mankind’s destiny from the cabal's USD contraption and their globalist dystopian plans. The elaborate preparations toward this end are coming into view. The new cartel seems to be advancing without much real resistance except in the media because the USD is already defrocked, the Petro-Dollar dismantling has momentum, and everybody knows it but the US population. They will remain in the dark until the end. Not much waiting is likely to be required for the powerful transition. All theaters within this shift are in either critical mode or are already broken down. The next few years will see the clean-up process. The die is cast. What we see from the cabal is the campaign to salvage whatever they can. The cabal has has no responses to the mega energy solutions of the new Eastern cartel. Delivering more costly natural gas by boat is a good example of how the United States is clueless and out of the loop. The only fast delivery pipelines the US comprehends is for narcotics.
The most important point in my view is that the new oil & gas cartel has the opportunity and must break definitively the grip and the hegemonic philosophy of those who still run the Petro-Dollar version. It must be rubbed out. These are the same cartel enemies who are stalling a larger shift to the new currency system within the RESET. In a sense, the USDollar remains as gasoline in their tank. The many petards they have always used are being dismantled or pushed aside. The cabal is being evicted from the financial system, the tipping point seemingly reached. Such critical turns usually pass without much notice. It is the fallout that is more clearly seen. Although these changes are not as apparent in the media, a good observer can see that many dynamics are changing every day. In no way can the genie be put back in the bottle, as events are moving fast. My main fear is that when the general state of humanity is observed, for the most part humans continue to act like barnyard animals, easily manipulated by the cabal. It continues in Pavlovian fashion. This is the hardest part of the shift to eradicate, as it is supported in real time in the MSM media where entrainment by repetition and inuring the public by saturation continue to befuddle barnyard inhabitants.
We the people can only hope the White Hats are well organized and can weaponize the same human (gullible sheeple) condition to effectively counter the cabal. Like popular movements toward fair money with safe bank accounts and true job creation, and usage of benevolent NGO groups. Best way is to take away the vig money from the cabal, namely their USD free pass. Understanding of how the human species is being altered permanently is key, as in genetically manipulated (GMO foods) and selectively modified by social engineering (FaceBook). It will determine how we will either survive the change or perish in it. Most of the barnyard animals are doomed one way or the other, fit for slaughter or ready for the treadmill.
◄$$$ IRAN MIGHT START OIL SUPPLIES TO RUSSIA WITHIN A MONTH… IRAN WILL JOIN THE RUSSIAN OIL CONSORTIUM FOR CASH FLOW SECURITY, REALIZED IN THE FORM OF BARTER… IN COMPLEMENTARY FORM, IRAN HAS SHIPPED TWO MILLION BARRELS OF SOUTH PARS OIL TO EAST ASIA… THE MASSIVE OIL & GAS DEPOSIT HAS BEGUN TO BE EXPLOITED AFTER A FLOATING PROCESS PLATFORM WAS PURCHASED AND DEPLOYED… IRAN HAS ARRIVED IN THE ENERGY GAME. $$$
Moscow and Tehran are expected soon to agree upon conditions for sale of 100,000 barrels oil per day, according to the Russian energy minister Alexander Novak. Iran can start deliveries to Russia under the Oil-for-Goods program within the next month, so stated Novak. Supplies can be either physical or swap-based, adding to the flexible options for Tehran managers. See Mehr News (HERE).
Iran’s Ministry of Petroleum announced that four crude consignments recovered from South Pars Oil Layer (SPOL) with an overall volume of two million barrels have been shipped to East Asian markets. In addition to being the world’s largest gas field, South Pars possesses oil layers which had previously remained dormant and untouched. The end of US sanctions has begun to unleash its potential. Iran can use the cash to fund the Iranian Gas Pipeline through Syria and Iraq. Let it be known that Qatar has been recovering oil from the South Pars Oil Field for several years, which they call the North Dome.
Iran had missed the opportunity because of lack of technical equipment like Floating Production, Storage & Offloading (FPSO) unit, an obstacle from the US sanctions and its allies. The previous Iranian Govt administration purchased an FPSO facility, which is a massive conglomeration of equipment, after sanctions were lifted. It was put in place, deployed in March 2017. Deputy Head of NIOC for Development & Engineering Affairs, Gholamreza Manuchehri announced that that the oil recovery from South Pars had kicked off. Crude oil is moved through a 12-inch pipeline after processing, then transferred to export tankers. The main destinations for the Iranian product were Asian countries. South Pars, a supergiant gas field Iran shares with Qatar in Persian Gulf waters, is estimated to contain over 14 billion barrels of oil in its oil layer. Its output will make for very significant non-USD energy sales volume. See Mehr News (HERE).
◄$$$ IRAN HAS RESTARTED OIL SWAPS WITH CASPIAN STATES AFTER A SEVEN-YEAR HIATUS… THE PRACTICE FACILITATES REFINERY AND DELIVERY STEPS… ANOTHER IMPORTANT STEP WITHIN THE RUSSIAN OIL CONSORTIUM, IN SERVICE TO THE EURASIAN TRADE ZONE. $$$
Under the swap deals, Iran accepts oil from other Caspian littoral states to use at its Tabriz and Tehran refineries in the north of the country. In return, it delivers the same amount and quality of crude to its southern oil terminals in the Persian Gulf region for delivery to international customers for the Caspian nations. The deal avoids costly shipment of Caspian oil output across the Iranian land mass. Several oil tankers have been offloaded at the Neka port on Iran's shore of the Caspian Sea. The swap consignments will gradually increase in volume.
The swap arrangement was halted during the tenure of former President Ahmadinejad, as authorities questioned its economic merits. However, Iranian leaders perceive the value provided to Eurasian neighbors trapped without shipping means, or else the Russian help them to see the value. Iran is proving thereby to be a team player in the overall Eastern oil network, critical to the Russian Oil Consortium concept. The new Iran Govt leaders decided in 2016 to resume the oil swap scheme with Russia, Kazakhstan, Turkmenistan, and Azerbaijan in a good neighbor policy. These nations are all among the littoral states of the Caspian Sea. Certainly Russia has promised Iran some reward, like pipeline construction loans or missile batteries or significant barter of goods. The average daily swap volume was 90,000 bpd in 2009, which Iran planned to raise to 300,000 bpd by 2015. Iran also charged the partners with a transit fee which totaled $880 million between 1997 and 2009, according to the local media. So the swap deals carry some profit, although of a small annual amount. See Tehran Times (HERE).
◄$$$ AMERICAN DOLLAR WILL CEASE TO BE THE RESERVE CURRENCY OF THE WORLD IF THE USCONGRESS DOES NOT COMPLETE THE IRAN TREATY… FORMER SECRETARY OF STATE JOHN KERRY IS WARNING THE CONGRESSIONAL MEMBERS OF DANGER… HE UNDERSTANDS THE RISK OF RETALIATION AGAINST EUROPEAN ALLIES. $$$
John Kerry believes that if the USCongress rejects the already approved and hammered out Iran Nuclear Deal, the USDollar could lose its global reserve status. He has given a stern warning, and deserves credit for flying the face of the idiotic legislature driven by NeoCon fascist interest bent on wider war. He stated in clear terms that if Congress rejects the Iran deal, “that is a recipe, very quickly, my friends, business people here, for the American Dollar to cease to be the reserve currency of the world, which is already bubbling out there.” He notices that the anti-USD movement already has significant momentum. Some opponents of the deal have argued that if Iran will not agree to a better deal, more favorable to US interests, the USGovt should unilaterally reimpose sanctions on Iran and its economy.
Kerry shot back “Are you kidding me? The United States is going to start sanctioning our allies and their banks and their businesses [who transact with Iran] because we [the USGovt] walked away from a deal? And we are going to force them to do what we want them to do, even though they agreed to the deal we came to? Are you kidding? That is a recipe, very quickly, my friends, for them to walk away from Ukraine.” Worse, the Jackass believes the Europeans will walk away from USD trade payments systems, will not honor Russian sanctions, will not support NATO, and will not oppose the Eastern energy pipelines. In other words, the European Union will set itself up politically and psychologically for joining the Eurasian Trade Zone led by Russia & China. The EU member nations will not tolerate the Washington NeoCons dictating energy policy and enduring US sanctions. What comes is US isolation, a Jackass forecast for three years running. See Real Clear Politics (HERE).
◄$$$ MOSCOW FURTHER EXITS THE USDOLLAR PAYMENT SYSTEM, AS IT ROLLS OUT ITS OWN MIR CREDIT CARD SYSTEM… SO FAR 13.9 MILLION CREDIT CARDS HAVE BEEN ISSUED, FREE FROM USGOVT INTERFERENCE. $$$
Following the recently adopted sanctions against Russia, Moscow is leaving the US payment system. New Russian MIR credit cards are very popular, due to being trusted by the population. Deputy Foreign Minister Sergei Ryabkow stated, “We will, of course, intensify our work on import substitutes as well as reducing the dependency on the American payment system and the USDollar as reserve currency. This is a crucial necessity. Otherwise we would always walk on the leash of the United States.” He expressed resentment that the United States used their dominant role in the money and financial system to exert pressure on foreign businesses, including Russian companies. After Washington imposed sanctions against Moscow in 2014, the international MasterCard payment system terminated the cooperation with seven Russian banks without prior warning. In response, Russia established a new national payment system to avoid further dependendence on the West. Washington is justifying the new sanctions with the alleged Russian interference in the US presidential elections last year. Initially, sanctions were justified with Moscow’s conduct in the Ukraine conflict. Both reasons for sanctions are bogus, and the population is becoming aware of the lies. The truth is never a tool for US NeoCon fascists.
The new Russian payment system is referred to as MIR, which translates as world or peace in English. The MIR cards are advertised with the following slogan, “Your card is free of external influences. Created in Russia.“ So far, 13.9 million MIR cards have been issued in Russia. They are distributed by the Russian national system for card payments NSPK, which belongs to the National Bank. See Anonymous News (HERE). The non-USD platforms grow steadily. More backfires, more US isolation.
◄$$$ THE GIGANTIC TRADE DEFICIT HAS MADE THE UNITED STATES VULNERABLE TO ONGOING ECONOMIC EXTORTION… THE UNITED STATES IS IN WORSE SHAPE THAN THE BRITISH WHEN THEY LOST THE GLOBAL RESERVE CURRENCY STATUS… THE BRITISH WERE NET INVESTORS, AS IN CAPITAL EXPORTERS… THE UNITED STATES IS NET DEBTOR, AS IN CAPITAL IMPORTERS… THE PLUG IS TO BE PULLED SOON, WITH THE AMERICANS TO SUFFER THEIR OWN SUEZ MOMENT. $$$
The growing trade deficit threatens US living standards and makes the country dangerously vulnerable to economic extortion. Simply by dumping USTreasury Bills and other USDollar denominated assets, China could cause the value of the USD to plummet, leading to a major crisis for the USEconomy. The Middle Kingdom holds more USGovt debt than any other country. Worse, China could lead a parade of international dumping of USTBonds with 20 to 30 nations participating.
America is like no other dominant great power in modern history, because it depends on foreign capital to sustain its military and economic dominance. Lately, the foreign bond investors have been replaced by USFed gimmicks related to QE and fabricated bond demand by derivative machinery. The result carries ten times the risk. For a good comparison, consider the British Empire. At the height of its imperial reign in 1913, Britain was a net exporter of capital, as in a foreign investor. The British invested the equivalent of 9% of its GDP in foreign countries that year, helping to finance the infra-structures of the United States, Canada, Australia, and Argentina. Long afterward Britain was able to retain a prominent international role, mainly because it earned interest and dividends from the enormous investments made during its strong years. In contrast, the United States today is a net importer of capital, as in a major debtor. The US borrows not only from China and Japan but also from Europe and emerging economies, at a rate of more than $500 billion per year. It comes to around 5% of current GDP. Among the total USGovt debt, almost $3 trillion stands as international debt, close to 30% of annual GDP.
The British Empire eventually declined. In 1956, it endured the humiliating embarrassment in a clash over the Suez Canal. The mighty Great Britain was brought to its knees not by a military defeat, but rather by an economic defeat. Eventually Egypt nationalized the Suez Canal. As its international debt grows, and as the USDollar is gradually pushed aside in global trade, the United States becomes ever more vulnerable to its own Suez moment. The Jackass foresees this key turning point moment happening in the energy market. See Atlantic (HERE).
## GOLD MATTERS
◄$$$ STEPHEN LEEB REITERATES HIS URGENT CALL TO BUY PHYSICAL GOLD UNDER $1300 PER OUNCE WHILE POSSIBLE… HE SHARES THE JACKASS VIEW THAT CHINESE PURCHASE OF SAUDI OIL OUTSIDE THE USDOLLAR WILL BE A VERY SIGNIFICANT EVENT, AND IT IS NEAR TO REALITY. $$$
Stephen Leeb has often been quoted in the Hat Trick Letter, for his insights. “Finally, I continue to believe that the catalyst for the inevitable transition from the dollar-based monetary system to one based on gold will be an Eastern oil benchmark controlled by China. In this regard, without going into detail here, all the evidence I see suggests demand for oil is on the verge of outstripping supply. Just look at two factoids. In the East, demand for oil is at record highs. But even in the United States over the past 52 weeks the moving average of oil demand is approaching eight-year or nine-year highs. The US demand for oil this summer has been the greatest of any summer since the early part of the century. As the East continues to grow, where will the extra oil come from? Yes, there is fracking, but as we have said before, fracking consumes as well as produces a lot of oil. So it would have to come from OPEC, except that OPEC is within 3% of its all-time high production, meaning very little excess capacity. We do not expect China to do anything until after its fall [autumn] party conference is over. Maybe it will wait until after the start of 2018. But change is coming. I do not expect gold to break out just yet; it will probably await some of the above unfolding events more clearly. But if gold does not decisively penetrate $1300 here, don’t feel bad. Just buy more.”
◄$$$ GOLD EXCHANGE TRADED PRODUCTS ARE SEEING HISTORICALLY HIGH DEMAND… IN EUROPE THE GOLD ETFUND HOLDINGS HIT A NEW RECORD HIGH IN 2Q2017… EUROPEAN GOLD ETFUND DEMAND STANDS AT 67% OF ALL GLOBAL Q2 DEMAND… GOLD DEMAND IN CHINA IS ON PACE TO REACH 1000 TONS FOR THE YEAR… SILVER DEMAND IN CHINA IS RUNNING AT 37% ABOVE LAST YEAR’S LEVEL… SILVER COIN DEMAND IN THE UNITED STATES IS SKYROCKETING OVER THE LAST TWO MONTHS. $$$
Combine all the gold exchange traded products (ETPs) around the world to conclude that the first half of the year has been superlative. Global ETPs (which includes ETFs like GLD) saw inflows of $245 billion in the first six months of 2017, a new record. The amount vastly eclipses the nearly $50 billion in the first half that serves as average over the last 10 years. The strongest part of the year is coming up, from September to December.
The current global demand is for gold ETProducts has been robust. Compare the first half of 2017 with $245 billion in demand seen in total global inflows, to the full year 2016 which saw $283 billion in demand. In fact, if the current $245bn were a full year, it would constitute the second largest full year amount on record. If the current pace continues, ETP inflows could reach an extremely impressive $500 billion by year end. That is half a $trillion. This clearly signals that institutional investors, who make up the primary buyers of gold ETPs, see a crucial need to have exposure to gold. Consider silver. The total global silver ETF holdings reached yet another record level last month, with unrelenting demand from investors buying silver ETFunds. They clearly see strong potential in silver.
Consider Europe. Holdings in gold ETFunds based in Europe just reached a new record level. Demand for gold is so strong in Europe that these ETFs represented 76% of all net global inflows in the second quarter. It is rather obvious that European investors see an ever-growing need to have exposure to gold. The European Union disunity and frequent calls to return to the former currencies has spurred gold demand as protection. The bank runs also prompt gold demand. The chart apparently indicates Q2 demand each year.
Consider China. The Chinese gold ETFs saw net outflows in the first half of 2017, but coin and bar demand was up a remarkable 56% over last year. Total gold consumption grew almost 10%, and physical withdrawals from the Shanghai Gold Exchange in July were the third highest ever for that month. The China Gold Assn stated, “Physical gold is playing an increasingly important role in Chinese residents investment portfolio. Gold is broadly favored by investors as a store of wealth, as global markets become more fragile, the Federal Reserve raising interest rates, and increasing geopolitical uncertainty.” The association estimates that demand for the year may exceed 1000 tons, which would be the highest level in four years. Gold production in the country is down 6% so far, similar to what is happening almost everywhere. The Jackass does not believe the Chinese have curtailed gold mine output, since they are as savvy as they are secretive. They are very likely storing the gold bar output with the sovereign wealth funds, amidst non-stop production. They surely are motivated by knowledge of tripled gold prices in the coming years. As for silver, the Chinese customs data shows that 1984 tons were imported in the first half of the year, 37% more than last year. It was also the highest level of imports for the first six months since 2010. The press stories promulgated about lower demand does not seem confirmed by the data.
Consider Asia and the gateway. Gold demand in India was up 26% in Q2, the third consecutive quarter of higher volume. Imports in July more than doubled. Retail investment in Turkey has surged, hitting its highest level since 2013. Gold demand was flat in Vietnam, but the government just introduced a measure to remove much of the bureaucratic red tape surrounding gold bars. As such, state banks will soon be able to import gold bullion directly with less obstruction, which will likely lead to a spike in demand. No letup in interest for gold in these countries can be seen.
Consider the United States. The USMint just reported that silver coin sales were up significantly last month, from 986,000 Eagles sold in June to 2.27 million in July, a jump of 130%. The strong trend continues, as silver sales last month were actually 65.7% higher than July 2016. Overall sales for gold remain subdued for gold, after the banner 2016 year.
Consider Britain. Meanwhile, UK dealer BullionVault reported an interesting anecdote about demand in early July. It reported that record gold holdings are now so high that they could make more than 10 million 18-carat wedding rings, or supply the microchips for 1.5 billion iPhones. Special thanks to GoldSilver.com, whose link was so long as to be unwieldy. See their main website. If they cannot make workable links, they will not be included in the report.
◄$$$ SILVER EAGLE SALES ARE ZOOMING… THE JULY SALES ARE WAY AHEAD OF LAST YEAR FOR SAME MONTH. $$$
◄$$$ SILVER TRADERS COVERED $425 MILLION OF SHORT EXPOSURE IN THE FIRST WEEK OF AUGUST… THEY MIGHT BE EXPECTING AN UPWARD MOVE, NOT WANTING TO BE CAUGHT ON THE WRONG SIDE. $$$
◄$$$ THE BRICS CURRENCIES ALL RISING… THE USDOLLAR UPTREND HAS ENDED… NOT JUST THE EURO CURRENCY IS RISING, BUT THOSE FROM ALL FIVE BRICS NATIONS… WITNESS THE RISE OF THE SERFS… THE RUSSIAN RUBLE HAS A VERY POWERFUL REVERSAL PATTERN WITH UPWARD BIAS IN ADDITION… THE INDIAN RUPEE HAS A RECOVERY OVER A LONGER PERIOD OF TIME… THE BRAZILIAN REAL IS SEEING A POSSIBLE MAJOR REVERSAL. $$$
◄$$$ THE SOUTH AFRICAN RAND CURRENCY RECOVERY IS PUNISHING SOUTH AFRICA’S VERY OLD COSTLY GOLD MINES… THEY ARE BUSY WRITING DOWN ASSETS IN LOSSES (DEAD CAPITAL) AFTER CLOSING DOWN MINES WIDELY… THE LULL IS TEMPORARY, BUT THEIR POTENTIAL PROJECTS HAVE BECOME MORE LIMITED AS THE MINES ARE VERY OLD. $$$
Sibanye, Harmony, and AngloGold are in the midst of writing down assets, as they reduce output and shut down some marginal mines. The country still possesses the world’s third largest gold reserves. What a difference one year makes. At this point a year ago, South Africa’s biggest gold producer was churning cash, evaluating acquisitions, and plotting expansion projects. Today, Sibanye Gold is recording losses and shutting down mines. The main difference between then and now is primarily a big rebound in their Rand currency. High costs and labor intensive operations from very deep and difficult mine deposits mean that Sibanye and other South African producers are vulnerable to one of the world’s most volatile major currencies. They are highly leveraged. Sibanye expects to report a first half loss of at least $360 million, compared with a $22 million profit a year earlier. The loss was partly due to the Rand rise, which averaged 14% stronger during the period, plus a big impairment charge on unprofitable mines it plans to close.
Since the first discovery near Johannesburg in 1886, gold production has been historically brisk. The country of South Africa boasted being the world’s biggest producer of the metal for a century until 2007. At one time just a few decades ago, an incredible one third of all gold in the world originated from SAfrican mines. However, time takes its toll. With many of its mines dating back to the 1950 and 1960 decades, the bulk of low-cost metal has been dug up and delivered. Current projects are located in deeper locations where costs to extract are higher. Also, the veins are thinner, meaning lower gold yields. Labor strife has also plagued the nation, with numerous strikes and battles over safety conditions. Deeper mines mean more dangerous work days, and more deaths on the job. Many of the mining companies have costs that are priced in Rand. Therefore, the costs have risen, in some cases rendering entire mines unprofitable.
Last year, Sibanye was considering the expansion of some existing operations, restarting production at its mothballed Burnstone project. They even had ambitions to harvest tailings at old waste dumps for gold. Now it is working on plans to close its Cooke and Beatrix West operations, potentially affecting 7400 jobs. The company officials announced earlier in August that it will write down the value of those assets by 2.8 billion Rand. The stock has declined by 58% in the past twelve months. Sibanye is not the only company feeling the pain from a stronger currency in South Africa. Another is AngloGold Ashanti, which produces about a quarter of its gold from South African sites. At the turn of August, its officials announced it will report a loss for the first half. The firm will write down the value of local mines by $86 million. Harmony Gold Mining also took a $129 million impairment write-off, after deciding to close some mines earlier instead of expending capital toward further development. See Bloomberg (HERE). This entire national story means lower gold supply, at a time of higher and rising gold demand.
◄$$$ TREASURY SECRETARY MNUCHIN VISITED FORT KNOX AND REPORTED THAT THE GOLD RESERVES ARE SAFELY STOLEN (ERR, SAFE)… NO AUDIT REQUIRED, JUST A FIVE SECOND VISUAL INSPECTION WITHOUT INDEPENDENT REPORTERS, AND SURELY NO ASSAY GROUPS. $$$
What an absurd publicity stunt. The USGovt has no credibility on gold matters, less than zero. The Fort Knox contents were largely removed during the Clinton Admin, and placed at the USArmy Academy in upstate New York. From there it was sold into the COMEX market in enormous volumes. With the zero percent gold lease rate fixed by then Treasury Secretary Rubin, the gold carry trade was combined with the USTreasury Bond futures trade to deplete the entire Fort Knox with 8700 tons gold. Perhaps Treasury Secy Mnuchin staged a movie set, complete with hundreds of yellow painted wooden blocks. The USGovt has such experience, having used them to lie about the stolen Iraqi Central Bank gold in 2003. Maybe they used many of the same yellow wooden blocks. Maybe as Rob Kirby would claim, the contents are actually tungsten salted bricks with gold coating of 1-2 mm thickness. The USGovt has ample experience in this area also, having sent a few thousand to Hong Kong and German banks in the 1990 decade. Both nations are working out restitutions deals in secrecy.
The USGovt knows full well that they will be compelled to form a new gold-backed currency. They are setting the stage for the event whereby the New Scheiss Dollar will be launched, backed by deep storage gold and yellow bricks, maybe the Strategic Petroleum Reserve also. The bricks are either made of wood or tungsten. With a $550 billion annual trade deficit, the big question is how many nearly worthless yellow bricks will creditors accept? Put the oil reserve into perspective. It is worth about $70 billion. So the USGovt needs 80 of them to forfeit in exchange for the credit on the trade deficit, every year. See Zero Hedge (HERE) and try not to vomit.
Thanks to the following for charts StockCharts, Financial Times, UK Independent, Wall Street Journal, Zero Hedge, UK Independent, Bloomberg, Business Insider, Calculated Risk, Shadow Govt Statistics, Market Watch, and many more.