Charles Hugh Smith – A funny thing happened on the way to permanently expanding global markets: unintended consequences. Borrowing cheap, abundant U.S. dollars seemed like a good idea when the dollar was declining, and few voiced any concern when $9 trillion was borrowed in USD-denominated debt around the world in the years since 2009.
Few saw the possibility of the USD rising, or that if it did appreciate against other currencies, that the blowback would destabilize the global economy.
It turns out a strengthening USD has triggered capital flight as other currencies devalue. Anyone propping up their currency to stem the flood tide faces another unintended consequence–a faltering export sector: China: Doomed If You Do, Doomed If You Don’t (September 1, 2015).
Meanwhile, the Imperial economy is suffering its own spate of unintended consequences, notably rising yields, a.k.a. quantitative tightening. As emerging markets and nations attempting to defend their currency pegs to the USD sell U.S. Treasury bonds (which have been held as foreign exchange reserves), the yields on the Treasuries rise as a matter of supply and demand.
As supply increases, sellers must offer higher yields to entice buyers to soak up the inventory.
This increase in yields reverses the primary effect of quantitative easing, i.e. declining yields/interest rates in the U.S.
This dynamic undermines both the emerging markets and the U.S. Emerging markets are not really restored to growth by selling Treasuries; the strong dollar continues to crush their currencies and dampen growth, as assets must be sold to pay back debt borrowed in USD.
Rising rates threaten the feeble U.S. “recovery” as well.
So what’s the solution to this inconvenient dynamic? QE4, of course. Why would the Federal Reserve launch QE4, if not to push rates down in the U.S.? Continue reading
Michael Snyder – Russian President Vladimir Putin has introduced legislation that would deal a tremendous blow to the U.S. dollar. If Putin gets his way, and he almost certainly will, the U.S. dollar will be eliminated from trade between nations that belong to the Commonwealth of Independent States. In addition to Russia, that list of countries includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan and Uzbekistan. Obviously this would not mean “the death of the dollar”, but it would be a very significant step toward the end of the era of the absolute dominance of the U.S. dollar. Most people don’t realize this, but more U.S. dollars are actually used outside of the United States than are used inside this country. If the rest of the planet decides to stop accumulating dollars, using them to trade with one another, and loaning them back to us at ultra-low interest rates, we are going to be in for a world of hurt. Unfortunately for us, it is only a matter of time until that happens.
For months, despite every shred of data pointing to a weaker economy, China’s currency has been strengthening.
Michael Noonan – All the world is indeed a stage, and what is unfolding is a worsening tragicomedy, and it is under the direction of the elites through their debt enslavement [un]known by the world as fiat currency. The unelected “officials” in the EU are the equivalent of Keystone Kops. In fact, that is also true even of elected officials. They are all a bunch of clowns in charge of the circus called government.