Friday, June 22, 2018

FIAT Tribes

When you're a hammer, every problem looks like a nail. And when your'e a notorious deal-slinger, every problem can be solved with a better deal. So Trump is proving to be the best character to pull off a perceived "populist" policy of trade wars and sanctions (one and the same really) as a way to "put America first". In so doing, he compliments systemic tightening and CB balance sheet normalization, without crashing the system.

In other words, as we all know, the system can't really survive the removal of the QE punch bowl without Trump's "protectionism" as a psychological backstop. Progressive free trade and progressive monetary policy is "too much" progressive for our debt markets. And the number one thing to protect is the debt market the dollar system. It is a slow withdrawal of liquidity accompanied by a "just dare me" attitude - and emerging markets have felt the sting of the dare in the art of the deal.

We feel the pain of the BIS's never-ending stagflation Bolero. But with a quadrillion in derivatives creating, balancing and maintaining our entire global financial experience, any sort of hyper-shock to the system would set off a circular "dollar feedback"chain reaction that would challenge our economic reality to the point in which the reality we experience would dramatically, drastically change.

People would jump out of windows, as in the prior century's great systemic shock, simply because their belief in their own personal wealth and well being - their sense of value and their belief in what is important in this world - is shattered. But in fact, then as now, their most cherished beliefs about wealth and value were delusional all along. And therefore their panic can be attributed to a harsh psychological reaction ... to the shock of reality.

Think about this in terms of what you see today on both social and sponsored media (to the degree that they differ - very little). What do people care about? What causes them to lash out in inappropriate rage? And look at how grossly misinformed and mistaken they are about things which they seem as though they would nearly kill or die for. Is the drama real? Does it really matter?

The approaching reality is that the FIAT currencies of progressive economies are losing critical credibility. There is a very real "rule of law" that is no less important than "legal tender law" that is being violated, along with some other serious moral, social and political violations, across MANY borders - not just the borders and issues designed to distract you with emotional appeal.

Surely dear reader, you can "feel" that something isn't right with the world. But you're living in a Matrix where "debt is wealth". That illusion comforts the masses as they tweet and post about the absurd, and the ridiculously unimportant, from their completely inconsequential existence as a single "power cell" for a debt based reality.

It was the stackers and holders of debt who jumped from those windows in 1929. No one who owned farmland and vineyards, fine art and automobiles, oil wells and gold mines - free and clear - ever skipped a beat.

No one wants to see history repeated - and especially no central banker (and no politician) wants it on their watch. If they could preserve the illusion forever, they would. What you see today is what it takes to preserve the illusion.

Fiat currencies - derivatives of wealth (and themselves derivatives) create this compelling illusion. The power of the illusion corrupts, and its issuers (including those of cryptos - the transactors themselves) are corrupted. This is the nature of humanity.

Now the most powerful FIAT Tribe, to which all other FIAT tribes are connected for credibility, breaks with other tribes to defend its power. This "group retreat to avoid paying up" manifests in the abuse of power and separation from its cardinal rule of law. A currency cannot be used as a political (or tribal) weapon and hope to retain it's status as a global wealth reserve asset and unit of account.

This is where we are in the US Dollar system's reserve asset timeline. Destroying itself to save itself, now that all other policy has been exhausted. We got used to the lunacy of QE, and now we must endure economic sanctions and trade wars. There's nothing left to milk. Suicide is the final lifeline. Facts are living turned inside out. Facts are useless in emergencies ... How ironic.

But the families do enjoy a good spine-tingling twist of ironic tragedy. After all, if you didn't like this system, you won't like the next (and if you're one of the little people, you probably don't like the current system very much at all). On the other hand if you have a brand new set of keys to the clubhouse, you'll be one of the few who truly understands the advantages of the new system. It will be just grand. Yours is not a tribe, but a house. A house that stands above the rest, through the test of time ... a name that commands respect.

After all, the hand that gives is above the hand that takes.

Friday, June 8, 2018


It seems as though there have been 3000 posts, but in fact this will be number 300. So to commemorate this milestone, I did a little extra searching ... and found a few worthy gems.

I managed to find something that is perhaps the most stimulating read of the last several years. Though the author died in 2015, his view on derivatives captures the essence of Roacheforque's core premise about the dollar derivative, our derivative exchange rate complex, global financial markets, and the essence of our abstract derivative world.

The article posted above delves oddly into the subject of modern dance for several paragraphs (the author was both a Socialist, and a dancer, so there's a dose of subjectivity here and there) but otherwise, the "view of the world" that it offers is so astoundingly close to the view of this blog, that it is profoundly affirming to see such thoughts expressed so eloquently.

Here is a para-quoted teaser:
A key to thinking (through) this process is its abstraction. Particular, concrete labors become abstract labor; particular commodities extruded from their factories all embody some quantity of that labor, the ultimate determinant of their exchange value ... This other abstraction is the derivative, via which each of the component flows in commodification can be subdivided, valued, combined and sold again and again in the form of a financial instrument. On top of the quantitative abstraction of the energetics of production is a quantitative abstraction of the information about all of the possible future states of that system. Each of which can be separately priced and sold.
Martin understands how financialization creates a derived abstraction of the real world and everything in it. As money (our measure of wealth and power) is the prime force which motivates and drives the majority of human activity across the planet, financial markets are a prime driver of world affairs.

Martin recognizes that our money, our markets and our world have much more to do with the infinite world of possibilities than the physical world of the "here and now". As such, derivatives literally create our perception of the here and now, which defines reality.

Tracing back to the money which fuels this governance over our perceptions, we can reason that the creators of money have a power over reality which far oversteps the boundaries of their purview. And yet, all is perception, driven by illusion, where money creates our reality through a quadrillion dollar matrix of possibilities that shape it.

If people don't see a problem with this construct, so be it. But Roacheforque contends that people do not see the construct at all. Martin does, but perhaps the book will need to be read to flesh that out fully. The article, as a teaser, is stimulating.


Pepe Escobar never disappoints, and his recent article at the Hedge is another broadly affirming treatment of observations that are a backdrop to this first core view, namely, that there is a global response to our derivative reality and the unipolar (dollar derivative) power center behind it. 300 posts ago, this concept was hardly visible, but as we have followed it for years, we now see the fruits of the planted seed.
Western elites cannot but worry when central banks in China, Russia, India and Turkey actively increase their physical gold stash; when Moscow and Beijing discuss launching a gold-backed currency system to replace the US dollar; when the IMF warns that the debt burden of the global economy has reached $237 trillion; when the Bank for International Settlements (BIS) warns that, on top of that there is also an ungraspable $750 trillion in additional debt outstanding in derivatives.
It is interesting to see the BIS citing a derivative complex of $750 trillion (if they have indeed) whereas US call reports indicate a slight decline in US systemic bank numbers since 2008. That number is considerably higher than estimates of years past, though it doesn't account for non OTC numbers which probably account for the remainder of a quadrillion in notional USD.

But what does this massive concentration of perceived value truly accomplish? Is it "protecting the debt" as explained by Another, or does it actually provide substance to illusion by virtue of human expectations and perceptions? When we look at the continuously eroding quality of indebted, "progressive economy" civilizations, do we not see a world where the physical is decaying and the derivative (virtual) is "recovering"?

Is the wealth made by betting on layers upon layers of infinite possibilities pertaining to a single underlying reality truly wealth earned? Is it wealth at all? Or does it simply "fractionalize" reality while paying a full measure of derived wealth on derived outcomes? In the end, will derivative wealth collapse along with its denominator?

The banking class offers up derivative financialization as protection against a future of undesired possibilities - but instead, it "prices" everything in its own terms - defining all values of our world, our reality in the here and now. The reality it has created? One in which (by no strange coincidence) there is unprecedented wealth inequality, infrastructure collapse in it's sponsoring "advanced" economies, and a moral crisis of epic proportions.

By contrast, it's "competing reality" is one of equity partnerships, unprecedented real world infrastructure development and economic activity which has created new middle class wealth in participating nations, and a world in which key proponents are "enhancing collective autonomy and influence". Yes, it's just a fancy way of describing a multi-polar world. But more importantly (and especially true of Russia, historically and traditionally) an appreciation for the diversity of world history, its nations, cultures and traditions - and sovereignty at many levels.

By contrast, we have the unipolar order, which appears to prefer migration, race blending, culture blending, history revision and a homogenized under-class of manageable debt slaves within a global feudal (Hunger Games style) plantation. Take the progressive (democracy, Soros style) view of Africa for example. You will no doubt uncover the view (if you read between the lines) that "the country has never been able to civilize itself", so the cure for it's problems is that it's populations migrate to progressive economies where they can be blended in and "cared for" by the welfare statists.

Such ideas are indicative of the neocolonialist attitude that it is better to feed a man than to teach him to fish. For when you feed a man you become "the hand that gives". Always above "the hand that takes". Conversely, when we look at Asia's interests in Africa, they are much more productive and dignified than Dollar Faction (AADF) interventionism.

This is not to say that China is the world's great hope for a return to Western values. They are in fact the most outspoken advocates of derivative financialization in the SCO. But their partnership with Russia is a counter balance to their dollar dependency. Let us just say that, your grandchildren will never live to see a world governed and defined by "a quadrillion notional in Yuan". But their grandchildren may. And if so, the relationship of yuan to gold will be a huge factor in that definition.

Thursday, June 7, 2018

From Ridiculous to Surreality

This morning's syndicated network news has suddenly taken a turn from ridiculous to surreal, opening with a story about an aging black cocaine ring matriarch having her jail sentence commuted by Trump after being cajoled by Kim Kardashian West (cut to photo op) followed by more staged police brutality videos, then an androgynous multi-ethnic skinhead named Vlad introduces clips from a popular reality TV "gender sensitivity moment".

And who is the sponsor of this madness? Multi-national pharmaceutical companies.
God help us.

The producers of Idiocracy came eerily close to their dire prediction of a completely dehumanized, commercialized and commoditized media-to-audience class structure. The real life version is much closer to the Hunger Games, yet I suspect that Nora O'Donnell is doomed to be replaced by Formica Davis if the "news" progresses further in its current direction.

If you can find the truth (and even if you can't) surely you must get the feeling that you're being lied to nearly completely, all day every day that you view material that is being delivered to the masses. Our reward system of payment for the production of such material is governed by the general findings of the last post.

Mass delivery of information is far too powerful NOT to be corrupted, and we understand this, but the lengths to which the intellect of rational thinking beings is being insulted is mind boggling.

Again, the connection to recent posts is clear. We live in world where cost / benefit analysis replaces morality. As Trump himself would have it, it's all one big show and everything is for sale at the right price if it's a good deal.

We got to this sad state of affairs through the gradual and persistent degradation of traditional Western values - and the assault upon them continues for all to see, if only they could open their eyes.

Did it start with the corruption of our founding father's clear Constitutional assumptions regarding money? I think so. Humans are incapable of properly managing fiat money, and once they accept and widely adopt it, insanity in all forms ensues through the adoption of the world's foremost derivative structure - the dollar ... and it's "exchange rate system" a derivative byproduct.

Some will see only the correlation, but Roacheforque sees the cause.

Modern societies need fiat currencies, and there is a way to regulate them that bypasses the weakness of any Congress, any banking class or international monetary fund -  any construct of human decision making. But we have strayed so far from it, and have been hypnotized so thoroughly by its imposters, that we can no longer recognize reality on many fronts.

This is the result of a world of lies, deception and corruption at its very foundation, which engenders a false world of fake virtues, fake money and a fake alternate reality for the consuming masses. As I hope to show in my next post, the 300th, our world is a byproduct of "derivative logic"

Our only hope is the timeless permanence of the cure. Our greatest challenge is the disaster needed to reawaken.

Tuesday, June 5, 2018

What Kind of Value

There are a few decent online assessments of money's impact on moral values. Alarmingly, they all seem to omit the singular point of "what kind of money imparts what kind of value. For example:
If everything has a price, does nothing have a value? All money tends to corrupt, and absolute money corrupts absolutely. The love of money is the root of all evil.
All relevant truisms to be sure, but all treat "money" under a broad assumption that Roacheforque labors to dissect and clarify.

We can lament endlessly upon the evils of "money", but our modern society needs money in order to create positive social development. It needs money to function, and sound money can have a huge morally responsible impact.

It is debt based money, the money which intrinsically subordinates all lesser classes to the banking class, that engenders the moral hazard that we have seen on the rise ever since money became "purely debt based". Again, we must consider what is possibly the most insightful post ever offered by FOFOA:
Debt is inherently unstable. This is because debt can be destroyed instantly by non-payment ...  In today's marketplace new debt is created extremely easily and casually. A new debt instrument is issued with the ease of a single signature, and then that debt is traded into the marketplace. A system that is built upon equity positions is much more stable ... as equity agreements are entered into with much more gravity.
Taken into consideration, we can view the QT of US Dollar Central Bank (FED) policy not as gravitating toward an equity based monetary and financial system, but rather by simply altering the price (in its own terms) and flow of debt based money - a rather circular premise. The banking class is not changing money's form, they are simply controlling its flow. Further, all "accommodation" which in essence is a form of "saving the debt" only further erodes it's true basis. More debt to preserve its credibility. More ironic circularity - buoyed by boom-bust cycles.

If and when society's legal tender money morphs back into a real world equity position, it's nature changes drastically. The real world of physical wealth becomes primary, and the derivative world defined by "debt as wealth" becomes secondary. The banking class is thus redefined, and their position in society is restructured to be more socially beneficial.
If price is defined by debt, does nothing have value? Debt based money corrupts, and absolute power in the creation of debt based money corrupts absolutely. The love of "debt as wealth" is the root of all evil.
These statements more appropriately detail the moral impact of our current monetary system. We fail to grasp this little detail - that we inadvertently empower a ruling banking class to enslave us by holding our fellow man accountable to their absolute power ... in the creation of a debt based system of values ... that supersede our social and moral obligation to each other.

We allow the banking class to profit from our willingness to let their money system enslave us, according to a system of "getting ahead". But who are we getting ahead of? Each other.

The banking class plays society much like the political class does, as partners in a system of global banking-class corporatism. They use our willingness to exploit, to "gain at the expense of others" as the basis for our money system. The classes who sink deeper into debt, hold up the values of those with a greater share of equity.

The only cure for such a dilemma is to have competing equity based money systems as an alternative for societies to gravitate toward. China's use of equity agreements in international development partnerships, along with it's development of physical oil and gold markets are one such alternative.

The crypto asset phenomenon is another - though it's equity backing is problematic. Again, easily created money is easily destroyed. Artificial "hardness" eventually subordinates to reality. But most importantly, control over access to the "system" is a huge weakness. Yes there are bitcoin ATMs cropping up that allow you to pay tribute to that concept, but you are being taken. Crypto platforms, even when positioned as an asset class, will not change the nature of debt based currencies.

The exchange rate system is key, as it morphs and as its inputs change in relative value - wherever and however they may manifest. The destruction of wealth through political will reveals the artificiality, the fragility and the partiality of our "debt as wealth" construct. Intrinsically, we know that a beautiful Villa in Monaco has certain wealth in a civilized world. But due to political will, no amount of Turkish lira can buy it today, whereas a few years ago, this was not the case. The villa can always be bought with gold, but the dollar derivative manages it's relative exchange rate, which in turn obscures it's true equity value.

Again, an equity backed money or currency is not so easily destroyed as our volatile debt backed currencies are today. Our most widely held reserve fiat is the author of this instability, and the political will of the regime behind it, which wields the power of systemic access and control.

When the families determine that the BIS needs to intervene, change is assured.

Friday, June 1, 2018


Yes indeed, the price of gold in dollars is being managed ... same as it ever was ... ever since the dollar became "as good as gold" ... for all to see.

To follow the nature of this dollar system market contrivance is exhausting.

But if you were born in the 1970's, you will likely live to a time when the "price of gold in dollars" will be of little importance. Much like the "price of gold in rubles" is today. You will live to see the dollar system become irrelevant.

Once in a lifetime. More than enough time for gold to be repriced.

Monday, May 28, 2018


While the Euro has certainly not failed completely (as some would have it) neither has it stepped up to the task of "cushioning" the dollar's fall. It was designed in part to both encourage, and to gracefully offset, the dollar's decline. And the fact that it hasn't done either is simply a testament to the fundamental role of gold.

As explained (and ultimately predicted) gold flows in position to perform this function, as no fiat (and certainly no crypto) can, or will.

Confidence is now long lost in the USD's ability to act as a "free market" currency. It is true that US policy is predictable enough to know which "enemies of the state" will be attacked with systemic sanctions. But once a currency's role turns toward protectionism and protracted financial warfare, it's global usage demand is necessarily sacrificed. For a currency to have optimal appeal in a global usage context, it must have the apolitical (agnostic) attribute of gold.

The E.U.'s attitude toward the physical gold reserves of it's members was always a step in the right direction, but early proponents like Mundell (and of course, Another) must see today that politicians are indeed within the reach of Euro monetary policy. In the larger scheme of things, the inclusion and weight of Euro in SDR allows it to have influence within the next fiat regime. But the dollar's final weapon (self destruction by sanction) will bring this current regime to its knees.

The balance of payments "netting" that Jim Rickards describes in his strengthening axis of gold doesn't play out quite as literally as all that. As long as there is a functioning physical gold market for yuan, yuan will be accepted for oil, just as euro and dollar are. Today, the dollar prices gold. Tomorrow, gold will price the dollar. Gold is best recognized and appreciated for having no political affiliation or discrimination ... at a time when financial fiat-warfare is destroying global growth and productivity in favor of enriching a failed Hegemon.

The problem arises when dollar system sanctions hurt the wrong banks and corporations in a complex interdependent chain that "strong dollar policy" doesn't fully understand - especially where international banks and their derivative exposure is concerned. In the past, financial warfare was much simpler. But it always took place, and the rise of fiat gives rise to a new development in financial weaponry - reserve currency abuse.

Dollar system "tamperers" were warned ... by entities whose warnings should clearly be heeded. Fuck with our functioning global monetary system at your own peril.

It is difficult to understand who or what the "United States" really is today and what control it really has over the dollar system. But the certainty of change, and the shifting of power and wealth are always morphing - whether by design or circumstance. If the dollar system is doomed to a gradual sentence of irrelevance, and it's final rounds of ammunition are intrinsically self-destructive, the situation will be a forgone conclusion to say the least.

That being the case, the families can simply do nothing and watch the design of inevitability unfold. As a strong dollar has been shown by the BIS to be a factor in global stagflation, it can either weaken or drag the world down with its strength. That seems to be the same prescription as sanctions, as well as US military interventionism. Again, design and circumstance seem intertwined.

Plans to circumvent the dollar thus gain consensus appeal, despite deep financial entrenchment, and are increasingly robust. International banks profit in times of growth, not stagflation. Producer nations of the East provide such growth. A spoiled bully who sits in his own soiled diaper and throws endless tantrums tends to be ignored, no matter how unchallenged his former playground status was. He can have his stinky sandbox. There are fertile playgrounds elsewhere, and they grow over time.

So the Euro cannot be counted upon to act as a true "free market" currency.

But in any event, a free market in gold will certainly engender a more objective "free market" (freely floating) currency just as much as an optimal global currency will engender a free market in gold. They go hand in hand.

As for a "dirty float", what could be dirtier than dollar system sanctions today?

The Euro, as something mostly in-between, will cushion what it will cushion in the transition. The SDR will seem less political as a hybrid reserve fiat, and a trading bloc's gold will have a much greater role in fiat exchange rate factoring.

Countries? Nations? How quaint.

Thursday, May 24, 2018

Would They?

The worlds largest consumer of oil (of a 14 trillion dollar per year market) is now paying for it's oil in it's own currency. Buying not just from Russia and Iran, but soon to be the Saudis. From LEAP:
We had anticipated that Saudi Arabia could not resist for very long and would soon sell its oil in yuan to ... China. In doing so, Saudi Arabia, historically at the heart of the petrodollar system, would put a definite end to the hegemony of the dollar as energy exchange currency. ... the yuan-denominated futures contracts did indeed appear on the Shanghai Energy Stock Exchange last March and, as anticipated, a meeting was held in Shanghai in December 2017 between Saudi Arabia's Finance Minister and the Governor of China's Central Bank… to discuss the date Saudi oil purchases in Chinese currency will start.
... petro-yuan contracts of the Shanghai International Energy Exchange made a notable entry into the markets on 26th March 2018. Foreign giga-operators like Glencore and Trafigura immediately positioned themselves on those futures. At the end of the first trading day, the oil price in this market was 429.9 yuan/barrel. Less than two months later, it is 447.8 yuan/barrel, i.e. between the price of Brent and that of WTI - after yuan-dollar conversion, reflecting the seriousness of this market.
Interestingly, Donald Trump’s recent decision to tighten the sanctions against Iran has had the effect of boosting oil sales in yuan. The contracts went from 8 to 12% ... of the world market share and the volumes traded doubled (125,000 to 250,000) between Tuesday 8th and Wednesday 9th May [footnotes removed. editing for brevity].
We have touched upon this before, but the speed and progress of these developments are noteworthy. The AADF will have Mnuchin on overdrive. Let us hope trophy-wifey can cool his jets with ice-water and fans.

Buckle up, get extra butter for that popcorn, and perhaps a chilled Belgian lager or two. Trade Wars and Sanctions at this point will only hasten the dollar's demise.

If oil was to suddenly become very expensive in dollars, dollar holders could be spooked. Remember expensive oil? Could you imagine a 14 trillion dollar market, becoming a 60 trillion dollar market in less than 90 days? What a ride that would be ;0)

But the dollar system has that under control, right? I mean, 14 generational wealth dynasty's wouldn't (couldn't) dump their dollars in the same 90 days ... or ... could they have been slowly getting out of dollars for a decade and are just now holding the very last few? How would we know?

Perhaps there is nothing left for the AADF to do but take the gold at gunpoint, and just eliminate whoever it takes, by whatever means it takes, to enforce dollar hegemony through full spectrum dominance. The question is. Would they?