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 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 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 real money - create this compelling illusion. The power of the illusion corrupts, and its issuers 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, trade wars and QT. 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 (few little people 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.

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