Wednesday, April 3, 2019

The Dollar Paradigm

Many people seem confused about the inexplicable and unpredictable "financial markets". This includes the recent action of cryptos. Most of this confusion stems from the problem of using an "old paradigm" framework in a "new paradigm" environment.

Most market watchers, at least the vocal ones, operate from a pre-1990's framework of how financial markets "worked" before the advent of financial derivatives.

It was not that long ago that the many hundreds of trillions in forwards, swaps and other financial instruments shown below simply did not exist:


But today they are the very foundation of the global dollar system. How long does it take for a medium sized country to spend 2 trillion dollars on various commodities for its population? Hard to say, but five banks have positions of 2 trillion in the commodities derivative marketplace today. You see, soybeans and pork bellies are irrelevant, it is the movement of their price in dollars which is the item traded.

Likewise, so called "dark money" in the form of lira, ruble, peso or riyal are irrelevant. But dark money issued in yen, euro, pound or yuan - and especially the US Dollar - these are relevant.

The financial markets are no longer mechanisms of supply and demand economics for goods and services. They are a derivatives casino for the currency trade. In most cases the item traded is truly the dollar. Another noted this explicitly in terms of the gold derivatives market, but all markets operate in this manner - the gold market being different because the underlying asset of physical gold is the only true form of real (not derivative - not debt-based) money.

But gold is not the point of this post. It's separation from paper currencies is. The issuing authority of a paper currency not pegged to gold has the absolute power which the derivatives casino affords. Is that currency relatively stable? Is it widely used in global trade? Is it widely held in sovereign reserves and the global bond market? Is it deeply embedded in its own self-referencing financial market? And finally, is it the preferred denominator as a betting chip in the worldwide derivatives casino? If yes to all, then you can rest assured that it is the item traded world-wide in every type of market known to man.

These concepts are taken for granted without their implications being fully recognized. Articles and posts are written everyday which support the core concept that it is the paper currencies which are the item traded in every marketplace where massive derivative positions exist - the bond market (interest rate derivatives) the equities market (stocks), the commodities markets and the currency markets themselves (FX derivatives). You see these four markets above and you see the handful of too-big-to-fail mega-banks which hold the lions share over nearly a quadrillion USDs in futures market positions. 

And these are just the publicly visible positions from call reports. OTC mostly, secondary insurers like AIG and Generali are not generally visible here.

And then we have the dark money continuum of the US Treasury and ESF (the financial arms of the Dollar System Military Weaponization Construct), the Federal Reserve System and it's primary dealers (the largest of which are shown above, a.k.a. the dollar system's Bailout Queens) whose main shareholders are the generational wealth dynasties who own the FED by virtue of voting rights and sit on the board of directors of the BIS.

This is the dollar paradigm which has turned the global financial markets into a massive confidence scheme ... not a PONZI scheme as some have likened it to. A Ponzi scheme is a qualitative level below the dollar system CONfidence scheme. It requires a flow of investors in a pyramid scheme structure who are willing to offer currency units for profit. The Dollar System requires no investors - it only requires an unlimited flow of the units of denomination and because those units control the price of everything (including gold) the issuer of those fiat units has ultimate control of the price of ALL underlying assets.

This is why the assets themselves are irrelevant (including gold). It is the denominator, the currency unit, that is prized above all. Who would rather have a thing that money buys when money buys everything? Ask yourself truly, do you really prize a stock, or the company it represents, or do you prize the profit, in currency terms, which that stocks future performance promises. Today, the issuers of the world's betting chips have guaranteed future performance, as only they can - and must - to keep the dollar paradigm in place.

Truly, nearly everyone lives in a dollar paradigm which they accept wholeheartedly without understanding it's implications.

Nearly everyone. Think about it ... and allow the flower of understanding to grow.

Saturday, March 2, 2019

SPECIAL FX

It has been said that the making of money "out of thin air" is frowned upon by the ruling class. One might wonder how this differs from the usual making of money from bonds, especially  when one looks at the eventual likelihood of USTs being traded as a subprime issuance.

The use of dark money enters into these thoughts - massive sums of USDs that support geopolitical strategy. This dark money never reaches the world's middle classes in any significant way. However, it does impact the thoughts of nations regarding trade, when the currency being used is the world's de facto trade settlement unit..

We know that NO ONE Nation-state is foolish enough to outright detonate the dollar. Just the same, EVERYONE is on board with the idea of a concerted, gradual (yet substantial) reduction in global USD trade settlement. In energy, agriculture, even semiconductors. So the battle behind the curtain today is one of dark money flow vs. working economy geopolitical support. This is a late stage can kicking exercise as the inevitable approaches. Negative interest rates, bond yield targeting and outright stock purchases (by CBs) will be too little, too late.

Dark money gradually loses power when those who benefit weigh all disadvantages - including those of a politicized and weaponized trade settlement unit. That loss of power weighs heavily on the dollar system's issuing central bank.


So the essential question in this debate of the coming crisis remains - will it actually come (or not) in the epic hyper-inflationary currency destruction event described by Another and his followers. Remember the great oxymoron of the digital currencies, "when one major currency fails, they all fail" and "no paper currency will survive the coming fire".

But this line of reasoning follows from the current FX paradigm, in which "all currencies get their value from the dollar".

Again I will tell you, this connection to the dollar is changing, and the entire FX paradigm with it. As the dollar system is gradually abandoned, those major currencies become less affected by it - thereby "less connected " to it - and more connected to balance sheet gold reserves. Sovereign gold reserves will become a MAJOR determinant of relative currency value, especially as the currencies relate to oil, LNG, major commodities and critical technology including military industry. The IMF and World Bank? Soon to become relics of their former systemic role.

The problem is debt. And the dollar system's "U.S. debt as wealth" premise is being abandoned by nations settling trade in gold-backed currencies. The stronger currencies will trade with each other "backed by gold reserves in a gold regulated trading place". Today, these currencies are backed by gold in a dollar regulated marketplace where gold is a commodity priced by the dollar futures market. As the dollar function is replaced by gold used as a global reserve reference point for trading currencies, we will have a gradual return to relatively free markets where the dollar is ultimately priced by gold, instead of the other way around.

We will still have debt. We will still have currencies and derivatives. But these will all be valued by an FX regime that weighs their relationship to freely traded, free market priced physical gold. Ask any central banker about the only unencumbered asset on their balance sheet, which is now declared a "tier one" asset by the BIS.

The matter at hand today is less "when" than "how gently we arrive". Iraq's gold, Libya's and now Syria's is all part of this transition. The dollar system is still buying time.

Friday, February 1, 2019

Earning Your CONfidence

Yes, as time passes, we watch the slow-motion version of the global economic event unfolding - toward some form of closure perhaps in its second decade? So many people are wanting to know "WHEN?" when in fact they should be focusing on "how".

It's seldom acknowledged publicly, but large dollar denominated contracts are in fact being renewed, rewritten or rolled over into euro. You won't hear about the cumulative effect, but you'll notice an article here or there where someone decided to mention that little change to the agreement. Watch and see the EU practicing the dying art of "rule of law" in order to keep the euro credible as an established IMF/SDR currency ... one which has the depth and precedent required. The hand above does not rush out of a currency overnight, as that benefits no family, nor the system.

But clearly, the contrast between dollar and euro factions could not be more evident. The dollar, it's government, and by usage extension, it's monetary and financial faction are regressing into third world style acts of desperation, from self-defeating economic sanctions to abandonment of the most basic rules of gold custodianship.

One might wonder why an article written more than three months ago is suddenly now receiving such attention. Some things take time to make their point, just as it does take time to "change expectations". This Brexit thing after all, is quite a thorn in the side.

Confidence, consistency and rule of law are important factors which affect exchange rates in the currency markets. Some inputs to the standard "exchange rate valuation formula" are less public than others, and also more important to those who matter. We might think of how confidence and influence work to change sentiment and expectations. The importance of these impacts are not lost in the minds of CB chairpersons, nor the directors of the BIS. They will not arm the nuclear option of gold ... not while a long, drawn out strategic draw of shifting sentiment and juggled expectations can still be maintained. But when CONfidence is lost, all is lost. Such is the fragility of debt.

The dollar faction has long past abandoned the practice of earning confidence. It seems in fact intent upon either destroying world confidence, or bolstering it with the sheer brazenness of its own machismo (or the market's perception of that). Is it a desperation move or is there a brilliant method to the madness of leveraged over-confidence?

This is the burning question which the market (the hand that takes) would kill to know. Of course, above the markets, the hand that gives already does.

Friday, January 4, 2019

The Great Tragedy of Mankind

It has been quite a journey, this lifetime. And what have we learned along the way? Many things ... but one truth is self-evident, upon which most all will agree. Power corrupts.

But what is power in the context of humanity? Power over God? Never happening. Power over nature? See for yourself, we cannot even decide which way to turn (though it may be the end of us after all).

No, it is power over others, other people - other classes - which is the power we speak of.

It is the power of some people, one class of people - over other people, to exploit and obligate these many lesser classes - which is the greatest power any class can aspire to.

And how is this accomplished? It is very simple. Very simple indeed. The banking class creates money ... wealth ... from nothing ... and lends it out to those who cannot. And they in turn must work to earn back this money to be repaid ... this money which is created without work, unearned ... from nothing... by the banking class. And the world agrees to this arrangement, by virtue of an accounting gimmick called fractional reserve lending ... using purely fiat money.

At the root of all the exploitation ... and servitude ... lies "debt as wealth" ... it is no more complex than this. A simple trick. We will even sell our bodies to make good upon it.

You have but to recognize this condition, and repudiate your debts - as being completely unreasonable once recognized for what they are - to see that all classes, including the judicial, the police state and the civic or governmental classes, uphold this absurdly unjust class indenture, by virtue of a banking canard.

Revolt against the power of the banking class and see all that you own taken away to meet the unjust obligation of "money for nothing" which only the banks are empowered to manage, as all other classes defend this system. And the little people, out of fear of this arrangement, agree - en masse - to work as such, and earn the money to repay debts created from thin air.

And this, we call "wealth".

As this great power of the banking class corrupts ... its credibility to manage itself comes under stress, and GOLD comes into play, to "set the exploitation right". We saw the fiat price of gold rise after the great corruption of 2007 - 2008 ... and the management of the banking system set about the task of reigning in that power. It would be well to understand the new role of gold in Basel III.

And the fiat price of gold will rise again, always in response to the corruption of power which must be reigned in by the object of power which the banking class cannot abuse - true wealth, not based in bondage, not conjured from self-referencing debt, but rather the timeless equity which rights the abuse of banking class power, by adequately "repricing it" in its own terms.

And now you know.

Cryptic? My friend, you have more than 300 clues running backward from this final post to judge from. There is nothing more to write about. It now waits for what has already been written about to transpire.

Wednesday, January 2, 2019

The Turning Point

Sadly, there is little information about the real world available to our derivative world ... the hypersensitive world we live in where morality is a relative value just like any other value. Zero Hedge offers a continuous doom and gloom conspiracy bias as it dwells upon the same old tired themes and warnings and predictions from the same old people with the same old viewpoints.

So with that said, there is very little to write about, until FOFOA comes along and reminds me (as he should us all) that there is an underlying cause for our "state of the world" condition. That is, the international monetary and financial system ... which is still about 62% dollar denominated and not losing ground so steadily or quickly on that front as to accelerate the effects which Zero Hedgers flash about like "END IS NIGH" billboards every couple of minutes or so.

Yes we will have volatility. Yes the everything bubble is popping ... and the efforts of the banking class have less to do with its controlled descent than market participants who front run volatility peaks and dips on the trendline downward. But as with "deliberate incidentals" effects are much more complex than the root cause:
Sundance understands things well from a certain starting point, but what he's missing is the most fundamental underlying cause. For example, he is right that Wall Street and Main Street are disconnected. What's good for Wall Street is not good for Main Street, and (that) one is not a reflection of the other. Wall Street is rather a reflection of the $IMFS, which is the use of dollars and US assets as global savings and monetary reserves, which overvalues the dollar for imports, and therefore sends manufacturing abroad. That last part is the fundamental underlying cause that he's missing. 
To end the bad stuff, you simply take away the cause. You take away the $IMFS. And you do that by ending the use of dollars and US assets as global savings and monetary reserves, which will collapse the dollar's overvaluation and naturally bring manufacturing back to the US. 
Interestingly, if you really think about it, the things we're doing (deliberate) are likely to help that process along. So, even if you don't know the primary cause, if you purposely restrict or reverse the primary effects thinking they are themselves the cause, you may be unknowingly undermining the already-crumbling real foundation (incidental). 
It is a fools errand (and there are fools-a-plenty) to try and predict the true "turning point" in the global dollar system. That is because it has grown into a system unlike any before it, in a time unlike any before it. And yet ... that can be said of each new system (as time inexorably reveals) in each new era.

But when it does turn (as I would define it) I do believe there will be a systemic intervention. If there is none, the potential hyperinflation would be massive and that would create the monster crash which doom and gloomers seem all to happy to rail about ... until it comes.

So while I could care less about the dark intrigue of the LBMA and it's paper sideshow, the second and third of the three articles reposted by FOFOA have more to say about the thoughts of Roacheforque than anything else I could write about, without unduly repeating myself (which I feel I have done a lot lately). They are "fruitfully" presented to your right - with my full endorsement.

Happy 2019!

Monday, December 3, 2018

DECOMI$$IONED

Truly the dollar has taken on a financial singularity that its creators never intended, and its supporters never imagined in their wildest dreams. Even it's issuers no longer fully support its amaranthine derivative empire, and it's most important vassals now finally reject it ... though that rejection has been several decades in coming.

It is difficult for Obama era politicos to tell someone like Kyle Bass: "Oh, we're just going to kill the dollar," when the military empire the dollar maintains is fighting for its survival. But the dollar fed military is losing ground against emerging gold-backed military forces. Not so much because they are "gold backed" but by comparison this just happens to be so. The U.S. is no match for the combined forces of China and Russia, and while the alliances between China and Russia are played against the dollar continually, the writing is on the wall. Again, not because the dollar is being played against gold - it just happens that there is a correlation there. And while correlations do not imply causation, the background factors that accompany the differences between "gold economy" and "debt economy" do mark the emerging military against the progressive military. It was not explained properly in "deliberate incidentals" but some concepts a single post cannot nearly cover.

Today, we see the bi-polar struggle between exorbitant privilege and its opposite effect - an effect not well documented or explained, yet understood and quite apparent. Unearned economic privilege destroys the character of a nation just as unearned economic privilege destroys the character of a child. One might liken it to an average family winning some massive lottery du jour which the little people flock to in droves. With vast amounts of unearned wealth, the family showers the child with every extravagance imaginable until it becomes a contemptuous spoiled brat, bullying its peers with undeserved power and domination.

And that is the true difference after all, is it not? Gold is wealth earned, whereas debt is wealth decreed (on the backs of the unwashed). And yet, it is more even than that. When a Rothschild or a Roacheforque heir is given charge to manage the succession of dynasty, this wealth is not earned as much as it is bequeathed, and there is a responsibility in the breeding and education of a dynastic heir ... which cannot succeed in a "middle class country".

Again, difficult to define, but the European heirs which broke from empire and saved civilization from the dark face (fascism) of global corporatism has become the empire it broke from, and has spawned a much more powerful era of global corporatism with its flagship dollar - the currency the world attributed "exceptionalism" to, only to be betrayed by an heir not properly instructed in the ways of succession.

Today, we can truly say that the US military is simply no longer adequate to back the US dollar without playing the "end game" card, which it has flashed repeatedly from its vest in a most unconvincing way, while it regroups through Nationalist priorities.

And the world accepts change as the Nationalist face of populism goes global. Truly we have turned the corner in this new era of dollar deceleration. Today, FOA's vision of the Euro manifests in the final withdrawal of support.

Tuesday, November 20, 2018

Deliberate Incidentals

Once again we must ask ... do important "systemic" matters always happen deliberately? Or can they be a purely incidental matter? Framed another way ... is the dollar faction intent on destroying the current system ... to save itself? Intuitively, the current path toward increasing dollar sanctions even further seems beyond risky, almost suicidal.

And the link above is far from isolated. Surely, many of the little people are beginning to wonder if the dollar system believes it can overcome the growing wave of economic resistance by ratcheting up it's imperialistic behavior ... in essence, doing even more of the same thing to achieve different results.

Most will agree that a key strength of the US dollar has been its stability and predictability. For the dollar system to "withhold its promise" as an inducement to imperial subjugation is hardly endearing. Yet with international banking managing interest and exchange rates on one side, and sanctions and tariffs applied by its "government partner" on the other, we see aspects of the dollar's systemic play. Ending resistance to the BIS system of central banking (central) governance is definitely a deliberate incidental of that strategy ... a move well known. Yet, watching it proceed politically is another matter.

The US may seem like yet another predictably self destructive empire in their final throes of decline. Yet the move is extending the play, and considering the cards this game of debt has dealt, well enough considered. It's a game of balance and maintenance, under increasing pressure.

Strangely, the little people are meant to conflate fascism with white supremacy, or something akin to the "old guard rule". Few ever use the term "corporatism" (which more accurately describes modern international governance). Nor do they understand that the term is synonymous with fascism. Indeed, the little people cheer for something they do not even recognize, and which they mistakenly think they hate.

What is more ironic than for a people to be shown how to act, think and feel by their masters and consider this the greatest freedom of their existence. The warm embrace of conformity. The safety in being normal by being the most like everyone else. All with the same goal of "upward mobility, as prescribed by the ruling class"

Isn't that the truly defining quality that separates the shepherd from the sheep? Most of us are born into slavery, while the system spawns each new ruling class.

Truly a deliberate incidental of our human nature.