AuthorTopic: Hyperinflation or Deflation?  (Read 124750 times)

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Dollar is now caught in a tug-of-war between the Fed and Trump
« Reply #615 on: February 15, 2017, 03:55:06 AM »
Da Fed RULES!  Trumpty-Dumpty is Toothless in Washington.  He's a pathetic marionette who will do as he is told by his Puppet Masters.

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http://www.cnbc.com/2017/02/15/dollar-is-now-caught-in-a-tug-of-war-between-the-fed-and-trump.html

Dollar is now caught in a tug-of-war between the Fed and Trump
Gemma Acton   | @GemmaActon   

The U.S. dollar spiked to a more than three-week high in the wake of the comments on Tuesday from Federal Reserve Chair Janet Yellen that prompted markets to assign a higher probability to the prospect of an interest rate hike as early as March.

The dollar index posted its fourth positive session in a row and its highest level since January 20 before slipping back only marginally in early trade on Wednesday as Yellen's remarks were interpreted as placing greater emphasis on the possibility of a hike at each upcoming meeting.

This although Yellen "danced it very well and avoided making any committal statement whatsoever," according to Jan Halper-Hayes, a Republican commentator and the former worldwide VP for Republicans Overseas, speaking on CNBC Wednesday.
Raymond Kleboe Collection | Getty Images

The reaction of the Fed funds futures market showed relatively muted optimism, with the read across from market levels indicating odds of 23 percent for a March hike, versus 16 percent earlier in the day, and a jump in expectations for a May hike to 50 percent from 38 percent, according to investment bank Jefferies.

While the upwards move in the dollar makes sense in the context of the latest news from the Fed, the near-term outlook for the dollar is uncertain given the conflicting force of President Donald Trump's anticipated economic policies, Richard Falkenhäll, senior FX strategist at SEB, told CNBC Wednesday via emailed comments.

As the new administration is likely to turn more expansionary due to lower taxes, the Fed may be propelled to tighten policy more rapidly, he suggests. This in addition to other potential changes such as the introduction of a border adjustment tax and a reduction of earnings retained from overseas should also be positive for the dollar, posits Falkenhäll.

"On the other hand, the Trump administration seems to prefer a weaker dollar and the behavior of the president since the inauguration probably motivates a political risk premium on the USD for now," he countered.

Indeed, Halper-Hayes cites President Trump's and Treasury Secretary Steve Mnuchin's attempts to talk down the dollar as one of her primary concerns.

"They don't believe in holding to the strong dollar policy … How are they going to abandon the strong dollar policy? If that happens what is that going to do? I see corporate earnings for global corporations, it would be very good but on the other hand what is it going to do to the domestic economy?" she asked, spelling out her apprehensions.

The ongoing debate over the dollar's strength follows an international flare-up last month, during which Peter Navarro, Trump's selected director of the National Trade Council, accused Germany of exploiting other countries by keeping the euro "grossly undervalued". Although Germany robustly defended the independence of the rate-setting European Central Bank (ECB), many commentators – including Germany's own Finance Minister Wolfgang Schäuble - did agree that the exchange rate was too low for Europe's largest economy.
Buy weakness in US dollar: Pro
Buy weakness in US dollar: Pro 
6 Hours Ago | 02:15

Indeed, Germany's exchange rate is 15 percent undervalued, according to research released Tuesday by World Economics, whose World Price Index compares the fundamental purchasing power parity (PPP) values of currencies against market exchange rates. PPP looks at the cost to buy a hypothetical basket of goods in different countries and suggests currencies are in equilibrium when the basket is priced the same in each country.

The same research indicates that sterling is 9 percent undervalued following its slump in the wake of last June's Brexit vote and that the carefully managed Chinese yuan is 24 percent undervalued.

Weighing the conflicting factors, there is still a risk that the dollar could weaken in the near-term if the administration fails to deliver on the high expectations resting on it and causes an equity market sell-off, says SEB's Falkenhäll.

"However, medium term strong growth prospects for the U.S. and further tightening by the Fed this year are likely to maintain support for the dollar, which is why we expect it to trade between parity and 1.05 against the euro in the second half of this year," he concluded.
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MOAR DEBT! GIMMEE MOAR!
« Reply #616 on: February 27, 2017, 01:26:14 AM »
Pop Goes the Weasel.


RE

http://wolfstreet.com/2017/02/25/desperation-over-europe-banking-system-senior-non-preferred-bonds/

Is that Desperation Hanging Over Europe’s Banking System?

by Don Quijones • Feb 25, 2017 • 21 Comments   

Turns out, Italy’s banking crisis is not fixed.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Many of Europe’s and America’s biggest banks have begun begging, cap in hand, for a new, innovative way of raising vast sums of dirt-cheap debt on Europe’s financial markets.

The Association for Financial Markets in Europe (AFMA), an organization that prides itself on serving as “the voice of Europe’s wholesale financial markets,” just sent a strongly worded letter to the European Central Bank, urging for the prompt creation of EU-wide regulation allowing banks to sell a newfangled class of bail-in-able debt called “senior non-preferred bonds.”

“A swift agreement is essential to enable banks to continue increasing their loss-absorbing cushions and improve their resolution capacity,” says the letter (translated from Spanish).

In its own words, the AFMA represents “leading global and European banks and other significant capital market players.” Its board includes representatives of the biggest banks, from US megabanks like Citi, Goldman, JP Morgan Chase, Morgan Stanley, Bank of America Merrill Lynch and BNY Mellon to European behemoths like Deutsche Bank, HSBC, Lloyds TSB, Barclays, Unicredit, ING, BNP Paribas, Credit Agrcole, Crédit Agircole, and Credit Suisse.

Many of these banks and a few others not directly represented on AFMA’s board (such as Spain’s Santander) are facing heightened regulatory pressure, both at the regional and global level, to issue increasingly more bail-in-able debt so as to ensure that the next time a banking disaster strikes, part or all of the debt can be used to “bail in” those investors before taxpayers are called upon to cough up the rest.

It’s the way it should have been from the very inception of this global banking crisis. Instead, governments and central banks have injected trillions of dollars, euros, pounds, yen, and yuan of public funds into banks to keep the banks upright and make most bondholders whole, including those holding subordinated, or junior, debt, which is theoretically designed to bear losses in times of stress.

global-banking_300x250

The “senior non-preferred bond” is the financial system’s latest effort to finally change all of that. Also known as senior junior, senior subordinated or Tier 3, this newfangled class of bank debt is a hybrid creation that combines the biggest drawback (for investors) of senior debt (i.e. low yields) with the biggest drawback (once again, for investors) of subordinate debt (i.e. virtually no protection in the event of a banking collapse).

It’s what makes senior non-preferred bonds so attractive to capital-starved TBTF banks: the bonds pretend to be simultaneously one thing (senior), in order to keep the yield (and the cost for the bank) down, and another (junior) in order to qualify as bail-in-able. It’s a way for big banks to bamboozle bondholders – usually institutional investors like pension funds – into buying something with other people’s money that doesn’t yield nearly enough to compensate them for the risks they’re taking. But that hasn’t stopped yield-starved institutional investors from gobbling them up.

The European Commission has already endorsed the financial instrument, rating agencies have also lent their approval, and the ECB can’t wait to come up with “a common framework at Union level.” However, the legislation permitting its issuance, both at the regional and national level, is taking a long time to complete. And one thing many of the banks appear to be rather short of is time.

The only jurisdiction where big banks can issue, 100% legally, senior non-preferred debt is France, where the debt instrument was initially created as a means of helping the country’s big four banks (BNP Paribas, Crédit Agricole, Groupe BPCE, and Société Générale) spruce up their balance sheets at minimal cost.

Elsewhere in Europe there is no legal framework for issuance of the new debt instrument but that hasn’t stopped some banks, including Holland’s ING and Spain’s Santander, from issuing senior non-preferred bonds. Spain’s second biggest bank, BBVA, which is not even officially too big to fail, is also expected to dip its toes in the non-quite-legal market in the coming months.

Santander, BBVA and Spain’s third biggest bank, La Caixa, have been on a spectacular debt binge since this fledgling year began, issuing more combined debt in the first six weeks of 2017 than at any other time since 2007, the year that Spain’s spectacular real estate bubble reached its climactic peak.

Even more ominous, Italy’s fragile megabank, Unicredit, has also expressed an interest in issuing non-preferred bonds, though it will probably have to wait for Italy’s banking crisis, in which it is has a major role, to blow over (assuming it actually can) before joining the party. That could be a long time coming: there continues to be widespread disagreement between the ECB and the European Commission over whether to allow Italy to go ahead with its more or less illegal bailout of the banking sector.

In the meantime, Italy’s Target2 imbalance continues to grow. The Banca d’Italia now owes a record €364 billion to the ECB – the equivalent of 22% of GDP, its highest point since the creation of the euro, and the figure keeps rising. It’s testament to an ongoing — and accelerating — capital flight out of Italy’s banking system, as investors lose faith not only in the possibility of a workable solution being found to Europe’s most serious and arguably most complex financial threat but in the long-term viability of the single currency itself.

If Italian and European authorities don’t soon find a workable solution to Italy’s intractable banking problem — and preferably one that is more or less palatable for the German electorate, which is already up in arms at the latest Target2 imbalances — there is a very real risk that Italy will suffer sudden bank runs and disorderly failures, at which point the chances of Unicredit raising €13 billion of new capital by its June deadline will fade to zero. And at that point, as even the FT has admitted (behind paywall), it will probably be game over. By Don Quijones.

The law finally catches up with some big bankers. Read…  Two Former Bank CEOs and Dozens of Former Bank Execs Just Got Sentenced to Jail in Spain
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Petrodollar faces growing threat from the East
« Reply #617 on: May 01, 2017, 03:54:35 AM »
http://www.atimes.com/loss-petrodollar-domination-beginning-form/

Petrodollar faces growing threat from the East

Andrew Brennan
By Andrew Brennan April 27, 2017 2:51 AM (UTC+8)

Asia Times is not responsible for the opinions, facts or any media content presented by contributors. In case of abuse, click here to report.

While the recent raft of Sino-Saudi trade agreements benefited Chinese soft power in protecting Xinjiang, and the Saudis by diversifying their economy, China’s slow intertwining with Saudi Arabia complements the Sino-Russo alliance. Primarily, its benefits could lead to a realistic threat to the petrodollar.
The Persian rival who showed ‘the way’

In 2012/2013, the US Treasury Department, under the Obama administration, initiated a raft of sanctions in an amateurish fashion against the Central Bank of Iran. As we were told, it was done to tire and bleed Iranian economic and social life enough to draw Tehran into negotiations concerning its nuclear programme. The argument of were they/weren’t they pursuing a weaponized nuclear program isn’t important; how the Iranians circumvented these sanctions is.

The sanctions were meant to be stifling, but the Iranians loosened this problematic liquidity noose by using all their banks that weren’t sanctioned, and sold rich Iranian oil to India. Of course, the Indians couldn’t pay Tehran directly. Neither could they pay bilaterally in rupees due to sanctions and infrastructure needed to trade in a bilateral currency. Instead, Iran requested that India pay in gold so India paid Turkey, the Middle East’s gold market, and Turkey gave Turkish gold to Iranian banks, which then swapped with the Central Bank of Iran.

Turkey, for its part, may soon be the gold payment intermediator across Asia, and is already nationalizing the sector with a demand for private confiscation occurring to support the Turkish economy, but this has scarcely been reported.

This clever evasion was known as the Iran-India-Turkey triangle. Iran was escaping the dominance of the US dollar and trading in real money, not a hegemonic fiat currency that was being printed hot-off-the-press all day. They were dealing in gold; not something that could be strangled through SWIFT and electrons traded on a screen easily. A simple intermediator and precious metals could break Obama’s heralded “crippling” sanctions.

Iran ideologically, as well as practically, wants nothing to do with the US dollar but rather it wants to be free of monetary pressures by the US on its domestic policies. The effectiveness of this evasion was a preview to what countries like China, Russia, and to a lesser extent India and South Korea, have all been trying to do: increase their independence from the US dollar. The Iranian gold triangle showed successful independence from US dollar reliance.

The Chinese usurpers and their yellow metal

Fast forward to March 2017; the Russian Central Bank opened its first overseas office in Beijing as an early step in phasing in a gold-backed standard of trade. This would be done by finalizing the issuance of the first federal loan bonds denominated in Chinese yuan and to allow gold imports from Russia.

The Chinese government wishes to internationalize the yuan, and conduct trade in yuan as it has been doing, and is beginning to increase trade with Russia. They’ve been taking these steps with bilateral trading, native trading systems and so on. However, when Russia and China agreed on their bilateral US$400 billion pipeline deal, China wished to, and did, pay for the pipeline with yuan treasury bonds, and then later for Russian oil in yuan.

This evasion of, and unprecedented breakaway from, the reign of the US dollar monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese yuan for gold. The Russians are already taking Chinese yuan, made from the sales of their oil to China, back to the Shanghai Gold Exchange to then buy gold with yuan-denominated gold futures contracts – basically a barter system or trade.

The Chinese are hoping that by starting to assimilate the yuan futures contract for oil, facilitating the payment of oil in yuan, the hedging of which will be done in Shanghai, it will allow the yuan to be perceived as a primary currency for trading oil. The world’s top importer (China) and exporter (Russia) are taking steps to convert payments into gold. This is known. So, who would be the greatest asset to lure into trading oil for yuan? The Saudis, of course.

All the Chinese need is for the Saudis to sell China oil in exchange for yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow suit, and then Nigeria, and so on. This will fundamentally threaten the petrodollar.

Now the argument is that if China does this it will put a slam on Chinese exports, but China is undergoing an intentional metamorphosis from a producer and exporter to a service and consumer economy of internal products. Look to China’s technology sector, e-commerce sector, and other domestic sectors that will provide a large market for sustainable service and growth.

A second argument against this train of thought is that maybe China doesn’t want the yuan to be a world reserve currency but just have a strong currency; a gold-backed yuan currency. Having a gold trade note may not hurt Chinese exports as it transforms its economy and its future exports.

Beijing may also have thought that if Saudi Arabia is persuaded to trade in yuan or gold-backed yuan, etc, South Korea and Japan may follow suit, as both have been looking to detach from the US dollar.

China and Iran were the first to initiate bypassing the dollar, followed by Russia circumventing the SWIFT system and then India beginning to move away from the US dollar and starting bilateral trade deals. China and Japan made moves to trade directly, as did Japan with India, bypassing the dollar.

The use of alternative payment systems like gold, yuan, rupees, rubles and other monies, fiat and not, to evade the potential of sanctions and seizures of the US dollar, or its decline, are seen as favorable.

    Everyting is pointing towards a declining West and a rising East.

What decline?

Well, we can look at the historic East-West cycle, the baby-boom demographic in the West, the growing inequality in the wealth distribution cycle, the ratio of household debt as a percentage of disposable income, and for you history buffs, the Kondratiev wave are all peaking and are descending into a deflationary wave.

Wait, what?

Okay, all of those mentioned cycles are economic swings of wealth. Everything is pointing towards a declining West and a rising East. But we can equally blame central bankers’ quantitative easing policies of printing to prosperity. The idea is a falsity that also has only benefited the wealthier classes, and can’t beat back cyclical pressure. A shift in world monetary systems is occurring.

The Chinese economy has begun an economic restructuring and focus on domestic production and services. The Trump administration thinks weakening the US dollar will help American exports and likewise respectfully grow the US economy (or “grow” within the confines of the current monetary system). However, the overvalued dollar has subsidized the cherished “American standard of living,” and any weakening will now have detrimental effects.

The US needs to also restructure its economy to one that is based on production. It can no longer continue to run a debt-serviced economy that imports all goods it doesn’t produce. It’s unsustainable, and the continuous mistake of many. The wealth of the world is shifting eastwards.

The petrodollar is the last vestige of that “American standard of living” middle America cherishes, and if the gold trade bonds fly and yuan changes hands as the oil flows, the US is going to get a shock when Saudi Arabia likes the look of red paper as much as green, or worse yet, yellow metal, a lot of which is moving east.
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Re: Petrodollar faces growing threat from the East
« Reply #618 on: May 01, 2017, 06:47:12 AM »
http://www.atimes.com/loss-petrodollar-domination-beginning-form/

Petrodollar faces growing threat from the East

Andrew Brennan
By Andrew Brennan April 27, 2017 2:51 AM (UTC+8)

Asia Times is not responsible for the opinions, facts or any media content presented by contributors. In case of abuse, click here to report.

While the recent raft of Sino-Saudi trade agreements benefited Chinese soft power in protecting Xinjiang, and the Saudis by diversifying their economy, China’s slow intertwining with Saudi Arabia complements the Sino-Russo alliance. Primarily, its benefits could lead to a realistic threat to the petrodollar.
The Persian rival who showed ‘the way’

In 2012/2013, the US Treasury Department, under the Obama administration, initiated a raft of sanctions in an amateurish fashion against the Central Bank of Iran. As we were told, it was done to tire and bleed Iranian economic and social life enough to draw Tehran into negotiations concerning its nuclear programme. The argument of were they/weren’t they pursuing a weaponized nuclear program isn’t important; how the Iranians circumvented these sanctions is.

The sanctions were meant to be stifling, but the Iranians loosened this problematic liquidity noose by using all their banks that weren’t sanctioned, and sold rich Iranian oil to India. Of course, the Indians couldn’t pay Tehran directly. Neither could they pay bilaterally in rupees due to sanctions and infrastructure needed to trade in a bilateral currency. Instead, Iran requested that India pay in gold so India paid Turkey, the Middle East’s gold market, and Turkey gave Turkish gold to Iranian banks, which then swapped with the Central Bank of Iran.

Turkey, for its part, may soon be the gold payment intermediator across Asia, and is already nationalizing the sector with a demand for private confiscation occurring to support the Turkish economy, but this has scarcely been reported.

This clever evasion was known as the Iran-India-Turkey triangle. Iran was escaping the dominance of the US dollar and trading in real money, not a hegemonic fiat currency that was being printed hot-off-the-press all day. They were dealing in gold; not something that could be strangled through SWIFT and electrons traded on a screen easily. A simple intermediator and precious metals could break Obama’s heralded “crippling” sanctions.

Iran ideologically, as well as practically, wants nothing to do with the US dollar but rather it wants to be free of monetary pressures by the US on its domestic policies. The effectiveness of this evasion was a preview to what countries like China, Russia, and to a lesser extent India and South Korea, have all been trying to do: increase their independence from the US dollar. The Iranian gold triangle showed successful independence from US dollar reliance.

The Chinese usurpers and their yellow metal

Fast forward to March 2017; the Russian Central Bank opened its first overseas office in Beijing as an early step in phasing in a gold-backed standard of trade. This would be done by finalizing the issuance of the first federal loan bonds denominated in Chinese yuan and to allow gold imports from Russia.

The Chinese government wishes to internationalize the yuan, and conduct trade in yuan as it has been doing, and is beginning to increase trade with Russia. They’ve been taking these steps with bilateral trading, native trading systems and so on. However, when Russia and China agreed on their bilateral US$400 billion pipeline deal, China wished to, and did, pay for the pipeline with yuan treasury bonds, and then later for Russian oil in yuan.

This evasion of, and unprecedented breakaway from, the reign of the US dollar monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese yuan for gold. The Russians are already taking Chinese yuan, made from the sales of their oil to China, back to the Shanghai Gold Exchange to then buy gold with yuan-denominated gold futures contracts – basically a barter system or trade.

The Chinese are hoping that by starting to assimilate the yuan futures contract for oil, facilitating the payment of oil in yuan, the hedging of which will be done in Shanghai, it will allow the yuan to be perceived as a primary currency for trading oil. The world’s top importer (China) and exporter (Russia) are taking steps to convert payments into gold. This is known. So, who would be the greatest asset to lure into trading oil for yuan? The Saudis, of course.

All the Chinese need is for the Saudis to sell China oil in exchange for yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow suit, and then Nigeria, and so on. This will fundamentally threaten the petrodollar.

Now the argument is that if China does this it will put a slam on Chinese exports, but China is undergoing an intentional metamorphosis from a producer and exporter to a service and consumer economy of internal products. Look to China’s technology sector, e-commerce sector, and other domestic sectors that will provide a large market for sustainable service and growth.

A second argument against this train of thought is that maybe China doesn’t want the yuan to be a world reserve currency but just have a strong currency; a gold-backed yuan currency. Having a gold trade note may not hurt Chinese exports as it transforms its economy and its future exports.

Beijing may also have thought that if Saudi Arabia is persuaded to trade in yuan or gold-backed yuan, etc, South Korea and Japan may follow suit, as both have been looking to detach from the US dollar.

China and Iran were the first to initiate bypassing the dollar, followed by Russia circumventing the SWIFT system and then India beginning to move away from the US dollar and starting bilateral trade deals. China and Japan made moves to trade directly, as did Japan with India, bypassing the dollar.

The use of alternative payment systems like gold, yuan, rupees, rubles and other monies, fiat and not, to evade the potential of sanctions and seizures of the US dollar, or its decline, are seen as favorable.

    Everyting is pointing towards a declining West and a rising East.

What decline?

Well, we can look at the historic East-West cycle, the baby-boom demographic in the West, the growing inequality in the wealth distribution cycle, the ratio of household debt as a percentage of disposable income, and for you history buffs, the Kondratiev wave are all peaking and are descending into a deflationary wave.

Wait, what?

Okay, all of those mentioned cycles are economic swings of wealth. Everything is pointing towards a declining West and a rising East. But we can equally blame central bankers’ quantitative easing policies of printing to prosperity. The idea is a falsity that also has only benefited the wealthier classes, and can’t beat back cyclical pressure. A shift in world monetary systems is occurring.

The Chinese economy has begun an economic restructuring and focus on domestic production and services. The Trump administration thinks weakening the US dollar will help American exports and likewise respectfully grow the US economy (or “grow” within the confines of the current monetary system). However, the overvalued dollar has subsidized the cherished “American standard of living,” and any weakening will now have detrimental effects.

The US needs to also restructure its economy to one that is based on production. It can no longer continue to run a debt-serviced economy that imports all goods it doesn’t produce. It’s unsustainable, and the continuous mistake of many. The wealth of the world is shifting eastwards.

The petrodollar is the last vestige of that “American standard of living” middle America cherishes, and if the gold trade bonds fly and yuan changes hands as the oil flows, the US is going to get a shock when Saudi Arabia likes the look of red paper as much as green, or worse yet, yellow metal, a lot of which is moving east.

Same story we were hearing 6-7 years ago. Is it closer to happening now? Probably, but I still have no idea what the real timeline will be on the loss of petrodollar status. Wish I knew.
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Re: Hyperinflation or Deflation?
« Reply #619 on: May 04, 2017, 07:44:29 AM »
I'm sure the Saudis would love to trade oil for Chinese mass produced goods, mediated by yuan or gold, but the trouble is they have a deal with the US to only sell for Dollars, and in return they can buy weapons and receive other protection.  If they break that deal the US will turn very nastily against them, and the royal family is weak and divided against itself, so they stick to it.

When the implosion happens though, all the US's "good allies" will heave a sigh of relief and start dealing with China without blinking.
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💸 In Tehran, Economic Protests Flare As Iran's Currency Plunges
« Reply #620 on: June 27, 2018, 01:29:31 AM »
https://www.npr.org/2018/06/26/623522943/in-tehran-economic-protests-flare-as-irans-currency-plunges


World
In Tehran, Economic Protests Flare As Iran's Currency Plunges

June 26, 20184:51 PM ET

Sasha Ingber


Demonstrators filled the streets of Tehran on Monday to protest economic downtown in Iran.
Atta Kenare/AFP/Getty Images

Iran's capital has been racked by protests this week over a plunge in the value of the country's currency, the rial. Crowds at one point shut down Tehran's sprawling Grand Bazaar, an economic center and a place where the 1979 revolution gained footing.

Protesters called for shop owners to close their businesses as the demonstrations ramped up on Monday. They marched to the gates of Iran's parliament, and police tried to quell them with what multiple news outlets said appeared to be tear gas. Videos purportedly showing clashes between security forces and protesters were put up online Tuesday. BBC Persian posted footage of people running as security forces approached.

The rial has fallen to a new low — 90,000 against the U.S. dollar on the country's black market, Iranian media said, despite government efforts to control the currency rate. The official exchange rate is about 42,000 rials to the dollar.

Anti-government demonstrations driven by economic troubles erupted across the country last December and January. But they didn't gain traction in Tehran. This week's demonstrations in the capital were the biggest in years, multiple media outlets have reported.

Abbas Milani, director of Iranian studies at Stanford University, tells NPR via email that these demonstrations are different. "They have taken place amongst the regime's hitherto reliable basis of support — the members of the bazaar and the working classes. For over a hundred years, strikes in bazaars have been harbingers of change and invariably the clergy were allied with these merchants. Now the ruling clergy are the subject of the merchants' wrath."

President Hassan Rouhani addressed the protests on state television Monday night, telling the Iranian people that the United States is to blame for the country's economic difficulties. He said the spontaneous demonstrations were caused by "foreign media propaganda."

He was also quoted as saying that the government would be able to endure the rial's downward spiral and upcoming sanctions, which the Trump administration plans to impose after announcing a withdrawal from the Iran nuclear deal in May. "Even in the worst case, I promise that the basic needs of Iranians will be provided. We have enough sugar, wheat, and cooking oil. We have enough foreign currency to inject into the market," Rouhani said, per Reuters.

Iran's economy was lagging before President Trump announced the exit from the Iran nuclear deal, and it has grown weaker in anticipation of U.S. sanctions, NPR's Peter Kenyon reports. The country's buying power and retail sector have suffered.

The Central Bank of Iran reportedly announced that it will create a secondary currency market to relieve pressure on the country's currency.

Citing economic security, Iran is also clamping down on foreign products by banning imports of more than 1,300 items, according to Reuters.

It wasn't immediately clear who led the Tehran protests. Some observers believe that conservative factions in the government may have encouraged the demonstrations in an attempt to undermine the more moderate Rouhani. But some protests evolved into chants with anti-government slogans, according to the U.S.-government funded Voice of America.

Milani said that Rouhani faces pressure not just from the angered public, but radical conservatives such as the leaders of the Islamic Revolutionary Guard Corps.

"The hardliners clearly think they can ride public dissent into more consolidated power for themselves," he said. "But they might well have underestimated the seriousness of the crisis and its possible outcome."
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💸 But Who Pays the Price of All This Inflation?
« Reply #621 on: July 14, 2018, 03:53:14 AM »
https://wolfstreet.com/2018/07/12/but-who-pays-the-price-of-all-this-inflation/

But Who Pays the Price of All This Inflation?
by Wolf Richter • Jul 12, 2018 • 61 Comments   
We already know who.

Inflation “looks quite good,” Chicago Fed President Charles Evans said so eloquently in an interview even before today’s Consumer Price Index was released.

Today, by his standards, inflation looks even better. In June, the Consumer Price Index for all urban consumers rose a brisk 2.9% compared to a year ago, the sharpest increase since February 2012::


Without the volatile food and energy groups, which weigh about 21% in the index, “core” CPI rose 2.2% in June compared to a year ago.

And the purchasing power of the dollar – which the Bureau of Labor Statistics also provides as a helpful reminder of what consumer price inflation actually is – dropped 2.7% from a year ago. In May and June, the dollar’s purchasing power reached, as it just about always does, a new record low. The chart below shows what the purchasing power of the dollar has been doing over the past decade:


Inflation is good for companies and landlords because it means they’re raising prices and rents, and they can report higher revenues without having sold a single extra thing. Their input costs may also rise, but they’re hoping that those increases will be less, and that in this manner, inflation will inflate their earnings. For that reason, they and their Wall Street hype jockeys love consumer price inflation. But they hate wage inflation because it eats into the hard-earned inflation profits. And the Fed has been trying to help out.

So the question arises: Who is paying for this inflation that the Fed has been strenuously trying to obtain over the last few years and that it now has obtained to the satisfaction of even its doves, such as aforementioned Mr. Evans?

Average hourly earnings for all employees in the private sector in June, according to the Bureau of Labor Statistics, rose 2.7% from a year ago. This was at the upper end of the miserably slow growth range that has prevailed since 2010. The range peaked at a year-over-year increase of 2.8% in September 2017 and bottomed out with an increase of 1.5% in October 2012. It doesn’t take much inflation – however inflation is measured – to turn these feeble nominal wage increases into real-wage declines.

And this is precisely what happened in June. Mr. Evan should be pleased.

The nominal wage-increase of 2.74% was more than eaten up by inflation as measured by CPI of 2.87%: Real wages fell by 0.13% from a year ago. Workers pay for consumer price inflation:


Wage inflation, if it were allowed to exist, could more than compensate workers for consumer price inflation. Wage inflation would also help consumers pay off their debts. But wage inflation is precisely what the Fed fears the most.

The Fed understands that declining real wages, if they decline long enough, will eat into consumption in a consumption-based economy, and will further diminish consumers’ ability to pay credit card debts, auto loans, and the like, in a credit-dependent economy. Hence the Fed’s mixed feelings about consumer price inflation: If it gets just a little too high, it triggers broader effects that might turn the corporate party into a mess. And in this manner, today’s data will embolden even the doves to nudge interest rates up further.

And the last doves are coming around to more rate hikes. Read…  With this Inflation, What Will the Fed Do? 
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Re: 💸 But Who Pays the Price of All This Inflation?
« Reply #622 on: July 14, 2018, 04:55:41 AM »
https://wolfstreet.com/2018/07/12/but-who-pays-the-price-of-all-this-inflation/

But Who Pays the Price of All This Inflation?
by Wolf Richter • Jul 12, 2018 • 61 Comments   
We already know who.

Inflation “looks quite good,” Chicago Fed President Charles Evans said so eloquently in an interview even before today’s Consumer Price Index was released.

Today, by his standards, inflation looks even better. In June, the Consumer Price Index for all urban consumers rose a brisk 2.9% compared to a year ago, the sharpest increase since February 2012::


Without the volatile food and energy groups, which weigh about 21% in the index, “core” CPI rose 2.2% in June compared to a year ago.

And the purchasing power of the dollar – which the Bureau of Labor Statistics also provides as a helpful reminder of what consumer price inflation actually is – dropped 2.7% from a year ago. In May and June, the dollar’s purchasing power reached, as it just about always does, a new record low. The chart below shows what the purchasing power of the dollar has been doing over the past decade:


Inflation is good for companies and landlords because it means they’re raising prices and rents, and they can report higher revenues without having sold a single extra thing. Their input costs may also rise, but they’re hoping that those increases will be less, and that in this manner, inflation will inflate their earnings. For that reason, they and their Wall Street hype jockeys love consumer price inflation. But they hate wage inflation because it eats into the hard-earned inflation profits. And the Fed has been trying to help out.

So the question arises: Who is paying for this inflation that the Fed has been strenuously trying to obtain over the last few years and that it now has obtained to the satisfaction of even its doves, such as aforementioned Mr. Evans?

Average hourly earnings for all employees in the private sector in June, according to the Bureau of Labor Statistics, rose 2.7% from a year ago. This was at the upper end of the miserably slow growth range that has prevailed since 2010. The range peaked at a year-over-year increase of 2.8% in September 2017 and bottomed out with an increase of 1.5% in October 2012. It doesn’t take much inflation – however inflation is measured – to turn these feeble nominal wage increases into real-wage declines.

And this is precisely what happened in June. Mr. Evan should be pleased.

The nominal wage-increase of 2.74% was more than eaten up by inflation as measured by CPI of 2.87%: Real wages fell by 0.13% from a year ago. Workers pay for consumer price inflation:


Wage inflation, if it were allowed to exist, could more than compensate workers for consumer price inflation. Wage inflation would also help consumers pay off their debts. But wage inflation is precisely what the Fed fears the most.

The Fed understands that declining real wages, if they decline long enough, will eat into consumption in a consumption-based economy, and will further diminish consumers’ ability to pay credit card debts, auto loans, and the like, in a credit-dependent economy. Hence the Fed’s mixed feelings about consumer price inflation: If it gets just a little too high, it triggers broader effects that might turn the corporate party into a mess. And in this manner, today’s data will embolden even the doves to nudge interest rates up further.

And the last doves are coming around to more rate hikes. Read…  With this Inflation, What Will the Fed Do?

The Fed will continue to jerk each other off as to their wisdom and elite status as guardians of the Dim. They will sit around in their circle jerk and enjoy escargot, lobster, and champagne for lunch on our dime, giggling to themselves what a great time they are having as they plan their next Jackson Hole outing while the dim shuffle bills and rob Peter to Pay Paul when the bankster usury bill arrives.

It is not the worker who suffers most from this. It is the poor, the elderly, the crippled and maimed, the uneducated who know nothing of how to protect themselves from these bankster pricks.

"Let them eat cake" or I guess Ramerron noodles will do in today's world.

                                     


                                     

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Re: Hyperinflation or Deflation?
« Reply #623 on: July 14, 2018, 09:38:43 AM »
It was always the only politically palatable solution to the unpayable debt. So it had to happen, as you and I discussed here five years ago,or longer, now.

The only unknown was whether they could really make it happen in the face of so much deflationary pressure from so many different sources.

Bad as it is, I view it as better than a massive depression, which could have happened, and still can, if the banks lose control of the bond markets. 

Be glad you saved and invested your way to financial freedom. It didn't happen by accident, but by your patience, your willingness to delay gratification, and by sticking to your plan. Don't let the banksters eat all the lobster. Order one for yourself, and don't even ask what today's market price is. It doesn't matter.

What makes the desert beautiful is that somewhere it hides a well.

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💸 Wages drop despite economic boom
« Reply #624 on: August 12, 2018, 03:38:48 AM »
If you keep repeating "Economic Boom" enough times, people will believe there is an economic boom.

RE

http://thehill.com/policy/finance/401341-wages-drop-despite-economic-boom

Wages drop despite economic boom
By Niv Elis - 08/10/18 06:27 PM EDT


Wages drop despite economic boom

Wages in the U.S. fell over the past year despite an ongoing economic boom, according to data released by the Bureau of Labor Statistics on Friday.

In the past 12 months through July, real average hourly earnings dropped 0.4 percent. That figure takes into account seasonal differences, as well as the effects of rising prices.

An increase in the length of the average workweek was not enough to compensate for the fall, leaving average weekly earnings down 0.1 percent in the same period.

Over the past month alone, real hourly wages were flat, while real weekly earnings dropped 0.2 percent.

The sluggish advance in wages comes amid an economy that, by other measures, is booming. The economy grew at an annualized rate of 4.2 percent in the second quarter, and unemployment dipped below 4 percent in July.

The dynamic could prove troublesome for Republicans hoping that a thriving economy will boost them in November's midterm
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💱 The Price of Cheap Dollar/Euro Debts: Local Currencies Come Unglued
« Reply #625 on: August 15, 2018, 02:31:04 AM »
https://wolfstreet.com/2018/08/13/price-of-cheap-debt-dollar-euro-local-currencies-come-unglued/

The Price of Cheap Dollar/Euro Debts: Local Currencies Come Unglued, Debt Crises Ensue
by Wolf Richter • Aug 13, 2018 • 49 Comments   
Grand Collapse in Turkey; to avoid the same fate, Argentina hikes rate to 45%.

On Monday, Argentina’s central bank responded to the currency chaos in Turkey and other sections of the Emerging Markets, including the ongoing collapse of the Argentine peso: It raised its policy rate by five percentage points to 45%.

Argentina’s annual rate of inflation in June surged to nearly 30%, and indications are that this is getting worse. The central bank (the BCRA) is part of the Ministry of Finance, has no independence, and has been tasked over the decades to fund government spending. But at least the current government publishes inflation data. The prior government made inflation a secret and made independent publication of inflation data illegal.

To soothe everyone’s nerves apparently, the BCRA promised to keep the rate at 45% until October. This was the fourth draconian rate-hike since April 27.

Argentina has also received a $50-billion bailout loan commitment from the IMF with which to prop up the peso. This money, which was approved in June, comes with some IMF strings attached. Flush with this bailout money, the government has since been selling dollars and buying pesos in daily auctions to put a floor under the peso. But on Monday, along with the rate hike, the government stopped throwing those dollars out the window, hoping that higher rates will do the job.

And so the peso dropped only 2.3% today against the US dollar to a new low of 29.93 pesos to the dollar. Seen the other way, one peso, which in 2000 was still worth $1, is now worth 3.34 US cents. It lost 8% over the past 3 days and 33% over the past four months:


Oh my, what a change this is from June 2017, the peak of the junk-bond craziness, when Argentina, which is junk-rated, was able to sell $2.75 billion of 100-year dollar-denominated bonds, the first time ever that a junk-rated country was able to find investors willing or desperate enough to buy century bonds denominated in a foreign currency – and this from a country that over the past 67 years, has defaulted six times on its foreign currency debts: in 1951, 1956, 1982, 1989, 2001, and its “selective default” in 2014. For the holders of those century bonds, one year down, 99 more to go.

Turkey has its own sets of problems and isn’t even seriously trying to prop up its currency. Now global bondholders are clamoring for the IMF to step in and calm the waters around the currency crisis in Turkey that has turned into a debt crisis that is now dragging some European banks through the dirt. Those global bondholders want the IMF to lend Turkey money to bail out Turkey’s bondholders to put an end to the turmoil and torture in emerging markets bonds that were so hot just eight months ago.

In return for an IMF bailout of its bondholders, Turkey would have to follow the IMF’s program, slash its expenses, including social expenses, and curtail its crazy borrowing binge. But no go.

Instead of trying to address the problem, or beg the IMF for a bailout, the Turkish government has heaped scorn on the West. In return, the Turkish lira plunged another 8% against the dollar on Monday, to 7.04 lira to the dollar.

Seen the other way around, as the chart below shows, the value of 1 lira has now dropped to 14.4 US cents, from 25 cents just four months ago, which, if nothing else, tells people to go figure out how to invest in gold and silver. Monday’s drop brings the grand collapse over the past three days to 24%, and over the past four months to 43%:


After nine years of experimental monetary policies in the US, Europe, Japan, and elsewhere, the Emerging Market economies have become addicted to this debt borrowed in a hard currency that they cannot inflate away. In Turkey, this cheap debt – cheap even for junk-rated issuers such as the government of Turkey – funded a construction boom in the property sector. This construction boom has been crucial to the economy – which is why the government is trying to ride this bull all the way.

Turkey’s inflation is surging. In July, annual inflation reached 16%, the highest since January 2004. Inflation is what ultimately destroys a currency. But it’s not yet 30% as in Argentina, and perhaps the government thinks it still has some leeway.

The Turkish lira always hits record lows against the dollar, interspersed with brief periods of upticks, because the Turkish government has always destroyed its currency at a blistering speed. But even for Turkey, this is a bit much.

A currency crisis is one thing. But when a currency crisis morphs into a foreign-currency-denominated debt crisis, all heck tends to break lose. This is when the cheaply borrowed dollars and euros that the economy has come to depend on suddenly dry up. And then the whole economic edifice based on this debt tends to come unglued.
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💱 The crisis in emerging market currencies isn’t going away
« Reply #626 on: September 02, 2018, 12:13:43 AM »
Go to the website for the charts.

RE

https://qz.com/1375648/the-crisis-in-emerging-market-currencies-isnt-going-away/


Argentina’s President Mauricio Macri speaks during a news conference
Reuters/Marcos Brindicci

The crisis in emerging market currencies isn’t going away
By Eshe NelsonSeptember 1, 2018

After just a brief respite, the turmoil in emerging market currencies has resumed. What began in Argentina and Turkey has snowballed into broader collapse in confidence that has policy makers in Indonesia, India, South Africa, and Brazil scrambling to protect their economies.

Left unchecked, more nations could get wrapped up in the declines, threatening their country’s and the world’s economic growth.

The Turkish lira, which has been relentlessly setting new all-time lows, proved to be the “canary in the coal mine” for troubles across emerging markets, according to strategists at BNY Mellon. Traders worry about countries with large current account deficits and a large stock of dollar-denominated debt in a world with rising interest rates and a stronger dollar, according to the bank.

This week, the Argentine peso usurped the Turkish lira to become the worst performing emerging market currency this year (paywall). It has now lost more than half of its value since the end of 2017.
Argentina’s currency crisis

Argentina’s problems aren’t getting any better, despite taking conventional measures to stem a currency crisis: raising interest rates, selling reserves, and reducing government spending. In June, the government even repaired ties with the International Monetary Fund (IMF) after a decade-long break.

In a poorly communicated move the government asked the IMF to speed up the release of the $50 billion in funds from its new agreement. It spooked traders. The peso resumed its plunge. Desperate to resolve the crisis, the central bank raised interest rates to 60%, the highest in the world. The peso kept falling.
Turkey’s currency crisis

Turkey refuses to raise interest rates to stem its crisis, making matters worse. Instead president Recep Tayyip Erdogan is trying to use small fiscal measures to end the crisis. Markets reacted negatively to this. Erdogan is holding steadfast to his view that higher interest rates will lead to inflation. (The opposite is true.) He also blames a US-led conspiracy for the economic problems.

Analysts at ING say traditional measures, i.e. raising rates, are needed to convince traders to buy the lira again. But Commerzbank strategists say that it could be too late for that. “In Turkey we have probably already reached a point at which monetary policy alone cannot save the lira any longer but where this has to be accompanied by political measures,” they wrote in a note to clients.

The lira caught a small respite after the government increased the tax on foreign exchange deposits and reduced the tax on lira deposits on Aug. 31. Many analysts aren’t convinced the confidence will last. The central bank’s deputy governor is said to be leaving, creating a vacancy that president Erdogan can fill to further cement his influence over monetary policy.
India’s currency crisis

Commerzbank warns that the lesson from Turkey and Argentina is that other emerging market currencies shouldn’t watch their currencies depreciate for too long. The bank says they need to show they are fostering an economy that can sustainably support their current account deficits.

That warning is being sent in India’s direction. The rupee has suffered its worst monthly decline in more than three years (paywall). Most recently falling past the psychologically important level of Rs70 per dollar to an all-time low.
Indonesia’s currency crisis

Meanwhile, the Indonesian rupiah has tumbled to its lowest level since the 1998 Asian financial crisis.

It’s getting harder to believe that these currency troubles are idiosyncratic events coincidentally happening in several countries at the same time. The troubles appear are spreading between them (paywall), with one currency’s decline precipitating falls in other corners of the world.
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https://www.greanvillepost.com/2018/09/26/sanctions-sanctions-sanctions-the-final-demise-of-the-dollar-hegemony%e2%80%a8/

Sanctions, Sanctions, Sanctions – the Final Demise of the Dollar Hegemony?

September 26, 2018 branford perry


HELP ENLIGHTEN YOUR FELLOWS. BE SURE TO PASS THIS ON. SURVIVAL DEPENDS ON IT.


US sanctions have acquired a malignancy that many people attribute to Trump, and that is correct, as far as it goes. But the “sanctions” tactic started long ago, and Obama, the Democrats’ patron saint, was a notorious practitioner of this foul approach to imperialist dominance. See the material below.

Sanctions left and sanctions right. Financial mostly, taxes, tariffs, visas, travel bans – confiscation of foreign assets, import and export prohibitions and limitations; and also punishing those who do not respect sanctions dished out by Trump, alias the US of A, against friends of their enemies. The absurdity seems endless and escalating – exponentially, as if there was a deadline to collapse the world. Looks like a last-ditch effort to bring down international trade in favor of — what? – Make America Great Again? – Prepare for US mid-term elections? – Rally the people behind an illusion? – Or what?

All looks arbitrary and destructive. All is of course totally illegal by any international law or, forget law, which is not respected anyway by the empire and its vassals, but not even by human moral standards. Sanctions are destructive. They are interfering in other countries sovereignty. They are made to punish countries, nations, that refuse to bend to a world dictatorship.

Looks like everybody accepts this new economic warfare as the new normal. Nobody objects. And the United Nations, the body created to maintain Peace, to protect our globe from other wars, to uphold human rights – this very body is silent – out of fear? Out of fear that it might be ‘sanctioned’ into oblivion by the dying empire? – Why cannot the vast majority of countries – often it is a ratio of 191 to 2 (Israel and the US) – reign-in the criminals?

Imagine Turkey – sudden massive tariffs on aluminum (20%) and steel (50%) imposed by Trump, plus central bank currency interference had the Turkish Lira drop by 40%, and that ‘only’ because Erdogan is not freeing US pastor Andrew Brunson, who faces in Turkey a jail sentence of 35 years for “terror and espionage”. An Izmir court has just turned down another US request for clemency, however, converting his jail sentence to house arrest for health reason. It is widely believed that Mr. Brunson’s alleged 23 years of ‘missionary work’ is but a smoke screen for spying.
President Erdogan has just declared he would look out for new friends, including new trading partners in the east – Russia, China, Iran, Ukraine, even the unviable EU, and that his country is planning issuing Yuan-denominated bonds to diversify Turkey’s economy, foremost the country’s reserves and gradually moving away from the dollar hegemony.
Looking out for new friends, may also include new military alliances. Is Turkey planning to exit NATO? Would turkey be ‘allowed’ to exit NATO – given its strategic maritime and land position between east and west? – Turkey knows that having military allies that dish out punishments for acting sovereignly in internal affair – spells disaster for the future. Why continue offering your country to NATO, whose only objective it is to destroy the east – the very east which is not only Turkey’s but the world’s future? Turkey is already approaching the SCO (Shanghai Cooperation Organization) and may actually accede to it within the foreseeable future. That might be the end of Turkey’s NATO alliance.
Sanctions are destructive. They are interfering in other countries sovereignty. They are made to punish countries, nations, that refuse to bend to a world dictatorship.
What if Iran, Venezuela, Russia, China – and many more countries not ready to bow to the empire, would jail all those spies embedded in the US Embassies or camouflaged in these countries’ national (financial) institutions, acting as Fifth Columns, undermining their host countries’ national and economic policies? – Entire cities of new jails would have to be built to accommodate the empire’s army of criminals.

Imagine Russia – more sanctions were just imposed for alleged and totally unproven (to the contrary: disproven) Russian poisoning of four UK citizens with the deadly nerve agent, Novichok – and for not admitting it. This is a total farce, a flagrant lie, that has become so ridiculous, most thinking people, even in the UK, just laugh about it. Yet, Trump and his minions in Europe and many parts of the world succumb to this lie – and out of fear of being sanctioned, they also sanction Russia. What has the world become? – Hitler’s Propaganda Minister, Joseph Goebbels, would be proud for having taught the important lesson to the liars of the universe: “Let me control the media, and I will turn any nation into a herd of Pigs”. That’s what we have become – a herd of pigs.

Fortunately, Russia too has moved away so far already from the western dollar-controlled economy that such sanctions do no longer hurt. They serve Trump and his cronies as mere propaganda tools – show-offs, “we are still the greatest!”.
Venezuela is being sanctioned into the ground, literally, by from-abroad (Miami and Bogota) Twitter-induced manipulations of her national currency, the Bolívar, causing astronomical inflation – constant ups and downs of the value of the local currency, bringing the national economy to a virtual halt. Imported food, pharmaceuticals and other goods are being deviated at the borders and other entry points, so they will never end up on supermarket shelves, but become smuggle ware in Colombia, where these goods are being sold at manipulated dollar-exchange rates to better-off Venezuelan and Columbian citizens. These mafia type gangs are being funded by NED and other similar nefarious State Department financed “NGOs”, trained by US secret services, either within or outside Venezuela. Once infiltrated into Venezuela – overtly or covertly – they tend to boycott the local economy from within, spread violence and become part of the Fifth Column, primarily sabotaging the financial system.
One of Obama’s many sanctions against Russia, this one signed in 2016. Smooth image aside, he’s as criminal as the rest.
Venezuela is struggling to get out of this dilemma which has people suffering, by de-dollarizing her economy, partly through a newly created cryptocurrency, the Petro, based on Venezuela’s huge oil reserves and also through a new Bolivar – in the hope of putting the brakes on the spiraling bursts of inflation. This scenario reminds so much of Chile in 1973, when Henry Kissinger was Foreign Secretary (1973-1977), and inspired the CIA coup, by “disappearing” food and other goods from Chilean markets, killing legitimately elected President Allende, bringing Augusto Pinochet, a horrendous murderer and despot, to power. The military dictatorship brought the death and disappearance of tens of thousands of people and lasted until 1990. Subjugating Venezuela might, however, not be so easy. After all, Venezuela has 19 years of revolutionary Chavista experience – and a solid sense of resistance.

Iran – is being plunged into a similar fate. For no reason at all, Trump reneged on the five-plus-one pronged so-called Nuclear Deal, signed in Vienna on 14 July 2015, after almost ten years of negotiations. Now – of course driven by the star-Zionist Netanyahu – new and ‘the most severe ever’ sanctions are being imposed on Iran, also decimating the value of their local currency, the Rial. Iran, under the Ayatollah, has already embarked on a course of “Resistance Economy”, meaning de-dollarization of their economy and moving towards food and industrial self-sufficiency, as well as increased trading with eastern countries, China, Russia, the SCO and other friendly and culturally aligned nations, like Pakistan. However, Iran too has a strong Fifth Column, engrained in the financial sector, that does not let go of forcing and propagating trading with the enemy, i.e. the west, the European Union, whose euro-monetary system is part of the dollar hegemony, hence posing similar vulnerability of sanctions as does the dollar.

China – the stellar prize of the Big Chess Game – is being ‘sanctioned’ with tariffs no end, for having become the world’s strongest economy, surpassing in real output and measured by people’s purchasing power, by far the United States of America. China also has a solid economy and gold-based currency, the Yuan – which is on a fast track to overtake the US-dollar as the number one world reserve currency. China retaliates, of course, with similar ‘sanctions’, but by and large, her dominance of Asian markets and growing economic influence in Europe, Africa and Latin America, is such that Trump’s tariff war means hardly more for China than a drop on a hot stone.

North Korea – the much-touted Trump-Kim mid-June Singapore summit – has long since become a tiny spot in the past. Alleged agreements reached then are being breached by the US, as could have been expected. All under the false and purely invented pretext of DPRK not adhering to her disarmament commitment; a reason to impose new strangulating sanctions. The world looks on. It’s normal. Nobody dares questioning the self-styled Masters of the Universe. Misery keeps being dished out left and right – accepted by the brainwashed to-the-core masses around the globe. War is peace and peace is war. Literally. The west is living in a “peaceful” comfort zone. Why disturb it? – If people die from starvation or bombs – it happens far away and allows us to live in peace. Why bother? – Especially since we are continuously, drip-by-steady drip being told its right.

In a recent interview with PressTV I was asked, why does the US not adhere to any of their internationally or bilaterally concluded treaties or agreements? – Good question. – Washington is breaking all the rules, agreements, accords, treaties, is not adhering to any international law or even moral standard, simply because following such standards would mean giving up world supremacy. Being on equal keel is not in Washington’s or Tel Aviv’s interest. Yes, this symbiotic and sick relationship between the US and Zionist Israel is becoming progressively more visible; the alliance of the brute military force and the slick and treacherous financial dominion – together striving for world hegemony, for full spectrum dominance. This trend is accelerating under Trump and those who give him orders, simply because “they can”. Nobody objects. This tends to portray an image of peerless power, instilling fear and is expected to incite obedience. Will it?

What is really transpiring is that Washington is isolating itself, that the one-polar world is moving towards a multipolar world, one that increasingly disregards and disrespects the United States, despises her bullying and warmongering – killing and shedding misery over hundreds of millions of people, most of them defenseless children, women and elderly, by direct military force or by proxy-led conflicts – Yemen is just one recent examples, causing endless human suffering to people who have never done any harm to their neighbors, let alone to Americans. Who could have any respect left for such a nation, called the United States of America, for the people behind such lying monsters?

This behavior by the dying empire is driving allies and friends into the opposite camp – to the east, where the future lays, away from a globalized One-World-Order, towards a healthy and more equal multi-polar world. – It would be good, if our world body, the members of the United Nations, created in the name of Peace, would finally gather the courage and stand up against the two destroyer nations for the good of humanity, of the globe, and of Mother Earth.

About the Author

Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research, ICH, RT, Sputnik, PressTV, The 4th Media (China), TeleSUR, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.
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💸 Why Did All this Money-Printing Not Trigger Massive Inflation?
« Reply #628 on: October 11, 2018, 01:55:25 AM »
https://wolfstreet.com/2018/10/09/why-did-qe-money-printing-not-cause-consumer-price-inflation/

I Was Asked: Why Did All this Money-Printing Not Trigger Massive Inflation?


by Wolf Richter • Oct 9, 2018 • 145 Comments   
Asset-price inflation feels good to asset holders – until it doesn’t

I was asked two important questions in this mind-boggling era of QE: The Bank of Japan has monetized 50% of its national debt; so why has there not been a surge of inflation? And why can’t the Fed restart QE and do the same without triggering inflation?

“Inflation” can be a lot of things. Here we’re not talking about “monetary inflation.” We’re talking about price inflation – when the currency loses its purchasing power. There are several types of price inflation that are accounted for separately, including:

    Consumer price inflation
    Wholesale price inflation
    Wage inflation.
    Asset price inflation.

The questions were about consumer price inflation; but the answer lies in asset price inflation.

It’s true that despite QE globally – not just in Japan – there has been relatively little consumer price inflation in the countries whose central banks perpetrated it. But it has caused enormous asset-price inflation. We call it the “Everything Bubble” where practically all asset classes globally have become ludicrously inflated.

Asset price inflation means that the currency loses purchasing power with regards to assets, such as real estate. The house is the same, only a little more run-down, but now it takes twice as many dollars to buy than five years ago.

When asset-price inflation reverses, which it invariably does, it can be deadly for the banks and the financial system overall. There are plenty of examples, including the US housing and mortgage crisis that was part of the Financial Crisis.

Assets are used as collateral by banks and other lenders. When asset prices get inflated, they support larger loans. But inflated asset prices invariably deflate at some point, and suddenly, when the borrower defaults, the collateral is no longer enough to cover the loan. Asset price inflation feels good because it translates into free and easy wealth for asset holders, but when it deflates, it tends to bring down the banks – even or especially the biggest ones – and causes all kinds of other mayhem.

Asset price inflation means risks are building up in the financial system.

So central banks, while they try to stimulate some asset price inflation, are worried when it goes too far. The Fed has expressed this worry in various forms for two years. The ECB is now murmuring about it. And even the Bank of Japan is suddenly fretting about the “sustainability” of its QE program, and its impact on the financial markets.

This is why QE cannot be maintained without setting the stage for another, and much bigger and even more magnificent collapse of the financial system, the Big One if you will, and all the real-economy mayhem it would entail.

Consumer price inflation – defined here as loss of purchasing power of the currency with regards to consumer goods and services, as measured by a consumer price index – is in part a confidence game.

Consumer price inflation results from a mix of market forces, psychology, and other factors. What exactly causes consumer price inflation is still not fully understood, as evidenced by the surprise that economists experienced when QE failed to cause it.

One factor in consumer price inflation is confidence in the currency – often measured as “inflation expectations.” Like so many other factors in economics, it’s psychological!

When the people have confidence that the purchasing power of their currency remains stable, and when businesses therefore cannot raise prices because people and other businesses would refuse to pay these higher prices, then inflation is “well anchored,” as central bankers say. This is expressed in various “inflation expectation” indices. But confidence can vanish, and once gone, it’s devilishly hard to rebuilt.

Over the past two decades, the Japanese have learned that there is very little or no inflation in their system:


All economic players have adjusted to it — consumers, government entities, businesses, pension funds, etc. This confidence has made it effectively impossible to raise prices on many goods and services (with some exceptions). When companies tried to raise prices, consumers simply switched to alternatives or cut back, and the price increases didn’t stick.

The Japanese are hoarding cash (via yen deposits and other low-risk yen instruments) because they know it will retain its purchasing power. They trust the yen! This attitude – “inflation expectations” – has helped keep inflation to near zero. It’s a self-reinforcing mechanism.

On the other hand, there’s Argentina: Successive governments have for decades trashed any kind of confidence or trust people might have had in the peso. Argentines get rid of pesos as soon as they can (convert them into dollars or assets). In other words, they constantly sell pesos. The entire economy has adjusted to dealing with a currency that rapidly loses purchasing power. It too is a self-reinforcing mechanism.

During the 1970s, there was a lot of inflation in the US, reaching nearly 15% in 1980. It had to be stopped before it would spiral completely out of control. Fed Chairman Paul Volcker, with the gutsy public backing of President Reagan, went to work with rate increases of a full percentage point per meeting that shocked. This was accompanied by a publicity campaign.

It was radical surgery to rebuild confidence in the dollar, and it caused a nasty “double-dip” recession that threw millions of people out of work. But inflation began dropping. And over many years, it gradually rebuilt confidence that prices might rise by about 2% to 3% a year, not more. In the Fed’s terms, “inflation expectations are well anchored.” As long as that confidence persists, inflation will have a hard time spiraling out of control.

But in the US, this confidence is still fragile. Inflation expectations already ticked up to 3%. Once inflation expectations rise, all bets are off.

This can also crop up in Japan, and when it does, nothing and no one will be prepared for it – after two decades of price stability. If consumer price inflation gets out of hand, the loss of purchasing power of the yen will destroy much of the wealth of the Japanese and the purchasing power of their labor.

That is a risk. And it comes on top of the more immediate risk associated with asset price inflation – what it does to the financial system when the prices of leveraged assets deflate. That’s the mechanism by which QE becomes destructive. That’s why the price of free money can be very costly.

Despite repeated speeches to the contrary, the Bank of Japan is sharply tapering its QE. Read…  QE Party Is Drying Up, Even at the Bank of Japan 
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Re: 💸 Why Did All this Money-Printing Not Trigger Massive Inflation?
« Reply #629 on: October 11, 2018, 06:08:27 AM »
https://wolfstreet.com/2018/10/09/why-did-qe-money-printing-not-cause-consumer-price-inflation/

I Was Asked: Why Did All this Money-Printing Not Trigger Massive Inflation?


by Wolf Richter • Oct 9, 2018 • 145 Comments   
Asset-price inflation feels good to asset holders – until it doesn’t

I was asked two important questions in this mind-boggling era of QE: The Bank of Japan has monetized 50% of its national debt; so why has there not been a surge of inflation? And why can’t the Fed restart QE and do the same without triggering inflation?

“Inflation” can be a lot of things. Here we’re not talking about “monetary inflation.” We’re talking about price inflation – when the currency loses its purchasing power. There are several types of price inflation that are accounted for separately, including:

    Consumer price inflation
    Wholesale price inflation
    Wage inflation.
    Asset price inflation.

The questions were about consumer price inflation; but the answer lies in asset price inflation.

It’s true that despite QE globally – not just in Japan – there has been relatively little consumer price inflation in the countries whose central banks perpetrated it. But it has caused enormous asset-price inflation. We call it the “Everything Bubble” where practically all asset classes globally have become ludicrously inflated.

Asset price inflation means that the currency loses purchasing power with regards to assets, such as real estate. The house is the same, only a little more run-down, but now it takes twice as many dollars to buy than five years ago.

When asset-price inflation reverses, which it invariably does, it can be deadly for the banks and the financial system overall. There are plenty of examples, including the US housing and mortgage crisis that was part of the Financial Crisis.

Assets are used as collateral by banks and other lenders. When asset prices get inflated, they support larger loans. But inflated asset prices invariably deflate at some point, and suddenly, when the borrower defaults, the collateral is no longer enough to cover the loan. Asset price inflation feels good because it translates into free and easy wealth for asset holders, but when it deflates, it tends to bring down the banks – even or especially the biggest ones – and causes all kinds of other mayhem.

Asset price inflation means risks are building up in the financial system.

So central banks, while they try to stimulate some asset price inflation, are worried when it goes too far. The Fed has expressed this worry in various forms for two years. The ECB is now murmuring about it. And even the Bank of Japan is suddenly fretting about the “sustainability” of its QE program, and its impact on the financial markets.

This is why QE cannot be maintained without setting the stage for another, and much bigger and even more magnificent collapse of the financial system, the Big One if you will, and all the real-economy mayhem it would entail.

Consumer price inflation – defined here as loss of purchasing power of the currency with regards to consumer goods and services, as measured by a consumer price index – is in part a confidence game.

Consumer price inflation results from a mix of market forces, psychology, and other factors. What exactly causes consumer price inflation is still not fully understood, as evidenced by the surprise that economists experienced when QE failed to cause it.

One factor in consumer price inflation is confidence in the currency – often measured as “inflation expectations.” Like so many other factors in economics, it’s psychological!

When the people have confidence that the purchasing power of their currency remains stable, and when businesses therefore cannot raise prices because people and other businesses would refuse to pay these higher prices, then inflation is “well anchored,” as central bankers say. This is expressed in various “inflation expectation” indices. But confidence can vanish, and once gone, it’s devilishly hard to rebuilt.

Over the past two decades, the Japanese have learned that there is very little or no inflation in their system:


All economic players have adjusted to it — consumers, government entities, businesses, pension funds, etc. This confidence has made it effectively impossible to raise prices on many goods and services (with some exceptions). When companies tried to raise prices, consumers simply switched to alternatives or cut back, and the price increases didn’t stick.

The Japanese are hoarding cash (via yen deposits and other low-risk yen instruments) because they know it will retain its purchasing power. They trust the yen! This attitude – “inflation expectations” – has helped keep inflation to near zero. It’s a self-reinforcing mechanism.

On the other hand, there’s Argentina: Successive governments have for decades trashed any kind of confidence or trust people might have had in the peso. Argentines get rid of pesos as soon as they can (convert them into dollars or assets). In other words, they constantly sell pesos. The entire economy has adjusted to dealing with a currency that rapidly loses purchasing power. It too is a self-reinforcing mechanism.

During the 1970s, there was a lot of inflation in the US, reaching nearly 15% in 1980. It had to be stopped before it would spiral completely out of control. Fed Chairman Paul Volcker, with the gutsy public backing of President Reagan, went to work with rate increases of a full percentage point per meeting that shocked. This was accompanied by a publicity campaign.

It was radical surgery to rebuild confidence in the dollar, and it caused a nasty “double-dip” recession that threw millions of people out of work. But inflation began dropping. And over many years, it gradually rebuilt confidence that prices might rise by about 2% to 3% a year, not more. In the Fed’s terms, “inflation expectations are well anchored.” As long as that confidence persists, inflation will have a hard time spiraling out of control.

But in the US, this confidence is still fragile. Inflation expectations already ticked up to 3%. Once inflation expectations rise, all bets are off.

This can also crop up in Japan, and when it does, nothing and no one will be prepared for it – after two decades of price stability. If consumer price inflation gets out of hand, the loss of purchasing power of the yen will destroy much of the wealth of the Japanese and the purchasing power of their labor.

That is a risk. And it comes on top of the more immediate risk associated with asset price inflation – what it does to the financial system when the prices of leveraged assets deflate. That’s the mechanism by which QE becomes destructive. That’s why the price of free money can be very costly.

Despite repeated speeches to the contrary, the Bank of Japan is sharply tapering its QE. Read…  QE Party Is Drying Up, Even at the Bank of Japan

I think this hits on some good points, but it leaves out some things.

Much of this has to do with how consumer price inflation works.

Consumers, in order to spend more, have to make more. They have a baseline existence....food, rent, gas, and "everything else".

All that has to come out of wages. If they can cover their nut, working stiffs will spend the rest, at least here in the US. Savings is not that ingrained in our culture. I think there has to be a surplus for price inflation to take off. If food and rent and gas are manageable, then there is surplus cash that chases non-essentials and status-reinforcing higher end goods.

In the recent past, all the surplus flows to the rich, who don't spend any more than usual when their "pay" goes up. The hoard money or buy assets.

If real wages are completely static or even falling, and gas is (over the longer term) going up, and rent is going up because the price of the underlying asset is in a bubble.....then working class existence is a constant struggle, just to get the basics, never mind the rest.

Cheap consumer goods, like a TV and and a game console....prices have fallen. Clothes are cheap...all because of cheap foreign labor. Low quality food is relatively cheap, because of Big Ag and FF's. That all keeps the fiery coals of inflation from affecting consumer prices.

Also, poor people live on credit. Instead of using credit wisely to acquire assets that appreciate, they use payday loans to get by until their next payday. This credit is NOT cheap credit. Even in the past several years of low, low credit, poor people have paid dearly for credit, because usury is legal.

Health care goes up...but our system doesn't turn people away for non-payment, so that puts an effective "ceiling" on medical costs. If you have serious illness, you get basic treatment, but it just makes you bankrupt. But I'd say drug costs and medical costs, especially for old people on fixed incomes, is where inflation DOES get felt the most.

I am trying to parse out how the new SDR/Yuan/Gold peg is going to affect the US.

The dollar is about 40% of the SDR basket, so Weimar inflation is not going to happen because of an SDR peg. It can't, I don't think. If the IMF changes the basket that could change.

But it has to hurt dollar buying power, as fewer dollars have to be held by foreign dollar borrowers.

It looks like the Chinese banks are using these pegs to control the USD and and gold price. This will protect them from the tariffs, or at least that is the strategy.

Rickards says the the Chines will be eventually bankrupted by the price they're paying to keep the pegs going. They are using gold to buy SDR's and using SDR's to buy gold.


What makes the desert beautiful is that somewhere it hides a well.