North Korea Declares War Against Everybody
Nobody knows what the hell to make of North Korea. Is he insane? Do we laugh or cry? He can;t reach the USA, but he can reach Japan and South Korea. The one thing talked about behind the curtain is simple. War would be generally conventional. The nuks are there as a backup. If Russia invaded Europe, what good are nuks? Neither side would push the button so we are back to conventional warfare. That is the real reason to develop nuks. Not to use them, but to be able to use conventional forces fully.
Latin America & Dollar Loans
From South America a reader has written about the trend down there:
“You know the same thing is happening in Latin America. Tons of dollars have been flowing there recently and dollar borrowing rates have skyrocketed as all US benchmark rates reached record lows.
Economies are booming and it doesn’t take a genius to see most of it has been funded with cheap dollars flowing from the United States as well as Europe.
Most Latin American countries indeed live on effective two-tier systems as the dollar is readily accepted for payments of most transactions. In particular, mortgages as well as land purchases are usually financed by dollar loans, it’s cheaper, and the lenders usually refuse to have long term exposure to local currencies.
Governments are also usually in the habit of borrowing in dollars. And borrowed they have! Argentina is the key here because they defaulted for political reasons a few years back, and up until now they were being financed by Venezuelan oil money, also for political reasons (Chavez was in the habit of handing out “gifts” in exchange for political favors).
So the short dollar position is indeed a WORLDWIDE issue. It will be very interesting to see what happens if something sparks a run to the USD, like the situation in Europe turning from bad to worse. Dollar borrowers the world over will indeed have a ‘religious experience’ of Biblical proportions!”
Conspiracy Theories – Way Too Much Credit.
The popular nonsense is that the confiscation of assets in Cyprus was to force people to invest. Smart money has been moving from PUBLIC to PRIVATE. But if you really think these people think more than one step at a time, you are crediting them way too much. Yes, capital should not park in bank accounts. Head into the private sector. But the consequence of that is also the rise in interest rates. Banks have been making a fortune giving you 0.5% for 3 years and charging you 4%. They did not think this through.
Yes, pulling assets out of banks will aid the stock market and real estate. I have been warning this is a shift from PUBLIC to PRIVATE. But it will hurt the banks and cut into their profits. Then they will freak out about that, see a bubble, raise interest rates, and blow their own debt up. There is no well thought out plan. It is FAR WORSE. The three stooges are in charge!
As far a metals, yes we still have to retest support. But then they should rise into 2017. Stay with coins rather than bullion. Silver coin will be better than bars. It is the storage that is not safe. You can trade them fine. But that is trading. The key to surviving this mess is tangible assets OUTSIDE the banking system. But make no mistake about it. They did not plan this shit. They only care about the immediate crisis with no longer-view. If there was, they would NEVER have borrowed with no end-game solution.
I met with the Australian Government trying to negotiate buying land to move Hong Kong in the mid ’90s. No matter what I was willing to pay, the answer was always no. When I pressed the Labour Government why, I was told they were NOT“Labour” people. I asked if this was racism? I did not understand. The response was no, they were fleeing communism and they believed that allowing them to enter would change politics for they would vote Conservative. It is ALWAYSimmediate self-interest. There is no grand conspiracy. These people are NOT that smart and could care less beyond their immediate term. Sorry, This is the reality behind the curtain.
Homeowner Forecloses on Bank of America!
This is truly an amazing story. Bank of America tried to foreclose on a home in Floridia when they had no such mortgage, and the homeowner proved he had paid cash. A judge ruled Bank of America had to pay the legal fees, and 5 months later ignoring the court order, the homeowner moved to seize Bank of America with the sheriff on their side. The bank had to pay up. The question is, HOW could any lawyer file foreclosure notices without proof the bank even had the mortgage. This is indicative of what has been going on in the courts since 2007. The banks have been foreclosing without legal ownership. This time, the homeowner had paid cash.
Cyprus & Confiscation of Assets is Global Plan
The Cypriot politicians will remain in the Euro at least for now. They are listening to Brussels and are afraid of retaliation if they try to leave. We submitted a proposal to try to save Cyprus, but the powers that be are doing as they are told by the European Commission. There is little hope of reversing the trend at this point and everyone should know that this confiscation of assets was NOT something out of the blue. This was seen as the alternative to “taxpayer” bailouts following the meltdown of 2008-2009. The bankers scared the hell out of government warning they would collapse if the big bankers failed for nobody would be there to sell their debt. At the Sovereign Debt Crisis Conference I warned of FORCED LOANSwere next whereby they confiscated your assets and handed you a bond. By the end of that session, the confiscation was announced. This time, they just took the assets with no bond swap.
We will publish a report on this, but effectively this was discussed at the G20 meeting and this has been put in written documents around the world. It is the next step in the Sovereign Debt Crisis that EVERY country has followed. This is theVERY SAME measure that was done in M.F. Global. The court refused to hold the banks responsible and thus the losses from the firm’s illegal trading were taken from client accounts.
This is why there will be ABSOLUTELY NO HYPERINFLATION. This is not about stimulating a damn thing and they have no intention of honoring their promises to the Baby Boomers. Forget our children. This is about keeping the banks alive to service the debt of government. They will slash and burn pensions, whatever it takes to retain power. Just follow the breadcrumbs. Government is digging in its heels and will not relinquish power nor will they reform.
There is no crazy scheme to stimulate anything. This is about protecting the banks initially (namely NYC) but is all about protecting the halls of government. The real problem; this was NOT done to protect the Cypriot banks. This was done to save the European Commission. They got away with this with M.F. Global. They are now trying it out on Cyprus.This is in the desk drawers of all major central banks as the way to do this. They are getting away with this just as Maximinus I (235-238AD)and all wealth at all times belongs to the state. By the way, when you deposit money in the bank, it is actually no longer legally yours. You become anUNSECURED creditor of the bank. Nothing more. Sorry. I fail to see where even Bitcoin creates some alternative for they can confiscate whatever they want at any time.
The Short Dollar & The Debt Bubble
Everyone keeps touting the demise of the dollar. They seem to be unaware of the global private debt bubble in dollars and how bullish that can be. During the 1980′s, banks in Australia sold Swiss loans on the basis that was the way to save massive interest with no view of the A$ whatsoever. Then the Swiss rallied and A$ fell and the losses to borrowers were massive. This even altered the capital flows confusing the hell out of economists. Back then, there were countless bankruptcies and it was good business for us for we were getting called in among Australia’s top 50 companies all dealing with currency losses on a grand scale.
Well, the short dollar debt bubble has been rising globally and in some respects for perfectly rational reasons in Europe and especially in Asia. Lending and borrowing have been encouraged by super low interest rates and bogus analysts who kept swearing the dollar would move lower, gold would soar, so borrow in dollars and you will pay back with funny money. This attitude has created a global private debt bubble with everyone expecting to profit from a dollar collapse. Unfortunately, as the Euro presses lower because of massive structural problems that have revealed that currency could NEVER rise as a true RESERVE currency displacing the dollar lacking a single national debt, the risks associated with a dollar rally are just off the charts.
Rising debt levels are a natural outgrowth of rising wealth that has been emerging in Asia. As economies advance, financial sectors become more advanced and debt tends to increase. Nevertheless, there are reasons to be concerned about what’s going on in Asia. These economies are requiring more debt to keep going and privately have been following the West down the primrose path of financial indebtedness.
Asia is not as economically healthy as its GDP growth rates suggest. There are growing debt problems with much of the debt in dollars. The economic growth is highly credit-dependent, which in fact provides leverage.Fundamentally, this is a trend we must respect comes with risks because of the cross currency borrowing that introduces massive currency exposure. The dollar has provided incredibly easy money conditions in the entire global economy. This extends far beyond the Fed’s balance sheet and in fact, the Fed looks conservative compared to the rest of the world no less the ECB. Debt has the possibility to rise even further, as financial institutions are under pressure to lend money as evidenced in the USA with mortgage rates dropping below 4%.
The analysis that constantly harp about the Fed and its quantitative easing being massively bearish for the dollar have only helped to create this dollar bubble that is the mirror image of gold. We are beginning to enter the more interesting stage as we await the final break in gold, but the shift in even more capital from Europe that is helping the US share market explode most likely going into a May high, is lining up with a Euro low initially also in May.
The dollar rise into 1985 was similarly fueled by massive dollar bearishness and goldbugs swearing new highs were around the corner. In 1980, the US national debt hit $1 trillion when gold hit $875 and the Eurodollar deposits also reached $1 trillion. Europeans were convinced as all the press there touted the way the USA would get out of its debt bubble was to create a two-tier dollar with green ones still domestic and red ones for Eurodollars. This belief led to huge capital outflows from Eurodollar deposits that collapsed by 50% going into 1985 shifting to domestic dollar deposits that they believed would be worth more. As the bearish dollar view expanded, the dollar rose even further.
This is what has taken place in recent times. The cry that the dollar will collapse because of Fed quantitative easing has been used to both sell gold and dollar loans. The Fed’s $3 trillion expansion was merely offset by the near $6 trillion in capital contraction by the deleveraging. Hence, the net effect fo QE1, QE2, andQE3 have utterly failed to produce the hyperinflation that the majority were forecasting.
This expansion by the Fed helped to create a gold rally, but more significantly, it created a short dollar bubble in debt on a global scale that will cause a dollar rally which will shock the borrowers just as the Australians who were borrowing in Swiss. The extensive short dollar positions through dollar loans counting on its demise, is enough fuel to cause the dollar rally. This is being egged on by the stupidity in Europe at the ECB over this whole Cyprus deal. As geopolitical concerns also rise in Japan with North Korea threatening everyone, the dollar is poised to move higher there. In Britain, the economic decline continues and we may even see negative growth rates there as they become also hunters of the rich and applying their tax laws internationally. The Swiss pegged their currency to the Euro to try to fend off capital flight there but with Russia pissed off over Cyprus, the safer bet is the dollar.
In Australia they called it “the economic equivalent of Mission Impossible” where their burgeoning foreign debt problem was accelerated by a government that did not understand capital flows any more that they do today or most conventional analysts still stuck in the Bretton Woods era of increase money supply must be inflationary ignoring international trends. The Australian Hawke Government at the time claimed to have the answer by tight monetary policy and high interest rates. But the loans were in Swiss. The more they raised interest rates, the greater the A$ rose and this increased the losses in foreign loans. The current account deficit rose because what was included in that is interest payments. The Australian government totally screwed up everything because they were clueless. Meanwhile, academics are focused intensely only on domestic models trying to apply random walks and market efficiency concepts unable to look at anything else like a 12 year old boy who sees his first nude woman unable to even blink.
So hang on to your seat. The press, government, herd of domestically fixated analysts, and most spellbound economists have no clue what has been created because they do not look to the horizon and do not understand the accounting system government are using in any event. As the dollar rises, Washington will call it a currency war, raise interest rates to discourage dollar loans, engage in protectionism, and this will create a feed-back loop sending the currency higher as was the case with the A$ and the Great Depression. Then we have the Sovereign Debt Crisis on top of this mess. So for all those touting the demise of the dollar, the majority are always wrong because that is the fuel that drives the markets. The majority MUST be wrong to create the swings within the economic pendulum. So don’t worry, be happy, we need those people to make money and survive.
When we look at our Dollar Index 1900=Par, we see a starkly bullish chart. The dollar has remained within the uptrend channel for the last century. It has never closed out of it yet. The secondary channel created from the World War I and 1931 high will provide the major technical resistance above the 1985 high when they formed G5 to manipulated the dollar lower creating the 1987 Crash & 1989 Japan Bubble. Even our Energy Model shows the dollar is FAR from over-bought and we can see the flat-line created by Bretton Woods for a brief shining moment. It certainly appears that the US dollar will befuddle everyone as it did before and the A$. We are looking at record highs ABOVE that of 1985 before this flips. So just as the 1980-1985 period when dollar bearishness was at its height yet the dollar rose, we are looking at a similar situation once again.
Both economics and geopolitical trends are conspiring to produce a strong dollar that the majority will never understand until it is too late mumbling - But the Fed increased the money supply! Yes – there is also the other side of that coin, it is called DEMAND!