Setting the Stage for the One World Currency
We can start to see how the one-world currency comes into play with BIG BANG. The more these governments try to manipulate the outcome of the free markets, the worse everything becomes. I met with members of the board in charge of the Swiss/Euro Peg just before the Berlin Conference. I explained that no peg has ever lasted and Bretton Woods stands as witness to that in recent memory no less the Pound/DMark Peg that made George Soros famous. Pegs only suppress the free market, they cannot prevent the eventual outcome.
Instead of an orderly market, the Swiss got overloaded with buying Euros. Had they continued to keep buying, they would have simply bankrupted the entire country if they did not abandon the peg. But what happens is rather simple to comprehend. The volatility increases and its released all in one shot. We can see here that the collapse was still orderly. The market fell to test the Downtrend Line from 2011. It would have reached that target in a normal fashion. The peg simply postponed the inevitable increasing the price shock the longer it was extended. The more you postponed, the steeper the shock for the market will still test that Downtrend line no matter what or when.
The G20 Finance ministers are now pleading with the Fed not to raise rates since they have seen the impact of a rising Swiss franc on everyone who had Swiss loans outside the country demonstrates the crisis we have in currency developing. They have yet to understand why Greece and Southern Europe got screwed. Their debts were transferred to Euros which thenDOUBLED. They had to pay back twice as much and that stripped mined their economies.
The G20 wants the Fed to surrender its domestic policy objective to serve external policy objectives. The Fed cannot and will not take that action. For when the stock market rises on an influx of foreign capital, they will see no other choice but raise rates. Everyone domestically will blame the Fed for low rates creating the bubble. They will set off a major debt crisis outside the USA by raising rates, but if they don’t they will be blamed for the Phase Transition into stocks from outside the country precisely as the bubble was created in Japan with the rising yen going into 1989.95.
This is all part of the crisis we have in the total lack of understanding the global economy. This is what I am warning about that politicians cannot stand up and even promise change when the influences are external. ONLY those of us who have actually dealt internationally can see what is unfolding. The rest are confined by their traditional interventionist views that a local government can manipulate its economy irrespective of the world as Marx and the Keynes argued. Sorry – we are all connected.
We will be moving toward a one-world currency as everyone starts to comprehend that allowing one nation’s currency to serve as the world reserve currency, imposes obligations upon that nation that will be in conflict with its domestic policy objectives.
G20 Leaders Plead with Fed Not to Raise Rates
The degree of crisis that we are now moving into is just off the charts. The G20 finance ministers have urged the Federal Reserve to “minimize negative spillovers” from potential interest-rate increases. With the collapse of the Swiss/Euro Peg, they have been stunned into the realization of cross-currency borrowing. For decades, bankers have been marketing loans in different currencies as a means to reduce interest rate costs. However, once the bankers sell these deals, they just walk away.
The collapse in the Swiss/Euro Peg has exposed the amount of mortgages and loans in Swiss being found in Britain to Greece. This is a drop in the bucket. For the amount of debt issued in dollars has grown by 50% since 2007 and has now reached some $9 trillion. This the total amount owed in dollars by non-bank borrowers outside the USA. If the Fed raises interest rates as anticipated this year for the first time since 2006, higher borrowing costs for companies and governments, along with a stronger greenback, will create the greatest economic collapse in modern times.
The dollar debt is just one example of how the Fed’s tightening would ripple through the world economy. From the housing markets in Canada and Hong Kong to capital flows into and out of China and Turkey right down throughout South America and lets not forget the Middle East and Australia.
I have explained the QE1-3 would not be inflationary and all those who simply try to equate inflation to money supply have been dead wrong. The dollar is now THEworld currency. Not merely is world trade taking place in dollars, we have world debt as well. The increase in money supply has been easily absorbed globally and that has rendered the old theory constructed on a simplistic idea that inflation is solely driven by an increase in money supply are in adequate in today’s global economy.
Liquidity conditions globally will start to tighten as this idea of negative interest rates unwinding the entire leverage of the economy as well. Emerging markets will not be the only area that will be affected. We have a domestic US economy now being fueled by collapsing energy prices and mortgage rates falling through the floor to historic lows. Anyone who can now take a mortgage or refinance at these lower rates on a FIXED basis should get off the couch and run before it is too late.
The broad trade-weighted dollar has strengthened 12.3% since June, and we expect the dollar outright will advance further as the Fed is forced to tighten while the European Central Bank continues to monetize with negative interest rates buying in failed sovereign debt. Of course, Japan extends its record stimulus as well leaving the USA the only game in town. The pegs of China will have to go as the dollar rises China will have to let go of the balloon or be dragged even higher into the sky without a footing. The pegs in the Middle East and Denmark will also have to go as more and more cappital concentrates into the USA.
The stronger greenback will become the wilder the market will become as liquidity declines and volatility rises. We are most likely going to see that Phase Transition in US equities unfold with a 2017 high. Just as the 1987 high took place on the half cycle leading into the peak of the ECM in 1989, this time we are likely to perhaps see the US share market peak on the half cycle after 2015.75.
When the Foreigner Becomes the Ruler
A lot emails have come in where people did not realize that Stalin was no more Russian than Hitler was actually German. Hitler’s father, Alois Hitler Sr, (1837–1903), was an Austrian Civil Servant. If we look at the same trend of an outsider rising to the head of a nation we need look no further than Rome. Claudius (born August 1st, 10 BC) was not born in Italy. While he was technically the first emperor not to be born in Italy, his father was of the Julio-Claudian family and was merely stationed in Gaul. This is why a child born outside his country is still considered to be a citizen if the parents were.
However, shortly before Emperor Nerva died, Roman generals had debated who should be the next emperor. They chose Trajan (98-117AD), a former army commander, senator and governor of Upper Germany. Trajan was first emperor to have been born outside Italy for he came from southern Spain. He issued this gold Aureus depicting he and Nerva together, although Nerva had not selected him as his heir.
It was Trajan who went off and greatly expanded the borders of the Roman Empire into Dacia or former Yugoslavia/Serbia. Hadrian, who succeeded him, abandoned that region and brought the borders back to the original Augustian boundaries.
So the comparisons of Obama and the dispute whether or not he was really born in the United States is an interesting comparison. What I can say is this guy has undermined everything that the leaders of the world accomplished before him. He has deliberately rekindled the cold war with Russia and has expanded Marxist philosophy to hunt down Americans worldwide with his FACTA. The history at the end of the day will not be written very favorably before he leaves office. If he was not born in the USA, he certainly fits the mold.