De a poco

De a poco, y sin hacer mucho ruido, algunos gobiernos se preparan para la crisis financiera que se viene. No será divertida, chicos. Los papeles se van a volatilizar, y entre los papeles incluimos las monedas nacionales, que en casi todas partes se imprimen con escaso o nulo respaldo. Algunos países quieren su oro de vuelta desde Fort Knox, previendo una declinación de la moneda universal actual, el dólar. El común de la gente, sin embargo, cree que el festival de bonos y papeles es algo así como la Ley de la Gravedad, una cosa cósmica y eterna. En fin. La primera de las notas que siguen es del sitio web Strategic Culture Foundation:

Título: Gold Leaving US Vaults: Signs of Upcoming Currency War and Armed Conflict

Texto: The Turkish government has made the decision to repatriate all of its gold reserves that are currently housed in the US Federal Reserve System (FRS). Overall Turkey was storing 220 tonnes, valued at $25.3 billion, in the US, which it repossessed on April 19, 2018.

Turkey’s President Recep Tayyip Erdogan has toughened his stance against the US dollar (USD), declaring that international loans should be made in gold instead of the American currency. Ankara is seeking to reduce dependence on the US financial system. The gold’s homecoming was partly prompted by the US threats to impose sanctions if Turkey goes through with the signed deal to purchase Russian S-400 missile defense systems.

This is a dramatic move reflecting an international trend. Venezuela repatriated its gold from the US in 2012. In 2014, the Netherlands also retrieved its 122.5 tonnes of gold that were stored in US vaults. Germany brought home 300 metric tonnes of gold stashed in the United States in 2017. It took Berlin four years to complete the transfers. Austria and Belgium have reviewed the possibility of taking similar measures.

Few people believe the US Treasury’s assurances that the 261 million ounces (roughly 8,100 tonnes) in official gold reserves that are stored in Fort Knox and other places are fully audited and accounted for. The Federal Reserve has never been fully and independently audited. The pressure for a full, independent audit of all US gold reserves has always been resisted by the government and in Congress. Nobody knows if the gold is really there. What if the vaults turn out to be empty? It’s wiser to bring your gold home while you can, rather than to just keep on wondering.

The gold bars that the US claims to hold are of low purity and do not conform to international industry standards. Even if the US has the amount of gold it claims to have, most of it would not be acceptable for trading on the international market. While other countries are pulling their gold out of the FRS banks, Russia and China are boosting their reserves, creating gold-backed currencies for themselves and thus moving the world away from the dominance of the USD.

The US dollar’s status as the global reserve currency has been called into question. It faces some tough competition. The tariffs introduced by the US administration as an instrument of coercion against other countries are failing to bolster the greenback, which may soon face headwinds. An international currency war looms as a possibility. This makes investors look for other options. Indeed, why should other countries rely on a US dollar that is not backed by gold or anything but “the good faith and credit of the American worker,” when America itself is not trusted internationally?

For instance, the Chinese yuan is going strong. Russia, Turkey, and Iran are considering the prospects for making payments in their national currencies. Iran has recently announced it is switching from the dollar to the euro as its official reporting currency. Russia and China have a currency swap agreement that avoids settlements in the USD.

The quest to reduce dependence on the dollar was provoked by the ongoing use of sanctions as a political weapon, a kind of foreign-policy tool of choice. Even America's closest allies are threatened by these restrictive measures. The recent attack on the Nord Stream 2 gas project is a good example. It’s only natural for other countries to be looking for ways to resist the US policy of twisting arms. Using alternative currencies and bringing gold home are ways to do that.

America has always opposed such efforts. Any methods would do. Muammar Gaddafi, the Libyan leader, was toppled and killed after he came up with the idea to introduce a golden dinar to be used as an international currency in the Middle East and Africa. Iran has recently banned the use of the USD in trade. It refuses to sell its oil for the US currency. President Trump is likely to kill the Iran deal in May, provoking Tehran into reviving its nuclear program.

An armed conflict with Iran might be much closer than generally believed. The nuclear deal has been honored, to everyone’s satisfaction but to Washington’s chagrin. Iran undoubtedly has no military capability that would be a threat to the US. It has never been responsible for any terrorist acts committed abroad or things like that. But it has done something unforgivable in the eyes of the US. It has threatened the USD. That’s what Washington cannot accept, because if it does not support the dollar, there will be problems financing the US government’s huge federal debt. A war with Iran would eliminate the largest non-USD oil exporter. One thing leads to another. The gold repatriations are a precursor to a currency war and armed conflict. That’s what drives US foreign policy.

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Por su parte, la nota de abajo salió hoy en Zero Hedge:

Título: Things Work Until They Don't

Texto: As the world begins its next adventure in financial chaos and rolls over to expose its soft underbelly of lies and deceit that have been perpetrated on the public, those that see the truth have been warning the people once again.

You can give people the truth but you cannot make them believe it. That is for them to come to grips with.

Trade wars are usually bad for all parties in the end but between the beginning and the end there can be some surprising developments. Human actions and delusions on the part of the public can produce strange results at times. All of our systems are based on trust. When that trust is lost, everything will come crashing down. Until then, things will go on.

If trade tariffs with China have the short term effect of creating American jobs, that could have a wealth effect by creating more disposable income in American pockets. That in turn can have a positive effect on the stock market and consumer confidence. Also, commodities are set to soar in price soon and this could carry the stock market up with it for a while.

Richard Russell once said he believed we would have a third leg in the current bull market before the bears take charge. He was right in the past and could be right again, only time will tell. This situation can not last long due to the enormous mal-investment built up in the system over many decades. A house of cards will eventually fall and the taller the house the longer and harder the fall will be.

One thing that could destroy the temporary high could be the destruction of the financial system due to loss of the reserve currency status and the replacement of the petrodollar system.

If and when that happens things will not be looking good for America for a very long time. China is taking actions that could result in just that type of outcome. Their new silk road initiative and oil trading system utilizing Yuan to gold will eventually have serious consequences for Americas standard of living.

Total debts and derivatives in the world amount to 30-50 times of world GDP. The bulk of this is derivatives and when they fail they will become worthless.

The 250 trillion or so in global debt will default when asset prices implode and interest rates explode. When the debt bubble explodes stocks could decline by as much as 95%. Interest rates could exceed the 20% rates we saw in the 1970’s.

In the last 100 years the value of major currencies have declined by 97-99 % relative to purchasing power in gold. The last 1-3% will follow very soon. When the financial system collapses due to losses from derivatives and stocks it will erase all of the savings, and retirement funds people were expecting to get at some future date. This will instantly impoverish the bulk of the population.

As the system collapses the banks will likely try to re-inflate assets by massive money printing which will only cause hyperinflation at some point. As hyperinflation kicks in the price of many assets like stocks, bonds, investment properties and art will likely collapse in real terms. Items like gold, silver and productive farmland will likely fare better.

Eventually deflation will carry all asset prices down as the world falls into a global depression, possibly for decades. All of these things will likely result in social unrest and wars as people become hungry and angry at a system they took for granted for so many years. The trust will be broken and people will look for something else to believe in.

One thing is for certain. People today believe anything but reality and that will catch up to them all very soon in a very painful way. Things work until they don’t. Our economy has been rolling along for decades on the stored wealth of previous generations but that is about to run out of steam very soon. When it does it will be a shock to all but a few.

You can ignore reality but you cannot ignore the consequences of ignoring reality.