Monday, December 28, 2020

Must Watch Video: The Plot To Steal America

I highly recommend this video titled: 'The Plot To Steal America'. Can also be found on Rumble and YouTube.

Part I - Election Fraud

Part II - CCP & Big Media & Big Tech vs. Trump & US Patriots

Thursday, December 26, 2019

Cryptocurrencies Provide Path to Freedom Amidst Banking Liquidity Crisis

Banking Liquidity Crisis

A major sign of problems in the financial system occurred this September in the repo market as 'the spike in overnight borrowing rates forced the New York Federal Reserve (NY FED) to come to the rescue with a special operation aimed at easing stress in financial markets'. By November 14, the NY FED announced it would 'continue to offer at least $35 billion in two-week term repo operations twice per week and at least $120 billion in daily overnight repo operations'.

(Watch this brief tutorial on the repo market for further explanation - Update: David Haggith recently posted an in-depth review of the 'repocalypse')

In retrospect, as liquidity continues to be injected in the system, the initial operation no longer seems so 'special'. In a strike against transparency, the NY FED rejected a request to disclose the recipient(s) of these loans stating it is not 'subject to the Freedom of Information Act ("FOIA") although it complies with the spirit of FOIA when responding to requests of this type'. The current crisis in the repo market is clear evidence of something broken in the banking industry. While the global debt bubble was set to burst at the end of last year, the Federal Reserve (FED) suddenly (and after pressure from the White House) refrained from additional interest rate hikes. Since July, the FED has deftly lowered interest rates three times. But, global debt has now surpassed $250 trillion by the end of the 2nd quarter and the total amount of cash owed to lenders is worth more than three times the global GDP. This level of debt is clearly unsustainable.

Trump Administration Policy

As a candidate, President Trump said the U.S. was 'in a big, fat, ugly bubble'. But as President, he has been the biggest cheerleader for a stock market that continues to make all-time highs. So, did the 2016 election make the bubble go away? Does the U.S. national debt (now over $23 trillion) no longer matter? While there has been positive economic progress over the past three years, stock market gains have been completely illusory. Low interest rates have enabled corporations to borrow money to fund stock buybacks (estimated to hit $480 billion this year) and contribute to the artificial rise in stock prices. The current administration has taken the bubble they inherited and encouraged it to get blown even bigger. Curiously, President Trump tweeted on September 11, 2019 (around the same time as problems began in the repo market) that the FED should 'get our interest rates down to zero, or less, and we should then start to refinance our debt'. For myself, that is the exact problem with our existing system. No one person (not the President, the FED Chairman or anyone else) should have the authority to devalue a nation's currency. It is unlikely that the U.S. can have a sound economy with negative interest rates as even FED policymakers are skeptical.

So, why has the Trump administration kept this bubble in place? I believe there are two key reasons. First, there is a strong feeling that the onset of mild economic contraction would prove impossible to contain and lead to economic depression. The second answer relates to geopolitical considerations. As covered last year, the Trump administration views China (and by extension the China - Russia - Iran axis) as a more immediate threat to U.S. interests than the FED. Since the U.S. dollar is the world's reserve currency, the U.S. holds an inherent advantage over any other country. A strategic decision has been made to keep the financial system afloat (and keep the U.S. dollar as the world's reserve currency) while using economic war via sanctions to weaken U.S. enemies.

Recently, Iran has dealt with an economic crisis as a result of these sanctions. CNBC reported that Iran's 'oil exports have dropped from 2.5 million barrels a day after the lifting of sanctions in 2016 to 400,000 barrels per day and perhaps as little as 200,000'. Newsweek recently declared that the result of sanctions has 'created unrest that is weakening the Tehran government at home and abroad'. According to this report, it is the banks that 'pull money out of people's pockets as deposits and invest in profitable business sectors such as tower construction, import projects, and brokerage through the private chain and satellite institutions and companies, rather than lending to factories and institutions. Eventually, profits of these investments turn back to the pockets of the banks' shareholders, who are affiliated with the government'. Perhaps, Iranian protesters were targeting some of these banks that they burned down during the recent uprising. In addition, multiple Chinese banks have been in crisis in recent months. To counter U.S. influence, the BRICS (Brazil, Russia, India, China, South Africa) nations have discussed issuance of a cross-national digital money in order to reduce the dependence of their economies on the U.S.

Freedom vs Slavery

In a true 'free market', private banks should be allowed to fail. Profits should not be privatized with socialized (protected) losses. The core issue is freedom and central banks will eventually be [cornered]. Supporters of a central banking system believe that since banks are such a vital part of the economy, they should be protected. Unfortunately, if bankers are assured of getting 'bailed out', there can never be any incentive to prevent unnecessary, reckless risk taking. As I've said previously, there is no way the U.S. can consider itself a 'free' country when the ultimate power remains embedded with a cadre of bankers. Money itself does not need to be defined by banker overlords. It can be defined as whatever people want it to be. The U.S. dollar is a Federal Reserve Note and backed by nothing. In spite of 30% Americans who believe the U.S. dollar is backed by gold, every day, more people are waking up to this reality.

Alternatives to Existing System

So, to obtain our desired 'freedom', an alternative to the U.S. dollar must exist. For any currency to be effective, it must function as a unit of account, a medium of exchange and a store of value. Since an overwhelming majority of business and consumer transactions today are done digitally, any replacement must be in a digital form. In my opinion, there are potentially two viable alternatives to the U.S. dollar - a digital currency backed by precious metals and cryptocurrencies like Bitcoin. I do not view stablecoins backed by fiat currencies as much of an alternative although they can act as a gateway to proof-of-work or proof-of-stake cryptocurrencies.

Recently, there were rumors of China launching a digital cryptocurrency. Noted economist Daniel Lacalle was highly skeptical of the move. He stated that 'China cannot disrupt the global monetary system and dethrone the US dollar when it has one of the world’s tightest capital control systems, a lack of separation of powers and weak transparency in its own financial system'. Any issuer (either a sovereign country or private firm) of such a digital asset must store the underlying asset (i.e. gold, silver) somewhere and perform periodic audits. One can not discount sovereign risk (i.e. war, regime change, etc.) and counterparty risk.

The most popular cryptocurrency, Bitcoin, has a fixed supply of 21 million (after all coins are mined). No entity can create more coins than its limit and thereby debase Bitcoin's value. The argument that Bitcoin is 'backed by nothing' is highly misleading. Cryptocurrencies provide an easy way for any individual around the world to 'opt-out' of the existing system and start a new one. Bitcoin is not only a decentralized cryptocurrency but it is censorship resistant. Examples of censorship like Chase Bank that terminated banking services of conservative media personalities and HSBC Bank that banned a corporate account allegedly related to the Hong Kong protests will be a remnant of history. Bitcoin does not account for the individual or business' political leanings.

Government & Banking Industry Roadblocks

According to some economists like Alex Krüger, the price of Bitcoin has nothing to do with macroeconomics. Krüger makes a valid point that 'it is such an illiquid/fragmented market that in the absence of mass influx of new buyers, actions of a few determine direction'. Normally, with heightened global tensions, one would expect the price of Bitcoin to explode higher. Instead, the price of Bitcoin has languished the past few months. But, the following two events provide greater transparency to the present situation.

1. Precious Metals Manipulation - In September, the U.S. Department of Justice filed racketeering charges against three employees of JPMorgan Chase & Co. They described the firm's precious metals trading desk as a criminal enterprise operating inside the bank for nearly a decade.

2. Popping the Bitcoin Bubble - In October, former chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo admitted to U.S. government interest (and likely involvement) in 'popping the bitcoin bubble'. He even made a bizarre statement in support of derivatives, 'If you don’t have that derivative, then all you’ve got are believers [and] it’s a believers’ market'. I am not aware of any mandates requiring government agencies to 'pop' bubbles.

These two examples show the determination of these entrenched powers to maintain the status quo. These powers continuously work to crush the perceived value of any asset (such as gold, silver or Bitcoin) that is a potential competitor to the U.S. dollar. The history of both the banking industry and government corruption validates the enormous challenges with affecting real change.

In addition, another immediate problem with Bitcoin is volatility. A legitimate global reserve currency can not depreciate, as Bitcoin did, by approximately 84% from its all time high ($20,000 --->; $3,200). Importantly, there is still a gross stigma associated with such a decline. Today, many people who have heard about cryptocurrencies in passing (or who passionately dislike it) view Bitcoin solely within the context of its price crash. (Although it increased by over 20X in one year prior to the downtrend) The price of Bitcoin will have to exceed its prior all-time high of $20,000 (and probably greater than $50,000) for this stigma to subside. But, since we do not have anything close to a free market, price discovery is especially difficult. Even Ethereum co-founder Vitalik Buterin criticized centralized exchanges, hoping they ‘burn in hell’.

How Do We Achieve Freedom

Conversely, maybe you don't care about your monetary freedom. Right now, life is good. You can go to the store and buy food, take a road trip, or go shopping at the mall. Why would anyone want wholesale changes in their lives? People like Peter Schiff have been ranting about a U.S. dollar collapse for years. Maybe these central bankers aren't so bad after all. Maybe they really care about all of us. These banking liquidity issues could not possibly be tied to any systematic failure. Cryptocurrencies are just too complicated and not needed.

Well, if you believe all of this, you should stop reading and put your head back in the sand. If you think bankers really care about you, then you are quite naive. Compare your grocery bill from 5 years, 10 years, and 20 years ago. Prices have consistently gone up. This hidden inflation is not officially reported by the government, but it is real and will only get worse.

Since it is not prudent to rely on the government for much of anything, especially to help fight off central banks like the FED, any change must arise from the will of the people. We are starting to see coordinated efforts as seen with NFL players asking for payment in Bitcoin. I envision a time where individuals come together, select a coin they like, invest in it and then demand payment in it. Of course, this would take years of coordination and planning.

The Future World Without Dependence On Banks

As we lessen our dependence on banks, many questions remain open. For example, how can we address changes to law enforcement when cryptocurrencies allow anonymous transactions? At a recent conference, the Deputy Secretary of the U.S. Treasury Department questioned how 'digital currencies can potentially be used to evade existing legal frameworks'. He also raised the following questions: 'If a cryptocurrency checked all the near term regulatory boxes today and grew to scale, what would be the process for making changes to rules governing the currency in the future? For instance, if a decade from now there were a desire for a stablecoin to go from fully reserved to partially reserved, or to shift its underlying mix of reserve currencies, would that decision be made by a private governing association? Or by a majority of coinholders? What if foreign actors had acquired a majority of the coins? In any case, would important decisions about our economic system have been taken out of the hands of representatives accountable to the people?'

In the future, I could see a scenario where Bitcoin and other cryptocurrencies compete with sovereign digital currencies backed by assets like gold. I am skeptical of central banks simply issuing digital currencies that are not backed by an asset. For something to be a store of value there must be an element of scarcity. While some would prefer the safety of a a sovereign digital currency, others may prefer Bitcoin. Today's central banks would be stripped of not only controlling the money supply but also of defining it. This change could lead to a separation of nation and currency. What happens if a rogue state like North Korea uses cryptocurrencies to evade sanctions? Geopolitics would be upended as the weaponizing of the U.S. dollar via sanctions would cease. Since U.S. citizens are so heavily dependent on government programs, it will be difficult to avoid societal upheaval. Freedom does not mean free stuff. Are we in the U.S. ready for some (if not all) government programs to go away? Thomas Jefferson once said 'I prefer dangerous freedom over peaceful slavery'. Perhaps, someday, we'll find out how all Americans feel about that.

This article was originally posted on' Medium page.

Tuesday, May 28, 2019

Are Vaccines Safe?

Are vaccines safe?
Do you trust the CDC?
Do you trust the mainstream media? Where does their advertising revenue come from?
Do you trust Big Pharma?
What did Q say about 'most all powerful organizations'?
What did Robert F. Kennedy Jr. discuss with POTUS when they met two years ago?
Who was Dan Olmstead? Who was he supposed to meet before his death?
Who was Daniel Best? What was his role? What happened to him?
>90 Holistic doctors, Nagalase - Coincidence?
CA SB276 - A database set up for what?
Who runs CA? Who really runs CA? i.e. AJR-44, Port of Long Beach, Hollywood, Clinton server, Feinstein driver, fentanyl, etc.
Biden - 'not competition for us'
Follow the money.
What if the trade war is a cover for something much deeper?
Has FLOTUS made any statement regarding vaccines? Why not?
What did Q say about vaccines?
Just asking questions.
Think logically.
Make Vaccines Safe Again.
Make California Great Again.

Friday, December 28, 2018

Troop Pull Out of Syria by President Trump Does Not Sell Out Israel

President Trump has boldly moved towards Senator Rand Paul's non-interventionist foreign policy with his decision to pull troops out of Syria. As expected, the DC establishment is upended with pundits decrying the move and in this case calling it 'reckless'. I strongly agree with the President's decision to pull troops out of Syria (and Afghanistan). There was no Congressional approval for any military action in Syria and the U.S. presence there is arguably unconstitutional.

One of the President's critics foolishly declared that he is bad for Israel. Prior administrations have had a mixed relationship with Israel (military aid that comes with strings attached does not automatically make the U.S. a great friend of Israel). Conversely, President Trump has aligned the U.S. with Israel more so than any prior administration.

So, does this decision sell out Israel? Not at all.

According to U.S. News & World Report, Israel currently ranks as the 8th most powerful country in the world. In the past, U.S. officials (specifically the State Department) would constantly ask that Israel use 'restraint' in conflicts. Israel is more than capable of meeting its security needs and does not need a supervisor providing 'guidance'.

Most importantly, Israel's security is ultimately decided on from the highest power. As written in Devarim (Deuteronomy) 11:26-28:
'See! I give you today (a choice of) a blessing and a curse. The blessing, when you listen to the commandments of G-d your Lord, which I command you today. The curse, if you do not listen to the commandments of G-d your Lord, and you deviate from the path which I command you today, in order to follow other gods which you did not know.'
So, we learn that if Jews follow the commandments, they will be blessed and if they do not follow the commandments, they will be cursed. Israel's existence has been a testament of countless miracles. If more Jews understood the true source of their power (not the IDF, Mossad, etc.), there wouldn't need to be any concern over U.S. foreign policy.

Monday, December 17, 2018

Global Debt Bubble Set to Burst as Mass Awakening Will End Central Bank Control

The yellow vest (a.k.a. gilets jaunes) protests in France are a sign of a populace that has grown more discontent with their falling standard of living and who feel completely disconnected from their elected politicians. The protesters have a wide range of concerns (i.e. immigration, taxes, free trade, benefits, etc.) that do not neatly fit into the left-right paradigm. It also appears that display of anger is spreading throughout Europe as in Belgium:
A retired man told RTBF that he receives a pension of €1,350 a month. “I get it on the 23rd of the month. It’s now the 8th and after I’ve paid insurance, rent, energy bills – which cost €150 – I only have €200 left for living expenses,” he said.
One protester gestured to the European institutional buildings behind him while talking to a NBC Euronews reporter. “There, in ‘Europe’, they’re having fun, they’re laughing," he said. "The people who make the laws are the ones driving us further into the ground. We have empty pockets. We shouldn’t be called the ‘yellow vests’, but the ‘empty pockets’.”
I outlined how the current economic system is not working well for 35% - 40% of Americans in my previous article. I view central banks, especially the Federal Reserve (FED), as a large part of the problem. For a more detailed history and analysis, I highly recommend the book 'The Creature from Jekyll Island: A Second Look at the Federal Reserve' written by G. Edward Griffin. Former Congressman Dr. Ron Paul called it 'a superb analysis deserving serious attention by all Americans'. I unequivocally reject critics who smear the book as 'conspiracy theory' and scurrilously attempt to demonize anyone who engages in critical thinking. Just because the FED website ends in .gov does not make it a government institution. The FED is a private corporation and as federal as Federal Express. For anyone who thinks the FED knows exactly what it is doing, recent remarks from Vice Chairman Richard Clarida's about how the FED Chairman is 'in a darkroom' would probably not inspire confidence.
While it is unclear what direction the protests will take, the Europeans appear to be going through a mass awakening, similar to the one in the U.S. It would likely impede any central bank from bailouts in the near future.

A few points that I want to reiterate:
  • The era of central banking (FED's inception was in 1913) has been marked by war (WWI, WWII, Korea, Vietnam, etc.) and numerous regime changes (courtesy of the CIA).
  • There is no way the U.S. can consider itself a 'free' country when the ultimate power remains embedded with a cadre of bankers.
  • The era of central banking is coming to an end as the FED will either be either dissolved, [restructured] or phased out.

Central Banks Face Math Problem

The world is addicted to cheap credit, the FED rate increases are hurting the economy, U.S. corporations are under duress and U.S. debt continues to explode. One may ask how I could be so confident in my assessment that the existing fiat currency system will end. My answer is very simple - basic math. I previously warned about the massive risk of derivatives to the financial system and detailed how the debt (now at $21.87 trillion) puts the solvency of the U.S. into question. CNBC reported last month how U.S. companies are carrying a $9 trillion debt load (86% higher than 2007). Analysts worry that companies teetering between investment grade and junk status could cause market trouble should their standing deteriorate. Bloomberg just reported how global debt hit a record $184 trillion last year, equivalent to more than $86,000 per person. Central banks tried to solve the 2008 financial crises by lowering interest rates and adding more debt. The original debt was mostly not written off and an inevitable crisis was simply deferred.
Interestingly, Mike Maloney put out a recent video on the 'financialization of government' where there exists strong correlation between the stock market and tax revenues. If the stock market does not do well, the FED must print money to lift stock markets to get enough revenues. This dangerous predicament approaches Ponzi scheme conditions.

There have been a couple of dramatic updates in recent weeks.

Update #1 – Closing Days of the Petrodollar

The petrodollar system (in effect since the 1970s) is the primary reason the U.S. dollar is still the world's reserve currency. Oil producing countries like Saudi Arabia do not sell their oil in currencies other than U.S. dollars. In recent years, there have been senseless wars in Iraq, Libya and Syria to protect the petrodollar. Without this agreement, the U.S. dollar would likely lose its role as the global reserve currency over time. China has made serious efforts to assert hegemony in the Middle East and in March introduced oil futures contracts priced in Chinese yuan. These contracts have achieved a 16% share of the global market and reached a pace of expansion termed as 'explosive'. The repercussions of Saudi Arabia breaking ties with the U.S. and moving closer to China are unknown but potentially volatile. The recent vote by the Senate to end U.S. support for the Saudi war in Yemen could hasten this break. Stunningly, a new report claimed the U.S. has become a net oil exporter for the first time in 75 years. While this may have been slightly misleading, the trend towards energy independence for the U.S. could render the petrodollar system obsolete and irrelevant in a few years.

Update #2 – U.S. Has Gold

In 2015, President Trump (then a private citizen) was asked if he could envision a scenario where the U.S. could go back to a gold standard. He had some interesting comments:
“In some ways, I like the gold standard and there is something very nice about it but you have to go back at the right time… We used to have a very solid country because it was based on a gold standard for it. We do not have that anymore. There is something very nice about the concept of that. It would be very hard to do at this point and one of the problems is we do not have the gold. Other places have the gold.”
According to some sources (which will be covered in a future post), the U.S. now has the gold.

Gold Standard

It is somewhat difficult to envision how a gold standard would work in today’s digital economy. Last year, former FED Chairman Greenspan confirmed its historic value:
"The gold standard was operating at its peak in the late 19th and early 20th centuries, a period of extraordinary global prosperity, characterized by firming productivity growth and very little inflation.
But today, there is a widespread view that the 19th century gold standard didn’t work. I think that’s like wearing the wrong size shoes and saying the shoes are uncomfortable! It wasn’t the gold standard that failed; it was politics."
Gold has played a part in policy even after Nixon closed the gold window and broke up the Bretton Woods system in 1971. According to this Forbes article, a panic occurred between 2011-2012 and to prevent a further decline in the dollar’s value there was probably ‘financial market manipulation at an unprecedented level’.
According to another Forbes article, ‘having a gold-linked currency made the selling of bonds, or equities, also known as international capital flows, much more attractive. The great era of the worldwide gold standard, in 1870-1910, was a time of internationalization, free movement of capital, and high levels of investment in emerging markets.’. As the U.S. trade deficit jumped to a 10-year high in October, it is unclear how the U.S. could maintain this imbalance without losing all its gold. It would be prudent U.S. policy to reduce its trade deficit prior to implementing any sort of gold standard.

Cryptocurrency Future

I received a few humorous personal attacks in my last article where I merely suggested that cryptocurrencies could provide an 'unknown path with the possibility of a better future'. I believe the future is promising for blockchain technology. No one can say with certainty that Bitcoin or another cryptocurrency will replace the U.S. dollar as the world's reserve currency. Several cryptocurrencies have dedicated development teams, miners and advocates that represents a kind of community. But, as evidenced by the Bitcoin Cash war, individuals take actions that do not always represent the community’s best interest. Regardless, an infrastructure is being built to attempt to coexist with (if not supplant) the existing monetary system. The upcoming January 3 Bitcoin Proof of Keys day to declare ‘monetary sovereignty’ should be watched.

  • The global debt bubble is on track to burst
  • The mass awakening in Europe (in addition to the U.S.) will impede any central bank bailouts
  • Higher U.S. energy production could render the petrodollar system obsolete
  • A gold standard is the most readily available alternative to the system of central banking but with the risk to the U.S due to excessive trade deficits
  • Cryptocurrencies hold promise but are not ready at this time to replace the system of central banking

Future Developments

I certainly would never pick a date for any sort of financial crisis nor offer financial advice. But Internet entrepreneur and political activist Kim Dotcom does offer somewhat provocative advice via this tweet. I guess anyone with capital can’t say they haven’t been warned. I completely understand how many readers may have difficulty coming to terms with such radical changes to our monetary system. People have been literally brainwashed into thinking the FED acts as some benevolent force for the common person’s best interest. Sorry, bankers at Goldman Sachs are not ‘doing G-d’s work’.

There is unfortunately a large entrenched establishment intent on maintaining the status quo. As Upton Sinclair said, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!". I do think there will be serious displacements in the workforce. I would guess that the banking, media/entertainment, and defense contractor industries along with the political bureaucracy in Washington DC would be adversely impacted. Many employees will need to transition to other areas of work. Since I do not endorse wealth confiscation (aside from extreme cases), I do foresee a problem. How do the estimated 35% - 40% of Americans (referenced earlier) who have hardly any savings obtain access to capital? I am sure there is a great plan out there.

Wednesday, October 17, 2018

Cryptocurrencies in Focus as Trump Plan to End the FED Activated

President Trump has drawn intense criticism for disparaging comments directed towards the Federal Reserve Bank (FED). Defenders of the FED cite its role as an independent entity that should not be mixed with politics. I could not disagree more with this argument as there are a multitude of reasons for shutting down the FED. Central banks, like the FED, exert unwarranted control over the money supply (which does not benefit the average American). Here is an example of fractional reserve banking, facilitated by the existing system, leading  to the creation of money out of thin air:
'Since 97 percent of fiat currency is loaned into existence by commercial banks creating loans through the fractional reserve banking process, the money supply continues to grow. Not only can CBs [commercial banks] create fiat currency from nothing, but they can buy U.S. government debt with that money and keep the interest to make a risk-free profit, which even adds to the CBs’ capital.'
The middle class in the U.S. has been negatively impacted by faulty monetary policy for decades. From 2008 to 2016, near 0% interest rates hurt savers the most. Meek job growth was coupled with rising asset prices like real estate. Americans that could not keep up with paying for basic needs (groceries, rent, etc.) were forced into debt. Some evidence of the dire circumstances facing a great segment of Americans:
Whether one supports the FED or not, clearly, the current system is not working well for 35% - 40% of Americans (many of which represent the Trump base). Further education and job training may help mitigate the circumstances for some but would in no way fix the underlying problem. A radical change (not towards socialism) to the current system of central banking in the U.S. is required. President Trump's experience and unpredictable, combative style make him the ideal person to enact this radical change. The FED (via rate increases) is actually a partner in the strategy to defeat China economically that has yielded encouraging results. So, the President's recent comments that the FED is 'crazy', raising rates 'too fast' and his 'biggest threat' are somewhat confusing. In reality, these remarks signal the closing stage of an ongoing war against the financial-media-military industrial complex (which includes the FED). It is a precursor to the President's plan to set up the FED and blame them for any sort of economic decline. I outlined this in January of 2017:
I believe Mr. Trump will try to push through all of his economic programs on the assumption that the Federal Reserve will keep interest rates low and continue to print massive amounts of dollars as needed (they did it for Obama, right). If the Federal Reserve obliges then great - infrastructure is restored, the military is strengthened, taxes are cut - all with printed dollars at no cost and limited inflation!! Well, unfortunately, there is virtually ZERO chance of this happening. China will no longer be allowed to provide short term support at the expense of losing strategic assets (see here). The massive size of the federal debt (see here) and ongoing deficits will make these policies impossible to implement.
Which brings us to Plan B (which is really the only plan) - Blame the Federal Reserve. Trump can say he tried to get his plan through but didn't get the support of the Federal Reserve. He can then claim that we need a 'new system' in place. That is where some kind of gold standard will come into play.
So, what happens if there is some kind of major financial crisis (i.e. Deutsche Bank, Chinese banks, etc) during his term. Same thing - Blame the Federal Reserve. Do you really think Donald Trump is going to protect the banks that he ran against??
The President has progressed towards meeting my criteria to be a successful president. The three conditions include preventing a world war, ending the FED and draining the swamp by rooting out corruption in government. His efforts to expose and defeat the deep state are commendable. But, to dispel any notion of 'hero worship', the President is just a guy from Queens (like myself) who happens to have a lot of money (unlike myself) and who should not receive any sort of special treatment. Suggested policies like the privatization of spying require greater scrutiny. The U.S. does not need to trade one deep state for another one.

So, once the FED is dissolved, restructured or phased out, the main question is what system will replace it (or co-exist with it). At the time of my original post, I assumed that gold would be the most likely replacement. Now, cryptocurrencies have been added as a potential option. We are seeing a new paradigm as evidenced in countries that have a currency in danger of devaluation (an official lowering of the value of a country's currency within a fixed exchange rate system). In the past, people would line up at a currency exchange center to exchange their local currency for a more stable one (i.e. USD, EUR). Now, people can also go online, open an account on a cryptocurrency exchange and buy Bitcoin. Similarly, depositors are no longer vulnerable to 'haircuts' like those in Cyprus who lost 47.5% of their savings exceeding 100,000 euros back in 2013. We are seeing instances of greater implementation of cryptocurrencies in economically troubled regions like Venezuela (Dash) and Iran  (Bitcoin). Cryptocurrencies may represent an even greater threat to ruling governments (and their central bank enablers) than gold since they are more difficult to confiscate. Still, we have not yet seen mass adoption to further validate them as a viable means of exchange.

For those of you who are still hopelessly negative about cryptocurrencies, I would refer you to a statement made to the U.S. Senate Banking Committee by J. Christopher Giancarlo, Chairman, Commodity Futures Trading Commission:
'We are entering a new digital era in world financial markets. As we saw with the development of the Internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response. The evolution of these assets, their volatility, and the interest they attract from a rising global millennial population demand serious examination.'
For years, the precious metals markets have been subjected to manipulation as exemplified by the Deutsche Bank settlement. We still often see obvious examples of this via futures trading on the COMEX. I previously asserted that Wall Street had limited resources for manipulating cryptocurrencies. Unfortunately, we are seeing hints of market rigging in the exchanges. When the crypto exchange BitMEX performed scheduled maintenance on its trading engine, the weight of shorts were alleviated off the shoulders of the crypto market and Bitcoin saw an immediate surge of buying volume, rising from $6,450 to $6,720 within a minute. Also, popular exchange Coinbase, was recently found to have the highest level of own trading. [Own trading is also called proprietary trading and defines a situation where an exchange trades against the sell orders. In other words, the crypto exchange buys instead of connecting sellers and buyers.] Exchanges like these are indirectly suppressing the price of Bitcoin (and other cryptocurrencies) and creating even more market distortions. Industry success vitally depends on overcoming this manipulation.

Bloomberg highlighted three potential scenarios for Bitcoin:
  • No. 1. Bitcoin Triumph: Bitcoin replaces the dollar (and probably other fiat currencies as well) as the economy’s main unit of exchange. People buy pizzas, finance their mortgages and pay their rent in Bitcoin.
  • No. 2. Bitcoin as Gold: Fiat currency remains the main unit of exchange everywhere except in a few extremely dysfunctional economies like Venezuela’s. But Bitcoin’s market capitalization remains substantial, and it rises in value over time, occasionally experiencing large bubbles and crashes.
  • No. 3. Bitcoin Bust: Bitcoin is abandoned, crashing relative to the dollar and never being useful as a payment method for daily necessities.
In my opinion, Bitcoin (and cryptocurrencies in general) is currently positioned at scenario #2. Scenario #3 does not appear likely and scenario #1 will require more time for the technology to improve. Remember that in the late 1990s, transfer rates of an Internet connection were nowhere near where they are today. In the near term, another price spike could help defuse the massive U.S. debt bomb and create a wealth effect to support the economy. Tom Lee, Managing Partner and the Head of Research at Fundstrat Global Advisors, previously estimated a $25 billion windfall in capital gains tax revenue for the U.S. government in 2017.

The U.S. dollar is a terrible currency. But, the one caveat is that most (if not all) other countries have currencies that are worse! According to the World Economic Forum, the U.S. is now ranked as the world's most competitive economy for the first time since 2008. The rise of interest rates by the FED has hurt emerging market economies far more than the U.S. Even European banks have significant exposure to emerging market debt. There have been rumblings that dollar credit will seize up globally and unleash a 'derivatives volcano'. So, it is unclear when (if at all) this ongoing global currency reset will impact the U.S.

One thing is 100% certain, the existing fiat system is doomed and no country will ever be able to  effectively devalue its currency (and prevent hyperinflation) with options like Bitcoin available. Even more important - there is no way the U.S. can consider itself a 'free' country when the ultimate power remains embedded with a cadre of bankers. The use of cryptocurrencies reinstates power to the individual in place of the state. Ultimately, there will be a choice for Americans - accept the status quo or take an unknown path with the possibility of a better future.

Sunday, July 15, 2018

Tariffs, Tax Cuts and the FED – The US Strategy to Defeat China

The current trade war underscores China’s role as the number one geopolitical competitor to the U.S. The Trump administration, with the support of the Federal Reserve Bank (FED), has embarked on a plan to economically defeat China. Back in April, President Trump could not deny that in the midst of a trade war that ‘there won't be a little pain’ but predicted the U.S. will ‘have a much stronger country when we are finished’. But, at a rally last week in Montana, President Trump confidently stated ‘The war was lost on trade many years ago... but now we're gonna win it and because we have all the cards’. This was somewhat puzzling as China has been slowly devaluing the yuan over the past two months and has withheld implementing its biggest card (the sale of its U.S. treasury holdings).

Last year, the U.S. posted a $375.6 billion deficit in goods with China with a large segment due to computer and electronics imports. In addition, an often-overlooked cause of this trade deficit is the manner in which China acquired its technology. A recent internal investigation found Chinese theft of American intellectual property costing between $225 billion and $600 billion annually. American trade officials cited the Chinese government’s method for acquiring valuable trade secrets as motivation for additional tariffs. The NY Times outlined how China stole designs from Micron Technology to enable it to build a $5.7 billion microchip factory. President Trump has effectively stopped prior administration’s ‘sellout’ policy of allowing Chinese purchases of strategic U.S. assets. While the Chinese government currently owns approximately $1.18 trillion of U.S. treasuries, any chance to swap this debt to equity and effectively colonize the U.S. is virtually zero.

Tax Cuts
The Tax Cuts and Jobs Act of 2017 signed into law by President Trump last December has met optimistic expectations as revenues from federal income taxes were $76 billion higher in the first half of this year, compared with the first half of 2017. It may be why President Trump recently hinted at a second phase of tax cuts that would involve a further reduction in the U.S. corporate tax rate and more stimulus for the middle class. One of the consequences of this tax cut have been greater budget deficits. While undoubtedly a long-term concern, the short-term results have yielded great benefits.

Large budget deficits, a trade war with China are being coordinated with the policies of the Federal Reserve. As summarized by a report from Palisade Research:
  • The always-rapidly-growing U.S. deficit requires constant funding from foreigners. But with the Federal Reserve raising rates and unwinding their balance sheet through Quantitative Tightening (QT) – meaning they’re sucking money out of the banking system.
  • These two situations are creating the shortage abroad. The U.S. Treasury’s soaking up more dollars at a time when the Fed is sucking capital out of the economy.
  • Not to[o] mention the strengthening dollar and higher short-term yields are making it more difficult for foreigners to borrow in dollars. Especially at a time when Emerging Market’s are imploding.
Clearly, the Trump administration views China as a greater threat to US interests than the Federal Reserve Bank at this time. As a candidate, President Trump had harsh words for Wall Street such as ‘I know Wall Street. I know the people on Wall Street.... I’m not going to let Wall Street get away with murder. Wall Street has caused tremendous problems for us.’ and ‘I don’t care about the Wall Street guys... I’m not taking any of their money.’. He even tweeted about the importance of auditing the FED. To date, his administration has not matched his prior rhetoric as they openly sided with banks and waived punishment over prior crimes. While some would question any type of coordination with a central bank, the President obviously does not share any such rigid ideology to constrain him. Still, alliances can be transitory and there is nothing to preclude the Trump administration from shifting policy at a later date.

China’s Options
We learned a few weeks ago that in fact Russia sold off half of their U.S. treasury holdings in the month of April. This coincided with a spike of 35 basis points on 10-year treasury bond yields. Perhaps, this was a test in preparation for a larger future sell-off. A treasury sale by the Chinese government could potentially have a devastating impact on the U.S. economy. Note that seven out of nine previous yield curve inversions have preceded a recession.

While China has launched the heavily anticipated yuan oil futures contract, it has not been implemented by Saudi Arabia as of yet, thereby delaying the death of the petrodollar.

So, the immediate goal for the U.S. is to starve China of US dollars until it makes satisfactory concessions. There have been reports of China’s economy slowing. Historically, the initiation of trade wars is bad economic policy. However, this unconventional strategy may be the only way for the U.S. to economically defeat China.
If this plan does not work as well as the President thinks it will, it could spur more people to question the current system of debt and centralized banking. The answer to what replaces the current system is anyone’s guess.