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SECOND UPDATE, Peter Schiff on the Chinamen dumpin’ dollars!
UPDATE, Paul Craig Roberts on the move by China to stop accumulating dollars. Hat tip to commenter Paladin Justice.
Since 2006, the US dollar has experienced a one-quarter to one-third drop in value to the Chinese yuan, depending on the choice of base.
Now China is going to let the dollar decline further in value. China also says it is considering undermining the petrodollar by pricing oil futures on the Shanghai Futures Exchange in yuan. This on top of the growing avoidance of the dollar to settle trade imbalances means that the dollar’s role as reserve currency is coming to an end, which means the termination of the US as financial bully and financial imperialist. This blow to the dollar in addition to the blows delivered by jobs offshoring and the uncovered bets in the gambling casino created by financial deregulation means that the US economy as we knew it is coming to an end.
The US economy is already in shambles, with bond and stock markets propped up by massive and historically unprecedented Fed money printing pouring liquidity into financial asset prices. This month at the IMF annual conference, former Treasury Secretary Larry Summers said that to achieve full employment in the US economy would require negative real interest rates. Negative real interest rates could only be achieved by eliminating cash, moving to digital money that can only be kept in banks, and penalizing people for saving.
The future is developing precisely as I have been predicting.
As the dollar enters its death throes, the lawless Federal Reserve and the Wall Street criminals will increase their shorting of gold in the paper futures market, thereby driving the remnants of the West’s gold into Asian hands.
Gold is indeed down this week, to 1220. all the gold watchers say the same thing – that the Central Banks are shorting gold, driving down its price, the Chinamen are buying it up, and it is going to China and staying there. It won’t circulate in our lifetimes ever again. Gold will become so valuable that it will be a “collectible,” it will be hoarded.
For some reason today I was thinking about an elderly Russian lady, Alla Konstantinovna, that my wife and I knew in Florida back in 1997. I’m sure she passed away a long time ago, but it was a great honor and privilege to know her.
She was a Russian aristocrat who was firmly in the camp of National Socialist Germany. She fled the Soviets in 1945, 8 months pregnant, on a bicycle, and ended up living on a beach in Venezuela for a time. She regarded my infant daughter as a link in the chain of our side, the right wing, nationalist, racialist, aristocratic side, a chain that has been all but destroyed.
At the time I knew I was right wing but I didn’t know what a White nationalist was. She gave me copies of Ed Fields’ “Final Call” newspaper, and Pat Buchanan articles that she’d cut out of some newspaper or newsletter.
The Bolsheviks have done a very complete job of eliminating their opposition – excluding us from all areas of influence, gatekeeping young conservatives and right wingers out of academia (to which we are drawn like moths), knowing that a conservative is just a National Socialist who hasn’t found himself yet.
The liberal/Bolshevik hogging of influence and systematic exclusion of the right wing side has caused great imbalances in the ecosystem of civilization, and it is an ecosystem. It’s akin to a campaign to kill all sharks, or eliminate wolves from the Great Plains.
We are a necessary force of human civilization. We represent human nature as it is, and we don’t try to deceive ourselves about that, or rise above it like demigods. The Bolsheviks pretend to be so morally above it all and above everyone, and presume to have the right to dictate to us and micromanage our lives from their ivory towers and government buildings.
This imbalance has led to great distortions in the economy and the culture. Right wingers are suspicious of debt, of gambling, of welfare, of “getting something for nothing.” But since we were not allowed to have any influence whatsoever, our concerns did not translate at all into public policy. It’s been accelerating Keynesianism (money printing) and inflating asset bubbles. Even liberal economists like Mike Whitney see that this isn’t going to work.
Once the dominoes start falling, the whole Bolshevik structure goes down, because it’s nothing but a bunch of debt bubbles anyway. The government employees bubble, the EBT bubble, the military industrial complex bubble, the foreign remittances bubble. Everything goes at once.
And it’s going to hurt real real bad. On the one hand, we have reason to celebrate. If we survive what’s coming, we’ll get a to see a society where liberals and Bolsheviks have ZERO influence whatsoever, and chances are that in the crash period, there will be a lot of blaming and settling accounts going on. But on the other hand, survival itself is going to be an issue. The analogy of economy crashing is no longer “a bad hangover from a party,” it’s major alcohol poisoning.
The survivors are going to remember. Just try to push liberalism on them. They’ll want to kill you.
So it looks like it might be kicking off now, for real. The Chinamen are officially dumping dollars.
PBOC Says No Longer in China’s Interest to Increase Reserves
By Bloomberg News – Nov 20, 2013 10:03 PM ET
The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.
Less intervention and smaller gains in foreign-exchange reserves may damp China’s appetite for U.S. government debt. The nation is the largest foreign creditor to the U.S. and its holdings of Treasuries increased by $25.7 billion, or 2 percent, to $1.294 trillion in September, the biggest gain since February. U.S. government securities lost 2.6 percent this year, according to the Bloomberg U.S. Treasury Bond Index. (BUSY)
Yi’s comments didn’t imply China will be cutting its holdings of U.S. government debt, said Scotiabank’s Tihanyi. “They are probably going to keep their allocations reasonably stable unless there’s a big policy shift, but it means they will possibly be buying less at the margin,” he said.
To contact Bloomberg News staff for this story: Xin Zhou in Beijing at email@example.com; Fion Li in Hong Kong at firstname.lastname@example.org
That’s all folks. That’s the beginning of the fullness of the latter days.
That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.
The largest chunk of those derivatives contracts is made up of interest rate derivatives.
I have mentioned this so many times before, but it bears repeating that there are approximately 441 trillion dollars worth of interest rate derivatives sitting out there.
If rapidly rising interest rates suddenly cause trillions of dollars of those bets to start going bad, we could potentially see several of the “too big to fail” banks collapse at the same time.
So what would happen then?
Would the federal government and the Federal Reserve somehow come up with trillions of dollars (or potentially even tens of trillions of dollars) to bail them out?
The Federal Reserve has created a giant mess, and when this current low interest rate bubble ends our financial system is going to slam very violently into a very solid brick wall.
As Graham Summers recently pointed out, entrusting Federal Reserve Chairman Ben Bernanke with control of our financial system is like putting a madman behind the wheel of a speeding vehicle…
Imagine if you were in the car with a driver who was going 85 MPH down a road with a speed limit of 35 MPH (this isn’t a bad metaphor as there is absolutely no evidence that QE creates jobs or GDP growth so there is no reason for the Fed to be doing it in the first place).
The guy is obviously out of control. The dangers of driving this fast are myriad (crashing, running someone over, etc.) while the benefits (you might get where you want to go a little faster assuming you don’t crash) are minimal.
Now imagine that the driver turned to you and said, “I’m thinking about slowing down.” Seems like a great idea doesn’t it? But then a mere two minutes later he says “ we need to continue at 85 MPH for the foreseeable future.”
At this point any sane person would scream, “STOP.” The driver is clearly a madman and shouldn’t be let anywhere near the driver’s seat. Moreover, he’s totally lost all credibility and isn’t to be trusted.
That’s our Fed Chairman.
Sadly, most Americans do not understand any of this.
Most Americans have no idea about the immense economic pain that is going to hit us when interest rates go back to normal levels.
All of this could have been avoided, but instead the American people let the central planners over at the Federal Reserve run wild.
When the bubble finally bursts, the official unemployment rate is going to rocket well up into the double digits, millions of families will lose their homes and America will find itself in the middle of the worst economic crisis in modern U.S. history.
It’s going to be more than “an economic crisis.” When the EBT cards don’t work, it’s going to be blood in the streets everywhere all the time.
But on the other end of this, no liberal is going to be allowed to be a dog catcher, if there’s even any left alive or left willing to admit that they were liberals at all.