Rickards: The Fed Is “Triple Tightening” Into Crisis

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If you have defective and obsolete models, you will produce incorrect analysis and bad policy every time. There’s no better example of this than the Federal Reserve.

The Fed uses equilibrium models to understand an economy that is not an equilibrium system; it’s a complex dynamic system.

The Fed uses the Phillips curve to understand the relationship between unemployment and inflation when 50 years of data say there is no fixed relationship.

The Fed uses “value at risk” modeling based on normally distributed events when the evidence is clear that the degree distribution of risk events is a power curve, not a normal or bell curve. Continue reading

The Biggest Threat To Dollar Dominance

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Russian oil exporters are pressuring Western commodity traders to pay for Russian crude in euros and not dollars as Washington prepares more sanctions for the 2014 annexation of Crimea by Moscow, Reuters reported last week, citing as many as seven industry sources.

While it may have come as a surprise to the traders, who, Reuters said, were not too happy about it, the Russian companies’ move was to be expected as the Trump administration pursues a foreign policy where sanctions feature prominently. This approach, however, could undermine the dominance of the U.S. dollar as the global oil trade currency. Continue reading

European Central Bank In Panic Mode as Economy Stalls

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The eurozone could not borrow from the momentum of the U.S. economy in the third quarter as economic growth slumped to a tepid 0.2% , the slowest rate in more than four years. With the 19-nation currency bloc beginning to stagnate, and the heavyweights failing to post significant gains, Brussels is in panic mode, likely leaning on the European Central Bank (ECB) for further stimulus.

Economists originally anticipated growth of 0.4%. But global trade woes, tumbling business confidence, Italian distress, and the gradual dissipation of an accommodative monetary policy all contributed to the poor numbers in the July-September period. Continue reading

China Is Beating the US in the Rare-Earths Game

For more information regarding China and the rare earths situation, see the following previous articles:

 

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It’s time for the administration to use its powers to preserve America’s access to vital defense materials.

How to view China’s recent threat to limit domestic production of rare earths, those 16 elements that make our cellphones and smart bombs work? It’s the latest move in a game that began before the United States realized it was even playing, that has grown more complex than U.S. leaders realize, and that is nearing a very unfortunate ending. Continue reading

The World’s Most Dangerous Man… Has a Terrifying Secret

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Saudi Crown Prince Mohammed bin Salman (MBS) has a secret.

No, it’s not that he was behind the horrific interrogation, torture and murder of journalist Jamal Khashoggi.

Although most people would argue otherwise.

The Crown Prince’s secret that I’m referring to isn’t even that he approved the use of chemical weapons by Saudi Arabia in its proxy war in Yemen. Continue reading

US sanctions: SWIFT network suspends Iran banks

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The SWIFT banking network, the backbone for international monetary transfers, said Monday it has suspended several Iranian banks from its service, after the United States reimposed nuclear sanctions on Tehran.

“In keeping with our mission of supporting the resilience and integrity of the global financial system as a global and neutral service provider, SWIFT is suspending certain Iranian banks’ access to the messaging system,” it said. Continue reading

Iran president warns of ‘war situation’ as sanctions resume

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US President Donald Trump, left, on July 22, 2018, and Iranian President Hassan Rouhani on February 6, 2018. (AP Photo)

 

Rouhani vows defiantly that ‘Iran is able to sell its oil and it will sell,’ rejects prospect of mediation with Washington

Iran greeted the re-imposition of US sanctions on Monday with air defense drills and an acknowledgement from President Hassan Rouhani that the nation faces a “war situation,” raising Mideast tensions as America’s maximalist approach to the Islamic Republic takes hold.

The sanctions end all the economic benefits America granted Tehran under its 2015 nuclear deal with world powers, though Iran for now continues to abide by the accord that saw it limit its enrichment of uranium. While for now not threatening to resume higher enrichment, Iranian officials in recent months have made a point to threaten that could resume at any time faster than before. Continue reading

The Chicago Boy and His President

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BERLIN/BRASÍLIA (Own report) – German business circles are placing high hopes on Brazil’s President-elect Jair Messias Bolsonaro pointing to the economic program of Paulo Guedes, designated to head a super ministry. During Augustino Pinochet’s military dictatorship, he was a professor at the University of Chile and his program resembles the economic policy of the Chilean Junta. Since about a year, Guedes has been Bolsonaro’s advisor. The Brazilian business community is hailing Bolsonaro, particularly the National Confederation of Industry (CNI), where German businesses hold strong positions. CNI is the Brazilian partner of the Federation of German Industries (BDI). German companies had already cooperated with the Brazilian military dictatorship. Bolsonaro’s victory is a deathblow to the policy of cautious redistribution in favor of impoverished segments of society, pursued by Presidents Lula da Silva and Dilma Rousseff. This policy was essentially ended with the May 2016 cold putsch – under applause of German business representatives.

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America’s Social Depression Is Accelerating

It’s no question America is at a crossroads and could go the way of Rome. This why it’s noteworthy to point out that things turn violent towards the very end, which is what we see not only in America through demonstrations and the demonization of politicians at restaurants, etc…, but the growing thirst for blood sports such as UFC/MMA, as astutely observed in this article:

Does Society Turn More Violent During its End Times?

 

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Beneath the rah-rah statistics of “the greatest economy ever,” the social depression is accelerating. The mainstream is reluctantly waking up to the future of the American Dream: downward mobility for all but the top 10% of households.

A 2015 Atlantic article fleshed out the zeitgeist with survey data that suggests the Great Middle Class/Nouveau Proletariat is also waking up to a future of downward mobility: The Downsizing of the American Dream.

People used to believe they would someday move on up in the world. Now they’re more concerned with just holding on to what they have. Continue reading

Disaster Awaits: National Debt Will Be 6 Times The Size Of The Economy

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Even without changes to the current spending policy, the government’s spending is on an unsustainable path. By the time a child born in 2018 reaches retirement age, the United States national debt will be six times the size of the economy according to an analysis released this week. Continue reading

Far-right Bolsonaro rides anti-corruption rage to Brazil presidency

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Jair Bolsonaro’s tough line on crime and market-friendly policies have gained him as much support as his controversial views on women, homosexuality, race and torture have provoked scorn. (Photo: AFP/Evaristo Sa)

 

BRASILIA/RIO DE JANEIRO: Far-right lawmaker Jair Bolsonaro won Brazil’s presidential election on Sunday, promising to clean up politics, shrink the state and crack down on crime, in a dramatic swing away from the left in the world’s fourth-largest democracy.

The former army captain has alarmed many with vows to sweep political opponents off the map and comments denigrating women, gays and racial minorities.

He will be the first president with a background in the armed forces since the end of Brazil’s 1964-1985 military dictatorship, which he has publicly praised. He has tapped retired generals to serve as his vice president and run key ministries.

In his first public comments after his landslide victory, he pledged to respect democratic principles, but said he wanted to change the country’s direction.

“We cannot continue flirting with socialism, communism, populism and leftist extremism … We are going to change the destiny of Brazil,” Bolsonaro said in an acceptance address, promising to root out graft and stem a tide of violent crime. Continue reading

Europe’s Gas Game Just Took A Wild Twist

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Despite the almost unprecedented divisive nature of Donald J. Trump’s presidency, he is chalking up some impressive foreign policy victories, including finally bringing Beijing to task over its decades long unfair trade practices, stealing of intellectual property rights, and rampant mercantilism that has given its state-run companies unfair trade advantages and as a result seen Western funds transform China to an emerging world power alongside the U.S.

Now, it looks as if Trump’s recent tirade against America’s European allies over its geopolitically troubling reliance on Russian gas supply may also be bearing fruit. On Tuesday, The Wall Street Journal reported that earlier this month German Chancellor Angela Merkel offered government support to efforts to open up Germany to U.S. gas, in what the report called “a key concession to President Trump as he tries to loosen Russia’s grip on Europe’s largest energy market.” Continue reading

A Transmission Belt of German Supremacy

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ROME/BERLIN (Own report) – German politicians and media are intensifying pressure on Rome in anticipation of today’s EU Commission verdict on Italy’s national budget. Already last week, EU Budget Commissioner Günther Oettinger announced, in reference to the Italian deficit, that the Italian government must “correct” its draft budget. Media reports refer to a “black week” for Rome. Negative reporting – like rating agencies’ devaluation of Italy’s creditworthiness – can contribute to the destabilization of Italy’s financial and credit markets. The country’s current downward spiral threatens to re-escalate the banking crisis. Whereas Berlin insists that the EU take sharp measures against deficits, Germany’s Finance Minister at the time, Wolfgang Schäuble had prevented the EU Commission from taking measures against excessive surpluses, which the commission sees as potentially just as destabilizing. Germany has been achieving these surpluses year after year.

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US Is Negotiating With SWIFT To Disconnect Iran From Network

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Treasury Secretary Steven Mnuchin said that unlike Obama’s 2013 Iran blockade, it would be harder for countries to get waivers on Iran oil sanctions as the US is already working on disconnecting Iran from the SWIFT network and dismissed concerns that oil prices could rise, saying the market had already factored in the output losses.

Speaking in an interview with Reuters in Jerusalem on Sunday at the start of a Middle East trip, Mnuchin said countries would have to reduce their purchases of Iranian oil by more than the roughly 20% level they did from 2013 to 2015 to get waivers. “I would expect that if we do give waivers it will be significantly larger reductions,” said the US Treasury Secretary. Continue reading

America Has the Government It Deserves

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“Every nation gets the government it deserves,” said 18th century French philosopher Joseph de Maistre.

If true, and we suspect there is justice here… the United States is a nation of no-good deadbeats.

For the nation hosts a spendthrift government perpetually on the borrow.

By some metrics, the United States now takes on more debt in one year than it did in the first 200 years of its lovely existence.

Its gross national debt rose $1.27 trillion in fiscal 2018… to a record $21.5 trillion. Continue reading