All Euros Gravitate To Germany

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The Euro has been around for almost 20 years. The Russian transfer ruble survived 25 years. As GEFIRA explains, the two currencies have something in common: they were and are not a success story…

The introduction of the transfer ruble was intended to enable free trade between the countries of the Eastern bloc. The creation of the common clearing system led to the exchange rates for the East German mark, zloty, forint, lev, and even the Mongolian tugrik being arbitrarily fixed by the Soviet Union, regardless of the purchasing power of the national currencies. In the 1960s, the Bulgarian lev was 20% undervalued and the Polish zloty about 45% overvalued. Since the transfer ruble was not yet convertible into Western currencies, it remained an illusion and a means by which the Soviet Union could enrich itself and save its budget at the expense of its satellite states: the Russians bought raw materials, goods, food for convertible currencies in the West and sold them to their “socialist friends” for transfer rubels. The international bank for economic cooperation, which sat in Moscow and handled all transactions in the transfer ruble, swept the real trade surpluses and deficits under the carpet. With the political change the common settlement currency came to to an end, and it turned out that the Soviet Union owed huge sums to its “brothers”. Continue reading

The Committee to Destroy The World: The Federal Reserve

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The general belief among average citizens is that the purpose of central banks is to help the economy by fighting inflation and mitigating financial crisis. It’s a fairy tale that politicians like to encourage. If there were any truth to it, however, where was the Federal Reserve during the crisis of 2007? Rather than helping, it was widening the crisis with its easy money policies.

While central banks are not a government entity, their primary purpose is to create money for the benefit of the government. By mindlessly printing fiat currency, central banks create a shaky illusion of financial stability. In reality, each central bank is a monopoly that controls the production of distribution of currency and interest rates. Most importantly, it also controls gold reserves. While paper currency allegedly has the backing of the government, it is the central bank that controls the value of the currency at any specific time. Continue reading

Iran Sanctions Are Damaging The Dollar

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Painful sanctions on Iran have demonstrated the long reach of the U.S. Treasury, forcing much of the globe to fall in line and cut oil imports from Iran despite widespread disagreement over the policy. Yet, we are only in the first few chapters of what may ultimately be a long story that ends with the erosion of the power of the U.S. dollar.

The role of the greenback in the international financial system is the reason why the U.S. can prevent much of the world from buying oil from Iran. Oil is traded in dollars, and so much of international commerce is based in dollars. In fact, as much as 88 percent of all foreign exchange trades involve the greenback. Continue reading

The Altay Pipeline: A Geopolitical Game Changer

Source: BP Statistical Review of World Energy 2018.

 

It is a matter of common knowledge that energy relations between Russia and China have boomed in the past decade, with all sorts of new infrastructure being built to facilitate the ever-further expansion of bilateral energy trade. Yet it has seemed for some time now that new gas projects are very unlikely to happen – the 38 BCm per year Power of Siberia pipeline will go onstream December 20, 2019 and seemed to satiate China‘s needs for Russian gas – but that has now changed. A second project, generally denoted as the Altay pipeline (sometimes also mentioned as Power of Siberia-2), which had been stalled for four years due to limited demand and Gazprom’s sanctions-induced constraints, is set to be the next big Russo-Chinese gas project. Continue reading

EU wants continental free-trade deal with Africa

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‘There is a huge potential in Africa,’ said EU policy chief Mogherini as she announced a new continent-to-continent trade deal plan (Photo: © European Union , 2018 / Photo: Lukasz Kobus)

 

The European Commission wants a continent-to-continent free trade deal with Africa, shifting relations away from development towards trade.

The proposal is a long-term goal for what it describes as a “new alliance” with the continent amid promises to create up to 10 million Africa-based jobs in the next five years.

Speaking to reporters in Brussels on Friday (14 September), the EU’s foreign policy chief Federica Mogherini said the latest plan is different from all the past announcements on Africa. Continue reading

Meet Turkey’s New Sovereign Wealth Fund Chairman, Who Has “Now Taken Public Companies Prisoners”

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What does a man who already controls pretty much everything in his country  from politics to the judiciary to defense  give to himself? How about direct takeover of his country’s sovereign wealth fund?

President Recep Tayyip Erdogan has appointed himself chairman of Turkey’s sovereign wealth fund after recent promises to exert greater influence over the economy. He’s nixed the old guard management and hand-picked their replacements, in a move his political rival, presidential candidate who lost the June election, Muharrem Ince, has aptly described as taking “public companies prisoners”.

And not to be one to break medieval sultanate tradition, he’s further named his son-in-law and Finance Minister Berat Albayrak as deputy chairman. Continue reading

GREAT AGAIN: USA Is Now The Largest Global Crude Oil Producer – Surpasses Russia and Saudi Arabia

In February, U.S. crude oil production exceeded that of Saudi Arabia for the first time in more than two decades. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999. Continue reading

Hong Kong Overtakes New York as City With Most Super-Rich People

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More proof that the Hong Kong transfer was a colossal loss for Great Britain, and a massive gain for China

Hong Kong has overtaken New York City to become the city home to more super-rich people than any other metropolis on the planet, according to a study published on September 6 by the Wealth X research firm.

The study tallies the number of individuals worth $30 million or more, labeling them ultra-high net worth individuals. In recent years, the number of these individuals living in Hong Kong has risen to about 10,000. Continue reading

Russia’s Pivoting To The Horn Of Africa Via Eritrea & The UAE

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Russian Foreign Minister Sergey Lavrov met Eritrea’s Foreign Minister Osman Saleh, August 31, 2018, Sochi, Russia

 

Russian Foreign Minister Sergei Lavrov lauded his country’s relationship with Eritrea and informed the world about Moscow’s plans to build a logistics center there.

He was speaking alongside his Eritrean counterpart at a press conference in Sochi after their bilateral meeting, which he also noted included discussions about building regional transport corridors, pipelines, and opening up a Russian language department in one of Asmara’s universities. Lavrov also said that the UNSC sanctions against Eritrea that were imposed in 2009 after reports that the country was aiding Somalia’s Al-Shaabab should be lifted, and he praised Eritrea for all that it’s done in the name of regional peace over the past few months in view of its rapidly moving rapprochement with Ethiopia that completely transformed the geopolitical situation in the Horn of Africa. Continue reading

The Global Financial System Is Unraveling, and No, the U.S. Is Not Immune

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The “recovery”/Bull Market is in its 10th year, and yet central banks are still tiptoeing around as if the tiniest misstep will cause the whole shebang to shatter: what are they so afraid of?

The cognitive dissonance/crazy-making is off the charts:

On the one hand, central banks are still pursuing unprecedented stimulus via historically low interest rates, liquidity and easing the creation of credit on a vast scale. Some central banks continue to buy assets such as stocks and bonds to directly prop up the “market.” (If assets don’t actually trade freely, is it even a market?) Continue reading

How Iran Plans To Bypass The World’s Main Oil Chokepoint

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Iran Tries to Bypass the Hormuz Strait

Global markets have recently gone into overdrive in anticipation of the US-Iran standoff’s outcome. President Trump is building up pressure on Tehran, his latest move was to announce his chairing of a UN Security Council meeting on Iran (the US is holding the council presidency this month), most likely to lambast once more the Iranian regime, whilst the Iranian authorities are reverting to their traditional threat, the closing off of the Hormuz Strait. Yet behind the bellicose façade, under the international radar Iran has been proceeding gradually with the construction of oil export infrastructure that bypasses the potentially fatal chokepoint and gives the Ayatollah regime a viable alternative to Kharg and Lavan islands, which currently account for the overwhelming majority, more than 95 percent, of Iran’s oil exports. Continue reading

China’s Command Innovation

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Image: Visual Capitalist

 

Hardly a day passes without some sort of China news in the financial headlines. There’s a good reason, too. China is the global economy’s 600-pound gorilla, second in size only to the US. Yes, it was largely a copycat business economy up until the early 2000s, but Chinese entrepreneurs have really taken charge in the last 10 years. Fueled by the profits from huge consumer demand, they are expanding not only in China but globally. This story is largely ignored in the US and in much of Europe. We hear about a few projects here and there, but we don’t understand the extent.

China is on its way to becoming the largest economy in the world, which because of its population, it should be (possibly with the exception of India, if they ever get their act together). Short-term events and arguments sometimes obscure this longer-term reality. China’s transition from rural poverty to export powerhouse to consumer goliath may be the most consequential economic event in centuries. Possibly ever—I can’t think of a historical example to rival it. Historians might argue the British Empire or even the US from 1800–2000, but that took centuries. China has done it in a little over 30 years. Continue reading

Is the “Melt-up” Back?

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Nothing remains of February’s correction but a quaint memory.

The stars are back in their courses… the angels are back on duty… and the Perfections are back within sight.

Both the S&P and Nasdaq have returned to record highs, while the Dow Jones is within an ace of its own.

More good cheer came by way of the Commerce Department yesterday…

Its bean counters inform us that second-quarter growth exceeded its own original 4.1% reading. Continue reading

Iran Sanctions, Emerging Markets And The End Of Dollar Dominance

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The trade war is a rather strange and bewildering affair if you do not understand the underlying goal behind it. If you think that the goal is to balance the trade deficit and provide a more amicable deal for U.S. producers on the global market, then you are probably finding yourself either confused, or operating on blind faith that the details will work themselves out.

Case in point, the latest reports that the U.S. trade deficit is now on track to hit 10-year highs, after a 7% increase in June. This is the exact opposite of what was supposed to happen when tariffs were initiated. In fact, I recall much talk in alternative media circles claiming that the mere threat of tariffs would frighten foreign exporters into balancing trade on their own. Obviously this has not been the case. Continue reading

Greece’s Bailout May Be Over, but Not Its Economic Woes

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A ripped off Greek national flag flutters in central Athens on July 22, 2015. (Louisa Gouliamaki/AFP/Getty Images)

 

Underlying obstacles to job creation and entrepreneurship remain

After eight years, Greece has finally exited bailout territory, and the European Union is making a strong case that the program was a success.

While Greece may have ended the bailout process, the underlying issues that wrecked its economy in the first place remain largely intact. Continue reading