The past year was full of events that inevitably split the global geopolitical space into two camps: those who still support using US currency as a universal financial tool, and those who are turning their back on the greenback.
Global tensions caused by economic sanctions and trade conflicts triggered by Washington have forced targeted countries to take a fresh look at alternative payment systems currently dominated by the US dollar. Continue reading
During a live interview with Barry Ritholtz for his “Masters In Business” podcast on Monday, Bridgewater Associates CEO – who has been on a seemingly never-ending media tour to promote his new free e-book “A Template For Understanding Big Debt Crises” – once again expounded upon his “1937” markets thesis: That is, his theory that the US economy increasingly resembles the late-cycle dynamic from the 1930s where equity prices topped out as the Federal Reserve tightened monetary policy. Like the 1930s, the global economy is awash and debt, and populist politicians gaining power and influence in the West.
But more interesting than Dalio’s retread of his calls for a recession to begin some time during the next two years, he also repeated a claim he first made back in September, which has been getting more attention since BlackRock CEO Larry Fink said something similar earlier this month: That the US dollar’s days as the dominant global reserve currency are numbered. Continue reading
Breaking the tie between oil and the U.S. Dollar means the collapse of the U.S. Dollar as the world reserve country. Collapsing of the U.S. Dollar as world reserve currency means the collapse of America. Ghadaffi attempted it, as well as Saddam Hussein and look how that worked out for them. Iran, Syria, China, Russia all want to. Economic warfare always precedes a hot war, in case you were wondering what’s around the corner.
One month ago, the bond market and political pundits did a double take when according to the latest Treasury International Capital report, Russia had liquidated virtually all of its US Treasury holdings, selling off the bulk of its US government bonds in just two months, March and April.
And with the US threatening to impose a new set of “crushing” sanctions on Russia, including in retaliation for the alleged Novichok nerve gas attack in the UK, Russia not only intends to continue liquidating its US holdings, but to significantly reduce its reliance on the US Dollar. Continue reading
In recent months, Russia – some claim – has “strenuously prepared for Putin’s meeting with Trump”.
What does this mean?
Firstly, in April the Central Bank of the Russian Federation dumped nearly a half of US Treasuries that it had on its balance sheet, reducing their stock from $96.2 billion to $48.7 billion. Continue reading
For the 2nd straight month in April, foreigners were net sellers of notes and bonds. The total was $4.8b, about the same as the net sales in March. The complexion of the activity was very bifurcated however as central banks sold a total of $48.3b, more than offsetting private foreign buying of $44.6b (International agencies make up the difference). Continue reading
While It’s Not Selling Them, Yet, It Reportedly Stopped Buying Them ‘Several Weeks Ago.’
Despite positive signs that Chinese President Xi Jinping may make a wink-and-nod concession to the U.S. overnight at the Boao Forum, a new report suggests China has already engaged its so-called “nuclear option.” Continue reading
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New financial instrument gives oil-exporting nations their long-sought alternative to the petrodollar.
China will soon introduce a crude oil futures contract denominated in yuan and convertible into gold, the Nikkei Asian Review reported on September 1. Analysts say that since China is the world’s largest oil importer, the move could deal a major blow to the global influence of the United States dollar.
The contract would allow oil exporting nations such as Russia, Iran and Venezuela to conduct sales in yuan, instead of in U.S. dollars, and to then change the yuan into gold on both the Hong Kong and Shanghai exchanges. This would also allow these countries that often fall afoul of American foreign policy to circumvent dollar-based U.S. sanctions.
The Chinese government has been developing the gold-backed futures contract for years, and Oilprice.com reports that it is expected to launch this year. It will be China’s first commodities futures contract available to foreign entities, and analysts expect many oil-exporting nations and firms to find it appealing. Continue reading
Regardless of how it all plays out, the U.S. Dollar hegemony is under threat. There is indeed a replacement system ready to go, with America out of the picture. There is an alternative to the Dollar. There is an alternative to SWIFT. There is an alternative to the IMF and the World Bank. America, for all its greatness, is not untouchable.
If nothing else, the Chinese have a sense of history and destiny. They have had a glorious past, stretching back millennia, and once controlled most of the Asian heartland in the days of Genghis and Kublai Khan. But even then, China was essentially inward-looking, protecting her own cultural values. Trade with Europeans in the centuries following Marco Polo’s visit was mostly at the behest of European travelers, not the Chinese. She exported her art and culture to visitors, and did not import European values.
This was a mistake, implicitly recognized by China’s current leadership. This time, China has embraced Western thinking and technology to further her own progress. The development of the Shanghai Cooperation Organization in recent years is the platform for China in partnership with Russia to embrace the Asian continent through peaceful trade, improving the lives of all the citizens of the many nations who are and will become members. The SCO promises a revolution in the wealth and living standards of over 40% of the world’s population, and associated benefits for its supplier-nations on the other continents. Continue reading
US-based media have been reporting that Japan has become the biggest holder of the US treasuries, surpassing China last month. However, this is true only in regard to single countries. If we consider the European Union member states collectively, then they appear to be the biggest holder of the US treasuries. It has been so almost one year long. Unfortunately, the EU’s holdings are artificially overstated because of some financial havens and they are going in the opposite direction to the trend: up rather than down. Continue reading
One month ago, when we last looked at the Fed’s update of Treasuries held in custody, we noted something troubling: the number had continued to drop sharply, declining by another $14 billion in one week, and pushing the total amount of custodial paper to $2.788 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week’s update, there is finally some good news: foreign central banks finally bought some US paper held in the Fed’s custody account, which following months of liquidation, rose over the past two weeks by $23 billion, the biggest two-week advance since November of 2016, pushing the total amount of custodial paper to $2.816 trillion, the highest since early October.
That was the good news, and we use the term loosely in as much as the custody account can be used as a proxy of foreign buying, which according to most rates watchers, it can. Continue reading
For the past year, Chinese selling of Treasuries has vexed investors and served as a gauge of the health of the world’s second-largest economy.
The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, burnt through 20 percent of its war chest since 2014, dumping about $250 billion of U.S. government debt and using the funds to support the yuan and stem capital outflows.
While China’s sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines. Continue reading
What a tangled web the global geopolitical situation has become. Geopolitics and finance have always been interrelated but recently much more so. As many readers know, I have speculated we would be hit over the head with a “truth bomb” from the East and most likely from Mr. Putin himself. Just this week Britain has alleged Mr. Putin personally ordered a “hit” on an ex KGB agent for calling him a pedophile (http://nypost.com/2016/01/21/murdered-ex-spy-accused-putin-of-pedophilia/). Another story came out that Turkey shot down a NATO helicopter which made no press coverage at all in the West. Also, Victoria Nuland recently travelled to Russia and was refused an audience by Mr. Putin. This, after John Kerry had a meeting where he went into it saying “Assad must go” and came out saying Mr. Assad can stay … Why all of this now? I would simply say this reeks of desperation and also a VERY dangerous strategy to attack Mr. Putin personally. I say “dangerous” because it raises the likelihood of a response from him. Can you imagine the outrage were Russia to accuse president Obama or the Prime Minister Cameron of Britain for ordering the murder of someone who called them a pedophile? Continue reading
In other words: China has officially entered the currency wars.
China devalued the yuan by the most in two decades, a move that rippled through global markets as policy makers stepped up efforts to support exporters and boost the role of market pricing in Asia’s largest economy.
The central bank cut its daily reference rate by 1.9 percent, triggering the yuan’s biggest one-day drop since China unified official and market exchange rates in January 1994. The People’s Bank of China called the change a one-time adjustment and said it will strengthen the market’s ability to determine the daily fixing.
Chinese authorities had been propping up the yuan to deter capital outflows, protect foreign-currency borrowers and make a case for official reserve status at the International Monetary Fund. Tuesday’s announcement suggests policy makers are now placing a greater emphasis on efforts to combat the deepest economic slowdown since 1990 and reduce the government’s grip on the financial system. Continue reading
(NaturalNews) We have been tracking and reporting on the worsening economic situation in Greece now for more than a year, and it appears as though our earlier predictions – that the broke Mediterranean nation would eventually default on bailout loans it received in 2012, under different leadership – will happen.
Reuters reported Monday that Greece will not pay a 1.6 billion-euro installment it owes on its loan that is due June 30, according to a Greek government official who confirmed the default yesterday, further highlighting the overall severity of the country’s financial crisis. Continue reading
‘It is absolute pandemonium in the fixed income markets. Everybody has been trying to get out at the same time but the door is getting smaller,’ says RBS
A wave of turmoil is sweeping through sovereign bond markets, setting off the most dramatic gyrations seen in recent years and threatening to spill over into over-heated equity markets.
Yields on German 10-year Bunds spiked violently by almost 20 basis points to 0.78pc in early trading on Thursday as funds scrambled to unwind the so-called “QE trade” in Europe, with powerful ripple effects reaching Japan, Australia, Brazil and even US Treasuries.
“It is absolute pandemonium in the fixed income markets,” said Andrew Roberts, head of European credit at RBS. “Everybody has been trying to get out of long-duration positions at the same time but the door is getting smaller.”
Global Geopolitics 