Sunday, November 30, 2014

Time Out for Some (Straight No Chaser) Fun for the Holidays

With Thanksgiving past, focus now will turn towards Christmas and the Holiday Season around the world. We cover a lot of serious material here on the blog. So, now and then, we deserve a little break from it all. Below you can enjoy some fun Holiday music from Straight No Chaser. 

The Christmas Can Can (performed in New York)

And, of course, we cannot leave out the song that made this group famous around the world on Youtube way back in 1998 (now with over 17 million views on the original version). The 12 Days of Christmas. This is the 2008 version done in Indiana. The group began as a mens acapella singing group at Inidana University. 

Enjoy the Holiday Season!

We have some great topics to cover coming up in December!

Bloomberg: Exit Polling shows Swiss Voted Against Gold Referendum

Bloomberg is reporting that the Swiss have voted down the Swiss Gold Initiative by a margin of 78-22 per cent. Below the text of the story is pasted. Here is a link to the Bloomberg report. It appears the vote margin is based on exit polling done by Swiss TV covering the vote.

"Swiss voters rejected a referendum requiring their central bank to hold a portion of its assets in gold, a measure its President Thomas Jordan termed an “invitation to speculators” that could have hamstrung the economy."
"The proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold was voted down by 78 percent to 22 percent, according to projections by Swiss television SRF as of 1:00 p.m. local time. The initiative “Save Our Swiss Gold” also would have prohibited the SNB from ever selling any of its bullion and required the 30 percent currently stored in Canada and the U.K. to be repatriated. Polls, including one by gfs.bern, had forecast the initiative’s rejection."

Rueters also ran this similar story based on the same Swiss TV exit polling projections.
Added comments: If the final vote margin is close to 78-22 it will mean that the Swiss banking establishment was able to successfully persuade voters during the campaign because very early polling showed voters were in favor by 44-38 per cent. Later polling showed the vote failing, but by a much smaller margin.
The impact of the vote on the price of gold is unknown since gold never appeared to rise in anticipation of the vote. Kitco covers that aspect of the story here. And here is a later update
after gold bounced back up strongly.

Proponents of this initiative were probably overly optimistic about how the general public views this topic. I think there at least a couple of reasons for this. One is that the general public really does not think much about the monetary system of their country in the first place. There is mostly apathy on this topic as this vote indicated with a very low voter turnout. Secondly, those who believe in an actual gold standard are mostly older people. They recall a time when more of the general public believed in this type of monetary system. However, now there are very few people under 50 years old who have ever lived under a monetary system where either gold or silver backed the currency. Most people now have very little experience with that type of monetary system.

We see this illustrated with the younger generation being fascinated by Bitcoin. This is part of what we cover here because how the public views things is an important part of staying informed and being prepared for monetary system change in future. As we have noted here, that change can take many forms and the timing is unknown. We will try to keep readers here informed as best we can. A good plan is flexible enough to adapt to however things change in the future. We will talk about how silver can work well in that plan in an upcoming blog post later this week.

Saturday, November 29, 2014

Chinese Economy Facing a 6.8 Trillion Nightmare?

One of the things we do here on this blog is to record and follow predictions made by those we think have established a solid overall track record of forecasting. No one gets everything right of course, but some do hit on a high %. Here is an example of a very specific problem that Jim Rickards identified in this February 2014 in February this year in the Darien Times.

On Friday (11-28-14) this Business News article runs and is picked up on Yahoo News. This article talks about things that Jim Rickards was writing about way back in February regarding the problems in the Chinese economy. First some quotes from the Jim Rickards article. Then some quotes from this article. We encourage readers to read both the linked articles to get the full context.

Jim Rickards February article:

"Amid weaker U.S. growth and volatility in capital markets, China stands out as a beacon in the minds of many investors. It is widely assumed that China will continue to grow at about 7% without interruption and will, in time, surpass the United States as the largest economic power in the world."
"This China growth story is one that investors take for granted. But investors are in for a rude awakening when they realize how much of the China story is false and how quickly it may come unraveled."
"China’s problem is an over-reliance on investment to the exclusion of consumption. Investment makes up 45% of Chinese gross domestic product compared with about 20% in the U.S. Investment can be sustainable if it results in improvements to productive assets such as ports, roads and other critical infrastructure. China’s problem is that much of its investment is wasted on white elephant projects such as empty cities, monumental train stations, and unused airports."
Now the Business News article dated 11-28-14:
"Empty apartment buildings litter Ordos, one of the "ghost cities" that have characterised China's wasteful investment. The Chinese economy has wasted $6.8 trillion (£4.3 trillion) in investment during the last four years."
"That's according to a report from China's National Development and Reform Commission and the Academy of Macroeconomic Research, written up here in the Financial Times. The report says that amount has been "ineffective investment."
"If reported GDP were adjusted for wasted investment, actual growth in China would be seen to be much lower today. If the costs of massive air pollution and other environmental degradation were also deducted, real growth would be even lower."
"The People's Bank of China just slashed interest rates, and it looks like there's probably more coming. The economy has slowed significantly in recent years: The government now targets a growth rate of 7.5%, well down from the double-digit rates seen before the crisis, and many analysts believe they will struggle to even reach that."
My added comments:
A couple of points to add here. First, we have a crystal clear example of why we rely on people like Jim Rickards here. Many times he identifies important issues correctly long before they become more widely accepted in mainstream media. Having accurate information as soon as possible is essential given the circumstances we find ourselves in these days
Secondly, let's see how this matters to us in practical terms in the real world. If you just accept the widely promoted view that China is on a sustainable high growth path for years to come, it might give you a false sense of security about the state of the global economy. It might cause you to lower your guard and think things are fine. If, in fact, China is actually struggling to sustain growth and some of the growth they are reporting is suspect, that is information we need to know. If China is lowering interest rates because they fear a debt problem and a faltering economy, we need to know that too.
Remember, a problem anywhere can lead to a problem everywhere in the highly connected global financial system. If China gets into trouble and has to liquidate some of their holdings they might be forced to sell off large US bond holdings for example. Or maybe they have also invested heavily in the US stock market. If China (or Japan or Europe, etc) gets into trouble, they might have to sell off US dollar related holdings. And what if trouble in any of these places causes a too big to fail entity to go under? What if that entity is holding huge derivative products that they cannot meet their obligations on? There is simply no way for us to know how big this risk is at any given point in time. Getting the best information on factors that impact this risk is very important.
So it is absolutely vital to be aware of the risks all around the world to the global financial system and to factor that into your plans for the future. It is why we encourage readers to stay informed, stay alert, and have a plan in mind in case the US dollar does get into trouble in the future.

Added note: There are several important issues we will be covering over the next week including the Swiss gold vote results (now posted just above), a proposal that Russia should back the ruble with gold, and another article calling on Central Banks to just print up money and give it directly to people (this one is in Europe in a mainstream publication). All these stories indicate that a lot is happening related to what we cover here so please check back in next week for these articles.

Also, we forgot to mention (and thank) Silver Doctors for running an abbreviated version of our stock car race to devalue article which you can see here on their site. We always appreciate other sites when they pick up our articles here.

Update 12-4-14: Marketwatch runs this article today. Given the information above, it's hard to know what the true numbers are for China. This Marketwatch article notes that, but also says it's hard to know the true numbers for the US too. It says the IMF numbers are the best we are going to get.

For New Readers - What Makes this Blog Unique?

Every so often we publish a post on this blog directed to new readers. Our statistics indicate we get regular new readers here from all over the world every week. So we designed a post to explain the purpose of this blog which you can read here

In this post I will ask the reader to consider the question, What Makes this Blog Unique?

I think there are several things that make it unique which I will try to list here:

1) There are not a lot of blogs devoted to following the topic of monetary system changes and how they might impact the average person. There are tons of blogs and media that cover many of the topics discussed here. In fact, I use links to those as the basis for comments and analysis here. But this blog is specifically following events that may tie to coming major monetary system changes that could impact the lives of all of us. I think this is a very important topic that most people don't have time to keep up with because it unfolds over a long period of time.

2) I don't try to push a political agenda or my point of view. Of course I have a point of view, but here that is not what is important. Solid, credible, factual information is highly valued here. Reasonable opinions of credible and expert sources of information are valued here. A variety of reasonable opinions and views are presented in an effort to allow readers to form their opinions based on the best information I can find. At least I believe it is the best information. I try to filter it the best I can after reading 10-15 articles for every one discussed here. I try to avoid obvious sales pitches (based on fear or emotion) or agenda driven material. 

3) This blog is written for "the average person" that does not have a background in macro economics or international banking. I am an average person so it's pretty easy to look at things from that perspective for me. I try to find the best information I can to use for my own family financial decisions. Hopefully, this blog will help others in that process as well.

4) I do not derive any income of any kind from this blog. That is by design.

5) I don't rule out any reasonable point of view. At least what I think are reasonable points of view. For example, I can think of at least three possible reasonable ways to interpret the actions of elites in the global banking system. I can list those here for illustration of the point:

A) They are genuinely trying to maintain a global economy and financial system for the betterment of mankind. They do the best they can to provide stability and promote growth so that the most people possible have opportunity to make a decent living. Their motives are good and they have done a reasonably good job of providing a stable system for many years, despite some mistakes. This is what I might call the mainstream interpretation of events.

B) They are genuinely trying to maintain a global economy and financial system for the betterment of mankind. However, because they use flawed assumptions and models, they often make mistakes that are harmful to many people. They are not doing this intentionally, but the results are still harmful to many people. This is somewhat how Jim Rickards tends to interpret events as I understand his view.

C) They are not genuinely concerned about the betterment of mankind first and foremost. Instead they are primarily concerned with acquiring power and wealth. Their motives are selfish at best. They will do whatever it takes to perpetuate the system because they are the prime beneficiaries of it and they don't really care what happens to the average person so long as they retain personal wealth and power. This we might call a conspiracy view.

All of the above are actually possible. History tells us there have been powerful people who fit Category C above. Most likely, there are people in all three categories within the financial elites who run the system. But my goal here is not to judge people. My goal is to present the best and most credible information I can find and let readers form their own opinions. 

The main objective of this blog is to provide a public service at no cost to anyone who is interested in this topic and can use the information. It hopefully serves as a credible place to stay informed if you don't have time to chase down all this information and sift through it. In addition, all the linked posts on the right side can be used as a free archive of data and information for anyone who can use it. I will have an in depth article on this a little later this year explaining how and why this blog got started.

I think this is what makes this blog unique and hopefully worth readers time to visit and encourage others to as well.  Over 64,000 visitors now from all over the world since the blog started and we get new readers every week. I never imagined that would happen when this blog started up in January of this year. As always, a big thank you to readers from around the world!

It's great to hear from readers and you can always contact us at:

Friday, November 28, 2014

Swiss Gold Initiative Vote on November 30th

The Swiss gold initiative will go to a vote of the people on Sunday November 30th. This is the referendum that would require the Swiss National Bank to buy back some sold gold for reserves and to maintain 20% of its reserves in gold. It allows for 5 years to acquire the gold. The Swiss banking establishment opposes the referendum. Those supporting the referendum are concerned about too much fiat money creation and that the nations gold reserves were sold at low prices. It would also forbid the nation from future sales of gold reserves.


With the vote coming up soon, here are two pretty good articles you can read on it.

Polls have been back and forth and many think the vote will be close one way or another. In order to pass, the referendum has to get a majority popular vote nationwide and also pass in a majority of the 26 Swiss Cantons (think of these like counties or states in the US).

The gold market has not given any indication as to how it thinks the vote will turn out. Some believe a Yes vote will give a quick boost to gold prices. Others say it may not because the time frame to buy the gold is over 5 years. 

Thursday, November 27, 2014

Happy Thanksgiving Day!

I did not realize that it was Abraham Lincoln who established the last Thursday in November as the national holiday for Thanksgiving. Times have changed a lot, but there is still a lot to be thankful for. And in true Thanksgiving Day tradition, you get to watch a video ad encouraging you to go shopping before the video on the history of Thanksgiving starts :)

Wednesday, November 26, 2014

Bloomberg: New 'Abnormal' Means Relying on Central Banks for Growth

This is a topic we have covered here extensively. This new Bloomberg article  simply reinforces the point. That point being that both the US economy and the global economy have failed to prove they can stand on their own feet and get reasonable growth without stimulus programs from Central Banks.  Everyone is waiting to see what happens now that the Fed has ended QE. Some quotes from this article and then a few added comments.


"The “new normal” may be new. It’s hardly normal."
"The “new abnormal” would be more apt, according to reports published this month by Ed Yardeni of Yardeni Research Inc. in New York and ING Bank NV’s Mark Cliffe in London."
"Among signs of irregularity since Pacific Investment Management Co. popularized the expression “new normal” in 2009 to describe an environment of below-average economic growth: Central banks are still deploying near-zero interest rates or quantitative easing six years after the financial crisis, yet output, inflation, business investment and wages remain mostly subpar."
"In financial markets, equities are hitting new highs as bond yields probe new lows. Even as the U.S. shows signs of strength, commodities are slumping."
"The lesson for Yardeni is that by running to the rescue every time asset prices swooned in the past two decades, central bankers’ prescriptions distorted economies."
“If a central bank moderates recessions, then speculative excesses are likely to build up much more during the booms and never get fully cleaned out,” Yardeni, a former chief economist at Deutsche Bank AG, said in a Nov. 19 report. “So each financial crisis gets progressively worse than the previous one, forcing the central bank to provide even more easy money to avert a financial meltdown.”

"Officials “are clearly concerned that a sharp fall in asset prices might derail their efforts to foster economic growth,” said Cliffe. “That leaves ample scope for policy errors and sudden investor panics.”


My added comments:

This article is almost like a summary recap of what we have covered here now for months. Even though it seems like a collapse was avoided from the first global financial crisis, officials have never been able to relax and feel like things are fixed. 

This is because all they were able to do was flood the system with money to avert collapse. As this Bloomberg article points out, this ongoing process over and over does not fix the structural problems like too much debt versus real GDP (GDP not generated from the money creation itself). Instead the article says it causes "distorted economies". It also says this leads to each new crisis getting "progressively worse than the previous one". When a new crisis does surface, the only action left to take is just even more easy money. The alternative is deflation which Central Banks fear.

We all know by instinct that this cannot go on forever. And clearly monetary officials know this too. It is why they have issued warning after warning that new asset bubbles are forming and this could lead to a new crisis even bigger than the last one.

Of course, this is exactly what people like Jim Rickards, Jim Sinclair, Peter Schiff, Nomi Prins, Marc Faber and many other well known experts are expecting. In the case of Jim Rickards, he goes on to say he thinks this next crisis will be so big that the US Fed will not be able to handle it (having already blown up its balance sheet over 4 Trillion dollars). This is where he thinks the IMF will step in with the creation of massive new amounts of SDR's to try and keep the system afloat.

Time will tell us if this is what happens or not. But it is no longer just alternative media and alternative view experts issuing warnings about this. The IMF, the BIS, and mainstream media (like this Bloomberg article) are talking about it regularly now.

This brings up one last question to think about if we do really get another huge global crisis. Those of a conspiratorial view believe all these warnings are being issued because the crisis is actually a planned and desired result. They think that officials will use the crisis to implement a new and more global system that the general public would be against if not for the crisis. Jim Rickards thinks a crisis will just be the result of poor policies and is not a planned event. And, of course, despite all the warnings, most mainstream media and public officials do not really believe another crisis will happen at all (or can be managed).

We can't possibly know here if there will be another crisis or not. If there is one, we can't possibly know if it is a planned event or not. Certainly, no one would admit that if it were. What we can do here is encourage readers to stay informed, take the threat seriously, and make whatever plans they can to be ready if another crisis does happen. Let's hope it doesn't and and a plan in mind if it does.

Tuesday, November 25, 2014

Economist Magazine: The Great Decleration (Latin America)

When we talk about the battle against deflation and stagnation going on around the world, it appears we can add Latin America to to list. This article in The Economist talks about it. So we have Japan, Europe and China struggling. Add Russia in there where the ruble is dropping like a rock. Now we learn that Latin America is falling behind expectations. Some quotes, then a comment. Readers should read the entire article for full context.


"IT WAS great while it lasted. In a golden period from 2003 to 2010 Latin America’s economies grew at an annual average rate of close to 5%, wages rose and unemployment fell, more than 50m people were lifted out of poverty and the middle class swelled to more than a third of the population. But now the growth spurt is over. What some worried would be a “new normal” of expansion of 3% a year is turning out to be far worse."
"The region’s economies will on average grow by only around 1.3% this year. Analysts continue to slash their forecasts, as they have done for the past two years (see chart). They now expect only the mildest of recoveries next year: both the IMF and the World Bank foresee growth of just 2.2% in 2015. Latin America is decelerating faster than much of the rest of the emerging world, points out Augusto de la Torre, the bank’s chief economist for the region. Alejandro Werner, his counterpart at the IMF, sees growth averaging just 2.7% over the next five years."
.  .  .  .  .  .  .  .  .
"What does seem clear is that the region is suffering a structural supply-side shock. Many economies have been operating close to capacity, points out Mr Werner. So demand-priming stimulus—such as Brazil’s loose fiscal policy or Peru’s recent giveaway of an extra bonus to public employees—looks mistaken. Fiscal balances have weakened by an average of three points of GDP since the 2009 recession."
My added comment: 
So Latin American countries appear ready to ramp up more loose money policies in response to economies weakening more than expected. This is a trend around the world. Projected growth keeps coming in below forecasts and policy makers keep responding with the only thing they know to do which is more stimulus of one kind or another.
It seems unlikely that the US will somehow lead the world out of this global weakness. The odds are that the US will join in the weakness again without the QE stimulus from the Fed. US Bond holders are concerned about what happens when intererst rates rise. The next two quarters GDP will obviously be very important. 
More and more it looks like 2015 is going to be an important year. Economies everywhere are struggling. More and more stimulus is added everywhere to try to revive things. But at some point, if it becomes clear that stimulus is failing, things could get messy. We will follow it all in 2015 here.

Monday, November 24, 2014

CNBC: China ready to cut interest rates again

The ink has barely dried on our blog post about the stock car race to devalue using monetary stimulus. Now CNBC runs this article which says China is ready to cut interest rates some more. Since the ink has also barely dried on the initial surprise announcement by China to cut rates, I think we can assume officials there are pretty worried. Some quotes from the CNBC article, then a few comments.

"China's leadership and central bank are ready to cut interest rates again and also loosen lending restrictions, concerned that falling prices could trigger a surge in debt defaults, business failures and job losses, said sources involved in policy-making."

"Top leaders have changed their views," said a senior economist at a government think-tank involved in internal policy discussions."
"The economist, who declined to be named, said the People's Bank of China had shifted its focus toward broad-based stimulus and were open to more rate cuts as well as a cut to the banking industry's reserve requirement ratio (RRR), which effectively restricts the amount of capital available to fund loans."
"Further interest rate cuts should be in the pipeline as we have entered into a rate-cut cycle and RRR cuts are also likely," the think-tank's economist said."
"Top leaders had been resisting a rate cut, fearing it could fuel debt and property bubbles and dent their reformist credentials, but were eventually swayed by signs of deteriorating growth as the property sector cooled."
"China's leaders also worried that a sharp economic slowdown could hurt employment and undermine public support for reforms."
"Employment still holds up now, but it will definitely be affected if growth slows further," said Yin Zhongli, senior economist at the Chinese Academy of Social Sciences, a top government think-tank.
"The central bank does not have the final word on adjusting interest rates or the value of the yuan. The basic course of monetary and currency policy is set by the State Council, China's cabinet, or by the Communist Party's ruling Politburo."
 My added comments: 
This article brings up a few points that relate to what we watch for here. First, note the use of the terms "sharp economic slowdown" and "falling prices could trigger a surge in debt defaults". Then remember one of our slogans here. A problem anywhere can lead to a problem everywhere. China is now a key part of the highly interconnected global economy and financial system. So if trouble erupts in China, it could spread around the world (just like in Japan or in the EU). The article points out that China is a big contributor to global GDP.
Next the article shows how concerned Chinese officials are about this. It says "top leaders have changed their views". This suggests that something has surprised these leaders and they are changing course quickly to lower interest rates. They also admit concerns about debt defaults and rising unemployment. The sudden surprise announcement, followed in just days by a statement they are ready to lower rates even more, suggests a sense of urgency.

Also, it is interesting to note that officials admit these looser money policies can cause "debt and property bubbles", but they are so concerned they are going to use them anyway. Recall that both the IMF and BIS have issues warnings that stimulus programs in the west have inflated financial assets and created bubbles.
Finally, anything China does that loosens money or might reduce the value of the yuan is probably going to provide a boost to gold demand. The Chinese people are already huge buyers of gold as it is. Any hints that looser money is coming or that there could be some economic troubles will probably just ramp up their desire to own gold.

Added note: Bloomberg runs an article on this

Sunday, November 23, 2014

What Happens When Your Currrency Falls?

One of the keys we watch constantly here on this blog is the stability of the US dollar, both against other currencies and against gold. Since our theme here is that monetary system change that involves the US dollar losing its sole global reserve currency status is coming, it makes sense to watch the dollar to see if it is dropping. That would be a very strong signal that demand for the US dollar as a global reserve currency was falling.

So what happens if your currency starts losing value sharply? US citizens have not really seen this happen yet, so its hard for them to visualize what happens. The dollar has lost a lot of value for sure, but it has happened over a long term period in mostly slow and steady increments (a US dollar has lost massive purchasing power over the last 100 years, but an ounce of gold still has the same or better purchasing power as it did 100 years ago).

For a look at what happens when your currency starts sinking fast, let's see how things are going over in Russia lately. Here is an article that talks about the pain the sharp drop in the ruble is causing for ordinary Russians. Below are some quotes from the article that illustrate how hard it makes things for people. Below that is a link to a chart for the price of gold in rubles. Gold has not done much in terms of its price in US dollars this year. But take a look at the link below to the chart of the gold price in rubles. Gold is moving up sharply just as you would expect when the currency is losing value sharply. First, here are some quotes:


"In Rostov-on-Don, a Russian port city of 1.1 million people just east of the Ukrainian border, signs of the fallout from the ruble's collapse are everywhere."

"There's the 27-year-old entrepreneur whose storage facility is packed to the ceiling with imported Spanish tiles that his clients can't afford anymore. There's the accountant who had a front tooth pulled, only to realize she didn't have enough money to pay for the imported implant needed to fill the gap. And there's the interior designer who's resigned herself to getting no year-end bonus after watching sales plunge at the European furniture store she works in."

"For Artyom Popov, the 27-year-old entrepreneur in Rostov-on-Don, the ruble devaluation has been a disaster.

Like his mother before him, Popov specializes in tracking down foreign products, ranging from fur coats to construction materials, and selling them to clients across the city.

Sales on his No. 1 product -- kitchen and bath tiles that he picks out himself in Spain -- are down 60 percent since July, Popov estimates. He'd been traveling to Spain every few months to purchase more tiles but said he has no plans to head back over anytime soon.

When clients see the price in euros, they say "it's fine," according to Popov. "Then I calculate that in rubles and I see it's psychologically hard for them to pay 60 rubles for something that used to be 45," Popov said as he maneuvered his black BMW X5 through traffic in Rostov-on-Don one afternoon this month. "They say it's too expensive and leave."

"Sticker shock also applies to teeth repair.

After having her upper right canine tooth pulled, Ulyana Lyubyatina said she was told in early September that an implant made in Italy would cost 18,000 rubles, or about $480 at the time -- "a huge sum of money for me."

Things only got worse from there.

A week later, the dentist's office informed the 48-year-old accountant that it had run out of the implants and needed to reorder at a price of 24,000 rubles. Earlier this month, she said the price climbed again, to 25,000 rubles.

Unable to afford the import, yet loathe to buy a Russian-made implant that she says she wouldn't trust, Lyubyatina is stuck with a temporary plastic tooth.

"I don't know what to do," she said, shouting over the traffic in downtown Rostov-on-Don as she stood in line at a bank ATM. "I hope the ruble chaos will eventually calm down. What is going on now is crazy."

Now take a look at the price of gold in rubles on this chart by clicking here.

Is there any lesson we can learn from this? I believe so. If and when the day arrives that the US dollar starts to lose value sharply like the ruble has, we can expect the same problems to show up here very quickly. And we can expect the price of gold in US dollars to rise sharply as it always has when a currency loses value.

This is why so many experts we cite on this blog advise acquiring some amount of insurance in the form of precious metals while the US dollar is still holding up. If events happen that cause it to drop sharply in value, it will be too late to get the insurance hedge needed to deal with the problem. It's impossible to know the time frame in advance.

Saturday, November 22, 2014

Japan vs. China vs. Europe - Stock Car Race to Devalue?

A few years ago Jim Rickards came out with his book "Currency Wars" which talked about countries engaging in a race to devalue their own currencies to try and pump up sagging domestic economies. As things have unfolded, the currency wars have indeed been intense. 

We can kind of think of all these massive QE and stimulus programs like a NASCAR(R) race to see who can devalue their currency the fastest. Right now the US has pulled in for a pit stop, but Japan, China, and the EU are still fighting it out on the track. The three articles linked below talk about it. 


"So-called Abenomics involves a 'three arrow' approach - a big government spending package, the targeting of a 2 per cent inflation rate through a massive money printing scheme, and a program of business reforms.'

"But early signs of a return to economic health appear to have been scuppered by a premature hike in VAT from 5 per cent to 8 per cent last April. So last Friday, the Bank of Japan announced it was pumping even more emergency cash into the economy, by cranking up money printing to Y80trillion (£450billion) a year from Y60-70trillion."

"China cut interest rates unexpectedly on Friday, stepping up a campaign to prop up growth in the world's second-largest economy as it heads toward its slowest growth in nearly a quarter century."
"The cut—the first such move in over two years—came as factory growth has stalled and the property market, long a pillar of growth, has remained weak, dragging on broader activity and curbing demand for everything from furniture to cement and steel."
"The European Central Bank announced Friday that it has started buying asset-backed securities as it attempts to revive its stagnating economy and encourage lending among banks."
"However, some analysts have pointed out that the ECB’s limited quantitative easing strategy will not be enough to support the faltering economy. Focus has now shifted towards whether or not the central bank will implement a full-scale strategy that would include buying various government bonds."
My added comments: If you look at this the way Jim Rickards does, right now the US Fed is losing the race. Despite massive efforts to bring down the US dollar, it has stubbornly held up and strengthened. With the Fed in for a pit stop for now, the dollar will probably fall further behind since the other competitors are fully engaged out on the track and revving up their engines. Based on the reports linked above; Japan looks like they are "winning" for now, China is behind them, and the EU is lagging (but might add some higher octane fuel to try and get a turbo boost). With Latin America's economy weakening, will they join the race?
If Jim Rickards is right, by early next year the Fed will be forced out of pit row and back onto to the track. He says the weak growth in the US will falter even more and recession comes back. Solution? Get back out there into the race to devalue with new tires, a full tank, and renewed determination. A question for the spectators might be: How many more laps is this race going to last? A question for the drivers might be: If I win this race, will my grand prize money have any value left to buy me anything? (maybe if it includes a gold cup).
Let's hope all this does not result is a multi car crash on the track with all the competing currencies going up in flames. Just like in a stock car race, a crash involving one car can end up involving a whole bunch of other cars in a chain reaction. And the spectators (us) are also likely to get hurt as well.

Added notes:   Here is an interesting opinion piece by Charles Hugh Smith on this topic.

And here is David Stockman's take on this. He sounds like Jim Rickards. Here is a quote:

"In short, there is a tidal wave of industrial deflation coming down the pike—- owing to two decades of world-wide central bank financial repression that has fueled vast malinvestments in mining, manufacturing, transportation and trade. That, in turn, will trigger a monetary race to the bottom by the central banks—a race that is already underway owing to Japan’s Halloween Massacre of the yen. Soon the rest of East Asia—and especially China— will have to join the exchange rate plunge or find their export based economies hitting the shoals."

Also the Wall Street Journal chimes in: Bring on the Currency Wars

(R) NASCAR is a registered trademark of the National Association for Stock Car Auto Racing

Friday, November 21, 2014

Russia, China Seek to form Collective Security System

Tass reports on military cooperation between Russia and China . You can go to a direct link to this story here. Below are a few quotes from the story. Readers should read the whole article for full context. Increased military cooperation is just another move on the global chess board by the BRICS. Every move has a purpose.


Here are some quotes from the story linked above:

"Defense ministries of Russia and China seek to form a regional collective security system in the Asia-Pacific region, Russian Defense Minister Sergey Shoigu said on Tuesday after talks with his Chinese counterpart Colonel General Chang Wanquan in Beijing."

"According to the Russian defense minister, Russia and China are concerned over US attempts to strengthen its military and political clout in the Asia-Pacific Region (APR)."
"Sergey Shoigu announced that Russia and China will hold joint naval drills in the Pacific and in the Mediterranean in 2015."

"Shoigu said strengthening and expanding ties with China remains Russia’s overriding priority.
“Amid a highly volatile world situation, it becomes particularly important to strengthen reliable good-neighbourly relations between our countries,” Shoigu said at talks with his Chinese counterpart General Chang Wanquan."

“This is not only an important factor for security of states but also a contribution to peace and stability on the Eurasian continent and beyond,” he said, adding that “regular private meetings between the leaders of Russia and China give a powerful impetus to development of bilateral partnership”.

My added commnents:

The public displays of cooperation between Russia and China are designed to counter US and western influence. Imagine it like a chess match where both sides move pieces around in an effort to gain advantage. Russia tends to present a more aggressive image while China a more laid back one. Both have an intended purpose.

At the recent G20 Summit Russian leader Vladimir Putin managed to project both images at the same summit. We called it Gunboat and Koala Bear diplomacy  :)

Added note:   Here is similar BRICSPost article on this same topic.

Added note: Russia-China Cooperation Expanding 

IMF Reforms: If you can't pass em, bypass em

We have covered the fate of the proposed 2010 IMF quota reforms for a long time now. The most recent event noting that these reforms are still not approved was the G20 summit. We covered that in this blog post where we also reported that there could be a plan in mind for the Obama Adminstration to bypass the US Congress to approve these. 

While we wait to see how that turns out, we can observe that China intends to move forward on internationalization of the yuan no matter what Congress does. Some relevant articles are linked below. Read the entire articles to get full context.

China has been relentless in setting up trading hubs around the world for the yuan. These are necessary steps to eventually get the yuan recognized around the world as a reserve currency. This BRICSPost article talks about the latest agreement with Australia. Here are some quotes from this article:

"China and Australia signed a deal in Canberra on Monday to launch an RMB clearing service in Sydney, the latest move to expand the offshore yuan market."
"According to the memorandum of understanding inked by the two countries’ central banks, the People’s Bank of China and the Reserve Bank of Australia, China will set up a clearing bank in Sydney to handle transactions denominated in RMB, or the Chinese yuan."
"So far this year, the world’s second largest economy has reached agreements with Germany, Britain, France, Luxembourg and South Korea to open local RMB trading hubs, as the Chinese currency has gained increasing popularity in global trade and investment."
"China is now Australia’s largest trading partner, export market and source of imports. Two-way trade reached $136.4 billion in 2013, a year-on-year rise of 11.5 per cent."
Notice all the agreements signed this year mentioned in the article. China has also been active getting the yuan setup in London and Canada. Russia and China will move towards their own currencies in trade between them bypassing the US dollar. 
This Bloomberg article talks about how all this helps position the yuan to be added into the basket of currencies that makeup the SDR (the currency unit used at the IMF) when that issue comes up in mid 2015.
Bottom line: No matter what the US Congress does with the 2010 IMF reforms, China is moving full speed ahead to get its currency recognized in the SDR basket at the IMF. All the BRICS nations will surely be in favor of that change. The IMF will be motivated as well because they are concerned that the inability to pass the 2010 quota reforms will cause the BRICS to distance themselves further within the IMF and make it harder to work together.

We can expect that the SDR basket will very likely be changed to include the yuan in 2015. So, as the title of this post suggests, if you can't pass IMF reforms, bypass em (one way or another).

Note: this won't be the same as passing the actual 2010 quota reforms, but it will be a public gesture of added prestige towards China (and the BRICS) at the IMF. 

Thursday, November 20, 2014

We Have Greater Readers Here

This is a little off topic but that is OK. 

I get a fair amount of feedback from readers and I can say without reservation that we have some great readers here. Here is an example. One thing you can tell about people is how well they raise their kids. One of our readers here let me know about his daughter who a journalism student at Oklahoma University. As part of her course work this fall she was asked to write a blog. 

Below is a link to an excellent article she wrote that shows what kind of great readers we have here. When you hear that the future looks bleak, remember we have young people like this coming on who provide a lot of hope for the future. Here is the link to her blog post .  The opening paragraphs are pasted just below. Be sure to read it all!



Dad’s Day Weekend. One weekend out of the year where you see strikingly masculine banners juxtaposed against white columned sorority houses. Where dads in greek letters and strikingly crimson polos adorn their lawns. A day when a girl can walk around campus with the first man she ever loved in this world, her dad.

Because our parents love us more than any other person. Unconditionally. Even when we mark on the wall with crayon. or sharpie. Or when we yell at them in an emotionally strained, hormonal teenage argument.

In just three months of college, I have come to value my parents in a way I never have before. I have realized just how similar I am to them, in morals, in values, in outward appearance, and in ideas. I have realized just how valuable it is to have someone cook dinner or do the laundry or buy the groceries so I can eat my rather strange food combinations at 10PM. But more than that, they have taught me more than I could have ever imagined

And over the years, I’ve learned these 10 things: CLICK HERE TO READ EM

Wednesday, November 19, 2014

What is Klickex Doing Lately?

Readers here know that we have followed a company in New Zealand called Klickex because they are working on cutting edge banking technology that has the potential to play a role in systemic change. We have written several posts on Klickex so we will link back to those just below for new readers that may have interest. 

So what is happening lately with Klickex? Nothing new or dramatic to report for now. Klickex is just steadily working on all the technology we have reported on here previously. Everything continues on a slow and steady path for now. We do hear from Klickex from time to time and what we can say is they stay extremely busy and literally travel the globe working on this technology. If they have major news to report, we will surely hear of it and post it here. But don't expect this to be something that happens suddenly or quickly. It's just a steady process that moves forward over time.

Below are links to several of our previous posts and one with a video presentation by Klickex Chairman Robert Bell who is a driving force behind what Klickex is working on.

This resulted in our first contact with Klickex where they politely informed us that Klickex
does not view its GSD technology as being like Bitcoin. Back then I did not realize that.
Now I understand why it is so different from Bitcoin and why the present banking system would be comfortable with it. Bitcoin Magazine picked up this original article and asked me to write one for them which is here. 

This is probably the most important update we did on this. Klickex Chairman Robert Bell reviewed this article for accuracy to make sure the facts we presented were correct. Much of what Klickex works on is technical banking technology that does not get much media attention. So this article provided the best insight we can give on how things were moving along. It was also written after we gained a much better understanding of Klickex than we had when we wrote the original articles.

Some added information due to reader response to our article.

I have said repeatedly how much respect I have for Mr. Bell. He is one of the nicest people you would ever meet. I believe he is a brilliant banking technology expert. I have said I think of him as the Steve Jobs of banking technology. His work at Klickex has the potential to play a big role in the future as to how we use and access money. It is already doing so in the South Pacific where Klickex operates now. They have helped unbanked people be able to transfer money at greatly reduced costs. Even if they need to do a currency conversion in the process of the transfer.

Mr. Bell's goals are to improve public credibility and confidence in the banking system, improve access to banking for unbanked people, and to help improve stability of the system overall. I value his insights greatly when he has time to share them because he is working inside the system and has an in depth understanding of how Central Banks work and how the banking system overall works. In my view, he is literally one of the best sources on the earth for learning how things work in the banking world. He is incredibly busy and his travel schedule is mind boggling literally spanning the globe.

This should give new readers a chance to catch up with what we have reported here on Klickex. It remains a company to watch in the future as things evolve in the global financial system in our view here.

Added note: We did get a new update earlier this week from Klickex indicating things are moving forward as planned. We might have some news later this year or early next year where we can report on all that is going on.