A Few Questions to Ponder as we Head Into 2017

2016 was perhaps one of the most eventful years in history in terms of political events with the Brexit vote and the US Presidential election result. Despite these being potential shocks to the system, we still did not get the major financial crisis that people like Jim Rickards and many others have said they believe is coming some day. Even with all the various systemic risks that have been mentioned by both the IMF and the BIS, none of these have resulted in a new major crisis so big that the entire monetary system has to be "reset". This is what we watch for here no matter what happens in the political arena. 

The election of Donald Trump has clearly changed the status quo in politics for better or worse and only time will tell how that will turn out. While it is true that politics can impact what public policies are put forward economically and we will clearly see some major changes in some areas, this is not really what we watch for here. If all that happens is that Trump simply tweaks the existing system (changes taxes, regulations, trade policies, etc) that may or may not contribute to the kind of major crisis we watch for here. It is likely his policies alone would not. Some are concerned over his ideas on trade, but it is really too early to tell what he will actually do in that area (major overhaul or just tweak things) and how much impact he will have.

The things that are more likely to matter in terms of what we watch for here are:

- the level of public and private debt vs. the GDP of the economy

- failure of one or more "too big to fail" entities that triggers a global derivatives chain reaction (resulting in trillions in contract defaults very quickly)

- monetary and interest rate policies at central banks around the world

- sharp movements in US dollar exchange rates 

- a major cyber attack against the financial/banking system of the US or other major powers

- any geo political event that places too much stress on the global financial system (a war involving major powers for example)

- a major crash in US and/or global stock markets (a major bubble bursting type event)

- a major crash in bond markets (a major bubble bursting type event) 

While Donald Trump's policies might have some impact on some of the above items, some of these items are likely completely out his control and if they were to unfold could overwhelm him no matter what policies he tries to put in place (good or bad).

As Donald Trump takes office all of the following possible triggers for a major crisis were already in place before he is sworn in:

- hundreds of trillions in global derivatives contracts around the world

- nearly 20 trillion in US government debt (plus many tens of trillion more unfunded future obligations like Medicare, Social Security, etc)

- a US stock market at all time highs and interest rates at all time lows (what happens if these markets reverse in a volatile way?)

- a sharply higher US dollar causing stress on foreign debt (estimated 9 Trillion) held in US dollars and borrowed at very low interest rates

- very high debt to GDP ratios in many advanced economies around the world and the US

- an interconnected global banking/financial system where a failure at one or more major institution (or sovereign power) could quickly lead to global contagion

- systematic hacking and cyber attacks by foreign governments intelligence agencies

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So, these are the big questions for us here heading into 2017:

1- Will one or more of the potential triggers in the list above go off during 2017 or sometime during Trumps first term of office?  (Jim Rickards has predicted this will happen)

2- Is Donald Trump walking into a "setup" (planned or unplanned) for economic failure no matter what policies he puts forward?

3- If a crisis does unfold in 2017 or during his first term, how will Trump deal with it? Would he agree to a "solution" from the IMF that included replacing the US dollar as global reserve currency with the SDR? 

4- If no crisis unfolds during his term, will his economic policies really stimulate true growth, increase better paying jobs, continue to boost markets, etc.? Can he "outgrow" the expanding future US debt obligations? Will most people feel better or worse off financially in four years? If he succeeds, the main purpose of this blog will disappear since major monetary system change would be very unlikely any time soon. (In this new interview on CNBC, Jim Rickards says he thinks Trump will not be able to get the results he is looking for in 2017)

We don't know the answers to the above questions. But we can get some idea from the economic team Trump has selected. 

His early picks suggest he is much more likely to just tweak the present system than to radically reform it unless the kind of major crisis we watch for here hits him during his term. If that happens, his picks for his economic team (very much establishment types) suggest he would likely go along with whatever they tell him has to be done including accepting the IMF as lender of last resort. There is nothing about his economic team that suggests they would resist an IMF plan if they were told it was the only viable option. Of course, it was never discussed during the campaign and Trump simply assumes it will never happen on his watch when he talks about his plans to the public. 

In fact though, he could ironically end up becoming a salesman for such a plan to many of his followers who would be skeptical of such a plan if someone else presented it to them. Trump is much more pragmatic than many people believe and can switch his perceived position at any time if he thinks he needs to (see Art of the Deal).  All of my best sources here are also watching to see how Trump might react to a new major crisis and none tell me they know for sure.

It will be interesting to see what actually happens in 2017 and beyond. We'll keep an eye on it here until at least early 2018 to see if there is any further purpose for this blog. I guess I should hope there isn't.


Added note of interest: I got this interesting bullet point list of questions/comments for 2017 below in an email from a highly respected and well connected blog reader that I view as a highly credible source.

What does 2017 have in store for us?

• A US stock market crash? 
• Or further boom?
• A recession - 
• or stronger growth?
• Property market crash
• China bubble crash
• A trade war US-EU- China?
• Collapse of Euro?
• Brexit-related flight of banks from the City of London?
• War - where? - Africa, Asia, Mid East, the Balkans, Baltics?
• If the euro falls apart, that might restart debate on the international monetary system.
• The dollar has medium-term strength but weak fundamentals…

And then we have the Economist 2017 magazine cover which always prompts massive speculation as to what subliminal messages the magazine may be attempting to convey (or not). This year they use tarot cards and feature Trump prominently. As you can imagine, these cards are prompting all kinds of speculation as to what they are supposed to mean. This has been going on ever since the Economist cover predicted a new "world currency" way back in 1988 supposedly to arrive around 2018 (the date on the golden Phoenix coin below). The cover appears to show the new global currency arsing from the flames (destruction?) of the various world fiat paper currencies.

Happy Holidays!

Enjoy the Holiday Season!

Bloomberg: IMF Doubles Down on Lagarde as Trump Aims to Upend World Order

As we noted here recently, IMF Director Christine Lagarde was issued a statement of full support by the IMF Board after her recent quilty verdict in France. Despite the verdict, the court found that she did not deserve any actual consequences in terms of serving time or even ending up with this on her record. It appears the court felt she technically acted in violation of the law, but without bad intentions.

Bloomberg now runs this article which is the first we have seen to raise the same kind of question we have been raising here. How will a Trump Administration view the IMF in the future?  Below are a few excerpts from the article and then a few added comments.

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"The International Monetary Fund’s executive board caught a glimpse this week of what life might be like in the wilderness of a rapidly shifting world order. It didn’t take them long to slam the door.

Christine Lagarde’s conviction on Monday of negligence in a French court cast uncertainty over her ability to continue as the IMF’s managing director. Within hours of the judgment, in which she escaped any punishment, the fund’s 24-member executive board put to rest any speculation that she might have to resign, praising her “outstanding leadership” and the “wide respect” she commands around the world.

But the episode raises the question of how the IMF would select a leader at a time when traditional alliances are fraying among developed economies and popular opposition is growing to the lopsided benefits of globalization. One of the biggest wild cards would be how the IMF’s role is viewed by U.S. President-elect Donald Trump, who campaigned on a promise to put America’s economy first and look past traditional U.S. allies in Europe toward warmer relations with Russia.

“It’s anybody’s guess who the next occupant of the White House would pick,” said Martin Edwards, an international relations professor at Seton Hall University in New Jersey. “They could pick someone who wants to downsize the organization.”

. . . . .

Please click here to read the full article

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My added comments: It's kind of interesting that this Bloomberg article talks quite a bit about what a Trump Adminstration might prefer in a new IMF leader when the current term for Christine Lagarde does not even expire until 2021. Of course we don't even know if Trump would be President in 2021. The IMF has made it pretty clear she will stay in her current position at least until then.

The real question (which the article does touch on some) is how does Trump view the IMF role in the world (and the World Bank)? Does he see them as vital pieces of US influence or does he view them as institutions promoting a "globalism" that he has campaigned against quite forcefully?

And then we still have the nagging question of what happens if we get the kind of major global financial crisis Jim Rickards predicts during Trump's term of office? Would he accept the solution Jim says will be put forward at that time to have the IMF step in as the global lender of last resort and use the SDR to replace the US dollar as global reserve currency? I suspect Jim is watching this just like we are to see what really happens.

Lots of questions, but not much information available yet to give us a hint as to the answers.

Robert Pringle - What Brexit and Trump's Victory Have in Common

Robert Pringle offers his post US election analysis and concurs with many others we have featured here on the blog. He sees public distrust of those in charge of the present system as a prime cause for the election results we have seen around the world (we can now add Italy to the list). Below are a few excerpts from his recent blog article.

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"Many facile comparisons have been made between Brexit and the election of Donald Trump today.

They have an important element in common. But the commentators have missed it.

It is said that both represent a backlash against globalisation. Others say it is a revolt of the uneducated, the marginalised, the people who have been left behind.  Others  emphasise the reaction against excessive immigration: “We want our country back”.

Many blame “experts”. The overwhelming majority of US economists sided with Clinton. The majority of the governors of the Federal Reserve  and the entire policy-making establishment in Washington are Democrats.

Nearly 400 economists including several Nobel Prize winners wrote an open letter denouncing Trump.

Have the experts done so startlingly well as to deserve the public trust, the status, the cushy jobs, the limousines and honours that go with it? Has the economy done well under their expert stewardship?

This is where we get nearer to the nub of the issue."

. . . .

They voted against gross unfairness

"They were voting against unfairness. They were signalling their disgust at the disgraceful behaviour of governments and the financial elite, behaviour that any 10-year old should be ashamed of. Against the power of money and greed.

They were voting against cronyism, the revolving doors between the banks, central banks and governments, in short, against a corrupt political system.

And they were voting against technocrats who had promised financial stability and delivered one crisis after another."

. . . .

Please click here to read the full article by Robert Pringle

Added news note (9 am 12-19-16): IMF's Lagarde found guilty - IMF meets to decide her future. I would be surprised if the IMF asked her to step down based on the last sentence below but we should know soon. Here is a bit more from CNN:

"A special court made up of members of parliament and magistrates announced the guilty verdict on Monday in Paris. But it also said Lagarde won't be fined, serve any jail time, or receive a criminal record."

Update 12-20-16: As expected the IMF issues a statement in support of Christine Lagarde and we should expect that her term at IMF will continue. The guilty verdict appears to essentially be a slap on the wrist with no actual consequences.

Q&A Interview With Claudio Borio (BIS) on Monetary Policy

Claudio Borio of the BIS has conducted another Q&A interview covering his thoughts on the limits of the monetary policies being used right now by central banks. Below are a few selected excerpts and here is a link to the full interview published on the BIS web site. 

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Mr Borio, the world is facing many problems. What is the root cause? 

"We do not know for sure. The big questions in economics have not quite been solved. But let me start by saying that the rhetoric about the global economy is worse than the reality. In terms of global growth, we are not that far away from historical averages, especially if we adjust for demographics. Moreover, unemployment has been declining, and in several cases is close to historical norms or measures of full employment." 

So everything is fine? 

"It is the medium term that is our concern - what we have called the "risky trilogy". The long-term decline in productivity growth has accelerated since the crisis, so that the prospects for long-term growth are not bright. Debt levels, both private and public, are historically high and have been increasing since the crisis. And, most critically, the room for policy manoeuvre, both monetary and fiscal, is limited."

But can central banks help out? 

"Monetary policy has been stretched to its limits. In inflation-adjusted terms, interest rates have never been negative for so long and they are lower now than in the midst of the financial crisis, which is odd since the situation has improved. If you came from Mars and they told you that policymakers were struggling to reach price stability, you might be surprised, as inflation is not far from measures of stable prices. But since many central banks have inflation targets set at 2%, there is a lot at stake."

Why do we have low inflation? 

"We do not fully understand this. But I think we have underestimated the long-lasting impact of the globalisation of the real economy, notably the entry of China and former communist states into the world trading system. There has been persistent downward pressure on wages and prices, as competition has greatly increased, helped also by technological change. The pricing power of producers and, in particular, the bargaining power of workers have declined, making the wage-price spirals of the past less likely."

. . . . 

The global debt is around $90 trillion, and it is rising. How should one reduce it? 

"How to manage the debt burden is the hardest question. The best way, of course, is to grow out of it, which is why structural reforms are so important. Other forms are more painful."

. . . . .

Do you fear political populism? 

I fear a return to trade and financial protectionism. We are seeing some worrying signs. The open global economy order has been remarkably resilient to the financial crisis; but it might not so easily survive another one. At that point, we could see a historic rupture. That is an endgame we should do all we can to avoid. 

There are academics and politicians advocating the abolition of cash. What do you think of that? 

Negative nominal interest rates, especially if persistent, are already problematic. Quite apart from the problems they generate for the financial system, they can be perceived as a desperate measure, paradoxically undermining confidence. Getting rid of cash would take all this one big step further, as it would signal that there is no limit to how far into negative territory nominal interest rates could be pushed. That would risk undermining the very essence of our monetary economy. It would be playing with fire. Also, it would be quite a challenge for communication, even in simply economic terms. It would be like saying: "We want to abolish cash in order to tax you with lower negative rates in order to - tax you even more in the future." 

Why? 

Because the reason for doing this would be to raise inflation - which is perceived as an unjust tax on savings. This would require people to have faith in the "model" which policymakers use to steer the economy. Quite a challenge!

Please click here to read the full Interview with Claudio Borio

Added note: In other BIS news, Mexico central bank Chief Agustin Carstens will assume the role of General Manager of the BIS next year, taking over from Jaime Caruana. Again, we have no idea how new President Donald Trump will relate to either the IMF or the BIS.

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My added comments: We have cited Claudio Borio many times here on the blog as he has issues a number of warnings in the past about systemic risks to the global financial system which we keep an eye on here. In this interview he repeats that current monetary policies are still a risk and he adds that the global economic order "might not so easily survive" another major financial crisis. He still says its possible we "could see a historic rupture" in the current system even though he also points out that right now things seem pretty stable and there has been some improvement recently. 

These comments just further confirm that the thing we need to watch for here is another huge global financial crisis. This is the event most likely to lead to the kinds of major systemic changes we watch for here and that would certainly impact all of us in ways we could not ignore. 

The problem we face is to remain vigilant when things appear to be normal and there is no indication of such a crisis on the immediate horizon. I could document dozens of major crisis predictions that have come and gone over the past several years with no major crisis like this unfolding. People who follow these issues will naturally tend to become more and more numb to such predictions as they see so many events pass by that we are told will trigger the crisis and yet it does not happen (I made short bullet point list of some examples below to show what I mean). Here, we avoid any kind of predictions and certainly do not try to pinpoint some specific date or event as being a trigger. We just admit that we cannot know the future. We think a better idea is to make some upfront plans to prepare for such a crisis and then stay alert to actual events to see what really happens. Staying alert may be as important as anything else that one can do since Jim Rickards predicts that the kind of crisis we are talking about could easily arise very quickly due to an event no one is anticipating.

Here are is a very partial list of crisis predictions that so far have not panned out:

- world will be engulfed in super inflation/hyperinflation due to central banks QE policies

- stock markets are a bubble that will burst due to central bank policies

- bond market is a bubble that will burst as too low interest rates (and even negative interest rates) normalize back to higher rates

- a major sovereign debt default will trigger a global crisis

- Failure of a major too big to fail entity (like Deutsche Bank for example) that triggers a chain reaction failure in trillions of derivatives contracts across the globe

- Failure of a major gold (or silver) clearinghouse (like the Comex for example) to deliver physical gold (or silver) due to lack of available gold (or silver) to meet the contract with the buyer

- too strong US dollar triggers global defaults from entities who have borrowed US dollars at low interest rates and cannot pay back when the dollar rises too much (there is an estimated 9 Trillion around the world at risk on this issue)

- various specific dates that some believe have cyclical significance or religious significance have come and gone without the associated predicted crisis. (Examples - Shemitah, Year of Jubilee, etc)

- crash in oil prices would lead to major defaults in the oil industry and trigger massive derivative defaults and/or loan defaults 

- Brexit will trigger a crisis in global markets

- election of Donald Trump will trigger a crisis in global markets

The list can go on and on if you do some searching. The interesting thing here is that many of the items in this list are very valid concerns and still exist now even though no major crisis has yet unfolded. 

The point to take from this is that we should be aware of the systemic risks that do exist and have some kind of plan in mind to deal with one if it were to ever happen. At the same time, we should very skeptical when anyone issues some kind of specific date or event crisis prediction. The above list makes it clear that no one can possibly predict the exact timing for a crisis event if we do get one. 

Again, most of us buy insurance so that we will have it if we need it even though we don't know if we will need it or exactly when we might need it. This event should be viewed in the same way. Do whatever you can in your situation to have some kind of insurance in case you need it and then hope you never use it. Try to continue to stay alert and watch events.

Added news note (9 am 12-19-16): IMF's Lagarde found guilty - IMF meets to decide her future

OffTopic (But Good): Snowball Express Arrives in our Town

Very happy that my daughter got to cover the Snowball Express for our local paper when they came to our town. Snowball Express is a great event where American Airlines flies in families of fallen military heroes from across the country to the Dallas-Ft. Worth area for a week of fun and bonding activities for the kids. You can see the smiles on their faces as they get a big welcome from our local community. Similar events and activities take place all across the DFW metroplex. 

More on Snowball Express here and here 

We remember

Every day, many of the men and women of the armed forces return to their families and their civilian lives. But not every one will have that chance, and the families left behind are forever changed. Snowball Express remembers those fallen heroes who will never return, and honors the supreme sacrifice their families have made. Snowball Express serves the children who will never be reunited with their mom or dad.

We honor

Since 2006, the mission of Snowball Express has been a simple, yet profoundly important one: Provide hope and new happy memories to the children of military fallen heroes who have died while on active duty since 9/11. We bring children together from all over the world for a four-day experience filled with fun activities, like sporting events, dances, amusement parks and more. Parents of children of the fallen often tell us that their child is reserved, withdrawn or unwilling to talk about their loss. Participating in Snowball Express changes that, making each child feel special and giving them an opportunity to share their feelings about losing something so precious, their parent.

Here is some coverage from the 2015 Snowball Express

Jim Rickards - Trump Will Face New Major Crisis During His Term

In line with his previous forecasts on this, Jim Rickards has produced a new article in which he predicts that the crisis he expects will likely come during the Donald Trump term of office. The article does not give a specific time frame but does make it clear that he thinks Trump will have to deal with it. 

As we have noted here, we have no idea how he would respond to such a crisis. Jim says he will turn to the IMF. We will watch and see what actually does happen. Below are some excerpts from the article.

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As earthquake doesn’t care if you’re progressive or populist. It destroys your house all the same. Likewise a financial crisis is indifferent to a politician’s policy mix. Systemic crises proceed according to their own dynamic based on the array of agents in a system, and systemic scale.

"The tempo of recent crises in 1994, 1998, and 2008 says a crisis is likely soon. A new global financial panic will be one legacy of the Trump administration. It won’t be Trump’s fault, merely his misfortune.

The equilibrium and value-at-risk models used by banks will not foresee the new panic. Those models are junk science relying as they do on notions of efficient markets, normally distributed risk, continuous liquidity, and a future that resembles the past. None of those hypotheses match reality."

. . . . .

"Financial panics are dynamically and mathematically identical to a variety of natural phenomena such as earthquakes and avalanches. As snow accumulates on a mountainside, seasoned observers can spot avalanche danger. Soon one snowflake alights in such a way as to perturb others that begin to slide, form a chute, create momentum, and rip loose the entire snowpack. Timing is uncertain, yet the avalanche is inevitable.

What snowflake could precipitate the next financial panic? Deutsche Bank is an obvious candidate. Less obvious is a failure to deliver physical gold by a London bullion bank. That would expose the hyper-leveraged “paper gold” market for what it is. A natural disaster on the scale of Fukushima would do as well."

. . . . .

"In the next crisis, liquidity will come from the IMF, which has the only clean balance sheet remaining. The IMF will print the equivalent of $10 trillion in world money called special drawing rights. China and Russia will acquiesce in this liquidity injection provided it hastens the demise of the dollar as the benchmark global reserve currency.

Can Trump avoid this fate? Possibly.    . . . . ."

. . . . .

"Sooner than later a new treasury secretary and Fed chair will retrace the 2008 footsteps of Hank Paulson and Ben Bernanke to tell President Trump the system is having a heart attack. They will have no remedy except to suggest a call to Madame Lagarde."

Please click here to read the full article by Jim Rickards in CITY A.M.

For a more in depth discussion see this Q&A Transcript 

Added notes: Zero hedge provides another possible "snowflake that could precipitate the next financial panic" - a US dollar shortage abroad (see article here). The BIS also has dollar concerns as this Fortune article reports. At some point the US dollar must pull back quite a bit one way or another. When this happens, it will be time to keep a close watch on many major markets.

Also, as you can see here, it did not take long for alternative media writers to jump on this article as evidence that Trump is being setup to be a scapegoat for the next crisis. As we noted earlier here in our recent Crisis Watch update, this is a theory now making the rounds in alternative media articles. It should be noted that the Jim Rickards article does not suggest Trump is being setup as a scapegoat for a crisis. He simply predicts Trump will be in office when one takes place.

Also, today we get this news of further bank hacking within the SWIFT system. Just another systemic risk we must endure these days.

James Rickards vs Ann Pettitfor : The Future of the International Monetary System

Published on Dec 4, 2016London Debate, Nov. 30, 2016: Ann Pettitfor and Jim Rickards

The Future of the International Monetary System - Gold, SDRs, or More of the Same?

Below is the debate recently held in London between Jim Rickards and Ann Pettitfor. They discuss their views of the future for the global monetary system. Several readers requested to be made aware of this video when it became available.

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Watch above or click here to view

Additional information on Jim can be found on his website: http://JamesRickardsProject.com 
UK Link for The Road to Ruin: http://www.TheRoadtoRuin.uk
For more information on Ann Pettitfor: http://www.primeeconomics.org/


My added comments: This debate/discussion is a must watch for anyone who follows this blog or has any interest in this topic. Both presentations are well done and interesting. What struck me while watching this is how much both sides agree on -- and especially that we are likely headed towards a major crisis in the existing monetary system at some unknown point in the future. That is the main thing we are watching for here now, so to see both Jim Rickards and Ann Pettitfor say they think one is coming certainly gets our attention here. 


added note: A link to Jim's article on the prospects for a crisis during Trump's term will publish on 12-12-16 and we will feature this debate again in our Crisis Watch Update on 1-1-17.

Dr. Warren Coats - Globalization and Nationalism: Good and/or Bad?

Dr. Warren Coats has written a new article on his blog in which he thoughtfully considers the meaning of the US election results and and how the US might try to move forward to create a more "win-win" future for more people (at home and abroad). This is one of the best and most thoughtful articles I have seen on this topic anywhere. 

Dr. Coats clearly is trying to think through how to address the legitimate concerns of many who voted for Donald Trump without abandoning the parts of our present system which have worked pretty well for many. These are important issues and not easy to think through objectively, but he gives it his best effort here. Below are some excerpts from his new article.

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"Globalization is under attack and nationalism is on the rise. The evidence includes the election of Donald Trump. But what is this globalization these people are so opposed?"

. . . . .

"What about the rise of nationalism in relation to globalism? I believe strongly in the economic benefits of the freest possible global trade, but it would be a mistake to overlook or ignore the concerns of those who oppose it. In this note I attempt to restate the case for freer trade in terms that should appeal to economic nationalists who wish American trade (and other) policies to reflect the interests of Americans first (before taking into account the benefits to the rest of the world). I also reflect on the international rules of trade from the perspective of the sovereignty concerns of nationalists, or what economist Larry Summers calls “responsible nationalism.” Voters deserve responsible nationalism not reflex globalism.

I was forced to think more carefully about the case for freer trade by the opposition to globalization expressed by many of Trump’s supporters. But I quickly discovered that my friend Michael Lind has been there before (see above) as has the brilliant social psychologist Jonathan Haidt who noted that: “those who dismiss anti-immigrant sentiment as mere racism have missed several important aspects of moral psychology related to the general human need to live in a stable and coherent moral order.” Jonathan Haidt: “When and why Nationalism Beats Globalism”, The American Interest, July 2016

Haidt’s closing words succinctly summarize our challenge: “The great question for Western nations after 2016 may be this: How do we reap the gains of global cooperation in trade, culture, education, human rights, and environmental protection while respecting—rather than diluting or crushing—the world’s many local, national, and other “parochial” identities, each with its own traditions and moral order? In what kind of world can globalists and nationalists live together in peace?”

. . . . 

"In listening to the views of many Trump supporters I concluded that their anger and demand for big change derives from feelings that their government—especially the federal government—is not serving their legitimate interests and in fact is interfering with them without commensurate benefits. “The reason Mr. Trump won, [Mr. Bannon] says, ‘is not all that complicated. The data was overwhelming: This is a change election. People weren’t happy with the direction of the country. So all you had to do was to give people permission to vote for Donald Trump as an agent of change, and make sure he articulated that message.’” steve-bannon-on-politics-as-war-WSJ

So what are the Trump supporters mad about? What do they want to change? To the extent that they are concerned about the same things I am, it is that too much of our individual sovereignty has been taken by an overweening government, which has become a big brother who attempts to make our decisions for us for our own welfare. Our personal choices have increasingly been taken away from us and with them our opportunities. The “elites” have arranged the rules for there own benefit. It is no longer a fair game.

The weaknesses of current arrangements at the national level that seem to anger Trump supporters largely concern: a) regulatory capture of an over extended regulatory state, b) inadequate provision of a level playing field and c) an inefficient and poorly designed safety net for the losers in the competitive game."

. . . . .

"So there are plenty of things for Trump supporters to be angry about and to want to change. But now that we have him, what changes should we push for? . . . ."

Please click here to read the full article by Dr. Coats

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My added comments: This article also illustrates very well why we should not expect major monetary system changes any time soon (absent some kind of crisis which creates a sense of urgency for change). Right now, the entire world is trying to assess what the meaning of the recent US elections is and how things will go forward. 

It's too early to answer those questions and all we can do is continue to monitor events and see what actually happens. As we have hopefully learned by now, what actually happens can be quite different than what many people predict will happen and what actually happens is what matters, not the predictions.

Wall Street Journal: Global Economists Wonder if Trump will Shake up World Order

This new article in the Wall Street Journal says that global elites are concerned that Trump will abandon the global institutions that have ruled the day for decades now. This is exactly what we have noted we will watch for here. 

It's too early to tell what will really happen, but this article makes it clear there is deep concern that Trump will not have much use for the IMF or G-20 policies if he thinks they don't serve US interests. Time will tell. Below are a couple of excerpts from the article.

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"Could Donald Trump upend seven decades of U.S. international economic diplomacy? That what some economists fear, taking the president-elect’s trade threats at face value.

In the wake of World War II, the U.S. and its allies established several global institutions to help stabilize the world economy and prevent spasms of interstate violence. Now, some political scientists and economists fear Mr. Trump risks turning more countries inward if he disengages from the World Trade Organization, the International Monetary Fund and other cooperative forums Washington has long relied on to help preserve world security."

. . . . 

“A Trump administration might try to rewrite global architecture where he sees the American projection of power unduly constrained by convention or international rules,” says Robert Kahn, a senior fellow at the Council on Foreign Relations.

Combined with congressional Republican’s opposition to fresh funding for the IMF and its sister development institution, the World Bank, many economists envision Mr. Trump’s White House largely ignoring the two organizations."

Click here to find the full Wall Street Journal article (subscription required)

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My added comments: The US election has changed the game somewhat in terms for what we watch for here. In the past all we watched for were signs from the IMF that might indicate some kind of major monetary system change could be coming. Now, we have to see what kind of relationship unfolds between the Trump Administration and the IMF  (and G-20) first. If all the major powers (US, Russia, China, the EU) take a more nationalistic turn as this WSJ article suggests may happen, it is doubtful any kind of major global reforms can move forward any time soon and we may have even fewer articles here on the blog if that turns out to be the situation. We should have a better idea by the Spring of 2017.

Added note: on 12-7-16 we will feature Dr. Warren Coats new article with his thoughts on the election results and how things might go forward.

Trump Met With Gold Advocate, But Picks Wall Street Insider

As things move along with the new Administration, we get a little more insight into what Donald Trump might be thinking. It is becoming pretty clear that while some of his campaign promises carry priority, others may not. In this case Business Insider reported that Trump met with a potential Treasury Secretary nominee who has advocated abolishing the Federal Reserve and returning to a gold standard in the past. 

However, Trump instead chose a Wall Street Insider not likely to be interested in either of those ideas. This suggests that not much major change is likely in terms of monetary system change and it is more likely Trump prefers to simply tweak the existing system. Other cabinet picks also are trending towards traditional insider types (Wilbur Ross and Elaine Chao). Below are excerpts from the Business Insider article.

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"As President-elect's Donald Trump's transition rolls on, more and more attention is being paid to possible selections for a variety of high-ranking positions and meetings that might help decide these appointments.

On Monday, Trump will meet with John Allison, the former CEO of the bank BB&T and of the libertarian think tank the Cato Institute.

There have been reports that Allison is being considered for Treasury secretary.

Trump's has on the campaign trail questioned the future of the Federal Reserve's political independence, but Allison takes that rhetoric a step further. While running the the Cato Institute, Allison wrote a paper in support of abolishing the Fed."

. . . .

"Allison also suggested that the government's practice of insuring bank deposits up to $250,000 should be abolished and the US should go back to a banking system backed by "a market standard such as gold."

. . . .

"It is unclear if any of Allison's policy views will ultimately become a part of Trump's plan, but given the unconventional nature of his ideas, the meeting is notable."

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My added comments: Perhaps the last sentence is the most significant part of this article. The fact that this meeting took place means Trump is aware of unconventional policies that would indeed be major monetary system change if adopted. It does not appear he intends to move in that direction, but it does raise an interesting question as to what he would do if the current system were to fail sometime during his term.