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Showing posts with label reserve currency. Show all posts
Showing posts with label reserve currency. Show all posts

Friday, June 2, 2017

China in process of finally destroying the petrodollar by negotiating an agreement with Saudi Arabia to denominate oil in Yuan

Ever since 2013 when Russia and China began to buy and sell oil in a currency other than the dollar, the clock began to tick on U.S. hegemony over the global financial system.  This is because ever since 1973, the world has been forced to use the petrodollar system and function under a singular reserve currency that for the first time in centuries was not backed by a precious metal.

And subsequently over the next four years, the crack initiated by both Russia and China has begun to spread, with not only Moscow becoming the world's leading producer and distributor in energy, but also in agreeing to sell their oil and natural gas in both Rubles and Yuan.  And this left the last remaining roadblock to completely destroying the petrodollar being the stability and unity of OPEC nations who have stood firmly with the United States in holding onto that 1973 agreement.

However this final hurdle for the East in their battle against dollar hegemony may soon be achieved as China is currently in negotiations with Saudi Arabia to have oil also to be sold in RMB.

China is currently modifying the terms of its oil trade with Saudi Arabia. Specifically, China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar. 
If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974. You can revisit Jim Rickards article about the Assault on the Dollar, here
To recap, the petrodollar is weakening because the dollar is losing power as the world’s reserve currency. This is similar to the way pounds sterling gradually fell out of favor during the decline of the British Empire. The decline may take a long time, but what we’re seeing today is another step in the death march of the dollar. - Daily Reckoning
The entire foundation of the dollar being designated as the global reserve currency today is due to its ties to oil, and in particular, to the agreement that OPEC nation force customers to buy their oil only in U.S. dollars.  But once this agreement is breached, then not only will the dollar likely lose its status as the singular reserve currency by de facto rejection, but the U.S. economy and financial system will collapse because the only thing propping it up is the ongoing need for foreign countries to have to buy dollars in order to purchase energy and other commodities.

On the surface the U.S. doesn't appear to be worried about losing its reserve currency status, but this is far from the truth when you understand that most of the wars that the U.S. has engaged in since 2001 have all been about protecting dollar hegemony, and trying to keep Russia and China from succeeding in their plans.

Tuesday, May 23, 2017

U.S. Congresswoman submits bill to tie cryptocurrencies to terrorism but real threat is fear of Bitcoin supplanting the dollar

On May 18 U.S. Congresswomen and member of the House Counterterrorism and Intelligence subcommittee Kathleen Rice, pushed through a bill that would call for a threat assessment of all cryptocurrencies and their ties to terrorism and the funding of it.  However according to cybersecurity experts, the real reason for the this bill is the growing fear by Washington that Bitcoin and other cryptocurrencies could, and are supplanting the dollar and other global sovereign fiat currencies.

US Congresswoman Kathleen Rice has introduced a bill tasking Homeland Security with conducting a threat assessment for terrorists using virtual currencies such as Bitcoin, despite evidence terrorist groups use such payment methods is scant. A cybersecurity expert has told Sputnik the real fear is Bitcoin supplanting national currencies. 
"We will see an increase in terrorist groups using it as more and more members of the public use it. More people know about it, more and more websites accept it as a payment method, it's becoming increasingly pervasive in the digital world. It can be used for good or bad, but I hope it'll become a universal currency. There is no central authority with Bitcoin — no banks or financial organizations control it, the people who own it do — and users can bypass a lot of financial services fees as a result," he adds. 
Still, Dr. Curran believes there's "no doubt" Bitcoin will be the currency of the internet in years to come. It will become more regulated, and politicians will progressively view it as a threat to mainstream financial institutions and currencies as it becomes further accepted. Moreover, he's certain it'll be difficult if not impossible for governments to truly put a stop to it — the internet has no borders, and national bans won't be effective. - Sputnik News
For all intents and purposes, nearly every war is a 'banker war', or the need for the U.S. to ensure that dollar hegemony reigns supreme over the global financial system.  And when you look at the true underlying reasons behind the ousters of Libya's Muhmmar Ghaddfi, and Iraq's Suddam Hussein, and the insurgencies of Ukraine and Syria, then you would find that every one of them either had to do with protecting the dollar as the global reserve currency, or protecting the petrodollar system that is being supplanted by Russia's new pipeline projects.

Thus anyone who doesn't believe that as Bitcoin and other cryptocurrencies rise in both popularity and use that the U.S. government will not take steps to ensure their failure or encapsulation, is someone who has not paid attention to history and the willingness of Washington to use any means necessary to protect their monetary dominion over the rest of the world.

Tuesday, May 16, 2017

U.S. runs the threat of losing dollar hegemony if they don't join in on Silk Road according to economist

Following last weekend's Belt and Road Forum, Yaroslav Lissovolik, the Chief Economist for the Eurasian Development Bank, stated that the Silk Road project will have the power to wean member nations off the dollar, and allow countries to use their own currencies in direct bi-lateral trade.

Ironically for the U.S., who desperately needs the rest of the world to continue using dollars as the global reserve currency, their rejection of joining in with the Belt and Road initiative could actually hasten their downfall as the project will provide the perfect opportunity for a critical mass of de-dollarization.

According to chief economist of the Eurasian Development Bank Yaroslav Lissovolik, the implementation of the project will help to reduce the dependence on the US dollar and increase the role of the national currencies in Eurasian countries. 
"The implementation of such a megaproject could be used to increase the role of national currencies, contribute to the de-dollarization of the countries in Eurasia and reduce their dependence on the US dollar. In addition, it could help increase the role of other currencies, especially those of emerging markets," the expert said during a conference, organized by Rossiya Segodnya International Information Agency. 
According to Lissovolik, the initiative could help create "new reserve currencies and strengthen the yuan as a reserve currency in international financial relations." 
"This issue is very important, because it gives a chance to partially affect the financial architecture of Eurasia," he said. - Sputnik News

Thursday, March 9, 2017

Russian bank follows Japan's lead in bypassing the dollar through connecting to China's CIPS system for interbank settlement

Last month, several Japanese banks took the unprecedented step in bypassing SWIFT and the dollar by connecting directly to China's CIPS platform for interbank settlement.  Now on March 9, Russia is following suit as one of their largest banks announced today that they are officially connecting to CIPS to conduct their own interback settlement with China that will no longer require intervention with the global reserve currency.

Image result for china and russia against the us
Russia's VTB Bank has been successfully connected to Chinese-based Cross-Border Inter-Bank Payments System (CIPS), the bank said on Wednesday. 
"VTB has been linked up to the system via correspondent banks and has successfully completed test operations in late 2015. We are monitoring the development of the introduction of the next phase of the CIPS, which is supposed to increase the operational efficiency of transactions," VTB's press office said in a statement. - Sputnik News
China officially opened their CIPS messaging platform last October as a way to both expand internationalization of the RMB, and to allow for much easier processing between nations in their bi-lateral trade agenda.  And over time the cost savings for both sides of the trade equation will be significant since trade partners will no longer be required to pay currency swaps to SWIFT in their having to buy dollars to act as a medium of exchange.

As more and more nations find direct bi-lateral trade a better and more equitable way of conducting commerce between economies, the less need there will be for countries to have to buy dollars to function in antiquated trade models.  And at the leading edge of this is China, who through coalitions such as the Shanghai Cooperation Organization and Silk Road projects are steadily expanding the idea of direct trade, and in the natural currencies held by each respective partner.

Wednesday, February 22, 2017

Both Donald Trump and Vladimir Putin are working different ends of the tale to kill the petrodollar

In a fascinating dichotomy where both the United States and Russia are implementing different foreign policy angles that will inevitably kill the petrodollar, their main target happens to be the same in the Arab Kingdom of Saudi Arabia.

Back in 1973 Nixon's Secretary of State Henry Kissinger went to Saudi Arabia to forge what would become the next global backstop for keeping the dollar as the world's reserve currency.  But in doing so the U.S. made a promise to protect the Kingdom from foreign invasion, and in return the Saudi's would ensure that OPEC used only dollars in their global selling of oil.

But what the U.S. did not anticipate was the fact that the Saudi monarchy followed a radical form of Islam that was hell bent on seeing all other sects utterly destroyed.  And through their use of money, arms, and terrorism over the past 40 years, the U.S. has been forced to intervene in many of these unprovoked attacks on Saudi's Arab neighbors, and have played a major role in both toppling governments, as well as aiding terrorism.

And in 2017 with the election of Donald Trump, this all appears about to change, and could signal that the new U.S. President is content with letting the old petrodollar agreement dissolve away.

Image result for trump will kill the petrodollar
Unlike every president since the petrodollar’s birth, Donald Trump is openly hostile to Saudi Arabia. 
The Saudis did not want Donald Trump in the White House. And not because of some bad blood on Twitter. There are real geopolitical issues at stake. 
At the moment, Trump seems determined to walk back on US support for the so-called “moderate” rebels in Syria. 
The Saudis are furious with the US for not holding up its part of the petrodollar deal. They think the US should have already attacked Syria as part of its commitment to keep the region safe for the monarchy. 
Toppling Syrian President Bashar al-Assad is a longstanding Saudi goal. But a President Trump makes that unlikely. That’s not good for Saudi Arabia’s position in the Middle East, nor its relationship with the US. 
This is just one of the ways President Trump will hasten the death of the petrodollar. - International Man
On the other side of the gambit is Russia's President Vladimir Putin, who has not only sided with Syria's Bashir Assad in fighting the Islamic Caliphate's attempts to topple the government, but in a recent and unprecedented move invited Sunni clerics to a conference in which they castigated Saudi Wahabism as being deformed in the construct of Islam.
At the end of August, a meeting of Muslim clerics and scholars convened in the Chechen capital of Grozny to forge a consensus on the subject of ‘who constitutes a Sunni.’
Sunnism, the 200 or so Sunni clerics from Egypt, South Africa, India, Europe, Turkey, Jordan, Yemen, Russia warned, “has undergone a dangerous deformation in the wake of efforts by extremists to void its sense in order to take it over and reduce it to their perception.” 
The Muslim world is currently under a siege of terror, led by a deviant strain that claims religious authority and kills in the name of Islam. So the Grozny participants had gathered, by invitation of the Chechen president, to make “a radical change in order to re-establish the true meaning of Sunnism.” 
If their final communique was any indicator, the group of distinguished scholars had a very particular message for the Muslim world: Wahhabism - and its associated takfirism - are no longer welcome within the Sunni fold. 
Specifically, the conference’s closing statement says this: “Ash’arites and the Maturidi are the people of Sunnism and those who belong to the Sunni community, both at the level of the doctrine and of the four schools of Sunni jurisprudence (Hanafi, Hanbali, Shafi’i, Maliki), as well as Sufis, both in terms of knowledge and moral ethics." 
In one fell swoop, Wahhabism, the official state religion of only two Muslim countries -Saudi Arabia and Qatar - was not part of the majority Muslim agenda any longer. - Russia Today
The monetary stronghold for the petrodollar system has already been shattered when Russia and China signed an agreement to sell oil in both Yuan and Rubles a few years ago, and it appears that very soon the final matchstick in the 1973 agreement will fall as well with the coordinated efforts of the U.S. and Russia in eliminating ISIS and the independent terror groups that were spreading Saudi Wahabism through the Kingdom's financing them with money and arms.  And when this happens for good it will create a great vacuum in the global financial system, and all bets are off as to who will win the crown that replaces the dollar as the world's reserve currency.

Friday, February 3, 2017

Long time U.S. vassal state Japan to bypass dollar and SWIFT to transact using China's CIPS system in inter-bank settlement

Ever since China began to duplicate Western financial institutions starting in 2013, more and more nations have begun matriculating towards the East, and away from dollar hegemony.  And one of the most important of these new infrastructures is the Chinese CIPS platforms which functions for the RMB the same way SWIFT does for the dollar.

Yet unlike the way SWIFT charges for swaps when nations have to use the dollar as a middleman since it still reigns as the world's singular reserve currency, CIPS allows for much lower transaction fees and the convenience of bypassing the U.S. currency through direct bi-lateral currency settlement.

Hiroshima Bank and 13 other Japanese regional banks will connect to an interbank payment network that enables direct yuan wiring to mainland China -- a move that will lower transaction fees and boost convenience for customers. 
Joining the China International Payments System will reduce fees and processing days. Juroku Bank and Joyo Bank are also among the Japanese banks taking advantage of the system introduced by the People's Bank of China. They will be connected one by one after the end of the Chinese New Year holidays via the Bank of Tokyo Mitsubishi UFJ, which connected to the system last year. 
Previously, payments to mainland China had to be processed by clearing banks such as those in Hong Kong. CIPS can cut costs by several dollars (10 yuan equals $1.45) per transaction. Payments can be completed on the same day if certain conditions are met. - Asia.Nikkei

As the world continues to reject the dollar and the old financial model of a singular reserve currency, more countries are seeing the benefits of transacting in a bi-lateral environment.  And once enough of these nations decides to follow this new economic model being laid out from Beijing, and create the critical mass needed to bypass the dollar completely, then the reserve currency will simply fade away via de facto consent, and force change onto the Western institutions that have run the global financial system for decades.

Wednesday, January 25, 2017

Gold price should be well over $20,000 per ounce today if held to historical relation of gold to global GDP

Analysts have looked at several different measures as to why the current gold price is only around $1200 per ounce, especially as global money supplies have skyrocketed since the 1980's.  And even here at The Daily Economist we have published numerous articles pointing out the willful manipulation of gold by governments, central banks, and the markets that act as the platform for this manipulation.

But looking at gold from both a fundamental and technical perspective, its significance in supporting economic growth through the backstopping of currencies cannot be denied... and why the move in 1971 by President Richard Nixon to remove that gold backstop from the dollar reserve currency was a mistake that was paralleled by the previous controller of the global reserve (Britain) back in the 1931.


Graphic courtesy of SRS Rocco Report

The most powerful banker in the early part of the 20th century stated that "Gold is money, everything else is credit."  And it is this difference that determines whether economic growth is real, or simply an artificial creation that lasts until the fuel of debt (credit) runs out.

When stock markets crashed at the end of the 1920's, their boom had been fueled by cheap money, and borrowing on margin.  And it is interesting to note that these same markets did not return to their 1929 all-time highs until the 1950's, which was about 6-7 years after the world returned to a proxy form of a gold standard following the conference at Bretton Woods.  And the markets then went on to steadily rise until the late 1960's, when the U.S. decided to artificially expand the money supply to fund the war in Vietnam.

So why are these relations important?  Because there is still one relation we have not mentioned here that involves gold when it was historically part of the world's money system.  And that relation is Gold Supply/Value to GDP.

As we can see, the value of world monetary gold stocks of $11 billion was a third (33%) of the $32 billion of global GDP.  So, for each dollar of monetary gold, the world economies produced three times the GDP. 
Now, let’s look at the situation today.  According to the World Bank, global GDP fell to $73,892 billion ($73.9 trillion) in 2015.  As I mentioned in a previous article, this was down 5.7% from $78.4 trillion in 2014:
What a difference in 86 years… aye?  Today, the value of world monetary gold stocks is only 1.7% ($1.28 trillion) compared to global GDP of $73.9 trillion.  I calculated the value of present monetary gold stocks by multiplying the current 33,250 metric tons of official gold holdings by $1,200 an ounce.  Of course, we don’t know the TRUE official gold holdings figure, but this at least provides us a guideline. - SRS Rocco Report
In 1929 the dollar price of gold was $20.42, and the total value of above ground gold was approximately $11 billion.  This meant that the gold supply supported global GDP at a rate of 3:1.

However 86 years later, with the gold price being approximately $1200 and where there is a much greater supply of the metal having been mined and owned by governments and central banks, the ratio of GDP to the gold value is now a whopping 57.59 (close to 60) :1... or nearly 20 times what it was in 1931 when gold was removed from the reserve currency by the British.

Thus taking this historic relation to today, it would mean the price of gold to support a $73 trillion global GDP should be nearly 20 times what it is, or at least $20,000 per ounce.

Saturday, January 21, 2017

As Donald Trump speaks out against the dollar and globalism it could be setting the stage for a return of gold standard

Newly inaugurated President Donald Trump is a master when it comes to leverage, finance, and the use of credit to achieve great accomplishments.  But if ones listens to the media, they would not find a concise answer as to whether he actually understands the dollar or the economy.

This is because Trump stands at the middle of an ideological war where an establishment seeks to maintain its control over a debt based system.  And the foundation of that system is the establishment's ability to print unlimited amounts of fiat currency, manipulate markets and prices, and siphon the wealth of a nation into the hands of a select few.

(To validate this all one has to do is listen to Keynesian Nobel prize winning economists speaking today in Davos who are calling for the banning of cash and the implementation of an all digital cashless society)

Which brings the American people to the point where they must learn to read between the lines in discovering what President Trump's future direction for the dollar is headed.  And a couple of news stories out on Jan. 19 may provide that insight.

Trump and a New Gold-Backed Dollar
In an interview with The Wall Street Journal on Monday, Donald Trump uttered two words essentially never spoken by a president when describing the state of the U.S. dollar: "too strong." In describing how the U.S. is losing ground to China, Trump commented: "Our companies can't compete with them now because our currency is too strong. And it's killing us." It's incredibly rare for an American president to comment on the movement of the U.S. dollar, let alone advocate that it should fall. 
The movement of the dollar has a double-edged-sword effect on consumers. A stronger dollar, like we're experiencing now, gives U.S. consumers more buying power in overseas markets, and makes it less expensive for domestic businesses to import goods. 
On the other hand, a strong dollar makes U.S. exports less appealing to other countries where currencies have taken a beating, and can thus boost our national trade deficit and eventually slow growth. 
The dollar also happens to have an inverse relationship with gold. A stronger dollar often means weaker gold prices, whereas a weaker dollar leads to stronger gold prices. Trump's implying that the dollar is too strong might as well be a ringing endorsement for gold. - Fox Business
And from analysis from the well respected alt-economic Doug Casey...
The breakdown of the petrodollar is the perfect excuse for the globalists to usher in their SDR solution. 
So that’s the first option. It’s the global elites’ preferred outcome. It would be a very bad thing for personal and economic freedom. It means more fiat currency, more centralization, and less freedom for the individual. 
The second option is to simply return to gold as the premier international money. Here’s how it could happen… 
Trump might play along with the globalists’ schemes, but I doubt it. He’s the first president who’s openly and sincerely hostile toward globalism. He’s denounced it repeatedly. 
Trump recently said, “We will no longer surrender this country, or its people, to the false song of globalism.” 
In my view, there’s only one way Trump could fight the global elites and their SDR plan: return the dollar to some sort of gold backing. 
Trump has said favorable things about gold in the past. So have some of his advisers.
It wouldn’t be easy. He’d face one hell of a struggle with the globalists. And winning would be far from certain. 
No matter what, the death of the petrodollar, just like the end of the dollar’s link to gold, will be very good for the dollar price of gold and gold mining stocks. 
When Nixon took the dollar off gold in 1971, gold skyrocketed over 2,300%. It shot from $35 per ounce to a high of $850 in 1980. Gold mining stocks did even better. 
Gold is still bouncing around its lows. Gold mining stocks are still very cheap. I expect returns to be at least as great as they were during that paradigm shift in the international monetary system. 
All this is why what happens after Trump’s inauguration could change everything… in sudden, unexpected ways. - International Man
Russia has replaced OPEC over the past year in becoming the global leader for oil and natural gas, and China is not only the world's largest producer of goods sold around the world, but they are also the world's largest banker.  And both of these economies have invested vast quantities of resources towards buying gold at levels that far exceed the U.S.'s supposed 8,500 tons.  Yet in pursuing this course of action they have also sent a clear message to Washington in the past few years through their dumping of dollars at a record pace, and are signifying that the days of the U.S. currency remaining the sole global reserve is nearing an end.

Every indication shows that the fiat currency experiment that began with Richard Nixon closing the gold window in 1971 has reached a point where confidence in the dollar is no longer a sure thing, and even the newly inaugurated President has his doubts on the dollar being the catalyst for domestic growth and prosperity.  And as Donald Trump begins a new chapter today as the leader of the free world, and the world's largest economy, no one really knows what tools he plans to use to implement his agenda of protectionism, direct bi-lateral trade, and destroying the West's current trek towards globalism.  But perhaps what we do know that may give us insight is his understanding and appreciation for the power of gold as real and tangible money.


Wednesday, January 11, 2017

Forget Bitcoin, Swift may soon put the dollar itself on the blockchain

As financial institutions and think tanks work overtime to create new financial platforms using blockchain technology, one of the most unlikely of these announced on Jan. 12 that it is in the planning stages of creating a process to function in cross-border payments using the global reserve currency.

Known as SWIFT, or the Society for Worldwide Interbank Financial Telecommunications, it is the network that facilitates the exchanging of the world's currencies for dollars to aid in the function of global trade and commerce.  And in a release made on Wednesday the institution reported that they are planning on using blockchain technology to replace older infrastructures in their processes of servicing the global reserve currency.

Image result for blockchain dollar
A global platform that connects the vast majority of the world's banks has begun building a blockchain application to simplify cross-border payments. 
Announced today, The Society for Worldwide Interbank Financial Telecommunication (Swift) is integrating open-source blockchain technology with its own products to build a proof-of-concept that might one day replace the so-called "nostro" accounts it keeps filled with cash all over the world - just in case they need it. 
If successful, the blockchain application has the potential to finally achieve a longstanding dream of Swift, to free up the cash stored in those accounts so it can be invested in more profitable measures. - Coindesk

Friday, December 30, 2016

Gold, Bitcoin, and the state of the dollar heading into 2017

As an observer of economic and geo-political events, we at The Daily Economist prefer to look at things more pragmatically rather than to make wild speculations in forecasts or predictions for a coming year.  But with certain realities beginning to unfold all across the financial spectrum in the last days of 2016, the groundwork appears to be in place for commentary and analysis on a few trends that could be taking shape.

Each of these trends are tied specifically to differing forms of currency or money, and their potential growth in economies both regional, and worldwide as the global financial system heralds immense change and the likelihood of new crises.

The advent of Donald Trump winning the U.S. Presidential election 50 days ago saw stocks, bonds, and the dollar react in ways not seen in the past three years.  And likewise the rest of the world reacted in nearly opposite fashion, with China and India bearing the brunt of America's artificially exploding markets.

And with this in mind it is a high probability that policies coming out of Eurasia and the Far East will dictate much of the monetary changes that the world will experience in 2017.

Gold:

Following the election of Donald Trump to the U.S. Presidency, gold and silver were summarily crushed around 16.5% in the Comex and in London, and began the separation in price between the Western paper markets, and the physical one run out of Shanghai.  And those spreads in price will only become greater than the average $25 - $50 divergence that is currently taking place due to high demand and lower supply of the physical metal.

And it is likely that sometime in 2017 China will seize sole control over price determination for gold and silver as more and more producers sell their metals directly to China and abstain from the manipulated futures markets run by London and New York.

Bitcoin:

Thanks to the extreme rise in the dollar to over 103 on the index, China has experienced severe pressure to its own currency and economy as it fights desperately to rein in capital flight of the Yuan from the Mainland.  And it has been through Bitcoin that many Chinese investors are using to funnel wealth out of China over the past three weeks, causing the price to surge to nearly $1000 from its support level of $640 late last month.

This rise in value will only increase in 2017 as investors in not only China but also in other countries join in and expand their use of the crypto-currency as a conduit to launder money from their local currency into others to then buy tangible assets that protect their store of wealth.

The fate of the dollar as the global reserve currency:


2016 was a banner year for nations and industries to move away from the dollar and conduct commerce using direct bi-lateral currencies.  And these trade agreements were only drops in the bucket to the advent of China expanding the use of the IMF's M SDR currency in international finance.

But China is setting its sights on bigger game, and began this last week when the Deputy General Manager of the Shanghai International Gold Exchange announced a program through which the Yuan currency will be expanded globally through its physical gold markets.  And all that remains is for China to call for the end of the uni-polar reserve currency that is the dollar, and open the door for nations to bypass it at will in a new gold backed trading mechanism underwritten by the Yuan.
The Chinese Yuan is linked to the US Dollar. With the US Dollar at these levels China has rapidly entered a financial crisis. 
In the last month, China has: 
1)   Burned through over $70 billion defending the Yuan.
2)   Had to halt trading in its multi-TRILLION dollar bond market.
3)   Had to issue emergency lending to financial firms to keep them afloat. 
ALL of these are linked to the US Dollar’s rise. And it’s lead the world to a very nasty situation. 
China has a couple different options, NONE of them are pretty for the financial system. 
Alternatively China could go for the “nuclear” option and demand that the US be removed as reserve currency of the world. 
This is not some crazed notion. China is the second largest economy in the world. And the Yuan is now part of the IMF’s SDR currency basket along with the Yen, British Pound and the Euro. 
I’m not saying the US Dollar would necessarily LOSE reserve currency status, but if China were to publicly call for this, the consequences would be severe.
As in, CRISIS severe. - Phoenix Capital Marketing via Zerohedge
The stage is set for a global change in the long-standing Bretton Woods uni-polar reserve currency system, and 2017 is shaping up to be the year for the end of dollar hegemony.  And the primary winners in this will be gold, silver, bitcoin, and the Yuan, with anyone holding paper investments denominated in dollars potentially losing a great deal of their wealth.

Friday, November 25, 2016

Indian government seeks to expand war on cash to also include a war on gold as the death of fiat money becomes a global phenomenon

In India's move to end what they call 'black market' transactions by eliminating their two highest denominated currency notes, Prime Minister Modi is quickly discovering the folly of attempting to mess with the nation's money, and a system that has functioned outside of banking systems for decades.  And even as Modi's new measures of trying to force upwards of 1.3 billion people to turn in their now non-legal tender notes in exchange for a new currency has so far been a huge failure, the leader of India is now seeking to double down on capital controls and expand the war on cash to also a new war on gold.

As Bloomberg reports, the Indian government had observed a declining trend in exchange of old notes over the counter, according to a statement from the state-run Press Information Bureau. 
And so the decision to end OTC exchange of notes was to encourage people to deposit old notes in their bank accounts. 
Government allows certain exemptions for use of old notes until Dec. 15, with only 500 rupee denomination currency notes accepted for such transaction:
  • Old 500-rupee notes can be used for payment of school fees with limit; utility dues; payment of road toll fees
  • Foreigners permitted to exchange foreign currency up to 5,000 rupees/week
Furthermore, as CNBC reports, the Indian government is set to impose a 45% tax (haircut) on any suspicious deposits. 
This is a major problem as only 40% of banknotes have been exchanged according to local reports. 
We suspect the sudden urge to force citizens to deposit/exchange their old banknotes is due to the increasing prevalance of "illegal workarounds" across the nation... (as The Wall Street Journal reports) 
Unable to spend or deposit their sackfuls of large bank notes amid India’s crackdown on hoarding cash, business owners across the country are paying employees months of salary in advance, ringing up bogus sales and even buying gold they can smuggle overseas to get rid of stashed money or conceal its source. 
Such illegal workarounds are threatening to undercut Prime Minister Narendra Modi’s move this month to cancel India’s highest-denomination rupee bills, which was meant to punish tax evaders and other criminals and bring more of the nation’s $2 trillion economy out of the shadows. - Zerohedge
And because Prime Minister Modi's scheme has failed to accomplish his desired outcome from the people, it now appears he is going after their most sacred holdings.

Their gold.
Recall, that as per our report last night, one of the reasons proposed for the recent tumble in gold has been speculation that India may ban gold imports. As a reminder, gold has traditionally been a widely-accepted cash alternative in an economy where gold has long held a supremacy over cash equivalents, to the point where recently the government started paying a dividend to those who deposit their gold to local banks for "safe keeping." 
Well, it now appears that the government is taking its crusade against gold one step futher, and according to a report by NewsRise, the Indian government may soon impose curbs on domestic holdings of gold as Modi intensifies his war against "black money", news agency NewsRise reported. 
As we reported previously, gold prices have soared in India ever since the November 8 demonetization announcement, and premiums jumped to two-year highs last week as jewellers ramped up purchases on fears the government might restrict imports after withdrawing higher-denomination notes from circulation in its fight against black money. 
India is the world's second biggest gold buyer, and it is estimated that one-third of its annual demand of up to 1,000 tonnes is paid for in black money - untaxed funds held in secret by citizens in cash that don't appear in any official accounts.
India may be the most public and most notable of countries going through the turmoil of forcing their people to change their currency, but they are far from the only nations currently implementing a ban on cash and gold.  In just the past week the countries of Australia, Uruguay, and even Spain have begun the process of eliminating large currency denominations in their economies as the world seems ripe for a new liquidity crisis that is requiring extreme measures.
India, Uruguay, Australia and now Spain. The Minister of Finance and Public Service, Cristóbal Montoro has reportedly just announced “anticipated measures in order to ‘reduce the use of cash.’ 
In other words, Spain is going to make cash transactions even more difficult. As of presstime, from what we can tell, this has yet to be reported anywhere in English media except here now at TDV. 
As you can see, the chaos is increasing. Combine cash bans with attacks on fake news (more on that tomorrow), and you end up disturbing a significant amount of people as we wrote here recently. 
This amounts to a trend of course, of the sort we’ve been analyzing for several years now. We’ve predicted increased social chaos throughout the West and beyond because globalism is not built by votes but by violence and widespread disaffection that allows globalist “solutions” to be rammed home. 
I expect “cash banning” to be speeded up along with selected attacks on the alternative media - as part of a larger effort to create widespread social dissension. People believe attacks on cash and “news” are what they seem to be on the surface. They are not. They are part of a much deeper strategy that involves additional globalism. 
We’ve expected just these sorts of actions and have profited from them for the past several years along with our newsletter subscribers. We await more of the same. 
Currently, violence spawned by this anti-cash trend can be seen in such countries as Uruguay and India where cash banning on large bills has ignited significant social chaos already. India is in the throes of riots while Uruguay has been hit with a nationwide strike aimed in part at derailing a mandate that all employers must pay employees electronically via a bank account, starting as soon as March.  - Dollar Vigilante
Perhaps one of the reasons for this sudden attack on money by governments and central banks is due to the rising dollar and the expanding liquidity crisis that the reserve currency is creating as fewer nations can afford to buy dollars for international commerce.  And with the dollar reaching a 14 year high this week by nearly touching 102 on the dollar index, history shows that anytime the reserve currency has crossed the 100 level over the past 30 years it has triggered a financial crisis somewhere, which it appears to be doing now in multiple locations.

In the latest report from ADM ISI’s strategy team, “Dollar Liquidity Threat is Getting Critical and Fed is M.I.A.”, Paul Mylchreest argues that mainstream economic luminaries (like Carmen Reinhart) are finally acknowledging the evolving crisis due to the dollar shortage outside the US, a topic which even the head researcher at the BIS shone a spotlight on yesterday suggesting that the strength of the dollar, not the VIX is the new "fear indicator". - Zerohedge
As always in history, when people lose confidence in their currencies the natural and obvious next move is to rush out of their 'money' and into tangible assets such as gold and silver.  And besides the rumors of gold soaring as high as $3600 on the black market now in India, over in Asia people are massively increasing their own buying, and are more than willing to pay high premiums to get it.

The price of gold is being attacked right now in a manner that is quite reminiscent of the way it was attacked in the summer of 2008, right before the global financial markets collapsed, led by the fall of Lehman.  Something really ugly is coming toward the global economic and financial system. 
In Viet Nam the premium paid by the public has just soared to $90 over world gold.  The spread has been wider over the last 15 years, but not much and only during times when there’s been high “backwardation” between the physical delivery bullion markets in the east vs. the fraudulent paper gold markets in London and NYC. - From PM Fund Manager Dave Kranzler:  
Gold was pushing $1230/oz overnight, as the methodical take-down of gold and silver in the NYC and London paper markets has triggered an avalanche of demand for physical gold in the eastern hemisphere. 
Last night ex-duty import premiums in India were $14 over spot gold.  In Shanghai the premium to world gold was $9.76.  Delivery volume into the Shanghai Gold 
Exchange rocketed to an extraordinary 86.55 tonnes (it was 35.9 tonnes on Wednesday).  The open interest on the SGE was 807 tonnes.  To one observer’s recollection, John Brimelow of John Brimelow’s Gold Jottings, this is the first time the open interest has been over 800 tonnes. 
In Viet Nam the premium paid by the public was $90 over world gold.  only during times when there’s been high “backwardation” between the physical delivery bullion markets in the east vs. the fraudulent paper gold markets in London and NYC. - Silver Doctors
Just as most people imagine the strength of the economy as being tied to the value of the stock markets, so too do people erroneously picture the true value of gold as being tied to the manipulated paper spot price determined in London and the Comex.  But the coming financial crisis that has been deferred now for eight years ever since the 2008 Credit Event appears very much to be demanding a reckoning, and those who both see it early enough, as well as prepare for it, will find the ability to do so as the days of the dollar and of money quickly come to an end.


Tuesday, October 25, 2016

As the dollar strengthens and the Yuan weakens, China continues its heavy buying spree of physical gold in expectation of financial crisis

Six years ago, the Middle East erupted into protests that would become known as the Arab Spring.  And while politicians in the U.S. tried to spin this event as being a revolt against 'tyrannical governments', the reality was that these and many other nations were in bondage to a stronger dollar which made it impossible for them to afford to buy wheat and other commodities to feed their people at the height of the Great Recession.

With the U.S. dollar being the sole reserve currency in which all nations must exchange their money into to be able to purchase commodities on the international market, extreme changes to the dollar have historically been the catalyst for monetary crises elsewhere.  And two of the best examples occurred in both the 1980's and 1990's when Paul Volker's interest rate hike led to a Latin American debt crisis, and the stronger dollar during the height of the Dot.com boom triggered a currency crisis in Southeast Asia.

The U.S. dollar is getting too strong for some countries. Early warning signs suggest another emerging markets currency crisis. 
Currencies in Southeast Asia are at their worst points since the region's last financial crisis in the late 1990s. Mexico and South Africa's exchange rates are at their lowest levels ever compared to the dollar, according to Capital Economics. 
The dollar's gains should make history nerds shake in their boots. Its rally in the early 1980s helped trigger Latin America's debt crisis. Fifteen years later, the greenback surged quickly again, causing Southeast Asian economies, such as Thailand, to collapse after a run on the banks ensued. 
A large scale currency crisis could be a real hit to the global economy, even the United States. The world is a lot more integrated today than it was in the 1980s and 1990s. - Money.CNN
However, unlike the way the strong dollar effected currencies in second and third world economies two and three decades ago, this new move for the dollar over the past six months is causing financial problems to first world nations such as the UK, the Eurozone, and even the second largest economy in the world, China.


In response to this, China is once again ramping up their gold buying, especially since the price was slammed down by over $70 earlier this month.  And in addition to the latest report of over $350 billion in U.S. Treasuries being sold back to the United States over the past few months, those dollar reserves are in part the currency being used to swallow up Western gold supplies.

SWISS GOLD EXPORTS TO CHINA HIT HIGHEST SINCE JANUARY

As the dollar once again nears 100 on the weighted index, and the British Pound, Chinese Yuan, and Euro all devalue to in some cases historic levels, the chances of another regional or global monetary crisis comes to the fore, and unfortunately at a time when the world looks to already be in a new economic recession.

Sunday, September 25, 2016

Russia and China accumulates even more gold in August as world prepares for the end of dollar hegemony

This coming week could see one of the most anticipated financial events since central banks began their unprecedented policies of money expansion, stimulus, and quantitative easing six years ago.  In fact, dependent upon what China chooses to announce before Sept. 30, it could also be the most important financial paradigm shift since the U.S. took the reserve currency off the gold standard in 1971, or even as big as the implementation of the original Bretton Woods monetary agreement itself.

That is because China is preparing to both enter into the elite playing field as a fully recognized global currency through their inclusion in the IMF's SDR basket, and to also report their gold reserve holdings which dependent upon how much they choose to reveal, could create a seismic event that facilitates the beginning of the end of dollar hegemony.

And with both Russia and China continuing to accumulate large amounts of gold as recently as August, expectations are that China will report a number much greater than most analysts are conceiving.

This fact is not lost on the budding partnership of Russia and China, who continue to accumulate gold at a feverish pace. Russia continued to add to their reserves in the month of August, in which they added an additional 21.77 tonnes of the yellow metal, bringing their total gold reserves to 49.1 million ounces! 
In addition to this, China has also continued to move a portion of their massive fiat reserves into the more tangible form of money, gold bullion. They are continuing to accumulate gold, knowing that they are the most likely successor to the US dollar, and have the highest probability of being crowned with the "reserve currency" status. 
When that day will come is anyone's best guess, but what is no secret is the fact that China is set to rock the precious metals markets in the immediate future. By the end of this month , they are expected to announce an updated estimate of their gold holdings, something that many in the financial world believe is long overdue.
The reasoning for them finally tipping their hand and showing their cards is due to the fact that they are strongly being entertained to become a key member of the highly elite global banking currency, the SDR, and this is one of the stipulations in regards to their acceptance. 
The SDR is what some have called the "king" of fiat money and is a powerful currency in global settlements. This is perhaps just one more step for China in their path towards becoming the official reserve currency of the world. - Sprott Money

Friday, September 16, 2016

As China prepares to announce their gold reserve amount by end of the month, debate over gold backed Yuan increases sharply

As part of their requirements to enter into the SDR basket of currencies in October, China will soon be revealing the quantity of their gold reserves sometime between now and Sept. 30.  And with them also recently being appointed the managers of the M SDR internationalization program, debate over China implementing a gold backed currency is once again increasing at an accelerating rate.

At the heart of the discussion is how China is using their growing geo-political power to integrate 3rd world nations, especially those in Africa, in moving forward despite not having the economic finances to expand their infrastructure base.  And to date this has been shown to be moderately successful in a myriad of different ways, and could be the catalyst for catapulting a gold backed Yuan using their growing alliances and Silk Road strategies to envelop a large portion of the world under a financial umbrella that would be impervious to U.S. and Western subjugation.

In his March interview with CCTV the geostrategic analyst highlighted that China is "facilitating trade and development for Third World nations in ways major Western funders could not." Beijing is interested in boosting logistic networks in Eurasia and therefore it founded the Asian Infrastructure Investment Bank (AIIB) to fund the projects. 
Furthermore, "China may also offer barter trades in lieu of cash transactions for rail infrastructure projects, as was the case with Thailand. It seems to work. For cash-strapped economies, barter may emerge as an essential instrument of regional economic stability and a 'gold yuan' may help facilitate such a paradigm shift," Maavak elaborated speaking to Sputnik. In the context of the ongoing Eurasian integration, the RIC (Russia, India and China) nations may "weaponize" their gold holdings to ring-fence the Greater Eurasian geo-economy, according to the analyst. - Sputnik News
Whether it is through a gold backed SDR, or a gold backed Yuan, the world is rushing towards a return of some form of a gold standard.  And unfortunately for the West, which has been spending their currencies bailing out their banks and propping up their stock markets, China has been the one cultivating economic partnerships that when the time comes, could catapult them into becoming the masters of the next global financial system.

Friday, May 20, 2016

March saw global central banks dump dollars at a record clip

Since the middle of 2015, global central banks have been dumping Treasuries and other dollar reserves at record levels to accommodate a number of different needs within their own monetary policies.  For some like China, the dumping of dollars has helped the Far East economy protect their currency and ensure exports remain at the lowest costs achievable.  And for nations like Russia and Saudi Arabia, the selling of dollars has been a necessity to boost their budgets during the advent of low oil prices.
But perhaps the biggest reason behind the dumping of dollars en masse by central banks has been the rush out of the reserve currency, which is becoming less a requirement now that direct bi-lateral trade has returned to the global economy.
Dollar
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Friday, April 8, 2016

CFR President acknowledges that America’s massive debt will lead to the end of the dollar as global reserve currency

While only a small number of Americans actually understand that the Council on Foreign Relations is one of many institutions that act as the ‘power behind the throne’ for the U.S. and other Western governments, what is most important for the people who reside in these nations under their control is when they publicly disclose policies or agendas that will play an important role for their futures.  And on April 7, the current President of the CFR may have provided a glimpse into that future when he spoke to Congress and emphasized that the days of the dollar as the global reserve currency may be coming to an end due to the massive debt the U.S. has undertaken to try to sustain both the economy, and global hegemony over the world’s financial system.

dollar-whirlpool

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Thursday, March 17, 2016

Foreigners dump dollars in January at the highest rate on record

From August of last year through December, foreigners dumped more than $550 billion in dollar based assets as the demise of the petrodollar in global trade continues to expand.  And as we begin 2016, a new report out for January shows that more treasuries were dumped in that month alone than in any month on record.
The previous high of $48.1 billion in treasuries sent back to the U.S. was shattered in January as foreigners dumped their dollars at a rate of $57.2 billion.  Much of this was tied to country’s using their dollar reserves to shore up their own currencies, but a large part also included less need for dollars to purchase oil and other commodities as the global economy moved strongly into recession.

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Monday, February 29, 2016

U.S. beyond insolvent as financial filings show $3.2 trillion in assets and $21.5 trillion in debt

Each year the United States government files a financial statement showing their assets and liabilities through the Department of the Treasury.  And while previous years have been similar to 2015, in that their liabilities outweigh assets by a large margin, never before has the deficit been as extraordinary as it was calculated on Feb. 27.
This because the United States (which is a corporation by the way), has assets valued at $3.2 trillion while showing short-term liabilities at over $21.5 trillion.  This is a difference of $18.3 trillion in the red, and in every single instance of financial definition would make the country (or corporation) insolvent and bankrupt.

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Saturday, January 23, 2016

In all the fear over lower oil prices, few are talking about its impact on the dollar

When the U.S. signed its 1973 agreement with the House of Saud to peg oil to the dollar, few tended to realize that the opposite would be true, and that the dollar itself is intrinsically tied to oil and the price of this commodity.  It is one of the reasons why Kissinger had the Saudi’s (and OPEC) increase the price three fold so that this inflation would allow the U.S. to then increase the nation’s money supply by having the House of Saud put all of their reserves in U.S. debt instruments (Treasuries).
But as the use of debt and credit began to expand, and eventually reach exponential growth due to central banks choosing the Keynesian road over sound monetary policies, it put the dollar on a fragile precipice that then relied upon oil and other asset prices to remain high to keep the spigot going enough to be able to both roll over the growing debt, and to ensure confidence that in desired times they could increase that debt with little opposition.
However, following the Credit Crisis of 2008 confidence in the dollar began to crack, and eventually lead to an ever growing rejection of the reserve currency by nations who have been forced to devalue their own currencies to remain sustainable.  And this worldwide increase in debt has not only brought about a global point of diminishing returns (see the need for negative interest rates by some), but it has also killed real economies who’s consumers can no longer spend at the rates they were over the past two decades.
petrodollar1
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Tuesday, December 22, 2015

Everyone rushing to dump U.S. dollars as October sees decline of almost $150 billion

A new report came out on Dec. 15 from the U.S. Treasury Department showing the overall foreign holdings of U.S. Treasuries and dollar based reserve instruments.  And for the month of October, nearly $150 billion was divested from global accounts, and marks the biggest dumping of dollars in any month of this year.
A combination of the acceptance and expansion of the Yuan currency, and the need for nations to protect their economies by dissolving their reserves are primarily to account for this dollar dumping.  And it is expected that when we get to see November and December’s numbers by the Treasury Department, the selloff will be much greater as more options become available for nations to transact outside the reserve currency.

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