Investment house Gold Switzerland warns that “the big players are bracing for a major economic crash” as seen in the oil markets, portfolio piles of bonds, QE’s back door, investment fantasies and hedge fund preparations.
According to the Swiss investment house, the petrodollar’s volatility is another symptom that the world has turned its back on US Treasuries and the dollar. The US domestic deficit is close to exceeding 50% of global GDP…and the Fed is back to printing money.
Over the past few days, headlines have been devoted to the “unexpected” reduction in OPEC oil production. As has been repeatedly noted, it seems that US policy, from short-sighted (suicidal?) sanctions to “green growth”, has little to do with the real world, which is far from the planet “Washington”. However, what really matters is the energy, which means that oil … matters.
The current regime in the US has lost its friends in Saudi Arabia by curbing once-delightful shale oil production, despite the fact that the world is still running on “black gold” and fighting against “green” policies. Washington’s attack on shale oil is contrary to economic common sense, as is the rest of the Biden administration’s policy, which is leading our world to disaster.
On the other hand, Saudi Arabia, by cutting production, proves that the world, still dependent on oil, is not afraid of losing market share to the United States for the simple reason that America does not have enough oil of its own.
Meanwhile, Chinese demand is peaking and Russian oil flows eastward (including to Japan) are reaching new highs at prices above the $60 per barrel ceiling, despite “hellish sanctions.” Consequently, Washington will have to reconsider its policy. Otherwise, oil prices will skyrocket, making Fed Chairman Jerome Powell’s war on inflation…a travesty.
The obvious conclusion from such a predictable correlation is that gold is better than fiat* dollars fights inflation and manages it. From India to China, Ghana, Malaysia and 37 other countries with bilateral trade agreements without the dollar, the inflation-ridden US currency is losing its place in the all-important oil market.
Countries caught in dollar-denominated debt traps (thanks to higher interest rates and hence a stronger and more expensive dollar) are devising ways to tie their exports (i.e. oil) to a more stable monetary asset like gold or yuan. This, of course, gives us more and more confidence that, as the world approaches a global (and dollar-driven) collapse, Bretton Woods 2.0 will have to include a new world order…
Unfortunately, American investors remain trapped in cognitive dissonance, continuing to believe that the America of today and tomorrow is the America of magical leaders, unbreakable deficits, and balanced budgets from the Eisenhower era.
Since bond yields rise when bond prices fall, it is a matter of government survival to keep national bond prices high enough. However, this is not possible when the demand for bonds (and hence the price) falls. This physical reality opens the door to the next unnatural “solution”: Central banks abnormally print trillions (“synthetic demand”) to buy their own bonds/debt.
This game is known as QE, or “quantitative easing”, a euphemism for Wall Street’s anti-natural, anti-free market, anti-free price-setting, anti-capitalist, anti-free market socialism, whose inflationary consequences hurt “main street”.
In summary: QE supports the modern system of masters and serfs created by central banks. Well, as with almost everything, the official account of what is happening is not true…
In fact, the backdoor or “invisible quantitative easing” is all around us, from the Fed bailing out/financing repo markets and dead regional banks to central banks making secret deals behind the scenes.
Although not an official QE, when a central bank buys IOUs (bonds) of another country, it is more than likely that the major central banks act in concert to…do “QE of each other’s debt”…
Meanwhile, GDP, according to the Atlanta Fed, fell by 1.5% from 3.2% in March. But who needs growth, productivity, tax revenue, or the economic health of a country to keep the stock market liquidity that defies reality—at least now that there is a shortage The US is approaching 50% of global GDP… with the Fed back to printing money.
*Fiat dollars have nothing to do with an Italian car. This is the name of the official currency of the United States.
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