-- Published: Monday, 10 July 2017 | Print | Disqus
By Darryl Robert Schoon
We’re going to owe Chicken Little an apology
In May 2007, in Subprime America Infects Asia and Europe I predicted a severe financial crisis was imminent: the risks that have lain dormant beneath globalization's foundation are about to erupt and a reordering of the world's financial geography is about to ensue. It's spring 2007 and the sun is shining in the US, backyard BBQs are being cleaned in anticipation of summer’s use. A severe financial crisis, however, is in the offing; a crisis as unexpected as the Golden State Warrior’s last minute steak to the NBA playoffs.
An unexpected financial crisis, however, will be much more consequential than Don Nelson’s magical resurrection of the Warrior’s NBA hopes. There, at least, the Warriors will have a chance. But because most people don’t know a financial crisis is coming, they will have little chance of survival. This summer, America’s subprime CDOs are coming home to roost, and not just to the US.
In July 2007, two multi-billion dollar subprime hedge funds collapsed. One year later, the greatest financial crisis since the 1930s bankrupted Wall Street banks; real estate fell 40–70%; and central banks flooded markets with zero-cost credit and trillions of dollars in quantitative easing to keep stocks from crashing, setting in motion a still-inflating stock market bubble to replace the collapsed 2002-2007 real estate bubble that revived markets after the 2000 dot.com crash.
After the 2008 crisis, unprecedented central bank efforts to prevent the bankers’ endgame temporarily delayed its inevitable resolution. Today, however, the banker’s edifice of debt has reached such levels that systemic dangers, e.g. speculative bubbles, low inflation, low growth, etc. increasingly threaten global markets. The bankers’ endgame is accelerating.
THE BANKERS’ ENDGAME
The bankers’ historic run at capitalism’s casino of luck, i.e. 300-years of profiting from constantly compounding interest on debt-based paper money, is now ending; collapsing from the additional debt central bankers created in the aftermath of the 2008 financial crisis.
Capitalism’s uneasy balance between credit and debt has been fatally destabilized. Debt levels are so high, credit can no longer create sufficient growth to pay down or service what is owed. The bankers’ endgame has entered its final stage.
Rather than address the underlying over-indebtedness that detonated systemic risk and culminated in a full-blown catastrophe, [central bank] policy had simply catalyzed further indebtedness…From a starting point of the end of 2007 through mid-year 2014, global debt rose by $57 trillion to $199 trillion. As a percentage of global gross domestic product (GDP), global debt had risen to 286 percent from 269 percent.
Danielle DiMartino Booth, former advisor to Fed President Richard Fisher, July 5, 2017
Modern economics isn’t rocket science. It’s a debt-based ponzi-scheme dependent on constantly-expanding growth needed to pay down the constantly compounding interest accruing from the bankers’ issuance of money as debt.
In the bankers’ endgame, the demand for credit, i.e. loans, collapses. This is where we are today. Loan growth has now entered negative territory; and, as a consequence, the world is on the precipice of another financial crisis.
One key measure of US corporate borrowing [loan growth] is falling at the fastest rate since the onset of the Lehman Brothers  crisis. Money supply growth in the US has also slowed markedly. These monetary and credit signals tend to be leading indicators for the real economy...Net corporate bond issuance has also stalled, indicating that borrowing by US firms as a whole is in decline.
Ambrose Evans-Pritchard, Fading Trump rally threatened by rare contraction of US credit, The Telegraph, March 26, 2017
.. Commercial and industrial (C&I) loan growth...has flawlessly predicted the last eight US recessions since 1960… This indicator is always right…Not only does the low amount of commercial bank loan creation accurately signal that a recession is coming, it accurately signals the recession’s severity. America’s last three recessions (1990, 2000, 2008) are a testament to this, because they were largely fueled by debt. Each successive recession has been more severe and has required more government intervention to stave off collapse.
Benjamin A Smith, Commercial Loan Growth Signals a US Economic Recession Ahead,
June 21, 2017
TRADE DEFICITS, TRIFFIN’S PARADOX AND DONALD TRUMP
I wish to talk of global trade
Said the banker to the king
Of money, goods and commerce
The wealth that it does bring
And to discuss Triffin’s paradox
That’s killing this wondrous thing
America’s trade deficits are explained by Triffin’s paradox, i.e. US deficits are related to the US dollar as the global reserve currency. After 1971, with the US dollar no longer tied to gold, US trade deficits increased exponentially.
US TRADE DEFICITS
It was the closing of the ‘gold window’ in 1971 that triggered the bankers’ endgame. Thereafter, governments could print money ad infinitum without regard to sovereign gold reserves; resulting in an historic explosion of debt that will end in the collapse of today’s overly-indebted, and overleveraged capital markets.
This destabilization of capital markets after the removal of gold in 1971 is the reason for today’s ever-increasing trade imbalances, financial bubbles, their serial collapse and the crises that follow, i.e. the failure of Wall Street banks and the global economic meltdown in 2008.
In the wake of the financial crisis of 2007–2008, the governor of the People's Bank of China explicitly named the Triffin Dilemma as the root cause of the economic disorder.
Triffin Dilemma, Wikipedia
Had not China artificially resuscitated global markets with historic levels of borrowing and spending in 2008, had not the US bailed out insolvent banks and had not central bankers cut interest rates to zero and spent trillions in quantitative easing, the global economy would have collapsed in 2009 as it did in the 1930s.
The post-2009 artificial resuscitation of markets today, however, has run its course leaving nations with unprecedented levels of debt and burdened with moribund economies functioning only because of continuing central bank life-support.
Although US trade imbalances are explained by Triffin’s paradox, Many Americans, i.e. Trump et. al., believe that exporting nations, i.e. China, Japan, Germany, Mexico, etc. are responsible for America’s negative trade balance. Such neo-nationalist attitudes are not only naïve, but pose a systemic threat to today’s increasingly fragile global economies, including the US.
Mish Shedlock wrote on February 21, 2017: Global Trade Disaster Nearly Certain…For only the third time since 2000 has global trade growth dipped below 2%. On both prior occasions, the US economy was in recession…It is “certain” we are on a horrific global trade path…the forces in play over Brexit and Trump-inspired trade policies suggest a global trade disaster is “nearly certain” to happen.
In 1930, President Hoover signed the Smoot-Hawley Tariff Act that imposed tariffs on imported foreign goods. Subsequently, US imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion. GNP fell from $103.1 billion in 1929 to $75.8 billion in 1931 and bottomed out at $55.6 billion in 1933. Imports from Europe decreased from a 1929 high of $1.3 billion to just $390 million during 1932, while US exports to Europe decreased from $2.3 billion in 1929 to $784 million in 1932. Overall, world trade decreased by some 66% between 1929 and 1934.
Smoot-Hawley Tariff Act,Wikipedia,
DONALD TRUMP IS NOW CONTEMPLATING TRADE TARIFFS WHICH COULD HAVE THE SAME DISASTROUS EFFECTS.
…With more than 20 top officials present, including Trump and Vice President Pence, the president and a small band of America First advisers made it clear they’re hell-bent on imposing tariffs…more than 75% of those present, were adamantly opposed arguing it was bad economics and bad global politics. At one point, Trump was told his almost entire cabinet thought this was a bad idea. But everyone left the room believing the country is headed toward a major trade confrontation. The reason we’re told: Trump’s base—which drives more and more decisions, as his popularity sinks—likes the idea, and will love the fight.
Axios, Trump overrules cabinet, plots global trade war, June 30, 2017
WE ARE IN THE BANKERS’ ENDGAME WHERE ANY MISSTEP COULD BRING DOWN THE BANKERS’ HOUSE OF CARDS AND PLUNGE THE WORLD INTO ANOTHER GREAT DEPRESSION.
THE BANKERS’ ENDGAME AND GOLD AND SILVER
In 1971, when gold was removed from the international monetary system, the bankers’ endgame was triggered. Then, the price of gold, fixed by the US government, was $35 per ounce. Today, gold is $1,213 per ounce, an exponential increase resulting from the banker’s continuing debasement of fiat paper money. When the bankers’ endgame reaches its inevitable and cataclysmic resolution, the price of gold—and silver—will be far, far higher.
From capitalism’s inception in 1694 to 1971, precious metals gave the bankers’ banknotes real value. In 1971, all paper money became fiat, possessing no intrinsic value except for governments’ fiat declaration that paper banknotes be accepted as real money in exchange for real goods and services.
Ralph Terry Foster, author of Fiat Paper Money: The History and Evolution of Our Currency recently wrote about his book: Why should anyone care about money? Our culture has taught us to perceive it as a means to an end. We earn it, spend it, use it in various ways, and trust the government to print it and call it valuable. How did this come about?
In 301 pages, Fiat Paper Money—The History and Evolution of our currency© clears away the assumptions, illusions, and distractions that cloud our understanding of money. It tells the true stories of how people and governments lived with and used various forms of paper currency—and traces the evolution of the form we use today. It provides a frame of reference to understand the questions about which our ancestors cared so deeply. Changing cultures and attitudes tend to lead us astray from absolute truths. Yet the importance of negotiable exchange cannot be overstated, as we bear witness to historic events poised to have a lasting impact on our money.
Fiat now absolutely commands culture worldwide—yet culture is relative—truth is not
Ralph Terry Foster
Ralph Terry Foster in my YouTube video, Counterfeit Coins: Don’t Be A Victim, see https://goo.gl/ET6dFL , discusses counterfeit coins and how to tell the difference between the counterfeit and the real. With paper money it’s easy. After 1971, all paper money became completely fiat, i.e. without value except as government trading coupons with expiration dates written in invisible ink, printed and passed off by governments as the real thing.
Often, only in retrospect, does humanity see the error of its ways. Sometimes, however, humanity will choose not to see.
Buy gold, buy silver, have faith.
Darryl Robert Schoon
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-- Published: Monday, 10 July 2017 | E-Mail | Print | Source: GoldSeek.com