By Bob Rinear
Why is the Fed tapering when virtually everyone with a functioning brain cell knows the economy is just barely limping by? Why is the Fed saying they’ll need to see poor data to end tapering, when we’ve had gobs of bad data and they’re explaining it away?
This week we saw something quite remarkable happen. It didn’t seem remarkable to “too many” people, but indeed it was. So, just what was this thing that I categorize as being so remarkable?? Despite Janet Yellen telling Congress that the Fed was going to continue its tapering the market gave her a big pass because she mentioned that “if the data were to turn unfavorable” then of course there’d be reason to pause the cutting.
Okay, so what’s the issue with that, right? Well, here’s the issue with that. When the Fed’s did the first taper, did the data really suggest a good strong recovery? Hell no. Mortgage applications were crashing, Housing sales fell like a rock, unimaginable amount of people were falling out of the job market, Obama care was causing all manner of troubles, and on and on. Yet the Fed tapered.
Then we had January. The Jobs data was horrid. The market was falling. Companies were still reporting sketchy at best earnings, and many were warning of slowing growth. Isn’t that bad data??? It is. Yet the Fed’s tapered. Now we have Yellen saying that the Fed’s going to stay the course, the “data” could have all kinds of problems with it like “weather and other factors” and it would take a “considerable change” to make the Fed’s change course.
Danger, Danger! Warning Will Robinson!! Folks, “something” is going on. The question is, what is it?? Why is the Fed tapering when virtually everyone with a functioning brain cell knows the economy is just barely limping by? Why is the Fed saying they’ll need to see poor data to end tapering, when we’ve had gobs of bad data and they’re explaining it away? (the weather?? Really??) Why did they even taper to begin with??
I’ve said many many times to you all that a global “reset” is coming. The IMF World bank knows that there’s too much debt in too many countries for it to ever be repaid. Global currency fluctuations are so extreme and so rapid, it is sometimes impossible to carry on continuous trade. Just recently when Turkey’s currency was imploding, one carpet manufacturer had to call for currency pricing every 20 minutes so he could quote customers. This goes on world wide, every minute of every day Because of huge disparities over the amount of debts outstanding, versus the “value” of each countries GDP, it is evident that to have a continuous world where things stop blowing up every six months, it has to be changed. It will be.
Countries all over the world are tired of the US in particular, as they’ve destroyed the value of the dollar for years, making it virtually worthless. No matter where we look, the evidence suggests “they have to do something”. Well, they’re doing something as we speak. In the background, in the shadows, outside the spotlight they’re working on a “replacement” for the US dollar as the global reserve. But more than that, they’re working out a complete rebalancing of all Countries debts, versus their “worth” in natural resources, Gold and Silver reserves, output per capita, productivity, demographics, etc.
I want you to read these quotes folks. This is from China Daily, the US version of their “paper”…
The World Bank's former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.
"The dominance of the greenback is the root cause of global financial and economic crises," Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. "The solution to this is to replace the national currency with a global currency."
Lin, now a professor at Peking University and a leading adviser to the Chinese government, said expanding the basket of major reserve currencies — the dollar, the euro, the Japanese yen and pound sterling — will not address the consequences of a financial crisis. Internationalizing the Chinese currency is not the answer, either, he said.
"It is perhaps a good time for the befuddled world to start considering building a de-Americanized world," a Xinhua News Agency commentary said on Oct 14. The piece argued that creating a new international reserve currency to replace reliance on the greenback, would prevent government gridlock in Washington from affecting the rest of the world.
In March 2009, China's central bank governor, Zhou Xiaochuan, called for the creation of a new "super-sovereign reserve currency" to replace the dollar. In a paper published on the People's Bank of China's website, Zhou said an international reserve currency "disconnected from individual nations" and "able to remain stable in the long run" would benefit the global financial system more than current reliance on the dollar.
So the first thing to consider is that China is being very vocal about wanting to rid the world of US Supremacy concerning the Global reserve. This is no idle threat, China is scheduled to outpace us economically in just a few short years. Then you have to look at the tremendous amount of Gold that China especially and other Asian nations have been amassing.
Then you have to look at what the IMF and other elite think tanks have been saying about SDR’s, and how they’re promoting their use. SDR’s are “special drawing rights” which sovereigns can use as a form of money. If you connect the dots, a picture has emerged folks. Here’s the view….
In the not so distant future, there’s going to be the announcement of a complete and utter global reset. Debts will be discharged, equated to different values, Countries will be valued and ranked based on real tangible assets, and Countries that are “richest” in real things, not fiat “fake” money will carry more weight. These SDR’s of some fashion will be the new distribution between countries to facilitate trade. The US dollar will no longer be the Global Reserve Currency. The new exotic, revalued SDR will.
Because countries will be “weighted” based on true assets, it is now no wonder why China’s been getting rid of dollars and buying up tangibles. Gold, silver, oil, land, farms, buildings, businesses, etc. have been gobbled up at “any” cost.
As you can imagine, this brings up many many questions about our future. One right off the bat is this… is the reason the Fed started to taper in the first place and the reason the lousy data hasn’t deterred them from continuing the taper, because the wheels are in motion for this SDR to launch in the near future, and there’s no longer any reason to prop up a failed economy?? It could very well be.
Folks, you HAVE to understand this. For the last 20 years, any time the economy has shown that it needed to contract, go through a healthy recession and regroup, the Fed’s have rushed to the rescue with tons of free money printing. The single biggest example of this was of course what they’ve done since the 2008 meltdown. When QE 1 ended and things got weak they came out with QE 2. When that ended and things got weak they rushed the twist. When that was expiring they rushed out with QE3. Every time for two decades, a weak economy was met with ever rising printing. But now….after all this printing and the economy still soggy, they’re REMOVING stimulus.
I never really believed they were going to taper in the first place. Yes they talked about it and said for months that they were probably going to do it, but they said it would be “data dependant”. Well the Data stunk. You’d have to be a CNBC cheerleader to believe it was anything more than poor. Yet they did a taper. Then they did a second one. Now what I’m saying is that if they don’t halt this tapering by this summer, then INDEED something major has changed. Either that, or they’re coming up with a new program that lets them jam money in the system that they haven’t announced yet.
If they know that the US dollar is to be replaced on the world stage by these new “super currencies” as the Chinese man has called them, it would make sense that they stop flooding the world with them. So that’s something we have to consider as we see ever weaker data and if the Fed refuses to halt the tapering. That would indeed signal to me that the wheels are in motion. We’d be in the “end game”.
Next up, what happens to us? What happens to your “value?” If you have 100K in the bank, will it now be 200K or 50K? What happens to prices of goods? What happens to the value of land, homes, and businesses? There’s no question that the implementation of these sovereign SDR’s will mandate a revaluation of all currencies. Will ours be valued higher or lower? I’d suspect lower. What about interest rates? Will they have to be jacked higher to service what ever debt is left on the books after the discharges and revaluations?
What about gold? Will these new SDR’s be backed by gold? Not specifically, but in a way, Yes. In other words, countries with the “most” gold, will have their currencies carry a higher weighting in the composition of the SDR. But not all countries have gold and some have much more than others. This is why the individual country’s currency will have a weighting in the SDR, but those with the most assets will carry the most weight.
But, if currencies are allowed to have some portion of their value based on the assets of the underlying country and one of the assets is gold, it would make sense that gold attains some kind of price “fix” for stability purposes. For two years now ( almost three) Gold has been manipulated lower to facilitate China getting rid of dollars and amassing gold. When they’re satisfied that they have the amount that causes their renminbi to carry the proper weight in the currency basket that makes up the SDR, then gold will no longer be manipulated lower, it will be allowed to rise to a market price, and then a peg will be instituted. Where’s that price?
Finally there’s the question I raised on Wednesday. What’s on the other side? How does this directly affect us the “citizen?” As I pointed out, I am NOT in the zombie apocalypse camp that says a few thousand elites rule us all and we’re slaves working in FEMA camps churning out bon bon’s for them to gobble up at Davos. Sorry, that version doesn’t work for me. But lets face it, to implement a change as sweeping as a global reset you can bet your last dollar that there’s going to be pain, upheavals, dislocations, panics, and some real trouble in the short term. They couldn’t get a lousy healthcare roll out right, am I to expect a global currency reset will go any smoother??
But that aside, I do believe it is coming. There’s too much incidental evidence to ignore. So it is going to be our job to try and figure out the best way to navigate through all this. That might include personal and home defense, something we’re quite skilled at. That might include homeopathic medicines. Diet, physical exercise, budgeting, stocking up on food stuffs. It will certainly include investing ideas. In our “insiders club” we’ll be doing a lot of articles suggesting ideas and tips we think make the most sense to manage the things we think are coming.
I truly want to believe that we come out the other end of this “Reset” with something “better” than we have now. We’re all tired of the Federal Reserve creating booms and busts, we’re all tired of the US spending more than it takes in and telling the world they’re all screwed up. We’re all tired of the in your face Government push for control of our lives. Maybe, just maybe a good old fashioned economic shake up will finally get people to change their focus from Justin Beibers latest escapades to thinking about what the hell happened to our country. That would be a breath of fresh air.