Tag: economics

Explain it Like I’m Five

E.O Wilson had Richard Dawkins to explain his work to the masses. Apparently I have Skarn of the Razorforce to talk to the Bears, as he explains what the Tree of Woe and I have been pointing out about how the decline of the US military and NATO’s failure in Ukraine means the end of the USD-based Clown World economic system.

Can someone please explain to me like I am five as the real cause and effect of the recent TOW on VP? I can’t follow. It doesn’t make sense to a point where I can’t even ask a question.

Currencies have to be backed by something for them to be accepted. For the majority of history it has been precious metals. The US was on a gold standard but defaulted in 1933. WW2 gave the US the chance to become the global currency of choice due to holding the rest of the world’s gold. Thus Bretton woods agreement in 1944. However, the US continued to spend more than it earned, using credit to cover the difference. The rest of the world started asking for gold instead of dollars, coming to a head in 1971, when Nixon closed the gold window (ie no more exchanging foreigner held dollars for gold). To replace this, an agreement with the Saudis was reached to only allow the exchange of OPEC and Saudi oil in US Dollars, restoring the foreign demand for US dollars. The consequence was the US had to prevent oil from being traded in any other currency than USD.

However, between the constant USD printing and debt, making dollars less valuable to hold, the weaponization of the currency exchange and holdings system, and weakness of US is now allowing countries to bypass the USD, it’s all over but the tears, unless the US wins decisively in Ukraine and elsewhere, which doesn’t seem likely.

Thanks so much. it is the last part that I can’t follow, How is the weaponization of the currency allowing countries to bypass the USD?

The weaponization makes USD less valuable because foreign reserves held by countries can now be seized if the US doesn’t like your country’s policies. Such reserves are usually held in country of origin or close, aka Yen in Japan, to facilitate transactions. Or the SWIFT banking system. So stealing Russia’s USD and Euro reserves makes the carrot less attractive due to sovereign risk, at the same time the stick (US military interventions, sanctions, etc) is also weakening.

That’s a useful and reasonable summary that successfully gets the point across in a manner that most people should be able to understand despite the media’s best efforts to keep them in the dark. In support of these conclusions about the consequences of the US failure in Ukraine, it might be useful to read this recent observation by the Ayatollah Khamenei of Iran.

The US is no longer the power it once was, and has failed to rally the Arab world against Iran and curtail its nuclear program, Iranian Supreme Leader Ayatollah Ali Khamenei said in a speech to senior officials on Tuesday.

“Facts show that America was weaker under Obama’s administration than Bush’s administration. The US was weaker under Trump’s administration than the way it was under Obama’s administration. The US is weaker under [Joe Biden’s] administration than it was under Trump’s administration,” Khamenei proclaimed, according to Iran’s Tasnim news agency.

Khamenei noted that the US has failed to rally its Middle Eastern allies against Iran, declaring that “what has happened is the opposite.”

The Ayatollah went on to note the rise of several “anti-American” governments in Latin America, the declining importance of the dollar in global trade, the political chaos in Israel, and the diplomatic consequences of the EU “taking the brunt of the war” in Ukraine on Washington’s behalf as examples of the US’ waning influence.

By the way, the original Bear should be respected for doing the smart thing, and asking for a detailed explanation to help him understand the matter at hand rather than nodding, smiling, and pretending that he understood when he didn’t. Never forget that the difference between understanding a concept and having heard of its existence is greater than the difference between knowing about it and not knowing about it.

UPDATE: Nassim Nicholas Taleb isn’t too worried about the dollar’s status as the reserve currency… yet.

You will only start worrying about the dollar status as a reserve currency when you see long lines outside the Brazilian, Russian, Iranian, and Chinese consulates full of young professionals seeking immigration visas.

Of course, by then it will be too late. And there are already signs of smaller corporations establishing themselves in Russia and China, in particular, in preparation for the Great Bifurcation.

UPDATE: Start worrying.

About 300 German residents are ready to move to the Nizhny Novgorod region. By the end of 2023, this number of applicants can reach 1,000 people, said Olga Guseva, director of the department of external relations of the region. According to her, such activity is due to the fact that Germans see great potential in cooperation with the Nizhny Novgorod region in the automotive industry, construction, infrastructure development .Most of the people who want to relocate are specialists in the field of metalworking: welders, machine operators, technologists, as well as shipbuilding and the automotive industry.

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Contemplating De-dollarization

The Tree of Woe takes a victory lap concerning his prediction about the end of the US dollar hegemony:

In his novel Goldfinger, Ian Fleming famously said “Once is happenstance. Twice is coincidence. Three times is enemy action.” We’re well past three events. This is not a “trend”. This is a globally coordinated action against the petrodollar and there’s no mistaking what it means.

It means the Petrodollar System that has served as the bedrock of world finance since the 1970s is over.

It means I’ve been proven right even faster than I expected.

What is altogether depressing, yet not at all surprising, is how the press coverage of these shocking events has (a) utterly misunderstood their causality and (b) grossly underestimated their gravity. I’m going to use article over at VisualCapitalist.com as my punching bag because it so perfectly captures everything that’s wrong with our mainstream elite… Being either ignorant of or unwilling to acknowledge the petro-military basis of our financial order, VisualCapitalist.com then proceeds to misdiagnose the reason for the dollar’s precipitous decline, writing:

Concerned about America’s dominance over the global financial system and the country’s ability to ‘weaponize’ it, other nations have been testing alternatives to reduce the dollar’s hegemony…

They have entirely confused cause and effect. Other nations have been testing alternatives to reduce the dollar’s hegemony since, well, since the dollar has been hegemonic. All prior “tests” have resulted in the destructing of whichever regime was performing the test. Ask Muammar Gaddafi how his gold dinar worked out.

As I documented in Running on Empty (now available as a book!), since 1971 America’s dominance over the global financial system has been based on America’s military dominance over the Middle East. Now that America’s military dominance has declined, athe country’s dominance over global finance has declined, too. Therefore, the honest way to report the news would be to say:

Unconcerned about America’s purported military dominance and tired of the country’s increasingly punitive attempts to ‘weaponize’ the dollar to make up for it, nations have been testing alternatives to reduce the dollar’s hegemony…

Because that is what is actually happening. Of course no one will say that.

And what will be the consequences of this global event? Our friends at VisualCapitalist.com assert:

Despite these movements, few expect to see the end of the dollar’s global sovereign status anytime soon.

And they’re right. Very few experts expect to see the end of the dollar’s global sovereign status anytime soon. That’s because the majority of experts are too stupid to realize it’s already ended.

He’s absolutely right. It’s already over, and every single day, we’re seeing more countries taking steps to free themselves of the economic chains imposed by the petrodollar. The key, as the Tree of Woe repeatedly points out, is that the decline of the US military combined with the rise of the Chinese and Russian militaries, means that the nations of the world are free agents for the first time in seven decades.

As I pointed out in a recent Darkstream, the reason all the Clown World intellectuals declared the absolute necessity of winning the war in Ukraine, much to the confusion of the people of the USA and Europe who don’t understand why Ukraine matters when Afghanistan didn’t, is because Ukraine clearly shows the limits of US military power. And the whole system rested on the idea that any nation that attempted to evade the dollar tax would be punished with military invasion and regime change.

But the global superpower is no more. Everyone can see that the Empire has no army. Which means the nations are now free to buy and sell as they choose, in whatever medium of exchange they choose, rather than having to pay a tax to the US bankers on every single transaction. And the rapidity with which each of the steps taken by countries from Argentina to India, and from Brazil to Malaysia, indicates the eagerness with which the peoples of the world seek to free themselves from their dollar chains.

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Immigrants Don’t Grow Economies

Despite importing millions of Arabs and Africans since 2015, the German mortgage market is collapsing, soon to be followed by the real estate market.

According to the latest report issued by the consultancy, the Eurozone’s largest economy saw mortgage lending fall by a record 54% year over year. The report noted, “The decline in March will be even worse due to a base effect, given the record new business of €32.3 billion in 2022.”

The consultancy, based out of Dusseldorf, pointed out that the total new mortgage business figure of €12 billion ($13 billion) in February 2023 was the lowest reading since 2010, adding, “And this does not even take into account house price inflation.”

Germans have been under harsh economic pressures, as a worsening cost of living crisis has merged with rapidly rising interest rates to put the dream of home ownership out of reach for many Germans.

A recent poll of economists by the Reuters news agency found that experts are predicting a much steeper fall in home prices than previously expected as higher interest rates weigh heavily on demand.

It is projected that the average price of a home in Germany will fall 5.8% in 2023, and 2.5% in 2024.

A report by the German Property Federation noted in February that the shortage of housing in Germany was the worst seen in two decades. In addition, new residential construction is forecast to decline even further in the coming year.

The idea that immigrants are not only satisfactory substitutes for the native population, but are actually necessary for the growth of an economy is one of the most poisonous and destructive lies ever told. What we’re seeing in Germany is disproving generations of economic theory that was never based on anything but pure globalist propaganda.

Qualitative matters cannot always be solved by quantitative means.

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Substack Submerging

As I mentioned on a previous Darkstream, the end of the cult of free and the decline of the equity markets is not looking good for companies dependent upon startup financing to leverage their growth.

Substack is desperate, huh? That’s what I understand from their fundraising email, anyway. They’re now hitting up retail investors for millions of dollars after they failed to raise last year.

After certain recent historical events, I have become skeptical of the term “financial inclusion,” a set of buzzwords for making financial services more available to people who are not stratospherically rich. Maybe my cynicism is because Facebook tried to launch a stablecoin for the “unbanked” that you nonetheless needed (at least, according to the now-scrapped plan) a credit card to use. Maybe it is because Robinhood made a big fuss about how many brand-new retail investors it brought onto its gambling platform. Or maybe it’s the proliferation of buy now, pay later services from the likes of Klarna, Afterpay, and Affirm (and now Apple.)

As we all know from reading our 10-Ks, past performance is not indicative of future results

Anyway, Facebook’s stablecoin play failed and was sold for parts. Robinhood’s share price has fallen by a third in the last year. Oh, and Gen Z’s credit card debt is growing fast and furious. So yeah, when someone talks about financial inclusion, I assume the game is afoot…

You see, the last time Substack raised, the Fed hadn’t started its rate hikes yet. Startups — like Substack — are particularly vulnerable to being squeezed when the interest rates go up. It gets harder to raise money because conservative investors can simply invest in safer assets.

Where’s the money, Lebowski?

And during that 10-year period I cited with those outsize returns, interest rates were low and valuations of private companies ballooned. Now, with interest rates coming back up, those balloons are popping. Some VCs are slicing valuations by as much as 95 percent. There may be even more write-downs coming. And following the collapse of Silicon Valley Bank, there’s a considerable amount of uncertainty in the VC world.

Substack certainly knows this. It tried to raise last year, seeking $75 million to $100 million from investors. But it had revenue of only $9 million in 2021, and a sky-high valuation on relatively little revenue was not the vibe in 2022. The company gave up. On its Wefunder page, the company says that the pre-money valuation on Substack is now $585 million, a 10 percent decrease from 2021.

Any time you see a new platform explode out of nowhere, you can be assured of two things. First, there is hundreds of millions of VC dollars behind it. Second, they are paying the creators a LOT of money to join the platform. Third, the money being made by the creators on a monthly basis is NOT all coming from the subscribers and supporters.

Remember, Clown World is ALWAYS fake and gay. It always attempts to substitute the inorganic for the organic. You just have to know where to look in order to see through the illusions.

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The End of the Cult of Free

The Cult of Free was always fake, gay, and propped up by Clown World. And now it is beginning to come to an end:

Billionaire Elon Musk is further cutting the amount of features that Twitter users can access on the platform for free. From April 15, users who do not pay for Twitter Blue – which costs £11/month for Android and iOS – will no longer be able to vote in polls, Musk has said.

They also will no longer have their tweets appear in the ‘For You’ tab, which shows popular tweets that are boosted by an algorithm.

Musk said the changes will stop ‘AI bot swarms taking over’ the site, although he stopped short of explaining exactly how.

The CEO – who purchased the social media network in October – said that paid social media will be ‘the only social media that matters’. ‘[This] is the only realistic way to address advanced AI bot swarms taking over. It is otherwise a hopeless losing battle.

He’s absolutely correct. AI bots will utterly destroy every free platform in short order. This is just the beginning, and it won’t be long before Twitter blocks all free posting access.

It’s not even remotely surprising that the major platforms are beginning to go the way of Unauthorized, Arktoons, and Gab. I understood – and I explained to Andrew Torba – that the Silicon Valley Method of propping up a platform with investment capital, giving away the product for free to amass eyeballs, then trying to go public or get acquired before the investment capital ran out was a stupid and short-sighted strategy.

And, of course, the method only ever worked for those who were willing to sell their souls.

So the end of the Cult of Free was always inevitable; what is more interesting about Musk’s announcement is that it signifies that the seemingly-endless resources of Clown World are beginning to run out.

This is precisely why it is so vital to subscribe to projects such as Arktoons, UATV, and the Library. The more who do, the more that we can collectively accomplish, even on a shoestring.

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NOW They Protest?

Germany goes on strike over insufficient wages.

Airports, bus stops, and train stations were at a standstill across Germany on Monday, as more than 400,000 public transportation employees took part in a 24-hour strike. The workers are demanding pay rises to compensate for inflation, which has soared in Germany since last year.

The strike began at midnight and is set to end at midnight on Tuesday. Eight major German airports were affected, with the German Airports Association estimating that around 380,000 travelers were left stranded. Munich Airport shut down entirely from Sunday onwards, with all flights canceled and its terminal deserted.

Deutsche Bahn said on Monday that all long-distance services were canceled, while regional services were only restarting in some areas by Monday evening. Trams, buses, and metro lines were also affected throughout the country.

And yet, the Germans persist in welcoming refugees, re-electing politicians who enforce pro-US policies that murder their economy, bailing out their banks, mass-vaccinating themselves, transferring $62 billion and counting to Israel, and generally supporting Clown World. Of course their economy is in shambles! What other outcome could they possibly have expected?

This industrial action demonstrates a complete inability on the part of the German people to grasp the connection between cause and effect.

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If the Dollar is Their Superpower

Then their global hegemony is rapidly coming to an end:

The dollar is America’s superpower. It gives Washington unrivaled economic and political muscle. The United States can slap sanctions on countries unilaterally, freezing them out of large parts of the world economy. And when Washington spends freely, it can be certain that its debt, usually in the form of T-bills, will be bought up by the rest of the world.

Sanctions imposed on Russia for its invasion of Ukraine combined with Washington’s increasingly confrontational approach to China have created a perfect storm in which both Russia and China are accelerating efforts to diversify away from the dollar. Their central banks are keeping less of their reserves in dollars, and most trade between them is being settled in the yuan. They are also, as Putin noted, making efforts to get other countries to follow suit…

America’s politicians have gotten used to spending seemingly without any concerns about deficits — public debt has risen almost fivefold from roughly $6.5 trillion 20 years ago to $31.5 trillion today. The Fed has solved a series of financial crashes by massively expanding its balance sheet twelvefold, from around $730 billion 20 years ago to about $8.7 trillion today. All of this only works because of the dollar’s unique status. If that wanes, America will face a reckoning like none before.

The decline of the US financial superweapon will be exacerbated by the emergence of China as a financial safe harbor, at least for those who have not spent the last decade attacking it or attempting to subvert it.

The unfolding banking crisis in the US and Europe could highlight China as a “relative safe haven,” economists at Citi said in a note seen by CNBC. The Chinese economy could see accelerated expansion this year, giving the country a “hedge” for growth while economies in the US and Europe face heightened risk of financial disruption, according to the note.

It’s going to be interesting. That’s the only thing we can know for certain. And both one’s investment and consumption should be directed toward hard assets that will hold their value regardless of price levels.

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The Mistakes of Empire

I’ve repeatedly observed that both Russia and China have learned from the mistakes of previous regimes, as well as from those of the imperial USA. Here is evidence that Russia’s current leadership is actively aware of the mistakes made in their Soviet past:

Russia’s economy will not be reduced to the defense industry alone, despite the conflict with Ukraine and Western sanctions, former President Dmitry Medvedev told journalists on Sunday. Imbalances in the economy will not be allowed to develop, he said, adding that the country is unlikely to suffer the fate of the Soviet Union.

“There is currently no threat of economic militarization in a way, in which it existed [in the USSR] in the 1970s and 1980s,” Medvedev said. The former president argued that the Soviet Union gave too much priority to the defense industry. To avoid an imbalance, “priorities just need to be set correctly and major macroeconomic indicators monitored,” he added.

Russia does actually need to boost its defense industry, he said, adding that it is necessary to “lay the groundwork for the future” even after the Ukraine conflict ends. However, taking these steps will not affect other economic sectors, he believes.

The USSR lacked a market system and also the strong consumer goods sector that modern Russia has, Medvedev said, adding that had the West imposed sanctions on the USSR at that time, “we would have had a hard time.”

Now, Russia’s “market does not feel any colossal downturns even despite the sanctions,” the former president said. He lauded Russia’s agriculture sector, saying not only does it allow Russia to meet its own food supply needs, but also enables it to “feed others.”

And they’re clearly also acutely aware of the vulnerabilities created by blindly adopting the false “free trade” doctrine of Western liberalism: China and Russia top list of states with largest trade surplus – study

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Preemptive Bank Bailout

Now that the big banks have been given a no-ceiling deposit guarantee, the smaller banks need to be given the same guarantee before all their big deposits are transferred to the guaranteed banks. And so the contagion spreads.

Another 50 regional banks in the US could fail in the US banking crisis if authorities do not take immediate action to resolve structural issues in the sector, according to former vice-president at Lehman Brothers Lawrence McDonald, in an interview with RIA Novosti.

He said, “Policy-makers will most likely be forced to introduce a much larger withholding to maintain outflows of deposits from bank accounts that significantly exceed $250,000.”

The global financial crisis of 2008 began with the collapse of Lehman Brothers, which seized up funding markets, and prevented global lenders from getting ahold of US dollars.

McDonald says the problems today are very similar to the problems which preceded the collapse of Lehman and triggered the 2008 financial crisis.

He added that now it is expected US regional banks will lose “hundreds of billions of dollars” in deposits, as those funds are moved out to larger lenders believed to be “too big to fail,” as well as more secure US Treasuries.

He noted US authorities will have to massively increase the guarantees to US deposits over the present guarantees.

They can methodically merge all the banks that fail with the survivors until there is only one massive bank. But what will they do when that one final bank finally, and inevitably, fails. Because the problem is systemic, no credit system can survive indefinitely as the math guarantees its eventual failure.

Plot Twist

Yeah, but what if they’re MOON rocks? Then the fake nickel is even more valuable than the real stuff would have been. Problem solved. Contact me for any future economic confidence-related problems.

Anyhow, it’s a cool story. Now do all those “gold reserves” being held by the Federal Reserve.

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