Luongo: Powell Has Won The War For The Dollar (Pt. 1)

Tom Luongo has followed up on his promise of further elucidation of the economic and monetary front of the global war the elites of the collective West are trying to prosecute in order to maintain and extend their rule. The Luongo Theory of Everything, in a short form version, maintains that, in opposition to the elites of the collective West (“Davos”), the Fed—in league with major commercial banks based in New York City—is waging its own war. The purpose of that war is to defend the Dollar, to assert American sovereignty over the Dollar (and therefore over its economy), ultimately leading to a forced transformation of the current US economic and financial structure and a forced reformation of government finances. The point of the transformation is to move the US economy away from its finance based casino style of capital allocation to more productive purposes. The point of the reformation of government finances is similar—to put government finances on a sustainable basis.

To do this Fed Chairman Jay Powell needed to assert the independence of the Dollar, which is to say: Establish American sovereignty over its own currency, wresting that control away from the European legacy financial elites. Luongo’s contention in his latest article is that this part of the war has been won:

The War for the Dollar is Already Over Part I

I won’t pretend to have any in depth understanding of these matters, so what I’ll attempt is a summary of what I believe are Luongo’s main points.

Luongo begins by setting out Fed motives and goals. The Fed—and, may I add, this is very much Trump’s Fed?—saw that Davos was intent on destroying private formation of capital. That’s a fancy way of saying they are seeking—under the pretext of a “climate emergency” hoax—to establish a global centralized economy, with them at the top making the decisions on how capital would be allocated. The Fed, meaning also its backers among the big NY banks, was determined to stop this. Luongo quotes himself—a previous article—to set this out:

"The plan {Davos’} is pretty obvious at this point: hand over the keys to capital formation to the central banks and destroy all risk assessment. Commercial banks aren’t needed. Only socially acceptable projects going forward will get funded."

Again, we revert to Jamie Dimon’s extremely forthright testimony to Congress late last year. At that time Dimon forthrightly rejected a demand that he endorse ESG investing—investing based on “social acceptability.” Dimon’s rejection was a rejection of the very core of the Globalist Project, and he followed that out when he attended—against expectations—Davos 2023. He was drawing a line in the sand.

Luongo continues by pointing out that Powell’s aggressive interest rate hikes have also had the salutary effect of exposing which side major players are on. Those “actively working against” the Fed and the New York banks include:

Joe Biden, Federal Reserve Vice-Chair Lael Brainard, the Democratic Party and most of the Republican Party and Treasury Secretary Janet Yellen.

Now, the key to Powell’s strategy has been to shift the burden of the rate hikes overseas:

**The Fed, through aggressive rate hikes and fundamental changes to its transmission of monetary policy, has placed the biggest burden on US dollar markets overseas, not domestically.**

As we’ll see, the effect of this strategy of rate hikes has been to strengthen the US banking sector by sucking “offshore” dollars back to the US. I’ll quote Luongo on that score:

**the Fed is not raising rates to combat inflation. The Fed is raising rates to drain offshore dollar markets and force the offshore dollar trade to take its cues from the domestic cost of dollars as priced by SOFR, not LIBOR.**

For what follows, it’s useful to cite the Wikipedia explanation of what the US based SOFR is:

Secured Overnight Financing Rate (SOFR) is a secured overnight interest rate. SOFR is a reference rate (that is, a rate used by parties in commercial contracts that is outside their direct control) established as an alternative to LIBOR.

Now, LIBOR was the mechanism by which interests outside America were able to maintain a large degree of control over US monetary policy. That means that the measure of SOFR’s success or lack of success will be a measure of the success of Powell’s strategy. And that’s exactly what Luongo measures.

Luongo first explains that SOFR, which was introduced in 2017, was phased in, but it had a mandate that would take over in January, 2022. So Luongo measures the adoption of SOFR through the rise of SOFR futures contracts over the years leading up to—right now.

In December of 2021 SOFR futures traded around 290,000 contracts per day.

By [February 4, 2022] …, volume surged to 964,000 contracts.

That February, 2022, figure was a very large percentage increase from 2021, in terms of a share in total offshore dollar contracts:

SOFR futures volumes as a share of Eurodollar contracts have reached as high as 37% this month, compared with an average of 10% in the final quarter of 2021.

Now …

[F]lash forward to February of this year [2023]

… a single-day record of 7,558,467 SOFR futures and options traded and record open interest (OI) of 35,698,298 contracts on January 12…

…In the first two weeks of January 2023, the average daily volume (ADV) of SOFR futures and options traded reached 4,674,007 contracts. Month-to-date January 2023 SOFR futures ADV is equivalent to 572% of Eurodollar futures ADV and SOFR options ADV is equivalent to 1,334% of Eurodollar options ADV.

Boom. Mission Accomplished. And here I’ll quote Luongo’s conclusion without edits:

SOFR knocked out the Eurodollar because that was the Fed’s and New York’s ultimate goal; to replace the global rate for dollars with a domestic one where the capital would have to trade here. The globe takes its cues, not from what Europe or Hong Kong wants, but what America needs.

This stabilizes our banking system, taking back power the Fed had ceded under Greenspan, Bernanke and Yellen and reminding everyone else just who runs Bartertown.

Most importantly, it pulls liquidity from around the world back into US markets, providing a foundation for a future where Davos doesn’t control DC. There are further implications of this but I’ll leave that for Part II.

I’m guessing that the further implications will include matters that Luongo has discussed previously. He has maintained that it has been Eurodollar funny money and zero percent interest rates that have allowed Davos and malign players like George Soros to buy off US politicians. Putting a stop to that, or simply curtailing it, would be a VERY BIG DEAL. It would be transformative for US politics. It would give US politicians the freedom to speak out for American interests, rather than supinely following the lead of foreign masters and their US quislings. It could, should, also prove transformative for a reinvigoration of the US economy, shifting needed capital out of rent seeking speculation into productive uses. This would prepare the US for global economic competition and shift our foreign policy away from using our military hammer to deal with every problematic competitive nail.