Today we turn again to the money front in Globalist/Neocon war to maintain—and extend—their hegemony over the world—including Russia, China, and the Global South. Also over you and me. With the power of algorithms nothing and nobody is too minor to escape their all-seeing eye.
As to the ease of displacing the current system, I strongly suggest listening to the April 27 Muckrack podcast (particularly 10:00 to 20:00) of Brent Johnson and Jeff Snider discussing "Does the Fed Have any Idea What It's Doing?" Snider is extremely knowledgeable ("the" expert, according to Johnson) about every nook and cranny of the eurodollar systems, which developed during the 50's and 60's as a market response to Bretton Woods and is now the basis for most international trade.
Until 2008, the resulting network worked well at connecting the vast array of buyers, sellers, brokers, dealers, futures traders and other participants involved in global trade. Since then, its defects have become increasingly apparent, but it is still indispensable for market actors and it functions better than any available alternative. The Fed and other central banks are important players which sometimes affect outcomes, but they are generally overshadowed by the market, and the most important player in the market is the eurodollar system. Shttps://muckrack.com/podcast/hidden-forces/episodes/6757672-does-the-fed-have-any-idea-what-its-doing-/#!ee
Any system devised by the BRICS would have to be accepted by the market. Johnson and Snider agree that, as it is now, if Putin and Xi decide to settle trade in yuan or rubles, the market will still demand payment in eurodollars.
I've only had time to skim read this as the treadmill beckons. However, my first reaction is that for US hegemony to continue, the dollar has to have TOTAL dominance. Partial dominance means defeat for the neocons. As soon as one nation breaks ranks, has the power to dare the US to do its worst, and attracts other nations to do the same thing, US hegemony is done. It will indeed take a while to unwind, and the neocons will do their darndest to stop it, but for all intents and purposes, US hegemony is over. As for HOW the neocons react, they will do so internationally in the same way they have done domestically: by using brute force, by cheating and bullying. Tom is right about Europe being the weakest link. The quality of leadership here makes the Japanese government look dynamic.
I think you're right about that, and that's IMO what the disagreement between Luongo and Johnson is about. Luongo says point blank that there is a powerful faction in the US that realizes that it's better to give a little to avoid losing everything. That's why he, like me, refers to Powell's remarkably candid statement to the Senate that there's room for more than one reserve currency. Of course Powell's right, but only if the US renounces global hegemony. Several reserve currencies inevitably means living more or less within our means as a republic--not as an empire.
Johnson, otoh, seems to uncritically--even naively--accept the standard myth of American military invincibility. The is war is a wake up call in that regard, and regarding the way in which new military realities impact geopolitical and economic realities. Luongo gets that.
Interesting stuff. Just a couple of comments from a layperson:
1) At a high level, I think that Johnson and Luongo are right in that it will take a LONG time for the Dollar to lose its preeminent status as the reserve currency for global trade and investment. One reason is just the time and political will and trust and coordination among nations it would take to establish the mechanisms for a shared currency. In lieu of that, though, just using Gold to back trade among those nations (such as China and Russia have proposed) is not in itself such a huge effort. That is a lot different than trading in a common currency, though. Apart from Gold there is no other medium of exchange that has the trust or economic and financial system backing that the Dollar enjoys now; it would that would take a lot of time to establish a replacement and Johnson may be right in that in the end doing so could get violent.
2) Europe and Japan are in much worse shape than we (the U.S.) are, caught between fighting inflation and trying to maintain the values of their currencies, at the same time. A stronger Dollar will mean slower growth rates globally along with tightened credit, the necessity of higher sovereign bond yields, and/or greater inflation. These are particular problems for Europe and Japan (and Japan may well lose a lot of the "carry trade"). The goods they import (such as fuel for the coming Winter) are going to be much more expensive. If you were them, wouldn't you flee away from your currency to the Dollar and Dollar-denominated assets? China, the only other major power, is too unstable and with a government that changes its financial rules at the drop of a hat.
This is another reason the Dollar is sticking around despite how obnoxious we are acting in using it as a weapon. Capital will go where it is treated best - and that is going to be here for awhile.
This is essentially a financial article, although geopolitics comes up a lot. However, it is not financial jousting and cut and thrust that will decide the speed and extent of the dollar's demise; it is events on the ground. We can see how the Ukraine debacle and the neocon decision-making have vastly accelerated the whole BRICS process, as has the neocons' treatment of Saudi Arabia and China. Who would have thought 5 years ago that the Saudis would be selling oil for Yuan and roubles? Who would have thought that China and Russia would be leading the charge to a new global monetary system? To misquote Lenin, things that took years are now happening in months. And God knows what's around the corner. Jerome "Saviour of the Western World" Powell can do what he wants, as can the finance ministers of the larger nations, but the fate of the dollar isn't in their hands. As I mentioned before, the dollar having partial hegemony is an oxymoron. It has to have total hegemony for the US to be top dog. That ship has sailed.
Steghorn21, I can appreciate what you are saying (and I very much appreciate generally all of your very well thought out comments, with which I overwhelmingly agree). I agree with you that things can change quickly and even in unexpected ways (entropy) and that "facts on the ground" can impact what financial people call "secular trends." But along with this there is inertia and a large measure of self-interest in perpetuating current, predictable financial systems and static measures of change.
So where does that leave us? In large part, we have to look at the players in the current financial system and at what they will do to promote their self interest. That is what I am talking about when I talk about a perpetuation of the Dollar as a reserve currency along with all of the financial systems backing it. Geopolitical events are certainly important to these people but only to the extent they may impact the current financial system.
To your point, a currency is only as strong as its underlying economy. The U.S. economy may degrade to the point where its currency has a lesser value than others.
That is a relative thing, as I have pointed out above. Now do you see why many of the TPTB want to degrade the U.S. economy and end nation states and institute a global CBDC (run out of Europe)?
Hey, Diss. No problems, my friend. I'm feeling my way through these issues, just like everyone else, so I have no doubt I get things wrong. Yes, inertia is very powerful, but I suspect entropy is stronger. We are in the final cycle of civilisational lifespan and every "elite" in the past has tried to maintain the status quo in their favour. They have all failed. I can't see the result being different this time. The only question is how they will try to enforce the inertia. Probably by force and general nastiness dressed up as "saving democracy", as we are seeing now. As for high finance, I stick to my point that the individual financial actors can do all they want and hatch any number of cunning plans, but Big Events will render them useless. Take your example of the baddies trying to get rid of nation states and introduce CBDCs. That's definitely their game, but the neocons actions in pushing Russia into war have strengthened not weakened the sovereign status of Russia, China and the Brics. They have also guaranteed that there will never be a globally instituted CBDC and that any Western CBDC will be based on a dying fiat currency rather than hard metals and commodities. That's just my thoughts, Diss, so fire away if you have anything you'd like to challenge. I'm here to learn!
Steghorn21, excellent point about how the CBDC plans of the Resetters were derailed by Russia and China and the arrogance of the neoCons. I think we both have valid points when it comes to inertia vs. entropy and powerful players vs. unexpected events.
It is this kind of back and forth and the stimulus it provides to thought that makes me appreciate "Meaning In History" so much. It is not only Mark and his excellent mind and analytical abilities and belief of what is important in the larger scope of things; but also commenters such as yourself who give this place the great value that it has. Thanks very much for your perspective, your opinions, and your general attitude of wanting to learn and grow, an attitude which I share. All the best!
The pain is likely just starting in Japan, with its central bank having to "finesse" its Yield Curve Control and the Yen depreciating in value against the Dollar. Lagarde has been doing the balancing act trying to maintain both the Euro and Bonds for a long time now. No telling how much longer she will be able to do it. I will take Luongo's word for it. :)
Dare I mention that a significant decline in our stock markets could conceivably destroy trillions of dollars, which could not easily be replaced? Think deflation, when nobody has money. In 1929 we had little private and public debt. The Titanic was unsinkable. We have Modern Monetary Theory and Bidenomics. What could go wrong?
1. Lower because there will be a recession in 6 months. Neal Bawa is a proponent of this theory (multi family investor / analyst).
2. Same, because inflation will come back. And the Fed is still draining the excess liquidity from Covid, and destroying the Eurodollar Market. The us interest rate with the change from libor to sabor is actually focused on what the us economy needs. The fed can’t increase interest rates much, or it will blow up U.S. government spending.
3. Higher because the bond market will require it with de- dollarization and the end of the petro dollar. And the actual inflation rate is higher (Shadowstats), they requires a higher interest rate.
My guess is on #2.
My guess is the Biden Administration will do everything on its power to push a recession past the 2024 election. Perhaps scrapping Iranian and Venezuela sanctions to decrease the price of oil. On scrapping Russian Oil Sanctions I don’t see it, to much virtue signaling by the West.
A brilliant comment by Luongo is you can’t do economic forecasting without taking the politics into account.
You can't do economic forecasting without taking events into accounts. Politicians can think what they want but they can't change the reality on the ground.
You are so right about money. You are also so right about financialization. And the kicker is... this was intentionally foisted on the U.S. middle class both as a false promise to it and to its detriment.
As to the ease of displacing the current system, I strongly suggest listening to the April 27 Muckrack podcast (particularly 10:00 to 20:00) of Brent Johnson and Jeff Snider discussing "Does the Fed Have any Idea What It's Doing?" Snider is extremely knowledgeable ("the" expert, according to Johnson) about every nook and cranny of the eurodollar systems, which developed during the 50's and 60's as a market response to Bretton Woods and is now the basis for most international trade.
Until 2008, the resulting network worked well at connecting the vast array of buyers, sellers, brokers, dealers, futures traders and other participants involved in global trade. Since then, its defects have become increasingly apparent, but it is still indispensable for market actors and it functions better than any available alternative. The Fed and other central banks are important players which sometimes affect outcomes, but they are generally overshadowed by the market, and the most important player in the market is the eurodollar system. Shttps://muckrack.com/podcast/hidden-forces/episodes/6757672-does-the-fed-have-any-idea-what-its-doing-/#!ee
Any system devised by the BRICS would have to be accepted by the market. Johnson and Snider agree that, as it is now, if Putin and Xi decide to settle trade in yuan or rubles, the market will still demand payment in eurodollars.
I've only had time to skim read this as the treadmill beckons. However, my first reaction is that for US hegemony to continue, the dollar has to have TOTAL dominance. Partial dominance means defeat for the neocons. As soon as one nation breaks ranks, has the power to dare the US to do its worst, and attracts other nations to do the same thing, US hegemony is done. It will indeed take a while to unwind, and the neocons will do their darndest to stop it, but for all intents and purposes, US hegemony is over. As for HOW the neocons react, they will do so internationally in the same way they have done domestically: by using brute force, by cheating and bullying. Tom is right about Europe being the weakest link. The quality of leadership here makes the Japanese government look dynamic.
I think you're right about that, and that's IMO what the disagreement between Luongo and Johnson is about. Luongo says point blank that there is a powerful faction in the US that realizes that it's better to give a little to avoid losing everything. That's why he, like me, refers to Powell's remarkably candid statement to the Senate that there's room for more than one reserve currency. Of course Powell's right, but only if the US renounces global hegemony. Several reserve currencies inevitably means living more or less within our means as a republic--not as an empire.
Johnson, otoh, seems to uncritically--even naively--accept the standard myth of American military invincibility. The is war is a wake up call in that regard, and regarding the way in which new military realities impact geopolitical and economic realities. Luongo gets that.
Interesting stuff. Just a couple of comments from a layperson:
1) At a high level, I think that Johnson and Luongo are right in that it will take a LONG time for the Dollar to lose its preeminent status as the reserve currency for global trade and investment. One reason is just the time and political will and trust and coordination among nations it would take to establish the mechanisms for a shared currency. In lieu of that, though, just using Gold to back trade among those nations (such as China and Russia have proposed) is not in itself such a huge effort. That is a lot different than trading in a common currency, though. Apart from Gold there is no other medium of exchange that has the trust or economic and financial system backing that the Dollar enjoys now; it would that would take a lot of time to establish a replacement and Johnson may be right in that in the end doing so could get violent.
2) Europe and Japan are in much worse shape than we (the U.S.) are, caught between fighting inflation and trying to maintain the values of their currencies, at the same time. A stronger Dollar will mean slower growth rates globally along with tightened credit, the necessity of higher sovereign bond yields, and/or greater inflation. These are particular problems for Europe and Japan (and Japan may well lose a lot of the "carry trade"). The goods they import (such as fuel for the coming Winter) are going to be much more expensive. If you were them, wouldn't you flee away from your currency to the Dollar and Dollar-denominated assets? China, the only other major power, is too unstable and with a government that changes its financial rules at the drop of a hat.
This is another reason the Dollar is sticking around despite how obnoxious we are acting in using it as a weapon. Capital will go where it is treated best - and that is going to be here for awhile.
This is essentially a financial article, although geopolitics comes up a lot. However, it is not financial jousting and cut and thrust that will decide the speed and extent of the dollar's demise; it is events on the ground. We can see how the Ukraine debacle and the neocon decision-making have vastly accelerated the whole BRICS process, as has the neocons' treatment of Saudi Arabia and China. Who would have thought 5 years ago that the Saudis would be selling oil for Yuan and roubles? Who would have thought that China and Russia would be leading the charge to a new global monetary system? To misquote Lenin, things that took years are now happening in months. And God knows what's around the corner. Jerome "Saviour of the Western World" Powell can do what he wants, as can the finance ministers of the larger nations, but the fate of the dollar isn't in their hands. As I mentioned before, the dollar having partial hegemony is an oxymoron. It has to have total hegemony for the US to be top dog. That ship has sailed.
Steghorn21, I can appreciate what you are saying (and I very much appreciate generally all of your very well thought out comments, with which I overwhelmingly agree). I agree with you that things can change quickly and even in unexpected ways (entropy) and that "facts on the ground" can impact what financial people call "secular trends." But along with this there is inertia and a large measure of self-interest in perpetuating current, predictable financial systems and static measures of change.
So where does that leave us? In large part, we have to look at the players in the current financial system and at what they will do to promote their self interest. That is what I am talking about when I talk about a perpetuation of the Dollar as a reserve currency along with all of the financial systems backing it. Geopolitical events are certainly important to these people but only to the extent they may impact the current financial system.
To your point, a currency is only as strong as its underlying economy. The U.S. economy may degrade to the point where its currency has a lesser value than others.
That is a relative thing, as I have pointed out above. Now do you see why many of the TPTB want to degrade the U.S. economy and end nation states and institute a global CBDC (run out of Europe)?
Hey, Diss. No problems, my friend. I'm feeling my way through these issues, just like everyone else, so I have no doubt I get things wrong. Yes, inertia is very powerful, but I suspect entropy is stronger. We are in the final cycle of civilisational lifespan and every "elite" in the past has tried to maintain the status quo in their favour. They have all failed. I can't see the result being different this time. The only question is how they will try to enforce the inertia. Probably by force and general nastiness dressed up as "saving democracy", as we are seeing now. As for high finance, I stick to my point that the individual financial actors can do all they want and hatch any number of cunning plans, but Big Events will render them useless. Take your example of the baddies trying to get rid of nation states and introduce CBDCs. That's definitely their game, but the neocons actions in pushing Russia into war have strengthened not weakened the sovereign status of Russia, China and the Brics. They have also guaranteed that there will never be a globally instituted CBDC and that any Western CBDC will be based on a dying fiat currency rather than hard metals and commodities. That's just my thoughts, Diss, so fire away if you have anything you'd like to challenge. I'm here to learn!
Steghorn21, excellent point about how the CBDC plans of the Resetters were derailed by Russia and China and the arrogance of the neoCons. I think we both have valid points when it comes to inertia vs. entropy and powerful players vs. unexpected events.
It is this kind of back and forth and the stimulus it provides to thought that makes me appreciate "Meaning In History" so much. It is not only Mark and his excellent mind and analytical abilities and belief of what is important in the larger scope of things; but also commenters such as yourself who give this place the great value that it has. Thanks very much for your perspective, your opinions, and your general attitude of wanting to learn and grow, an attitude which I share. All the best!
Makes sense to me. Surprisingly (to me, a neophyte), Luongo stated that Europe is like an order of magnitude worse off than Japan.
Mark, you only have to live in Europe to realise how bad it is here.
The pain is likely just starting in Japan, with its central bank having to "finesse" its Yield Curve Control and the Yen depreciating in value against the Dollar. Lagarde has been doing the balancing act trying to maintain both the Euro and Bonds for a long time now. No telling how much longer she will be able to do it. I will take Luongo's word for it. :)
If Lagarde's the best we have, I suspect not much longer.
Dare I mention that a significant decline in our stock markets could conceivably destroy trillions of dollars, which could not easily be replaced? Think deflation, when nobody has money. In 1929 we had little private and public debt. The Titanic was unsinkable. We have Modern Monetary Theory and Bidenomics. What could go wrong?
Three Scenarios on U.S. interest rates:
1. Lower because there will be a recession in 6 months. Neal Bawa is a proponent of this theory (multi family investor / analyst).
2. Same, because inflation will come back. And the Fed is still draining the excess liquidity from Covid, and destroying the Eurodollar Market. The us interest rate with the change from libor to sabor is actually focused on what the us economy needs. The fed can’t increase interest rates much, or it will blow up U.S. government spending.
3. Higher because the bond market will require it with de- dollarization and the end of the petro dollar. And the actual inflation rate is higher (Shadowstats), they requires a higher interest rate.
My guess is on #2.
My guess is the Biden Administration will do everything on its power to push a recession past the 2024 election. Perhaps scrapping Iranian and Venezuela sanctions to decrease the price of oil. On scrapping Russian Oil Sanctions I don’t see it, to much virtue signaling by the West.
A brilliant comment by Luongo is you can’t do economic forecasting without taking the politics into account.
You can't do economic forecasting without taking events into accounts. Politicians can think what they want but they can't change the reality on the ground.
Agreed. pushing the recession egg past th 2024 election will require much more spending. The impact of that will be increasing inflation IMO.
Take it from an old geezer. Sometimes the economy and markets have a mind of their own.
My magic eightball says ... "2"
...with additional adjustments upward.
You are so right about money. You are also so right about financialization. And the kicker is... this was intentionally foisted on the U.S. middle class both as a false promise to it and to its detriment.