Last year, when alternative economic analysts were warning that the commodities crush and oil crash just after the taper of QE3 were blaring signals for a downshift in all other financial indicators, the general response in the mainstream was that we were overreacting and paranoid and that the commodities jolt was temporary. Perhaps the fact needs repeating that it’s not paranoia if they are really out to get you.
Only a short time later, it is truly amazing how the rhetoric from the mainstream economic yes-men is changing. The blind analysts who were cheerleading for the nonexistent global recovery are now being carefully relegated to the janitor’s closet over at The New York Times, where Paul Krugman’s office should be. Media outlets are begrudgingly admitting to global instabilities like, for instance, a U.S. interest rate hike leading to a return to recession. (Special note to the mainstream media: Take away the fruitless manipulation of indicators through Fed stimulus, and we never left the recession.) They also are now forced to acknowledge that China’s market crash and yuan devaluation have far-reaching implications for global crisis, whereas a year ago the claim was that China’s problems would stay in China. Even China’s own media are now warning of the chain of fiscally interdependent economies and what the nation’s downturn means for everyone.
The MSM are finally entertaining the obvious notion that the vast financial problems of the EU have little to do with the crisis in Greece and more to do with crushing debt obligations and employment problems in primary nations like France and Italy.
And suddenly, pundits are once again concerned with Japan’s epidemic of mini-recessions and the truth of fiscal contraction that is not just a way of life, but an exponential dynamic that is getting worse fast, rather than staying static. This concern is, of course, always followed with suggestions that the light can be seen at the end of the tunnel and that growth will inevitably return. The mainstream media may be discussing points of reality, but that does not stop them at times from mixing in fairy tales.
This alteration in rhetoric from the mainstream may not necessarily be due to an awakening in the media. Rather, it may be due to the new narratives being put forth by core banking elite institutions like the International Monetary Fund and the Bank of International Settlements, institutions that have established a mission to appear competent in the wake of an economic crisis they KNOW is about to be triggered. The IMF is consistently making statements regarding potential disaster in global markets due to central banking stimulus measures (which it originally championed), as well as potential rate hikes, sending mixed messages to devout mainstream followers. The IMF’s latest overviews of global markets have been far gloomier than mainstream media outlets until recently. Suddenly, it would seem, the media has been given direction to parrot internationalist talking points.
The BIS warns that the world is currently defenseless against the next market crisis. I would point out that the BIS has a record of predicting economic crashes, including back in 2007 just before the derivatives and credit crisis began. This ability to foresee fiscal disasters is far more likely due to the fact that the BIS is the dominant force in global central banking and is the cause of crisis, rather than merely a predictor of crisis. That is to say, it is easy to predict disasters you yourself are about to initiate.
It is no mistake that the warnings from the BIS and the IMF tend to come too little too late, or that they are beginning to compose cautionary press releases today that sound much like what alternative analysts were saying a few years ago. The goal of these globalist organizations is not to help people prepare, only to set themselves up as Johnny-come-lately prognosticators so that after a collapse they can claim they warned us all, which can then be used as a rationalization for why they are the best people to administrate the economies of the planet as a whole.
So now that the mainstream is willing to report on clear economic dangers, what happens next?
The change in the MSM narrative is a bad sign. The initial media coverage of the derivatives implosion in 2008 did not become negative until we were well within the shadow of the avalanche. If the same holds true today, then a market event is imminent. Here are some of the issues you may hear more about as the year goes forward.
China ‘Contagion’
Forget about Greek contagion, we will be hearing far more about Chinese contagion over the next several months. The globalist run Carnegie Endowment for International Peace is already fielding the concept in their magazine 'Foreign Policy'. With the devaluation of the yuan, mainstream analysts are frantic over the possibility of currency wars, a concept they rarely ever entertained in the past. Yuan devaluation is not, though, necessarily a negative for China itself. In fact, the IMF in recent statements argues that China’s economy is entering a “new normal” of slower but more “stable” growth. The IMF also has announced that the recent shock of the falling yuan to global markets actually makes the currency MORE viable for inclusion in the Special Drawing Rights global currency basket, a decision that is supposed to be finalized by November (though a year long extension has been recommended by the IMF before approval).
Expect that economic news will be focused nonstop on China for the rest of the year, perhaps leading to the perpetuation of the false East/West paradigm and the idea that Americans should blame China for the overall financial crisis rather than the global bankers who engineered the mess. In the meantime, top globalists will continue to remain "neutral", presenting themselves as peacemakers and problem solvers arguing that the crash is "no one's fault", that over-complexity is the danger, and that interconnected economies must be simplified down to a single global currency and single global authority.
U.S. Economy Feeling Effects
The Federal Reserve push for a rate hike will likely be determined before 2015 is over. Talk of a September increase in interest rates may be a ploy, and a last-minute decision to delay could be on the table. This tactic of edge-of-the-seat meetings and surprise delays was used during the QE taper scenario, which threw a lot of analysts off their guard and caused many to believe that a taper would never happen. Well, it did happen, just as a rate hike will happen, only slightly later than mainstream analysts expect.
If a delay occurs, it will be short-lived, triggering a dead cat bounce in stocks, with rates increasing by December as dismal retail sales become undeniable leading into the Christmas season. It is important to remember that the Fed's job is to DERAIL the U.S. economy, NOT protect it.
In the meantime, the IMF’s SDR conference continues, with the inclusion of the yuan now widely considered a threat to the dollar’s world-reserve status. The mainstream media are now preparing the American people (or at least those who are paying any attention) for the coming loss of world-reserve status. The propaganda aims to paint the dollar’s reserve position as a bad thing. The MSM argue that loss of reserve status could actually help the U.S. economy get back on track and that a global harmonization of sovereign currencies will be a boost to our fiscal outlook. This is clearly an attempt to inoculate the public against any concern over the eventual crash of dollar value.
Oil Price Panic
Oil prices will continue to deflate, and the after-effects will be difficult to gauge. With John Kerry publicly warning that the failure of an Iran deal (including the lucrative oil export deals that would be included) could lead to the loss of the dollar’s world-reserve status, I am not very optimistic about the future prospects of energy markets.
Kerry claims that a failed Iran agreement would put the U.S. at odds with allies who brokered the deal, but this is not the whole story. What is really taking place is an attempt by Kerry to distract the public away from the real reasons for the future fall of the dollar, including the rise of the SDR and the likelihood that Saudi Arabia will soon decouple from the dollar as the solitary purchasing mechanism for their oil (Saudi Arabia is surprisingly one of the main supporters of an Iran deal). It is perhaps possible that a collapse of the Iran agreement could be used as an excuse for a loss of dollar reserve status that was going to happen anyway.
Events Moving Faster
Economic news is moving extremely fast this year, and it will only become more frenetic as we close in on 2016. The general consensus among alternative economic investigators seems to be that 2015 will be the year for trigger events and dead fantasies. In my six part series entitled 'One Last Look At The Real Economy Before It Implodes' I essentially agree with this timetable. If 2014 was the new 2007 with all its immediate warning signs, then 2015 is the new 2008 with all the chaos and broken paradigms.
Alt-Market is currently running our annual Summer Donation Drive!
If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.
You can contact Brandon Smith at:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
written by Gdog , August 19, 2015
Spot on about the BIS stepping up at the end to blast each country's central banks. I noticed that same pattern the last few economic crisis.
Very similar to MSM writing a truthful article once in a while and hurrying on a back page. Then, when people are "researching" (googling) they will always find that the MSM DID cover the story. See? No vast conspiracy! MSM doesn't cover up the truth!
The BIS will throw the federal reserve right along with Goldman and the rest under the bus at the end. Like what Hitler did with his brownshirts after he was done with them. And then they will attempt to step forward to "save" us from the evil bankers.
written by new guy , August 19, 2015
while our political class at home has the population fighting amongst themselves (immigration crisis, race wars, class wars), the global bankers (BIS, IMF, FED, ECB) are engaged in a currency war.
each groups action result in the same outcome, keep the people occupied with distractions, while the real theft occurs.
the theft of your life savings by hidden inflation of good and services, and the hidden devaluation of currency, to "keep the books straight"
we are all just cattle, to be milked, and eventually slaughtered, so, at this point:
"what difference does it make"
pray for better outcomes, but expect the worse, this is human nature at work, exposed for all to see, as long as you are awake.
written by ThomasR , August 19, 2015
Good article
One thing that is in the back of my mind is wondering if this all will be a case of TPTB utilizing a crisis to switch to a completely electronic system where hard currency is eliminated and a more common system implemented world over, on the one hand that would make perfect sense, eliminate all the shadow systems etc, increase possibility of tax collection etc, improve oversight.
It will be interesting to watch for sure,
Dont have any money anyway so not sure exactly how a crash will play out in my world but have plenty of popcorn, carrot sticks and iced coffee ready to go!
written by maleger , August 19, 2015
Kerry claiming that no Iran deal would lead to the loss of reserve currency status -- something as you mentioned they know it coming anyway -- also allows the administration to scapegoat opponents of the deal when the economy crashes.
written by Broos , August 19, 2015
1967. When a dollar was still Worth A BUCK!
written by Observer , August 19, 2015
Brandon
Good analysis, again, though there is one point you mention that I think you have wrong. You paint the loss of reserve status and devaluation of the USD as a bad thing, when really it is needed to turn things around.
The fact that imports are so cheap has seen the US develop an unsustainable balance of payments and also decimated the manufacturing base across the country and lowered GDP. This situation will never change while the dollar is strong, which will never change while the USD is the world’s reserve currency, (have a look into the Triffin paradox).
Removing reserve status will …..
-Increase the competitiveness of US imports on the global stage
-Reduce imports – therefore improving the BoP
-Revitalise the manufacturing base - creating employment
-Increase GDP - bringing the Debt to GDP ratio down to a manageable level.
In the short term there will be pain during the period between imports being too expensive and US made products becoming available again. But this pain is better than the pain the alternatives bring with them.
The country is sick and spitting out the medicine because it tastes bad is not going to help.
written by Brandon Smith , August 19, 2015
@Observer
No, I actually mentioned the propaganda argument that loss of reserve status is a "good thing" in the above article. The same argument has been fielded by the New York Times, among others.
In the short term, trillions in fiat dollars will flood in from overseas causing hyperinflation. All imported consumer goods (which is most consumer goods) will skyrocket in price. The U.S. economy will be devastated.
In the long term, the U.S. economy will NOT recover to any semblance of former glory, and there is absolutely no evidence to suggest that it will. In fact, there is far more evidence in terms of existing debt and derivatives instruments, not to mention the average American's dependency on government handouts, that the U.S. will revert to third world status for a long time to come.
Manufacturing will not come back to the U.S. when there is no reliable credit mechanisms to finance such infrastructure. Therefore, there will be NO increase in American imports because there will be no increase in factories or manufacturing. The mainstream hucksters tried to argue that manufacturing would come back after the 2008 credit collapse and the considerable devaluation of the dollar. That never happened. In fact, what little US manufacturing there is only continued to decline as the dollar index dropped.
Foreign imports will be reduced, but only because the loss of reserve status will cause prices to increase exponentially.
GDP will not increase but decrease exactly because a large percentage of our GDP is produced through GOVERNMENT SPENDING. With a falling dollar and less desirable treasury bonds, the government will have to cut spending, or hyperinflate like Weimar Germany. Either way, GDP will collapse.
Losing reserve status is not a solution to any of our problems. Losing reserve status will only make our existing economic frailty more obvious than ever. Without localization BEFORE dollar collapse, there will be no positive short or long term outcome. Do not fall into the MSM trap of trying to sell the idea of lost reserve status as if it is a long term economic booster. It simply isn't. It is only a primary part of the total and final collapse of the U.S.
written by Observer , August 20, 2015
@ Brandon
The outcomes you suggest would occur if the USD was allowed to Free-fall and become worthless, but that is an unlikely scenario. No one benefits from completely destroying the US economy not even the Elites. A staged gradual reduction in value is what I would expect to see and that would negate the majority of the calamitous outcomes you mention.
Do you advocate that the US keeps the reserve currency status forever? Because that is unlikely, history has seen many reserve currencies but none of them have remained for an extended period of time.
Also how do you propose the US should address the implications of the Triffin Paradox?
I really think your analysis needs to focus on how things will look when the SDR is introduced as a global reserve currency, because as much as you or I disagree with that outcome I can't see it being stopped.
written by Brandon Smith , August 20, 2015
@Observer
No, they are guaranteed outcomes if the USD loses reserve status. There is simply no way around such consequences. I do not believe the dollar will become "worthless" (though it is a possibility), but extreme devaluation is inevitable and all the disasters that come with that scenario.
And yes, the Elites ABSOLUTELY benefit from a crash of the dollar and the U.S. economy. I highly suggest you read the article 'Get Ready For A World Currency By 2018' published by the Rothschild owned The Economist back in 1988. In that article they state in no uncertain terms that the SDR will replace the dollar as world reserve and that the U.S. will be marginalized in the process. They WANT the dollar and the U.S. to be diminished and our living standards crushed to make way for global "harmonization". They will never allow the U.S. to return to some former industrial nirvana (as long as they are alive and in power). Not to mention, the resulting chaos can be used as a rationale for the final erasure of constitutional protections. No one except the media propagandists are claiming that a loss of reserve status will be an advantage to America because it simply won't be.
The U.S., whether for good or ill, depends solely on world reserve status in order to maintain our economic growth. Without it, the resulting collapse would send us into the third world for a very long time, and this change would be fast moving and exponential. There is nothing to stop it from being as such and the elites have no motivation to spare Americans the pain. I think many people are desperate to believe that a crisis is not coming, and that the "best case" will occur over the worst case. I see no evidence for the existence of a best case scenario.
I do not advocate for ANY fiat reserve currency, ever, including a global SDR system. I only advocate for localization and tangible commodities for backing widespread currency. Just because I am warning of the inevitable dangers of the loss of reserve status does not mean I care about the dollar itself. I only care that the resulting crash will impoverish and destroy the general populace. And, I care that the elites already have a global currency system ready as a false solution to the problem they themselves created.
written by Observer , August 20, 2015
@ Brandon
I am interested in your definition of "extreme devaluation". I think the USD will end up being worth about 50% of what it is now, and will probably go to 30% of its current value prior to settling at that 50% level.
The Elites probably do want to see US Society go through a degree of pain, but I would argue that they want this despite the economic pain it will cause them. The US is too bigger part of the global economy to bring down in isolation, and sending the entire planet back to the stone age is not what they want. They want control of a functioning world. Remember if everyone reverts to subsistence living that ruins their dreams and aspirations too.
I think that the reserve status has become as much of a hindrance to growth at this point, there is very little that the US can produce at a competitive price because of this. But the US is stuck between a rock and a hard place. If reserve status is maintained then increasing unemployment, growing trade deficits and deficit spending are going to get exponentially worse. Devaluation at a slow controlled pace is the dream, but if it becomes a run away devaluation then all hell will break loose.
Prepare for the worst and hope for the best.
written by Brandon Smith , August 20, 2015
@Observer
They may very well want to send the world back to the stone age. In fact, that is the premise of the movie 'Things To Come' written by New World Order champion HG Wells. In the film, the world goes through unprecedented collapse. Years later, as humanity is scratching to survive, the elites return from wherever they were hiding to "save" civilization with technology they have been developing the whole time. Of course, they demand all people submit to world government before they "grace" us with a return to glory.
I don't pretend to read the minds of the elites, I only know what they tell us they want.
Any sizable devaluation of the dollar would destroy this nation considering there is a lack of any safety net to offset the damage. 50% would easily do it, but I think we're looking at immediate price increases of 200% to 400%. Who knows how bad it will become over time. There are really no limits, and that is the problem.
written by Bright Torch of Liberty , August 20, 2015
Spot on Brandon, including your response to Observer, whose ridiculous assertion that loss of USD reserve status is "needed to turn things around" makes me wonder if he's simply trolling.
It's an argument so weak and obviously wrong it's akin to saying "I have a bad headache [ailing US economy] so if I put a bullet in my brain [end of USD reserve status] it will end the pain and I'll feel better."
written by Guest , August 20, 2015
I am in no way an economist, and what bare grasp I have has been learned reading Brandon's excellent writings, and some others I have found that smack of "reality".
Even I can see that our economy is so over stretched with debt and fragile in this elitist run world that a crash of any proportion would start mass chaos for the millions getting their funds from the gov't teat! All hell will break loose when people begin to realize that they can no longer buy food.
Brandon I especially agree with your comment pointing out that "Observer" isn't taking into account the hyperinflation of 200-400% or higher.
Crash is NOT the word to use for this. More like devastation!
written by Whisper , August 21, 2015
Brandon,
What do you think about gold and silver's value if hyperinflation hits here for loss of the dollar as the world reserve?
written by George Job , August 21, 2015
Brandon, I know you know this, regional fiat currencies will remain only the exchange rate of these currencies are going to change and yes, a devaluation is coming for us, perhaps worst for the dollar, although some of it has already taken place.
It is this new exchange rate that will bewilder, as all at once rates are quoted as so many Right to Dollar or Right to Yuan, Right to Pound, etc. No more King Dollar.
This is when US assets take a plunge. On paper, assets become worth less, much less. This has to happen because abusing the exorbitant privilege of reserve currency to the point the system no longer functions without stimulus no longer works.
The RMB inclusion to SDR was supposed to happen in October but will not happen until a year from now. I can't see this hanging together that much longer but this "can kicking" is universal. Trying to prepare people by down playing these consequences has become obvious, for reasons you have stated quite elegantly here.
written by patriot momma , August 24, 2015
Hello Brandon, in times like these I always look for what you have to say. I am wondering if you think the day of reckoning has begun? And what do you think the next few weeks will look like in your opinion?
Thank you for your work!
written by clive m , August 26, 2015
"The mainstream media are now preparing the American people (or at least those who are paying any attention) for the coming loss of world-reserve status. The propaganda aims to paint the dollar’s reserve position as a bad thing."
Great point. And as good as JC Collins' SDR analysis is on the technical side, I think he is one of those propagandists who frames the issue in this way. He's argued Triffin's Dilemma puts pressure on the dollar while completely ignoring the massive credit expansion the petrodollar enabled which is about to expire. When the US trade balance moves toward some semblance of normalcy imports will dry up and those exported dollars will stay in country. Apparently mechanisms at the IMF are supposed to mop this all this liquidity up. I have my doubts.
written by Dennis BFF , April 13, 2017
Hey,
Thanks so much for this post. I think that it is so important to stay up to date with the latest economic developments. I really appreciate your point of view on the matter. I think the economy is definitely moving faster lately! I think that investing in real estate could be a safe option, but only time will tell.
Best,
Dennis
