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The Fortnightly Intelligence Briefing for June 15, 2009
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It will come as a shock to many to learn that the world's big foreign lenders, recently very critical of the safety of U.S. Treasuries and of the dollar, are now truly putting their money where their mouth has been. Words are turning into actions as they work to decrease their exposure to the dollar. Don't be blinded by the outdated conventional wisdom that says China and its partners are "stuck" with their high exposure to the dollar - they most certainly are not stuck. And don't be fooled by the ostensibly reassuring words from China, Russia and others in the past few days to the effect that they still have confidence in the dollar - they do not. They're deeply concerned about its stability and are trying to talk the dollar back up from its accelerating decline. The popular media has largely missed the real meaning of an entire set of recent developments that signal a watershed strategic shift as respects foreign confidence in the dollar and in U.S. Treasuries. You must judge this immensely important issue by the actions of the players and not merely by their words. This 8,500 word in-depth analysis will assist you to do just that. It is a must-read for anyone who wants to make coherent sense of the flood of recent developments surrounding the dollar and U.S. Treasuries.
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| In-Depth: Global Transition Underway - June 4, 2009 |
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For the foreseeable future, the prospects are dimming for a return to financial & economic vitality on the part of the U.S., Japan, the U.K. and other key developed economies. Their fiscal positions are seriously deteriorating, their bubble-based economies are being ravaged by mountains of wreckage left over from multiple ruptured asset bubbles, and the rest of the world is rapidly losing confidence in their ability to return anytime soon to the global stature and influence they possessed before this crisis. What are the global implications of the developed economies of the world turning zombie?
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In-Depth: Insight on the Dollar - June 3, 2009
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What is the real significance of recent negative developments regarding the dollar? Is the currency in real trouble this time? Have the fundamentals really turned negative for the dollar, or will it recover from its present trouble? How is the present global crisis changing the future prospects for the dollar, and for the old U.S.-centric global order itself?
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The Fortnightly Intelligence Briefing for May 18, 2009
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Western analysts and experts triumphantly assert that China is "stuck" with the dollar and is "trapped" in its trade relationship with the U.S. for the foreseeable future. Are they correct, or are they becoming victims of their own inane arrogance? Their entire case is built upon one grand, but profoundly faulty assumption. What is it, and how are China and its partners working hard and working smart to make sure the U.S. is the one placed in a trap of its own making? When will such a grand turn of events be demonstrated, and how?
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The Fortnightly Intelligence Briefing for May 4, 2009
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Is this crisis merely a severe recession fueled by what economists call the inevitable boom-bust cycle, or is it a symptom of a far more serious and fundamental crisis that is occurring within America's new economic model itself? If it is a symptom of a more serious crisis, how will that affect what shape this recession will take, whether "V", "U", "L" or possibly some other? How can we know what to expect?
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Where will yields go and who will push them there? How is the Fed's policy of Quantitative Easing enhancing the ability of certain bond market players to exploit yields to their own ends? What are those ends? Who are those players? With flagging foreign demand for longer-dated Treasuries, where are Treasuries headed, and when?
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Fears over the inherent safety of U.S. sovereign debt continue to rise. Exactly what are the causes, will they be addressed, and how long does the U.S. have to get its house in order before there is a global crisis of confidence in Treasuries and other government-backed financial assets?
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All indicators point to a continued transformation of the global financial and economic orders that will place BRIC and its partners unquestionably in the driver's seat. What are the indicators, when will the transformation be complete and how will BRIC and its partners achieve this goal?
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While NATO struggles ever harder to find a real reason for its existence and finds the goal of unity among its members ever more elusive, the SCO is finding greatly increased reason for its existence, and for its strengthening, and is finding ever greater unity. What reason is the SCO finding for itself? Why, it's the dangerous, bungling policies of NATO.
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East-West polarization is alive and well, and so is the epic contest between East and West for domination of the globe. We have arrived at a critical juncture in history because the geopolitical and global economic orders are in upheaval and transition, with East and West each striving to shape the outcome. But can Mr. Obama lead the players in a new direction, replacing the epic contest with strategic East-West compromise and accommodation? It's becoming fashionable in the popular media to intimate that he can do so, but what do the hard facts say?
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Solid Hits from the Archives
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( March 3, 2007 ) Is the world a virtually unobstructed 'flat plane' for U.S.-led unipolarity, or is it a 'round' world that is polarizing again into two fundamentally opposed geopolitical 'hemispheres', East and West? Conventional wisdom asserts it is a 'flat plane', but the handful of "heretics" who insist it isn't are about to win the day. The stakes in this ongoing debate are enormous, and it is the U.S. and the West that stand to lose the most when conventional wisdom soon turns out to be massively wrong.
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( November 1, 2006 ) The West continues to seriously underestimate Russia's potential and that of the deepening Russia-China strategic axis, and it habitually overplays its own increasingly weakened hand. Fatal assumptions are being made about whether Russia can and will position itself in strident opposition to the U.S. and whether it can really harm Western interests if it chooses to do so. It can, and it will. Russia and its partners have already set the stage to capitalize on Western weaknesses and vulnerabilities in a way that will hand Western global dominance a strategic defeat.
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( August 23, 2006) Russia is the prime architect of a new global energy order that fundamentally and gravely threatens Western geopolitical interests and security. The new energy order conceived by Russia also has enormous negative financial and economic implications for the West. Can such a comparatively weak power like Russia seriously threaten the West? What can the West do about it?
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A LOOK AT OUR FORECASTING TRACK RECORD |
| It should be noted that the Editor has stuck unwaveringly to the detailed predictions and analyses below, often bucking the pervasive, but faulted conventional wisdom and popular notions of the time. As a result of his analytical skills, he has accrued to his credit a very impressive list of correct predictions. His credentials as a strategic forecasting expert are equaled by few, if any. Examine just some of the highlights of his track record for yourself. |
Western financial/economic mess correctly predicted |
| "In every way U.S. power derives from its economic capital...If that true source of its power is ever spoiled significantly, then the last superpower will see a decline in the potency of all its derivative forms of power and influence. As a matter of fact, the evidence strongly indicates that decline is already happening... Immensely important vulnerabilities and weaknesses exist which make a disorderly, or even a chaotic loss of U.S. economic and/or military power much more likely...Tremendous economic wealth and its resulting power can dissipate very rapidly" - From the March 12, 2004 article, Can America Maintain Its Position of Global Dominance? |
| "Mr. Greenspan and his contemporaries are conveniently omitting the immensely important other half of the story, and they may be doing so intentionally. Why? Because they wish to leave a certain impression of U.S. economic strength and stability which is wholly unsupported by the facts but which suits their purpose of sustaining and promoting the image of U.S. economic health and virtual invincibility; an image which has become very seriously tarnished in the last two or three years with U.S. debt mushrooming to alarming levels, a systemic decline in the value of the dollar, an array of record-smashing structural imbalances, a long line of massive and scandalous corporate failures like Enron and deepening dependence upon foreign servicing of the huge U.S. debt." - From the June 19, 2004 article, Economic Developments Leaving the Experts to Grope for Lost Credibility |
| "If any part of this economic "contraption" breaks, or if the asset bubble values are kept inflating too long and explode, then it all unravels and the asset values "crash" back to their real values...When bubbles burst, what is left is severely-damaged asset values...The 'hot' economic activity in the real estate market is evidence, not of fundamental health, but of an expanding runaway bubble that is in complete denial as to its entirely precarious situation...When bubbles are about to burst, they usually grow exceedingly 'hot' first, then they burst. That is what the real estate market is doing right now. It is what the stock market has done. Both are enormously over-priced. Both are entirely dependent upon the artificial environment of negative real interest rate levels... when [such bubbles] break they leave in their wake economic debris and wreckage...the U.S. economy is in a lose-lose position." - From the February 2, 2005 article, Runaway Bubble Trouble |
| "The real problem with the asset-based model is obviously that when you exhaust all assets (and you will do so in a relatively short period of time), meaning there are no more assets to inflate because the intentionally-created asset bubbles have all burst (as the NASDAQ did in 2000, after which attention was focused on stocks and real estate bubble creation), then you have the potentially severe problem of making a quick and orderly transition back to the income-based model. There is no historical example I know of where an economy of considerable size has made such a transition without enduring a gut-wrenching collapse at the same time...you can easily see that the asset-based model is a dangerous trade-off between rapid and easy wealth creation on one hand and acutely increased vulnerability and instability on the other hand." - From the May 17, 2005 article, Nearing the Collapse of the Asset-Based Economic Model |
| "Consequently, the US economy has become like the top athlete who’s been on steroids and speed for five years, whose muscles ballooned to scary proportions, but who’s been found out by his coach just prior to the stiffest international competition of his career and has had all his medications confiscated. In the atmosphere of zero meds and the most intense international scrutiny and pressure ever, he’s on his own. Will he retain his top spot or be pushed aside by the competition?" - From the June 15, 2006 article, The New Geopolitical Implications of the Impending U.S. Economic Downturn |
| "Regardless of the P/R moves so far by the Fed related to its supposed "pumping of liquidity back into the markets", no real restoration of lost liquidity is occurring. It's an entirely new and different financial order out there, and the change from the comfortable old order to the scary new order was lightning-fast, occurring in only about three week's time. This should be a lesson for all with respect to how quickly things can and do change...The dollar has gotten a very short-term boost of sorts from the current unfolding liquidity crisis as investors pull their money out of risky commercial paper and other forms of collateralized debt and place it in the relative safety of government bonds...There is a psychological game being played out here for the confidence of the world's investors, and the stakes for the US are nothing short of colossal. If the US forfeits that game, then all is lost for it as far as its global economic position is concerned...The global economic and geopolitical landscape has been turned completely upside down as compared to the Asian/Russian currency crises of 1998/1999. This time around it is the US and significant portions of Europe that will need rescue. One should now begin to understand how true is the maxim that power flows to where the money goes...The autocracies will exact a heavy set of political and economic prices for any rescue, and the payment of those prices will demolish what is left of US-led unipolarity...The handwriting is on the wall for US-led unipolarity. The drunken party's over. The 'Babylonians' are already at the gate, and they're deadly serious. " - From the September 4, 2007 edition of, The Editor's Weekly Newsroom Briefing |
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