China’s Pincer Attack on the Dollar
- Bad liars at the Fed: What are their real intentions?
- China’s de-dollarization scheme: If “world money” doesn’t achieve their aims…
- … they have a backup plan
- Home improvement hell: Latest sign the mighty American consumer is cracking
- Mining firm puts its “Brand Ambassador” in a bikini… state fairs ain’t what they used to be… the trouble with democracy… and more!
“Why are ghosts such bad liars?” goes the corny old joke. “Because you can see right through them.”
Hmmm… We wouldn’t call New York Fed chief Bill Dudley a ghostly figure, although he does look kinda pasty…
Known affectionately to David Stockman’s readers as “B-Dud”…
Dudley is one of the most powerful figures on the Federal Reserve’s Open Market Committee — maybe the most powerful other than chairwoman Janet Yellen.
But he couldn’t lie his way out of the proverbial wet paper bag. “We’re edging closer towards the point in time where it will be appropriate, I think, to raise interest rates further,” he told Fox Business yesterday. Pressed whether next month might be “appropriate,” he said, “I think it’s possible.”
He almost managed to give his remarks a whiff of credibility, until he was asked how the election in November would steer the Fed’s thinking. “I don’t think the election would weigh on us one way or the other,” he replied.
The Fed as an institution might not be very transparent, but its lies certainly are. Heh…
“A rate hike now could tip the scales to recession and help elect Donald Trump,” says Jim Rickards.
“There’s no way the Democrats on the Fed Board, including Janet Yellen and Lael Brainard, are going to let that happen.
“The last time the Fed raised rates (December 2015), the stock market crashed 11% in the next eight weeks. The Fed does not want to repeat that blunder, either.”
But as Jim has pointed out before, the Fed is likewise nervous about the stock market sitting near record highs and would like to orchestrate an orderly climb-down. Before Dudley opened his yap yesterday, the Dow was down about 25 points. Afterward, about 80. Mission accomplished.
Dudley’s words also put a hurt on the dollar. The dollar index sank below 95 for the first time in nearly two months. This too is in keeping with Fed wishes, and the secret “Shanghai Accord” reached six months ago.
No, the next Fed meeting on Sept. 20–21 will be a snooze. Little will happen then that will affect your pocketbook or your life.
It’s two other dates in September you should worry about, says Jim. We’ve discussed them before.
On Sunday, Sept. 4, leaders of the G-20 nations will meet in Hangzhou, China. Jim expects much backroom maneuvering to undermine the dollar’s status as the world’s reserve currency.
And that maneuvering will climax on Friday, Sept. 30, when a major change to the International Monetary Fund’s “world money” — aka special drawing rights, or the SDR — will take place.
Today, with Jim’s help, we bring you the latest developments in the run-up to these two key dates.
“In military tactics, one of the most effective techniques is the pincer movement,” Jim says by way of a roundabout explanation.
“Using this tactic, you attack the enemy from two opposite directions at once. This initially causes confusion and then causes the enemy to divide their forces. It also gives the attacker two ways to win. If one side of the pincer bogs down, the other side may yet succeed and ultimately bolster the chance of total victory.
“Now China is using this tactic against the U.S. dollar.”
Here’s the first side of China’s pincer attack on the dollar. “China is 100% on board with SDRs and has recently greenlighted the creation of SDR-denominated bonds from the World Bank to be sold in China,” says Jim.
Five years ago in his first book Currency Wars, Jim described how the IMF had plans sitting on the shelf for a liquid SDR bond market. He called these plans “the antecedent to replacing the dollar as the global reserve currency with SDRs.” Now with the World Bank announcement, those plans are coming into reality.
But the announcement begs a question: Why would the World Bank issue SDR bonds in the first place? “It’s not because they have trouble borrowing,” Jim points out. “The World Bank is one of the best credits in the world. They can borrow whatever they want, whenever they want, in any currency they want.
“The reason is so that China can invest in SDR assets. How can China buy SDR bonds if no one issues them? The World Bank is just accommodating Chinese demand. And the Chinese want to invest in SDRs so they can stop investing in dollars. How much longer will investors sit in dollars waiting for the wipeout to come?”
But then there’s the other side of this pincer movement — and that’s the Chinese yuan.
“Even if the SDR does not take off as quickly as planned, the yuan might,” Jim points out. “Either way, with success by the SDR or the yuan, the dollar is the loser.
“The two sides of the pincer converge at the close of business on Sept. 30 when the yuan officially becomes part of the SDR. After Sept. 30, every time an institution invests in SDRs, they’re indirectly supporting the yuan and helping the world move away from dollars. Investors don’t have to bet on SDRs, dollars or yuan.”
Maybe now you have a better understanding why Jim says Sept. 30 “could spell disaster for the U.S. dollar, effectively gutting the U.S. stock market and cannibalizing your retirement savings.”
Jim’s preached the downfall of the dollar before. But now there’s a date attached to it. And it’s only 44 days away now. We urge you to give Jim’s detailed warning your full attention while there’s still time to act.
To the markets, where — ugh — traders are marking time until the release of the minutes from the last Fed meeting three weeks ago. They’ll be out around the time this episode of The 5 hits your inbox.
In the meantime, the major stock indexes are once again in the red, Mr. Dudley’s orderly climb-down still at work 24 hours later. The S&P 500 is off nearly a half percent, at 2,169.
Treasury yields are backing down a bit, the 10-year note at 1.57%. Gold sits where it did 24 hours ago, at $1,344. Crude has backed down a bit, at $46.47.
No big economic numbers today, but earnings are coming back into view, and they’re ominous: Lowe’s whiffed big-time this morning. Which might not be noteworthy except for the fact Home Depot’s earnings yesterday merely met expectations.
Recall the Wall Street earnings game: “Guide lower” and jawbone so mainstream analysts lower their estimates. That way when you report actual numbers, you surprise to the upside.
If LOW and HD can’t deliver earnings “beats”… and if those two names have been among the few brick-and-mortar retailers to flourish the last couple of years… it doesn’t say anything good about the resilience of the mighty American consumer.
Considering how the mainstream keeps telling us the consumer is the only thing still propping up the U.S. economy, that’s bad news indeed.
Oh, Target also reported today. It beat estimates… but cut its outlook.
Maybe Hardee’s and Carl’s Jr. can use sex to sell hamburgers… but can a miner use sex to sell shares? A Canadian outfit called KWG Resources hopes so.
KWG is exploring the wilds of northern Ontario in hopes of developing a deposit of chromite — the precursor to chromium, which has a host of uses, including stainless steel.
To help make its case to investors sitting on the fence, KWG signed up a model named Theresa Longo — to be specific, the Google search results for her website tout her as “Model, Actress, Brand Representative & Entrepreneur” — to make a bunch of YouTube videos.
The first batch starting in the spring were quite tame. But two weeks ago, the “Mining Minute” videos took a sharp turn in the direction of T&A — with Longo joined by a second model, both in bikini tops and cutoffs.
A group called Women in Mining is unimpressed: “If you want to educate people, putting someone in a bikini is not going to educate them,” says Barb Courte, chairwoman of the organization’s Thunder Bay chapter. “It’s tacky.”
But KWG President Frank Smeenk says he’s willing to try anything. “The markets have changed dramatically,” he tells Northern Ontario Business. “The brokerage industry by and large no longer exists, their clients are gone. So the participants in the market for risk capital are hard to find.”
So has the video had any impact apart from publicity? Shares are thinly traded, to say the least, but we do see a slight bump in volume a few days after the video’s release. The pink-sheet shares in the U.S. go for 2½ cents — on the high side of its average over the last year.
Uhhh… We’ll pass.
“Re the declassification of marijuana from dangerous drug that didn’t happen,” a reader writes, “I invested a small amount of money in two stocks.
“To say I was disappointed is accurate, but I can’t blame Ray Blanco. He was only using his experience and logic to make such a call.
“However, government is often illogical. I was more irritated with them (DEA/FDA) for ignoring both the inevitable and the beneficial. I can think of several reasons why marijuana should be legal, even though I don’t use it. If the District of Columbia would legalize marijuana, the politicians could all get high and we would be free to run our own lives.”
The 5: Two years ago, voters in the District approved a measure legalizing recreational weed by over a 2-to-1 margin. The D.C. City Council hopes to come up with a “regulatory framework” that would allow for the registration of growers and retailers… but Congress has blocked the D.C. City Council from spending any money to do so.
“In case you have not heard,” writes another reader, “the Oregon State Fair will become the first state fair ever to have a marijuana display, with nine real living plants inside a greenhouse guarded by extra security.
“You must be 21 to enter to check out the pretty ladies! The nine plants on display are the blue ribbon winners from last weekend’s first-ever cannabis fair in Salem. The Oregon State Fair begins on Aug. 26. Parking is $5, cash only! Entertainment includes Foreigner, Melissa Etheridge and Pat Benatar for you ’70s and ’80s rockers.
“If you cannot be happy visiting Oregon, just stay home. Even Oregon’s Legislative Revenue Office is happy! In May, they QUADRUPLED its estimate on net state tax revenue from recreational marijuana from $8.4 million to $35 million! Take that, DEA!”
The 5: As we’ve noted before, skeptics are becoming believers — most notably Colorado Gov. John Hickenlooper, who opposed his state’s recreational marijuana referendum four years ago. But he too likes the incoming revenue. Go figure.
We still expect a shift in federal policy. But clearly, it’ll be a while longer than we were anticipating.
“About the reader who claims the 16th Amendment was the first unconstitutional Amendment,” writes our final correspondent: “Maybe this person was checking out lotsa
pot from the previous day’s 5.
“An adopted amendment to the Constitution is, by definition, a part of the Constitution. Saying that an adopted amendment to the Constitution is unconstitutional is like saying that gold is not any good because there is nothing backing it… (note the ellipses).
“The ability to amend the Constitution is one of its greatest strengths… and greatest weaknesses. Amendments allow the Constitution to adapt to a changing world… and also allows adoption of the stupid. Kind of like the electorate is a democracy’s greatest strength… and greatest weakness.”
The 5: Which brings to mind Mencken’s quip: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”
The 5 Min. Forecast
P.S. As long as one of our readers brought up Congress today… Did you know about the “secret congressional benefits” enjoyed by our Congresscritters and their cronies?
It took 15 months and small army of researchers for us to expose it: This kind of knowledge could easily be called “surprising,” “controversial” and even “unfair”…
And there’s a huge potential payoff in it for you.
That said, the order to ban what we’re revealing could come at any time.