A great paradox has come home to roost and be felt. Harken back to 1971 when the US under the errant leadership of Richard Nixon. The US broke the Bretton Woods Accord that dictated gold to anchor the US Dollar in the global financial system. The Vietnam War and the Great Society programs at the time resulted in a quick run on US gold held in Fort Knox. That supply is 99% gone now, after the Clinton-Rubin Admin engineered their own Decade of Stolen Prosperity. They brought the gold lease rate to nearly zero, spawned a Gold Carry Trade, gutted the US Treasury of its gold, financed private gains for Wall Street in the hundreds of billion$, and rendered the US financial system vulnerable to collapse.
The paradox has come full circle. When a nation steps forward to declare itself the lead engine in the global economy, the lead police cop with global military reach, and the lead capital market in Wall Street, it does so at a great risk when it serves as custodian to the global reserve currency. In the initial decades, the risk is minimized. The risk is that the nation holding control of the global reserve currency, the US Dollar, must supply new funds for capital formation, for credit extension, for government finance, for continued functions of myriad types. The grand wellspring has a US$ brand on its liquid product that is essentially inflated unendingly. In the initial decades, the monetary base was inflated for productive purposes. Some would argue fervently that the entire US Military buildup with so-called Star Wars was the basis of exiting the strong 1980 recession. The initiative earned the US a Pyrrhic Victory, leaving it wounded in victory. At least a significant swath of new money and new credit was devoted to capital formation in the next decade or two, in forming businesses, and development of the US Economy. Not until after 2000, did the United States embark on highly destructive economic policies that would quickly fail. Refer to the dispatch of much US industrial base to China from 2000 to 2005. Refer to the rekindle of the housing bubble, the establishment of home equity ATM machines, the raid of home equity for consumption purposes. Refer to the wars in Iraq and Afghanistan, regardless of their purposes, but with heavy crippling ongoing costs. In the last year or more, the sanctioned purpose of new money and new credit, again without basis or tangible backstop, has been the flood of rescue funds to the banking sector. This is the same banking sector that spread fraudulent and toxic bonds around the globe during the same housing bubble, which has a matching mortgage finance bubble.
The destinations of the new money and new credit in the last year or more have been destructive, non-productive, and probably loaded with yet more fraud. An economy that must function without a sizable portion of its industrial base cannot remain stable, yet alone thrive. An economy that has been led to dependence upon housing bubble equity, otherwise known as inflated asset as collateral, cannot remain stable, yet alone thrive. Refer to the challenge against the US Fed itself to reveal first the usage of the TARP funds, and second their entire balance sheet. My view is straightforward. The destination of the majority of funds in the last few years has been for syndicate purposes, for private gain, with the defense establishment and the banking sector. My view is that high crimes are involved, and that US Govt agency protection is offered routinely. Refer to the Goldman Sachs insider trading Unix box that monitored and exploited order flow information, complete with front running, all tidily covered up.
Here we are at the end of an era, where the US Dollar sacrificed itself for the system. The high risk of the paradox is that late in the pathogenesis, the nation that benefited early in the cycle must endure powerful forces that bring a collapse of the currency that provided the wellspring of false capital. THE RISK IS OF A US DOLLAR IMPLOSION, AND WRECKAGE OF THE US BANKING SYSTEM. The currency served its purpose, and the cycle comes to an end. Originally, the benefits were global toward the flourish of capitalism. Lately, the benefits have been for the syndicate in its war machinery and the banking sector responsible for bond fraud. The gradual and inexorable decline of the US banking system will continue without interruption, only pauses to fool the gullible, the ignorant, and the unwashed masses of vassals. The global revolt against the US Dollar is surely a loud signal, enough to herald a new foundation in the making with key alternative structures. The US$ cannot co-exist with a new system underpinned by a different vehicle as foundation. The IMF basket of currencies is but a temporary device, as the new currencies backed by hard assets are to be delivered by the Monetary Stork. Their hatch will be difficult, require much careful planning, and must endure military threat. The end stage, part and parcel to the paradox stated, is that the US Dollar must die its death, assured when departure from the gold backing was permitted and agreed upon. The more capably the economy and financial sector is managed, the longer the process before the forced death of the system itself. In this decade, the Mussolini Fascist Business Model has embraced and promoted syndicate activity, with merger of big business with the state, to such an extent that the system is ripe for failure. A failed state comes.
This process has a parallel, the human birth ensures an eventual death. The US$ without the gold tether guaranteed its death, all in time. The time is upon us, as the US$ is going through its stages of death. First is denial. Second is alternatives in construction. Third is anger with vengeance. Also, the US banking system is going through its stages of death. Their ongoing fresh asset losses continue to out pace their new infusion of capital or funny money funds granted by the US Govt, delivered from the Printing Pre$$. Refer to their hidden housing inventory from foreclosure, along with the Prime Option AR Mortgage losses, in addition to the commercial loan losses. The US banks cannot be revived any more than Humpty Dumpty can have his shell glued back together after a fall in disgrace. The banks maintain a charade in order to continue to channel funds into their balance sheets, to enable stock sales to the public while executives sell out, and to permit elite overseas bank accounts to be filled. They are buying time hoping that borrowing at 0% and investing in long-term US Treasurys will replenish their balance sheets, mostly in safe keeping at the US Fed itself, and NOT LENT. They race against the Grim Reaper seeking out toxic assets.
Tags: Economy
