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All posts for the day May 8th, 2023
“We do not believe that Syria deserves to be returned to the Arab League for today,” a State Department spokesman said”.
Who cares what bloody corrupt murderers believe?
California’s recent decision not to pay back some $20 billion borrowed from the federal government to cover unemployment benefits during the pandemic will fall on the shoulders of employers, according to experts.
https://www.zerohedge.com/political/california-defaults-186-billion-debt-saddling-employers-expense
BY TYLER DURDEN
“The state should have taken care of the loans with the COVID money it received from the government in 2021,” said Marc Joffe, policy analyst at the Cato Institute—a public policy think tank headquartered in Washington, D.C., in a statement to the Epoch Times.
In the state’s proposed 2023-2024 budget, $750 million was allocated to start paying down the loans, until Governor Gavin Newsom nixed the provision in early January, leaving businesses in the state responsible for the loans, as mandated by federal regulations – so that the federal unemployment tax rate of .6 percent will increase by .3% per year starting in 2023 until the loan is extinguished.
“California is just not really an employer-friendly state,” said Joffe. “This one thing will not be a difference between a business remaining open or closing, but it’s just another burden on top of the many burdens the state puts on employers.“
In total, 22 states borrowed money for unemployment insurance from the federal government. All but four, California, Colorado, Connecticut, and New York, have paid back their debts – with California owing the most by far at $18.6 billion as of May 2, followed by New York at $8 billion, Connecticut at $187 million and Colorado at $77 million, according to data from the US Treasury.
More via the Epoch Times,
Initially, the state borrowed from its reserves to pay the benefits, but after exhausting its coffers borrowed to cover expenses, analysts said.
Exacerbating the situation were unprecedented levels of fraud occurring across the state, due to limited oversight and antiquated computer systems, according to Lee Ohanian, professor of economics at the University of California–Los Angeles.
Analytics firm LexisNexis estimated the total cost of the fraud at $32.6 billion.
Investigations have since uncovered that illegitimate unemployment benefits payments were paid to convicted felons, with one address receiving 60 separate fraudulent payments.
Fraud is a persistent issue historically with the program, and a $2 million federal grant in 2013 sought to address the issue with new computer software systems.
The upgrade successfully stopped instances of fraud, but further improvements stopped with the end of the grant in 2016, reportedly due to the agency’s reluctance to take on the annual expense for the third-party service.
“They were penny wise and pound foolish,” Ohanian told The Epoch Times.
At a cost of $2 million annual investment, the program would have cost $14 million to operate since it was terminated.
“Sadly, this is just a trifecta of bad decisions,” Ohanian said. “The [Employment Development Department] made a bad decision to not renew its lease for the fraud detection software, the state government took out a loan and chose to welch on the debt—which is outrageous—and now businesses are repaying more in taxes for the incredibly unwise decisions and mistakes of the state government.”
Reports that the state is seeking forgiveness from the federal government were met with resistance by policy experts, including Ohanian.
“We’ve made a lot of bad decisions and we expect the rest of the country to pay for it,” he said. “It also raises questions about the future: If the state is going to default on the $20 billion federal loans, how safe are municipal bonds from California?”
The major global economies are shifting and the clues are there for those who know where to look
https://www.rt.com/business/575849-dedollarization-us-oil-trade/
April 6, 2023
By Dr. Radhika Desai, a professor at the Department of Political Studies at the University of Manitoba in Winnipeg, Canada and director of the Geopolitical Economy Research Group. She also writes on current affairs for Valdai Club, CGTN, Counterpunch and other outlets and is the author of Geopolitical Economy: After US Hegemony, Globalization and Empire and Capitalism, Coronavirus and War: A Geopolitical Economy
© Aaron McCoy / Getty Images
De-dollarization is increasingly making headlines and you don’t have to look too hard to find examples.
New sources of non-dollar finance are emerging. There are new bilateral agreements to trade and lend in currencies other than the US dollar. Even more importantly, major oil trade buyers and sellers – Moscow and Riyadh as much as Beijing and New Delhi – are agreeing to trade it in non-dollar currencies. These deals are destroying one of the main pillars of dollar dominance since OPEC quadrupled and then doubled oil prices in the 1970s, giving countries around the world a major reason to demand and hold dollars.
However, many analysts continue to write as if the dollar’s dominance remains intact. Of course, these arguments are based on all sorts of false assumptions. For instance, they claim the dollar will continue dominating until another country’s currency replaces it or that this will only happen if other countries pursue forms of internationalization that mimic that of the US dollar today.
In a sense, the discussion is a little like that depicted in The Big Short, a film about a small band of bankers who bet against the housing market and the securities resting on it in the 2000s. Having made their bets, they waited for the market to collapse. It did. However, for a time, while mortgage defaults increased, the securities they are based on continued to rise in value. Prices were buoyed by investors primed by Alan Greenspan’s famous claim that there could not possibly be a housing market bubble. Nor were the securities downgraded. The rating agencies had not only given high scores to investment rubbish, they had come to believe their own lies. Only when the losses piled up and actually began to filter through the system in the form of payment shortfalls was the truth acknowledged.
Dollar being ‘gradually abandoned’ – IMF boss
De-dollarization also has its equivalent of the losses and payment shortfalls. Consider the recent Financial Times story, ‘China’s ‘men in black’ step up scrutiny of foreign corporate sleuths’. It describes the Chinese Ministry of State Security using “methods familiar to spies and private detectives” to crack down on “foreign corporate sleuths” performing “due diligence” on investments. They cite the process of checking whether a supply chain involved “forced labor from Xinjiang” as an example, stating that such due diligence is critical for attracting US investment.
The piece adds that earlier, “the due diligence groups felt they had ample space to operate and that authorities understood their importance,” but now Beijing has stepped up scrutiny of these scrutineers on grounds of national security. They lament that “spy companies were the gatekeepers for money,” but now, “[t]hat sense of a mutually beneficial relationship is gone.”
Now, the Chinese government has no shortage of reasons for stepping up its scrutiny of the information being gathered by foreign, particularly US entities. After all, it is the target of a US hybrid war whose fronts multiply daily. However, this is not the only significance of the story. It goes deeper than that and testifies to de-dollarization.
Since 1971 the US currency’s global role has rested on the claim that the dollar-denominated financial system was the world’s most sophisticated, with the broadest and deepest pools of capital from which the rest of the world’s investors could drink their fill. Certainly, the expansion of financial activity, also known as financialization, has been critical. By increasing financial demand for the dollar, it counteracted the Triffin Dilemma caused by the US deficits that provided the world with liquidity, meaning that the larger the US deficits, the greater the downward pressure on the dollar.
Yuan overtakes dollar in China’s cross-border payments
Needless to say, claims about the attractions of US finance were exaggerated. As far as most of the world was concerned, rather than providing beneficial productive investment, the US dollar-denominated financial system only unleashed torrents of short-term ‘hot’ money that has only profited mostly Western speculative investors, while regularly wreaking havoc on the rest of the world’s economies. Only China and a handful of other much smaller, favored, investment destinations benefited from a certain (easily overstated) amount of productive investment. Ironically, it was part of the hollowing out of US manufacturing through a little foreign direct investment and a lot of outsourcing.
Now, however, the US dollar-denominated system’s internal contradictions are mounting. While it is ceasing to provide its US and Western short-term investors with opportunities for speculative profit and to furnish the modest productive investment it once did.
The most fundamental of these mounting contradictions is the bind into which the rise of inflation puts the wizards at the Federal Reserve. On the one hand, the only way they can deal with inflation without eroding the power of capital is by raising interest rates, but that promises to crash the very financial structures of unproductive debt and speculation on which the wealth of the financial elite it serves relies. On the other hand, if the Fed does not raise interest rates, and permits inflation to run rampant, it will destroy the same system even more directly by undermining the value of the monetary unit, the US dollar, on which the entire system rests. What’s the point of accumulating your wealth in dollars if they are losing value at a rate close to or even higher than the rate at which you are accumulating it?
If the US financial system is losing its charm even for speculators, the very financialization over which it presides and on which the US dollar system rests has, over the last several decades, strangulated the alternative source of gain, the US productive economy. For decades, it was deprived of the long-term, patient investment that alone can make it dynamic. Today, therefore, neither the financial system nor the US productive economy will keep dollars flowing into the US dollar system. The former, which once yielded profits – via interest or speculation – by skimming off production incomes kept capital flowing into the US dollar system based on a reasonable expectation of gain. That situation has been eroded.
Gold leading ‘revolt against dollar’ – economist
It is no wonder that a recent Financial Times story comparing the US and European financial systems explained that, today the EU, with its proportionally larger base of productive corporations able to generate dividend income rather than merely uncertain and increasingly risky speculative gains, is likely to attract more money. And if Europe looks good compared to the US, China looks even better.
Money from around the world is flocking into Chinese IPOs (initial public offerings). By contrast, IPOs in the US and the UK, with the most financialized and productively weakened economies, have performed abysmally. The simple reason is that China still has a productive economy and far more of the sort of steady dividend-paying productive companies investors will now increasingly seek.
So, China cracking down on Western ‘due diligence’ sleuths is just another sign that the US financial system, and with it the dollar, is fast losing what few charms it once had. China may have tolerated a certain amount of espionage from Western financial investors when they constituted a major source of investment in China’s productive economy and US-China relations were miles better. Today, not only must it be more vigilant on national security grounds, with the US waging an ever-expanding hybrid war against China, its productive economy is winning the favor of the very capital that is fast falling out of love with the US financial system. China has no incentive to tolerate US “sleuthing.”
https://www.zerohedge.com/news/2023-05-06/us-dollar-sovereign-debt-endgame
BY QUOTH THE RAVEN
SATURDAY, MAY 06, 2023 – 5:25
Submitted by QTR’s Fringe Finance
The regional bank crisis is continuing on, or ahead, of schedule. Not wanting to live in an echo chamber – but also mindful of the fact that I’m in the minority with how I think about the economy – I wanted to have a long-form discussion with two of my friends, Andy Schectman and Larry Lepard, to discuss the state of the U.S.
We talked about the blowoff valve for the economy – something I wrote about days ago – as gold and precious metals.
“When we take out 2100 with authority, it’s game on,” Larry says. “That’ll be a clear historical breakout. When that occurs, we’re going to squirt up to 2500 or 3000 very quickly.”
“Where else do you go beside gold and silver? Yes I own a precious metals company, but I try to be objective. Where do you go in the system where rising rates inversely affect stocks and bonds?” Schectman asks.
“The blowoff valve is the value of the currency and the easiest measure of that is gold,” Lepard adds.
We also discussed the regional banking crisis. “How is it that anyone isn’t freaking out that the Fed is basically bailing out the FDIC? The FDIC is, in essence, insolvent,” Andy Schectman asked me. “They’re going to blow up the regional banks.”
“Everyone is leaving the regional banks because Janet told us they won’t be safe”
We also discussed the state of the Fed and the global economy.
“The Fed is really playing with fire with this tight monetary policy. They are solving the problem in the short term but compounding the problem in the long term. They’re going to be forced into yield curve control,” Larry adds. “The next QE will take the Fed’s balance sheet from $9 trillion to $25 trillion.”
“Hyperinflation occurs when everybody becomes convinced that there is no way out other than printing the currency,” he adds. “I think it’s kind of inevitable. Everyone can read the signals and the signals are going to be there.”
We talked about how the BRICS nations are trying to move away from the U.S. dollar. “When you look at countries that have expressed interest in joining BRICS, they all have substantial gold holdings,” Andy told me about the global economy. “The numbers are increasing among those who want to join, there’s over 60 countries they have lined up in a queue [to join BRICS].”
“I do believe it’ll be a Sunday night. OPEC, the BRICS nations, Saudi Arabia – they come out and say on a Sunday night, we’re taking other currency for oil – and everything blows up Monday morning. It’s a tsunami of dollars,” Andy concluded. “The pieces are being put into place right now. Nobody is going to have time to react.”
“Why the hell would Central Banks be buying more gold now than ever? They’re frontrunning. They don’t care about the technicals, they’re using the Western suppression of gold prices to de-dollarize. What does that look like when the world completely sheds dollars because they no longer need them to buy oil?”
We also discussed:
- the end of the U.S. dollar’s dominance
- the geopolitical divide taking place
- gold & silver markets and manipulation
- politics into 2024
- banking collapses & equity markets
- the future of Bitcoin & crypto
You can listen to my full interview with Larry and Andy on Spotify here, Apple Podcasts here, and streaming on YouTube here:
Larry manages the EMA GARP Fund, a Boston based investment management firm. Their strategy is focused on providing “Monetary Debasement Insurance”. He has 38 years experience and an MBA from Harvard Business School. And he likes to curse. On Twitter he is @LawrenceLepard
Andy is the President & Owner of Miles Franklin Precious Metal Investments. Prior to starting Miles Franklin, Ltd. in 1989, Andrew became a Licensed Financial Planner, specializing in Swiss Franc Investments and alternative investments. At Miles Franklin Ltd., a company that has eclipsed $5 billion in sales, Andrew has developed an operation that maintains trust, collaboration, and ethical behavior, superior customer service and satisfaction to better serve their clients. He is responsible for overseeing the firm’s operations and business functions; including strategy and planning, account management, finance, and new business. He is andy@milesfranklin.com on email.
QTR’s Disclaimer: I am not a guru or an expert. I am an idiot writing a blog and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning and generally trade like a degenerate psychopath. This is not a recommendation to buy or sell any stocks or securities or any asset class – just my opinions of me and my guests. I often lose money on positions I trade/invest in and I’m sure have lost more than I’ve made in my time in markets. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. Positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it three times because it’s that important.
Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.
De-dollarization is heading for a breakthrough due to rising global discontent with US ‘casino capitalism’…
“If you want to analyze the patterns these past two decades, you need to understand the fact that, if you are rich in commodities and if you are a productive capitalist nation and you decide to issue a currency, it will be internationally respected because people will know it’s based on facts, actual provenance, actual wealth,” he said. “That’s contrary to the system that we have now, which I have been calling it ‘casino capitalism’ for years. It’s futures, it’s bets, it’s suppositions. It may go right or wrong. If you lose, you lose it all. The house mostly always wins because the house is the one who prints the currency. It’s backed by nothing, literally, by a country that owes $30 trillion [in national debt] now and it will never be able to repay it.”
https://www.zerohedge.com/geopolitical/escobar-global-de-dollarization-nearing-crossroads-moment
BY TYLER DURDEN
SUNDAY, MAY 07, 2023
Authored by Ekaterina Blinova,
“It’s a gigantic snowball all over the world. We cannot even keep up with it,” Pepe Escobar said in an interview with the New Rules podcast.
“It’s very important what is going to be discussed at the BRICS summit in South Africa. This will probably be the crossroads moment where things are going to then go.”
Escobar explained that a growing number of countries in the Global South were doing the math and concluding that the US dollar was not a safe bet. The combination of aggressive US sanctions policy and reckless government spending have dramatically reduced the greenback’s international appeal.
“If you want to analyze the patterns these past two decades, you need to understand the fact that, if you are rich in commodities and if you are a productive capitalist nation and you decide to issue a currency, it will be internationally respected because people will know it’s based on facts, actual provenance, actual wealth,” he said. “That’s contrary to the system that we have now, which I have been calling it ‘casino capitalism’ for years. It’s futures, it’s bets, it’s suppositions. It may go right or wrong. If you lose, you lose it all. The house mostly always wins because the house is the one who prints the currency. It’s backed by nothing, literally, by a country that owes $30 trillion [in national debt] now and it will never be able to repay it.”
To make matters even worse, the US Federal Reserve’s aggressive interest rate hikes has made borrowing in dollars expensive for almost everyone in the world. Prior to the Fed’s move, Kristalina Georgieva, managing director of the International Monetary Fund, warned in January 2022 that the US raising interest rates could backfire on the global economy and especially on countries with higher levels of dollar-denominated debt.
https://sputnikglobe.com/services/video/embed/1110058768-1110062907.html
The ongoing US banking crisis threatens to further destabilize international financial markets. No country in the world wants to “catch a cold” when the US economy “sneezes,” as memories of the 2008 financial crisis linger.
“They say, ‘look, why do we have to be subjected to this kind of arrangement?’ And of course, before, as we all know, it was ‘the Empire of bases’, over 800 military bases all over the world, ‘the power of the financial markets’, ‘the power of soft culture’, ‘the power of cancel culture’, but the Global South is not intimidated anymore. I think this is the first [time] in this new millennium. We never had this before in the past two and a half centuries, at least,” Escobar said.
BRICS Seeking to Establish New Currency
In January 2023, BRICS – an acronym for Brazil, Russia, India, China, and South Africa – made a splash by announcing that it may soon explore the possibility of creating its own currency to by-pass the US dollar. The idea was articulated on both sides of the Atlantic: Russian Foreign Minister Sergey Lavrov touched upon the plan during a presser after his meeting with Angolan President Joao Lourenco on January 25.
On the other side of the pond, President of Brazil Luiz Inacio Lula da Silva discussed the issue of the creation of a common currency for BRICS and the countries of Mercosur, a South American trade bloc, during his meeting with his Argentine counterpart Alberto Fernandez.
“Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries? Who decided that the dollar was the (trade) currency after the end of gold parity?” Lula said during an April visit to the Shanghai-based New Development Bank.
According to Escobar, the formation and development of three organizations, namely BRICS, the Shanghai Cooperation Organization (SCO) and the Eurasian Economic Union predetermined the end of the greenback-centered world order. BRICS members are now discussing designing an alternative currency; similar discussions are being held in the Eurasian Economic Union; they should start coordinating and then this will spill over to the SCO, the writer projected.
The trend has already been engulfing other blocs, Escobar continued, referring to the Association of Southeast Asian Nations (ASEAN). On March 28, ASEAN finance ministers and central bank governors held a meeting in Indonesia to discuss how to move to settlements in local currencies by further enhancing an ASEAN cross-border digital payment system.
Initially, the agreement on such transactions was reached between Indonesia, Malaysia, Singapore, the Philippines, and Thailand in November 2022. The association is seeking to reduce dependence not only on the US dollar, but also on euros, yens, and British pounds in financial transactions.
“We have something that was absolutely unbelievable two months ago,” Escobar emphasized.
Why is De-Dollarization Gaining Steam?
De-dollarization has been discussed for decades. For instance, Mikhail Khazin, a Russian economist and publicist, who served in the Working Center for Economic Reforms under the Boris Yeltsin government in the 1990s, and his co-author Andrey Kobyakov predicted the demise of the US dollar dominance roughly 20 years ago in their book titled “The Decline of the Dollar Empire and the End of Pax Americana.” While the idea has been in the air for quite a while, why is it that this phenomenon has only now started to gain critical mass?
“We can even establish a date for it,” responded Escobar. “February last year, with that freezing, confiscation, stealing of Russian foreign reserves. And the Global South as practically as a whole started asking themselves from Latin America to Africa to South East Asia, ‘if they can do this with a nuclear superpower, they can do it with any one of us snapping their fingers’. So that’s why the coordination inside these multilateral organizations and in other forums picked up astronomic speed.”
To illustrate his point, the journalist referred to the swift development of BRICS with a staggering 19 countries currently on the list to join the organization. Among them, the strongest candidates are Iran, Argentina, Algeria, as well as the United Arab Emirates, Turkiye, Egypt, Kazakhstan, and Indonesia, as per the geopolitical analyst.
“So these are all strong middle rank powers from anywhere,” Escobar said. “And they’re going to start discussing the now notorious BRICS alternative currency. So they have to speed up this conversation and let’s hope that they are going to start discussing it in conjunction with the Eurasian Economic Union, which is much more advanced, and the Shanghai Cooperation Organization.”
Escobar believes that nothing short of a breakthrough in this respect could occur as early as next year.
“It’s possible, it’s a feasible scenario,” he insisted. “Until a few months ago, this would be the ultra-far-fetched scenario. Not anymore, because now the speed is unbelievable. Literally every day – Bangladesh, Argentina, Algeria, countries in Southeast Asia.”
Last month, Russian Foreign Minister Sergey Lavrov met with his Bolivian counterpart Rogelio Mayta in the Venezuelan capital Caracas and introduced a new trade transaction system to drop the US dollar and the euro and switch to rubles and Bolivianos instead.
Together with Argentina and Chile, Bolivia forms the so-called “Lithium Triangle” which accounts for more than half of the world’s deposits of the silvery-white alkali metal. Bolivia’s Salar de Uyuni salt flat alone contains 21 million metric tons of lithium, widely used in rechargeable batteries for mobile phones, laptops, digital cameras and electric vehicles.
Petroyuan May Dethrone Petrodollar
The most important element is the coming of the petroyuan, as per Escobar. For decades, crude oil has been traded in US dollars. However, the petrodollar could be soon dethroned: last year, Beijing called on Gulf leaders to settle their gas and oil deals with China in yuan. The US and China remain the world’s top two consumers of crude, using 18.7 million and 15.4 million barrels per day, respectively. Energy settlements in yuan could deal a heavy blow to the greenback.
“We are on our way, which is something that even very good American financial analysts who have been following this story could never imagine that this would be literally around the corner,” the journalist said. “Now, the only thing that is missing, in fact, is the Chinese delegation going to Riyadh and saying, ‘okay, from now on everything is going to be in yuan, no more Western currencies anymore.’ And we already have a mechanism for it. I did a column about that, basically explaining that it’s a very simple mechanism.”
“You buy oil futures at the Shanghai Exchange priced in yuan. So from now on you have a new benchmark, an oil benchmark in yuan that you transact in Shanghai. The Chinese say, ‘look, it’s linked to gold as well. You want to change yuan into gold? Simple. We have a gold exchange here in Shanghai and we have another one here in Hong Kong. You can trade all you want for gold.’ This is the way. It’s extremely simple. But not many people are aware of it. Only a few economists, in fact. And I have not seen this discussion in American media, for that matter,” Escobar continued.
That doesn’t mean, however, that the dollar will be replaced by the yuan: instead, a whole set of currencies will be used wiping out the greenback’s hegemony, according to the geopolitical analyst.
“I think we’re going to start with having multiple replacements, and then maybe in the second stage, these multilateral organizations start thinking, okay, why don’t we think about a fusion? Because we have different priorities,” he said.