Loading ...A RETURN TO SOVEREIGNTY :
From TOM LUONGO :
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Here is the Preamble …The rest of it is paywalled but too good to miss…so look in the first 4 comments
PS ..My name is Fully and I Fully Endorse the Message : May I add..WE are going to kick their Globalshit Asses . Fuck em
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In the post-WWII West, nationalism has become a four-letter
word to be avoided by all “decent people,” at all costs. This is
the crux of the globalist mantra and its agenda to break down
the traditional bonds between family, friends, communities, and
nations.
This putsch towards the globalist ideal, however, is a ruse to
disguise the face of a tyrant. His tools morph with the times,
piggybacking on our curiosity and innovation to find new ways
to sell us our lives back to us at pennies on the dollar.
This putsch is failing as the chaos they need to implement their agenda breeds the
very behavior they have sought to marginalize, the sovereignty of individual choice.
This issue explores the limits of globalism as seen through the lens of a culture
immune to the mind-virus whose response to the unfolding changes on the world
stage I believe will shock the entire investing world.
The title of the Thesis is
Following Japan
here is the Nikkei Chart he refers to
For more than a year, we’ve been talking in this
newsletter about the end of globalism. In other words, the idea
that we’re all one connected planet and that should drive all of
our economic and social thinking.
The process of making those ideas real reached its zenith
during the “ZIRP years,” the period where all the major central
banks held the cost of their money at or below zero percent
interest. The COVID-19 pandemic was used to begin ushering
in new transnational architecture to regulate human travel and
trade within an emerging global system of control.
Institutions like the World Health Organization (WHO) were
elevated to issuing global health policies just like the World
Trade Organization (WTO) and the Organization for Economic
Cooperation and Development (OECD) issue the rules on
international trade.
The goal is to implement a top-down control layer while
simultaneously only allowing people and goods to move to
where those who control the system want them to go. If you
step out of line as a country you would be sanctioned, fined,
and ostracized. As a company you would be barred from doing
any business with those sanctioned and be forced to constantly
respond to new regulations coming from on high.
Competitive advantage would be regulated just like everything
else. This is the technocrat’s wet dream.
The problem with this plan is that it, like all battle plans, never
survives contact with the enemy, who respond in their own best
interests and go on living their lives by making other plans.
So, the big push for globalism as epitomized by the World
Economic Forum’s mission statement, “You will own nothing
and be happy (or else),” was met with ever increasing pushback
from pretty much the rest of the world.
Globalism, in essence, is just colonialism repackaged with the
serene face of trying to save humanity from itself. Cue H.L.
Mencken.
And those who have been victims of centuries of European
colonialism immediately saw this for what it was and began
reacting accordingly. Russia and China have led the way. Iran,
since the overthrow of the Shah in 1979, has understood this
problem as well, not that it was, as a country, capable of doing
much more than surviving the onslaught of scorn heaped on it.
By the beginning of 2023 what had been simmering in the
background for years exploded in the public commentary
sphere. De-dollarization was on everyone’s lips. The BRICS
alliance added six key new members to expand their influence
over important trade routes.
Sanctions as a weapon proved to be far less effective than they
had been previously. Russia’s surviving and, in some ways,
thriving in the face of the massive sanctions imposed in 2022
was a signal to the rest of the world that the Globalist system
was no longer as imposing as it once was.
But the big betrayal of globalism wasn’t the obstinance of the
Russians, the craftiness of the Chinese, or the resistance of the
Iranians. That betrayal came from the US itself in the form of
the Federal Reserve’s extremely aggressive monetary policy.
It broke away from the cartel of central banks who rigged the
global monetary system in their favor after the 2008 financial
crisis, conspiring to keep the flow of cheap dollars strong
enough to fund all the projects needed to finish building the big
Globalist Skyscraper.
The Return of Sovereignty
As I’ve posited for more than two years now, FOMC Chair
Jerome Powell’s policy has been resisted at every turn hoping to
use political influence on Capitol Hill at home and international
events such as the War in Ukraine to force the Fed back to the
fantasy world of zero-cost money.
It accelerated a massive move in global trade out of euros and
into dollars. Slowly, the Chinese yuan has taken market share
from the US dollar in Asian trade. The dominant Society for
Worldwide Interbank Financial Telecommunications (SWIFT)
has lost market share to China’s CIPS and Russia’s Mir systems
for handling international remittances.
Broadly, over the past few years the West has shifted from the
EUR to the USD in trade settlement, while the East has shifted
away from both currencies.
So, dollars are flowing out of the east to the west. Gold, on the
other hand, evidenced by the persistent draining of the COMEX
and LBMA vaults, is flowing east. This has prompted soft
capital controls in the US on the flow of physical gold which
manifests as persistent premiums paid for gold in China versus
the price paid in Chicago and London.
Vince Lanci and I discussed these issues at length in episodes
#154 and #161 of the Gold Goats ‘n Guns Podcast. I suggest
these for further nuanced discussion of what I’m getting at here.
Central banks have revealed themselves to be big buyers of gold
to shore up their national balance sheets and protect themselves
from a rising dollar. This is what Russia did for ten years in
preparation for the day when the West would cut it out of the
global financial system.
We’re seeing this on a smaller scale from countries like Poland,
China, Hungary, Serbia, Kazakhstan and even Japan. Buying
gold is the ultimate statement of national sovereignty by a
government and central bank. It’s a repudiation of the Globalist
system intent on removing the final vestiges of physical
collateral from the financial system and replace it with carbon
credits as I’ve discussed in previous issues of the newsletter.
Where we are today is in the ugly
transition from globalism to
nationalism. Now, since World War II
nationalism has been the political
equivalent of a four-letter word
beginning with “N” and ending in “I”
but like so many things in today’s
world, that is simply a conditioned
response to incessant propaganda.
I prefer the term sovereigntism when discussing these things to
sidestep the negative connotations.
What Powell has unleashed with 5+% Fed Funds Rate is a wave
of sovereigntism across the world. No longer can globalists use
cheap dollars to circumvent central bank policy to fund
operations which undermine local governments intent on
protecting themselves as efficiently.
There is still a tremendous amount of money sloshing around
out there to buy politicians, influence corporate boards, fund
NGOs, etc. But with the world as indebted as it is, with
everyone’s balance sheets from the personal to the national so
weak because of this debt, it doesn’t take a massive change in
the cost of money to drain trillions of dollars from this web of
influence.
As I’ve pointed out many times, what leverage (debt) giveth on
the way up it taketh away twice as fast on the way down.
The longer Powell holds the cost of dollars at these or higher
levels, the more he tightens the screws on the existing globalist
system that requires cheap dollars to function. China and
Russia are pulling trade flows out of both dollars and euros to
put even more pressure on that system.
This process of reversing globalism is in the early stages.
There’s a long way to go yet. And that means looking to where
things are headed next.
The Davos Crowd is my term for globalism in the real world.
Their agenda leads to universal serfdom for us and unassailable
power for them. This reversal of the flow of dollars is the
biggest threat to them.
The European Union is their globalist gendarme using lawfare
and regulations to impose their system on the rest of the world.
As such, since Powell refuses to back down, the EU has
accelerated its plans to clamp down on capital movement both
within the EU and out of it. They are moving quickly to end the
free movement not just of money, but people themselves, and
ideas in the form of disinformation monitoring and outright
censorship.
What we’ve seen from these people so far is just the beginning
of what they will do. This dollar reversal is an existential threat
to the oldest powers in the western world. They will do
anything to prevent their bankruptcy.
Anything.
We also see this in the intense fighting on Capitol Hill in the US
as their quislings try to fast-track ridiculous regulations through
the three-letter agencies, erect political barricades around
spending cuts, and manipulate the most important markets in
the world such as oil, gold, and US Treasuries.
The Japan Model
And this brings me to Japan.
Japan, traditionally, has been the model
for a domestic market mostly
unconcerned with the rest of the world.
Mrs. Watanabe, the fictional typical
Japanese investor, is Japanese first and
an investor second.
As long as she can derive a positive real yield (nominal yield
minus inflation) from her investing in Japan, she is content to
keep her money “in Japan.” That is the focus of the Bank of
Japan’s monetary policy. If it strays from that, Mrs. Watanabe
will be forced to look abroad for yield.
And that’s when Japan’s national balance sheet with its high
Debt-to-GDP ratio comes starkly into focus.
As the Fed tightened, Japan has been the laggard in the shift
away from zero-bound interest rates, having continued using
Yield Curve Control (YCC) to keep prices of Japanese assets
high enough to prevent Mrs. Watanabe from getting a
wandering eye.
Japan has been able to get away with this because of all the
developed economies its inflation has been the lowest. CPI
inflation in Japan today has risen to 3.2%, while we’ve
struggled with much higher inflation which necessitated, in
standard Keynesian analysis, much higher interest rates to
combat.
They’ve held onto this policy while allowing the yen to fall hard
over the past two years as the US dollar strengthened.
Remember, Japanese investors don’t much care about the yen’s
purchasing power abroad.
But now Japan has reached the fork in the road. Something has
to change. And, as I predicted they would last year, the Bank of
Japan finally ended YCC as a policy at the October Board of
Governors meeting.
What this means is that we are in the early stages of Japan
pulling a major policy reversal on the world similar to the
advent of “Abenomics” in 2011, when Shinzo Abe came to
power and radically weakened the yen to support the global
central bank push to the zero-bound.
Japan was a good global citizen during the ZIRP/NIRP years.
Now, it’s getting ready to support the Fed’s policy but on its
own terms. The Japanese government was a prime mover in
extending globalism last decade, but as long as it brought home
the bacon in the form of slightly positive real yields its domestic
investor class was content.
With rates where they are today, the natives are restless, and
Mrs. Watanabe wants her money treated better. She doesn’t
care where she gets that yield, bonds or equities, as long as she
gets it.
And in my analysis the Bank of Japan is getting ready to give
her exactly that.
Ending YCC means allowing interest rates to rise to reflect more
of a market economy for Japanese Government Bonds (JGBs).
It means allowing their price to fall to reflect higher inflation so
that real yield on them approaches a positive number.
That implies Japanese investors rotating out of JGBs into
Japanese equities, as indexed by the Nikkei 225, which broke
out earlier this year and has run into resistance in recent
months (see chart).
It also means that the Bank of Japan’s ferocious selling of US
Treasuries to blunt the fall of the yen will end, if it hasn’t
already from recent Treasury International Capital (TIC) data.
The BoJ sold US Treasuries to buy USD, this weakened the Yen
and kept JGBs priced high (low yields).
I expect Japan to reverse this and begin buying US Treasuries to
strengthen the yen a lot and allow yields on JGBs to rise. They
can also dump a lot of US dollars on the market to move the
yen significantly, and I believe will do so when the time is right.
This will accelerate the shift from bonds to stocks sending the
Nikkei 225 soaring to new highs while also taming inflation as
a stronger yen will buy more energy on the global market.
Now with oil prices near $80 per barrel and the yen at ¥149
versus the US dollar is the perfect time to begin this shift.
Too many in the financial commentary space are not prepared
for this. They don’t believe Japan can do this. But Japan
absolutely can.
Japan has roughly $1.3 trillion USD in forex reserves, including
a big pile of cash. They are running a +1% of GDP current
account surplus, meaning they are a net lender to the world
while also running a slightly positive trade balance in dollar
terms. The weak yen has stimulated Foreign Direct Investment
which has been positive for over a year.
These are not the statistics of a country on the verge of
economic collapse. But they are the stats of a major economy
that still makes things and can absorb a stronger domestic
currency thanks to reinvestment in its domestic economy. This
is exactly what I think they are about to encourage, especially if
they push through significant tax reductions, which is being
hotly debated right now.
It’s time for the Kishida government to defend Japan. Public
opinion in Japan has turned against them because of high
inflation. Just like it is well past time for the US government
and financial powers to defend the US.
The standard view of Japan ending YCC is that they must,
which is correct. What those analysts are wrong about is what
Japan’s response will be and what it will cause.
One of our community members has dubbed the standard
short-Japan-trade as the “Widowmaker Trade,” because it has
been that so many times in the past for so many hedge fund
managers focused only on Japan’s balance sheet and not its
balance of payments.
Japan’s high Debt-to-GDP ratio is another way of saying its
national balance sheet is weak, too much debt, not enough
income, costs are too high. For a company, you cure a weak
balance sheet with strong cash flow, lower costs, and
reinvestment in your business.
This is exactly what Japan is setting up to do here.
see Nikkei Chart in the post
The Race to Sovereigntism
It’s also the same dynamic the US is setting up with Powell’s
“Higher for Longer” interest rate policy for the US. Powell’s
problems are orders of magnitude bigger than Ueda’s at the
BoJ. While reversing the global flow of dollars he also must
create sinks for those dollars and the US Treasuries that will
come home as de-dollarization continues and globalism fails.
That’s his burden, which is beyond the scope of this month’s
discussion. What I’ve outlined for Japan is what I see the rest
of world adopting in this shift from globalism to sovereigntism
at the domestic political and economic level.
Everyone’s response will differ country to country. Japan’s
response will be in coordination with US policy because our
two economies are so intertwined. I still expect the BoJ to act
as the Fed’s wingman to assist US policy.
But, at the same time, I also see over the next decade Japan to
regain more of its independence as the US retrenches, focusing
inwards on domestic reinvestment.
In essence, Dexter and I have long been talking about the push
to being ‘ungovernable’ as the way express your individual
sovereignty. The same thing can be applied to national policy if
our leadership acts accordingly.
The biggest barrier to accepting this idea is that we so rarely
see our politicians and critical corporate officers act this way.
We’re all so used to them bowing to the forces of globalism that
we, understandably, resist this possibility.
Humans only ever really change their behavior when faced with
some form of existential crisis. Until we stare into some abyss,
personally or culturally, do we finally face the unsustainability
of our current path. Would it be wiser to make changes before
that point? Of course.
Are any of us really that wise? From personal experience I can
answer that with an emphatic, “No.”
This is why I expect the globalist forces of The Davos Crowd will
fight the world “turning Japanese” with a vengeance. It is for
this reason and many others that I am simultaneously hopeful
and scared to death of what’s on tap for 2024