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ECONOMICS AND FINANCE

RUSSIAN ANALYSIS: FED'S RAMPANT PRINTING MAY KILL US DOLLAR AND TRUMP'S PRESIDENTIAL AMBITIONS

5/8/2020

1 Comment

 
In the following you will find our translation of an article from rueconomics.ru with commentary and notes [in brackets] by Vince Dhimos. I would like to point out a surprising takeaway from this analysis:
​
There are millions of people, mostly Democrats, who have an unshakable belief that the Russians support Donald Trump as president and will support his candidacy this year just as they supposedly did in 2016. However, as a daily reader of the Russian press, particularly the very serious site RIA Novosti, I have long seen article after article criticising Donald Trump’s bizarre, warlike, hostile, arrogant, reckless and senseless moves in economics and foreign policy. Generally speaking, regardless of where they may have stood in 2016, the Kremlin, which stands behind RIA Novosti and many other news sites, including rueconomics.ru, is just about fed up with the antics of Donald Trump. After all, he and his pals in Congress managed to shut down the arguably most potentially lucrative Russian exportation project Nord Stream 2, designed to deliver 55 billion cubic meters of natural gas per year to Germany. The loss incurred from this brazen interference in European affairs is hard to calculate but it represents a fairly large percentage of Russian revenues once the project is finally completed (Russia estimates it should be finished sometime this year or at the beginning of 2021), and it threatens the European economy by depriving the Germans of cheap gas needed to fuel their industries. Although in fairness, it must be said that for now, part of the gas stream to West Europe is already being supplied via Ukraine, Russia is eager to break economic ties with a hostile state that has been a thorn in the side for Russia since the Maidan coup. But news like this rarely reaches the average US news consumer. Only the relatively few Americans who read the financial pages will have heard of this pipeline project and its suspension due to grossly unjust US sanctions. Therefore, the Democrats can keep up their chorus about “Russian meddling” and keep bashing Russia for supposedly supporting a president that in reality, they are sick to death of. Because hardly anyone knows the truth.
 
BEGIN TRANSLATION
 
US record debt is burying the dollar and Trump's presidential ambitions
 
May 07, 2020 Washington, United States
 
https://rueconomics.ru/440936-rekordnyi-gosdolg-ssha-khoronit-dollar-i-prezidentskie-ambicii-trampa
 
Despite the fact that the US public debt has reached a record level and will continue to grow, large-scale borrowing will not be able to seriously help the American economy. FBA Ekonomika Segodnya learned this from the head of the international economic organizations sector of the Centre for Economic Research, RISI Vyacheslav Kholodkov.
 
The US national debt has reached a new record level, having exceeded $25 trillion. In November, it reached the $23 trillion mark, but since February of this year it has begun to grow rapidly. The level has now reached the highest rate in history, and this is not the limit. In early May, the US Treasury announced plans to issue bonds for three trillion dollars over the next three months. That is, the size of borrowings for the third quarter is more than double the same indicator for the entire last year.
 
The sharp increase is associated with budget expenditures to combat the coronavirus pandemic. From July to September, total borrowing will amount to $677 billion. The Federal Reserve System (FRS) and its head Jerome Powell have already announced their readiness to buy back as many government securities on the secondary market as needed to overcome the effects of the crisis.
 
“These borrowings will have some impact on the American economy, as they are intended to be distributed to the population in one form or another – direct subsidies or social support,” Kholodkov notes. “But these financial injections can’t be considered a serious pillar of the economy – the impact will be small, because the situation in the USA is so difficult that it is already impossible to stop the negative processes with money.
 
For example, we are seeing a record level of unemployment which was not seen even during the Great Depression of 1928-1933. Borrowing will not fix it. In addition, we need to talk about the size of the public debt itself – it is, on the whole, unprecedented for the planet. Such a large debt will inevitably affect the status of the dollar in the world, as well as confidence in the US currency, which will inevitably be undermined."
 
The dollar is no longer omnipotent
 
In his day, US Treasury Secretary Timothy Geithner notified Congress on May 16, 2011 that the country's public debt had reached the maximum statutory level of $14 trillion. According to the official, he had to use "various accounting tricks" as measures to prevent default. In response, President Barack Obama said that if Congress does not increase the state debt limit by the morning of July 16, the United States may declare a technical default.
 
Congress people took this step, and since then it has been repeated periodically. In September 2017, the US government debt exceeded the $20 trillion mark. That day, President Donald Trump signed a law to temporarily raise the country's national debt threshold, which allowed unlimited federal loans. Thus, America accrued 10 trillion dollars in debt in just eight years. The previous 10 trillion took more than 100 years.
 
"After the Second World War, confidence in the dollar was unlimited, but in recent years its position as a global currency has been increasingly eroded. Investors no longer see it as a reliable financial instrument. The dollar is being squeezed off its pedestal by cryptocurrencies and gold, and countries are actively switching to trading in national currencies, as the abuse of sanctions toppled confidence in the dollar.
 
So far no one can tell at what point the process of abandoning the dollar will take on an avalanche-like character. Once this point is reached, investors will begin to massively ditch dollar assets, bringing down the US currency. While there is no viable replacement for the dollar, one will appear sooner or later. It will stay afloat only until the world community finds what the “buck” can be completely replaced with,” points out Kholodkov.
 
Trump had promised to reduce US debt
 
Despite the high debt, thanks to extremely low rates, the United States spends no more than $300 billion a year on interest payments on its securities. That means they can save up indefinitely. But if the rate on ten-year bonds rises from the current 2% to 4.5% (the basic forecast of Congress), then this will increase the cost of services to $ 800-900 billion a year in 7-10 years, and up to half of the tax revenues will be spent on government coupon payments.
 
Last summer, the US Congress warned that by 2049 public debt could reach the "unprecedented level" of 144% of the country's GDP. At that time it was stated that this meant "significant risks" for the American economy. It is noteworthy that this danger was taken into account by Trump during the 2016 election race. He promised to stop debt growth, and then lower the debt level. But today we learned that the White House is considering the possibility of not returning China's investments in US government bonds – Beijing holds $ 1.1 trillion in Treasuries.
 
“If the United States dares to withhold China’s money, it will accelerate the collapse of the dollar – China will withdraw its investments if possible, and all other players will follow suit. The consequences for the US currency and economy will be catastrophic. But so far this option is unlikely.
 
However, the situation in the American economy is very serious, and now Trump promises "rapid growth" and an "economic miracle" to America immediately after the quarantine has been lifted. These promises, in my opinion, should also be divided by at least three. After all, Trump has already failed all points of his election program, including a decrease in public debt.
 
Many have forgotten about Trump's tax reform, which also ended up being worthless. And now it is not necessary to say that the president will be able to radically change something by raising the state debt. But the situation may well affect Trump’s presidential ambitions, "concludes Vyacheslav Kholodkov.
 
WAR NEWS
 
Below is our translation of a report from Al-Maalomah, the media arm of the Iraqi Popular Mobilization Force.
 
I decided to post this translation because I was unable to find this report in any English-language, or even Russian-language sites.
 
You need to be aware that the PMF, though kept off the books, is actually recognized as a legitimate part of the Iraqi armed forces and does a large percentage of Iraq’s anti-terrorism operations. The Iraqi government must be careful not to trumpet this too loudly for fear of US reprisals, so they have not yet declared the PMF an official arm of their armed forces. But off the books, the PMU is appreciated and recognized for the anti-terror organization that it is. After all, after Soleimani was murdered by the Trump administration, the Iraqi people thronged to the centre of Baghdad in protest and the Iraqi parliament voted to oust not the Iranians but the American military!
 
However, the sleazy US media and political class have kept up a constant din of propaganda noise aimed at convincing the public that the PMU is controlled by Iran against the will of the Iraqis. This was their excuse for various attacks on PMF bases and, of course, for the killing of General Soleimani and a high-ranking Iraqi PMF official.
 
BEGIN TRANSLATION
 
https://www.almaalomah.com/2020/05/03/472021/
 
The PMF kills three “ISIS” members in a security operation in Salah al-Din
 
almaalomah / Baghdad ..
 
On Sunday, the deputy brigade commander of the 35th Brigade of the Popular Mobilisation Forces, Farhan Khudair Al-Deir, announced that three ISIS terrorist operatives had been killed and some of their arms, equipment and supplies were found in a security operation along the Tigris River in Salah al-Din Governorate.
 
Al-Deir said in an interview between Al-Maalomah and the PMF media, "The PMF carried out a security operation in the islands located in the Tigris River in response to the martyrs of Machkisha," noting that "the operation resulted in the death of three ISIS members."
 
Al-Deir added, "Some supplies of the terrorist organization were also found, as well as American-made weapons and foreign currencies in the possession of ISIS terrorist remnants."
 
END TRANSLATION
 
1 Comment
John McClain
5/11/2020 05:01:34 am

We have very few competent economics students who work with our government. They exist, against its will, and have little influence. The effort to establish "central banking" among "the States" was begun with the violating of our "articles of confederation, conference", and writing a constitution for a "nation", rather than continue with the notion of "Sovereign States", each able to trade with the world, and gathered together, solely for purposes of defense.
We had "central banking" a dozen times before 1915, but each were lawful, private, contractual, and required to "balance the books, and shut down" after a decade, and only able to renew their charter, if they were in fact, "profitable", easy to fulfill, with rational economics.
Wilson's press for the Fed, along with a complacent congress, ended this, and established "debt based economics" which reared its ugly head, in less than a decade. "When one goes out hunting dinner, loaded for rabbit, and encounter a bear, it is wise to never venture out hunting, without being prepared for bear".
The market signals of utter failure, were present the very first months of the Fed's existence. Those devoted to the idea, simply won't change, because the facts on the ground don't fit their narrative, they merely change the narrative.
One can only lie on a topic such as money, for so long, before everyone knows what the lie is, and while at one time, the cost was so small, it was accepted, however disliked, but as is pointed out in the opinions of actual economists, we've alienated every single nation in the world, to our "fiat currency", even our "allies" hate the cost of being connected to us. None wishes to remain connected, when we inevitably fail. There will be "no good outcome" for the U.S., and it will cost the world, a pretty penny, when we fail. "They" will all get over it, or collapse with us, and those who don't collapse, with stand because they chose the right works to prevent their own collapse, real assets, real money, real goods.
Semper Fidelis,
God Bless you and yours,
John McClain
Vanceboro, NC, USA

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