Why are so many people suddenly moving away from major U.S. cities? Recently, I wrote about the mass exodus that is happening out of the state of California, but the truth is that what is happening there is just part of a national phenomenon. The populations of some of our largest cities are steadily shrinking, and many experts are completely mystified by the seismic demographic shifts that we are now witnessing. Of course there are a whole host of reasons why people would want to move away from huge cities such as Chicago, Detroit, Baltimore and Cleveland. For some families, it simply comes down to wanting a better life for their children. But as you will see below, there are others that believe that things in this country are about to take an apocalyptic turn, and the big cities will not be a place that you want to be when economic collapse, rioting, looting, civil unrest and crime are all spiraling out of control.
According to data just released by the U.S. Census Bureau, Chicago took the prize for the biggest population loss from 2015 to 2016, and it was followed by Detroit and Baltimore…
The counties containing Chicago, Detroit and the independent city of Baltimore were the biggest population losers in the United States from 2015 to 2016, according to data released today by the Census Bureau.
Cook County, Ill., where Chicago is the county seat, had the largest population loss of any county in the country from 2015 and 2016.
Cook County alone had a “domestic migration” loss of more than 66,000 people. That is a staggering number of people to lose in a single year.
Cleveland and Milwaukee were also very high on the list, and some are pointing out that all of these cities are in relatively colder climates and are all struggling economically.
So you certainly can’t blame people living in these cities for wanting to find somewhere warmer and more economically prosperous to live.
But others that are moving away from large cities are deeply concerned about where things are ultimately headed in this country. It doesn’t take a genius to see that anger, frustration and hatred are rising all around us, and many believe that conditions are ripe for civil unrest and civil conflict. In fact, best-selling author Doug Casey believes that we could soon see a “civil war” that is set off by a “financial collapse”…
Best-selling author Doug Casey wrote “Crisis Investing” at the time when the U.S. political landscape was transitioning from the Carter Administration to the Reagan Administration. Now, Casey sees a coming crisis that is equal or worse than the Civil War. Casey explains, “In the U.S. right now, there seems to be so much antagonism it’s almost like pre-Civil War. There is actually hatred in the U.S. at this point. It used to be the Republicans and Democrats could disagree, but they could have a civil conversation about a difference of opinion. Now, it’s active hatred between these two groups. This is not going to end well.”
Casey thinks the coming financial collapse will be the trigger. Casey says, “It’s going to come down eventually. I am worried about that, but we are in a situation where the country seem like it is just before a civil war. It will be more serious than just a financial collapse, and it is likely to be set off by a financial collapse.”
Without a doubt, our financial system is certainly primed for a financial collapse, and when things get really, really bad in this country how will people respond?
Many have decided that they want to get away from the major population centers before we find out the answer to that question.
For example, not too long ago the Chicago Tribune ran a story about why so many preppers are moving to the Great Northwest. One of the individuals profiled was an ex-resident of California named Trevor Treller who moved up to north Idaho prior to the recent election…
Trevor Treller, 44, who carries a small Smith & Wesson pistol on his hip, moved to north Idaho last year from Long Beach, California, and recently paid a little less than $400,000 for a defensible three-bedroom house on five wooded acres.
Treller, a sommelier at a local resort, said Obama was a key factor in his decision. He said the president has inflamed racial tensions in America, presided over a dangerous expansion of the national debt, been “hostile” to Second Amendment rights and failed to curtail the nuclear ambitions of North Korea and Iran.
Treller said any one of those factors could lead to crippling chaos, so he and his wife have laid in food, weapons and ammunition and are installing an iron gate across their long gravel driveway.
Of course it isn’t just ordinary Americans such as Treller that are deeply concerned about what is coming.
Less than a week ago, CNN ran an article entitled “Billionaire bunkers: How the 1% are preparing for the apocalypse“…
Many of the world’s elite, including hedge fund managers, sports stars and tech executives (Bill Gates is rumored to have bunkers at all his properties) have chosen to design their own secret shelters to house their families and staff.
Gary Lynch, general manager of Texas-based Rising S Company, says 2016 sales for their custom high-end underground bunkers grew 700% compared to 2015, while overall sales have grown 300% since the November US presidential election alone.
So why are Bill Gates and his billionaire friends so interested in buying luxury survival bunkers if everything is going to be just fine?
Can someone explain that one to me?
Everywhere you look, retail stores are closing and economic warning signs are flashing red, but those that sell survival bunkers to the elite are making tremendous amounts of money.
And I certainly wish that I could afford one of these survival bunkers, because they sound quite appealing…
One of those shelters, Vivos xPoint, is near the Black Hills of South Dakota, and consists of 575 military bunkers that served as an Army Munitions Depot until 1967.
Presently being converted into a facility that will accommodate about 5,000 people, the interiors of each bunker are outfitted by the owners at a cost of between $25,000 to $200,000 each. The price depends on whether they want a minimalist space or a home with high-end finishes.
The compound itself will be equipped with all the comforts of a small town, including a community theater, classrooms, hydroponic gardens, a medical clinic, a spa and a gym.
These elitists plan to ride out the coming American apocalypse in style while the world above them is literally going insane.
Meanwhile, most of the general population continues to be completely oblivious to what is about to happen to them, and so the events that are coming will close upon them suddenly like a trap and there will be no escape.
The United States and China are the two largest economies in the world by far, and the upcoming trade war that is about to erupt will be cataclysmic for both sides. The Trump administration and the Chinese government are both gearing up for a prolonged trade war, and this is going to have very severe implications for the entire global economy. During the campaign, Donald Trump repeatedly stated that we “can’t continue to allow China to rape our country”, and he was quite correct about that. Over the past ten years, the U.S. has run a trade deficit of over $2 trillion with China, and as a result of imbalanced trade we have lost tens of thousands of manufacturing businesses, millions of good paying jobs, and hundreds of billions of dollars of tax revenue.
So clearly something needs to be done to balance our trade with China and other countries. But the situation must also be handled delicately, because trade disruptions could bring substantial short-term economic pain.
Prior to winning the election, Trump threatened to unilaterally impose a 45 percent tariff on Chinese exports. Unfortunately, China is not just going to sit there and take whatever Trump throws at them. Every single time the U.S. has imposed tariffs on Chinese goods in the past, China has responded by slapping tariffs on U.S. goods.
And this time around, the Chinese are already preparing a very harsh response even though Trump has not officially made his move yet…
The policy advisers believe the Trump administration is most likely to impose higher tariffs on targeted sectors where China has a big surplus with the United States, such as steel and furniture, or on state-owned firms.
China could respond with actions such as finding alternative suppliers of agriculture products or machinery and manufactured goods, while cutting its exports of consumer staples such as mobile phones or laptops, they said.
Other options include imposing tax or other restrictions on big U.S. firms operating in China, or limiting their access to China’s fast-growing services sector, they added.
When this coming trade war erupts, economic activity will be reduced significantly. And considering the fact that U.S. economic growth is projected to be about one percent in the first quarter of 2017, that could be more than enough to push us into a deep recession.
Some of the biggest U.S. exports to China include airplanes, autos and agricultural products, and the Chinese are ready to attack on all of those fronts. The following comes from CNN…
Here’s what Global Times, a newspaper backed by the Communist Party, had to say about how Beijing would respond to tariffs of 45%:
“A batch of Boeing orders will be replaced by Airbus,” the paper said Monday. “U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.”
But once again, something must be done for the long-term good of our country. We have been allowing the Chinese to flood our shores with super cheap goods, but meanwhile they have already been hitting our products with ridiculously high tariffs. Here is just one example…
U.S.-made cars exported to China face tariffs of at least 25 percent, including American-made Cadillacs. The American-made Jeep Grand Cherokee costs $27,490 at U.S. dealerships and cost at least $85,000 in China.
What we have with China today is very far from “free trade”, and if they want to trade with us they need to do so on a level playing field.
But China will never allow that to happen. As Donald Trump has correctly stated, they have been “raping” us for years, and they are going to fight very hard to keep anything from upsetting the status quo.
Trump has got to do something for the long-term good of the U.S. economy, but he has also got to try to find a way to avoid a major trade war, because a major trade war would be exceedingly painful for both countries.
Most Americans don’t realize this, but more iPhones are actually sold in China than in the United States. And it is being projected that Boeing will sell nearly 7,000 airplanes to China over the next decade…
By the end of 2015, Chinese consumers bought 131 million iPhones. The total sales to U.S. customers during the same period stood at only 110 million. And iPhones are only a small part of U.S. exports. Boeing, which employs 150,000 workers in the U.S., estimates that China will buy some 6,810 airplanes over the next 20 years, and that market alone will be worth more than $1 trillion.
So what happens if all or part of that economic activity goes away?
According to one study, in the short-term millions of U.S. jobs could potentially be at risk if a major trade war happens…
“Millions of American jobs that appear unconnected to international trade—disproportionately lower-skilled and lower-wage jobs—would be at risk,” according to the PIIE study.
And of course a major trade war would hit American consumers very hard as well.
Just think about it. When you go into a Wal-Mart or a dollar store, are more of the products made in the United States or in China?
A trade war would hit all of us in the wallet as the cost of living goes up. And considering the fact that about two-thirds of the country is essentially living paycheck to paycheck, that would not be a good thing.
So yes, our trading relationship with China definitely needs to be rebalanced, but Trump needs to find a way to make this transition as minimally disruptive as possible.
A major trade war is just one of the “black swans” that could push us into the kind of economic nightmare scenario that I have been warning about for a very long time. And sometimes a trade war can serve as a prelude to a real war. The South China Sea has become a major sticking point between the U.S. and China, and the Chinese are getting ready to cross one of the “red lines” that Barack Obama established while he was still in office…
Beijing has plans to start construction on the disputed Scarborough Shoal this year.
China has reclaimed land in both the Spratly and Paracel Islands and constructed military outposts, but it has been hesitant to start construction on the Scarborough Shoal. Xiao Jie, the mayor of Sansha — an administrative base for China’s South China Sea activities masquerading as a city — said this week that China intends to construct environmental monitoring stations on a number of territories in the South China Sea, including the Scarborough Shoal.
So how will Trump respond when construction on Scarborough Shoal actually begins?
It will be very interesting to watch how that plays out.
The relationship between the United States and China was starting to deteriorate badly even before Donald Trump was elected, and it is very easy to see how it could totally break down in the months ahead.
And considering how interconnected the global economy is today, the United States and China could easily end up dragging down everyone else along with them.
We always knew that this would start happening. Earlier this month, I wrote about the severe economic problems that are plaguing South America, but up to this point I have neglected to discuss the horrific famines that are breaking out all over Africa. Right now there is a desperate need for food in South Sudan, Somalia, northeast Nigeria, Eritrea and Kenya. And Yemen, even though it is not technically part of Africa, is being affected by many of the same factors that are crippling nations all over eastern Africa. The United Nations says that more than 20 million people could die from starvation and disease if nothing is done. When I write about economic collapse, this is the kind of thing that I am talking about, and we are starting to see alarming conditions spread across the globe. Many believe that we could never possibly face this kind of food crisis in the western world, but unfortunately wishful thinking will only get you so far.
The United Nations was formed in 1945, and the UN has just announced that what we are facing this year is “the largest humanitarian crisis since the creation of the UN”. The following comes from a CNN article entitled “20 million at risk of starvation in world’s largest crisis since 1945, UN says“…
“We stand at a critical point in history. Already at the beginning of the year we are facing the largest humanitarian crisis since the creation of the UN,” UN humanitarian chief Stephen O’Brien said Friday.
“Now, more than 20 million people across four countries face starvation and famine. Without collective and coordinated global efforts, people will simply starve to death. Many more will suffer and die from disease.”
It would be hard to overstate the level of human suffering that we are witnessing in many parts of Africa at this moment. In Somalia, the UN estimates that more than 6 million people are in desperate need of food aid…
As Somalia inches closer to a calamitous famine, the prospect of utter devastation and colossal loss of human life is once again becoming an imminent reality. The humanitarian situation in Somalia is deteriorating by the day with up to 6.2 million people in need of urgent aid. People across Somalia have been forced to walk hundreds of miles in search of food, water and shelter- with women and children disproportionately affected. Over 300,000 children under the age of five are severely malnourished, with over 200,000 more children at risk of acute malnutrition.
In South Sudan, close to half the population is in dire need of assistance, and things have gotten so bad there that people will literally eat grass if they can find it…
Across South Sudan more than one million children are believed to be acutely malnourished and UNICEF have said that if urgent aid does not reach them, many of them will die. “There is no food, we eat anything we can find,” one South Sudanese mother told ITV. “We will find grass, we will eat it. That’s just the way it us for us now.”
Over in Yemen, there are about seven million people in need of food help, and authorities are warning that if nothing is done “millions of children” could starve to death…
“The numbers affected are absolutely extraordinary,” said Mark Kaye, Save the Children’s Yemen spokesperson.
“We keep on talking about a country that’s on the brink of famine, but for me these numbers highlight that we’re at the point of no return. If things are not done now we are going to be looking back on this and millions of children will have starved to death, and we’ll all have been aware of this for some time. That will shame us as an international community for years to come.
Eritrea was not specifically included in the recent UN alert, but it should have been. Much of the country has been hit by a crippling drought, and approximately half of all children in Eritrea are stunted…
But we cannot understand why Eritrea is not included in the appeal. Unicef has confirmed what we know from our friends and families inside the country. In a report in January, the agency said that the El Niño drought has hit half of all Eritrea’s regions. Acute malnutrition is widespread. As Unicef put it: “Malnutrition rates already exceeded emergency levels, with 22,700 children under five projected to suffer from severe acute malnutrition in 2017 … Half of all children in Eritrea are stunted, and as a result, these children are even more vulnerable to malnutrition and disease outbreaks.”
We have been warned that there would be famines in diverse places in these times. But here in the western world we tend to be lulled into a false sense of security by our comfortable lives, not realizing that the massively inflated standard of living that we have been enjoying has been fueled by the largest mountain of debt in the history of the planet.
In Kenya, a national emergency has been declared due to drought and famine. For those of you that are parents, what would you do if your children were crying out for food but you didn’t have anything to give them? The following story from Kenya is beyond heartbreaking…
Emmanuel Ayapar is three years old and can no longer walk. The flesh on his legs, which dangle from his mother’s hip as she carries him around, is wasting away.
He seems listless and sad, tongue flicking repeatedly in and out of his mouth.
‘We do not have enough food,’ said Veronica, his 28-year-old mother. ‘We eat only once a day.’
The little boy is suffering from severe malnutrition and is at risk of starving to death. He weighs just 15lb – half the typical weight for a boy of his age.
I don’t even know what to say after that.
In the western world we can be so incredibly self-absorbed that we don’t even realize that children are literally starving to death on the other side of the planet.
Hopefully those of us that live in “wealthy” western countries will step up to the plate and aid those in need, and hopefully this crisis will also help us to understand that we need to prepare for the day when things get difficult in our own nations too.
You can’t accuse Federal Reserve Chairman Ben Bernanke of not living up to his nickname. Back in 2002, Bernanke delivered a speech entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here” in which he referenced a statement by economist Milton Friedman about fighting deflation by dropping money from a helicopter. Well, it might be time for a new nickname for Bernanke because what he did today was a lot more than drop money from a helicopter. Today the Federal Reserve announced that QE3 will begin on Friday, but it is going to be much different from QE1 and QE2. Both of those rounds of quantitative easing were of limited duration. This time, the quantitative easing is going to be open-ended. The Fed is going to buy 40 billion dollars worth of mortgage-backed securities per month until they have decided that the economy is in good enough shape to stop. For those that get confused by terms like “quantitative easing” and “mortgage-backed securities”, what the Federal Reserve is essentially saying is this: “We’re going to print a bunch of money and buy stuff for as long as we feel it is necessary.” In addition, the Federal Reserve has promised to keep interest rates at ultra-low levels all the way through mid-2015. The course that the Federal Reserve has set us on is utter insanity. Ben Bernanke can rain money down on us all he wants, but it is not going to do much at all to help the real economy. However, it will definitely hasten the destruction of the U.S. dollar.
And the Federal Reserve is apparently very eager to get QE3 going. Purchases of mortgage-backed securities are going to start on Friday.
In the coming months, hundreds of billions of dollars that the Federal Reserve has zapped into existence out of nothing will be injected into our financial system.
So what will happen to all of this new money?
If banks and financial institutions use that money to make loans then it could have somewhat of a positive impact on the economy in the short-term.
However, the truth is that it isn’t as if banks are hurting for cash to loan out. In fact, right now banks are already sitting on $1.6 trillion in excess reserves. Just like with the first two rounds of quantitative easing, a lot of the money from QE3 will likely end up being put on the shelf.
But the stock market loved the news because they know that the previous two rounds of quantitative easing have been great for the financial markets. On Thursday, the stock market soared to levels not seen since December 2007.
There is much rejoicing on Wall Street right now.
And this stock market bounce is great for Bernanke’s good buddy Barack Obama.
Obama nominated Bernanke to a second term as Fed Chairman, and this might be Bernanke’s way of paying him back.
But of course the Fed is supposed to be “above politics” so that would never happen, right?
The Federal Reserve essentially “crossed the Rubicon” today. No longer will quantitative easing be considered an “emergency measure”. Rather, it will now be considered just another “tool” that the Fed uses in the normal course of business.
Considering how vulnerable the U.S. dollar already is, announcing an “open-ended” round of quantitative easing is utter foolishness. According to the Fed, when you add the 40 billion dollars of new mortgage-backed security purchases per month to all of the other “easing” measures the Fed is continuing to do, the grand total is going to come to about 85 billion dollars a month. The following is from the statement that the Fed released earlier today….
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
So what does all of this mean?
I really like how one analyst put it when he described this announcement as a “I’m gonna ease till your eyes bleed kinda statement“.
The Fed also promised to keep interest rates at “exceptionally low levels” until mid-2015….
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
It seems that whenever the U.S. economy gets into trouble, Bernanke and his friends at the Fed only have one prescription and it goes something like this….
“Print more money and promise to keep interest rates near zero even longer.”
Of course a lot of Republicans are quite disturbed that QE3 was announced with just a couple of months remaining in a very heated election battle.
Even big news organizations such as CNBC are commenting on this….
Though the Fed is ostensibly politically independent, the decision comes at a ticklish time with the presidential election less than two months away.
And without a doubt the mainstream media will be proclaiming this to be “good news” for the economy in the short-term.
But is QE3 really going to help the average person on the street?
Well, first let’s take a look at employment. We are told that one of the primary reasons for QE3 is jobs.
But did QE1 and QE2 create jobs?
The answer is clearly no.
As you can see from the chart below, the percentage of working age Americans with a job fell dramatically during the last recession and has not bounced back since that time despite all of the quantitative easing that has been done already….
So why try the same thing again when it did not work the first two times?
But what more quantitative easing is likely to do is to pump up stock market values because a lot of the money from QE3 is going to end up being put into stocks and other investments.
This is going to help the wealthy get even wealthier, and it is going to make the “wealth gap” between the rich and the poor even larger in America.
QE3 is also probably going to cause commodity prices to rise just like QE1 and QE2 did.
That means that you will be paying more for gasoline, food and other basic necessities.
So there may not be more jobs, but at least you will get the privilege of paying more for things.
The inflation that QE3 will cause will be particularly cruel for those on fixed incomes such as retirees.
None of the extra money from QE3 is going to go into their pockets, but they will have to pay more to heat their homes and fill up their shopping carts.
And the “exceptionally low interest rate” policy of the Federal Reserve is absolutely devastating for those that have saved for retirement and that are relying on interest income for their living expenses.
In short, quantitative easing is very good for the wealthy and it is very bad for the average man and woman on the street.
But what else would you expect from the Federal Reserve?
It is imperative that we educate the American people about the Federal Reserve and about how they are destroying our economy. For much more on this, please see my previous article entitled “10 Things That Every American Should Know About The Federal Reserve“.
Perhaps the biggest danger from QE3 is that it could greatly hasten the day when the U.S. dollar ceases to be the reserve currency of the world.
The rest of the world is not stupid. They see that the Federal Reserve is now firing up the printing presses whenever they feel like it. They can see the games that we are playing with our currency.
Why should the rest of the world continue to use the U.S. dollar to trade with one another when the United States is constantly debasing it and playing games with its value?
As I wrote about the other day, China and Russia have been calling for a new reserve currency for the world for several years. They have been leading the charge to conduct international trade in currencies other than the U.S. dollar, and I have documented many of the major international agreements to move away from the U.S. dollar that have been made in the last couple of years.
The status of the U.S. dollar in the world has already been steadily slipping, and now Helicopter Ben Bernanke pulls this kind of nonsense.
We are handing the rest of the world an excuse to abandon the U.S. dollar on a silver platter.
And when the rest of the globe rejects the U.S. dollar as a reserve currency, the dollar will crash, the cost of living will increase dramatically, our standard of living will go way down and we will never fully recover from it.
So if you think that things are “bad” now, just wait until that happens.
The U.S. dollar is one of the best things that the U.S. economy still has going for it, and Helicopter Ben Bernanke is doing his best to absolutely destroy that.
What is your opinion of QE3? Please feel free to post a comment with your thoughts below….
Is the petrodollar dead? Well, not yet, but the nails are being hammered into the coffin even as you read this. For decades, most of the nations of the world have used the U.S. dollar to buy oil and to trade with each other. In essence, the U.S. dollar has been acting as a true global currency. Virtually every country on the face of the earth has needed big piles of U.S. dollars for international trade. This has ensured a huge demand for U.S. dollars and U.S. government debt. This demand for dollars has kept prices and interest rates low, and it has given the U.S. government an incredible amount of power and leverage around the globe. Right now, U.S. dollars make up more than 60 percent of all foreign currency reserves in the world. But times are changing. Over the past couple of years there has been a whole bunch of international agreements that have made the U.S. dollar less important in international trade. The mainstream media in the United States has been strangely quiet about all of these agreements, but the truth is that they are setting the stage for a fundamental shift in the way that trade is conducted around the globe. When the petrodollar dies, it is going to have an absolutely devastating impact on the U.S. economy. Sadly, most Americans are totally clueless regarding what is about to happen to the dollar.
One of the reasons the Federal Reserve has been able to get away with flooding the financial system with U.S. dollars is because the rest of the world has been soaking a lot of those dollars up. The rest of the world has needed giant piles of dollars to trade with, but what is going to happen when they don’t need dollars anymore?
Could we see a tsunami of inflation as demand for the dollar plummets like a rock?
The power of the U.S. dollar has been one of the few things holding up our economy. Once that leg gets kicked out from under us we are going to be in a whole lot of trouble.
The following are 11 international agreements that are nails in the coffin of the petrodollar….
#1 China And Russia
China and Russia have decided to start using their own currencies when trading with each other. The following is from a China Daily article about this important agreement….
China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.
Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
“About trade settlement, we have decided to use our own currencies,” Putin said at a joint news conference with Wen in St. Petersburg.
The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.
#2 China And Brazil
Did you know that Brazil conducts more trade with China than with anyone else?
The largest economy in South America has just agreed to a huge currency swap deal with the largest economy in Asia. The following is from a recent BBC article….
China and Brazil have agreed a currency swap deal in a bid to safeguard against any global financial crisis and strengthen their trade ties.
It will allow their respective central banks to exchange local currencies worth up to 60bn reais or 190bn yuan ($30bn; £19bn).
The amount can be used to shore up reserves in times of crisis or put towards boosting bilateral trade.
#3 China And Australia
Did you know that Australia conducts more trade with China than with anyone else?
Australia also recently agreed to a huge currency swap deal with China. The following is from a recent Financial Express article….
The central banks of China and Australia signed a A$30 billion ($31.2 billion) currency-swap agreement to ensure the availability of capital between the trading partners, the Reserve Bank of Australia said.
“The main purposes of the swap agreement are to support trade and investment between Australia and China, particularly in local-currency terms, and to strengthen bilateral financial cooperation,” the RBA said in a statement on its website. “The agreement reflects the increasing opportunities available to settle trade between the two countries in Chinese renminbi and to make RMB-denominated investments.”
China has been expanding currency-swap accords as it promotes the international use of the yuan, and the accord with Australia follows similar deals with nations including South Korea, Turkey and Kazakhstan. China is Australia’s biggest trading partner and accounts for about a quarter of the nation’s merchandise sales abroad.
#4 China And Japan
The second and third largest economies on the entire planet have decided that they should start moving toward using their own currencies when trading with each other. This agreement was incredibly important but it was almost totally ignored by the U.S. media.
According to Bloomberg, it is anticipated that this agreement will strengthen ties between these two Asian giants….
Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.
China is Japan’s biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier.
#5 India And Japan
It is not just China making these kinds of currency agreements. According to Reuters, India and Japan have also agreed to a very large currency swap deal….
India and Japan have agreed to a $15 billion currency swap line, Japan’s Prime Minister Yoshihiko Noda said on Wednesday, in a positive move for the troubled Indian rupee, Asia’s worst-performing currency this year.
#6 “Junk For Oil”: How India And China Are Buying Oil From Iran
Iran is still selling lots of oil. They just aren’t exchanging that oil for U.S. dollars as much these days.
So how is Iran selling their oil without using dollars?
A Bloomberg article recently detailed what countries such as China and India are exchanging for Iranian oil….
Iran and its leading oil buyers, China and India, are finding ways to skirt U.S. and European Union financial sanctions on the Islamic republic by agreeing to trade oil for local currencies and goods including wheat, soybean meal and consumer products.
India, the second-biggest importer of Iran’s oil, has set up a rupee account at a state-owned bank to settle as much as much as 45 percent of its bill, according to Indian officials. China, Iran’s largest oil customer, already settles some of its oil debts through barter, Mahmoud Bahmani, Iran’s central bank governor, said Feb. 28. Iran also has sought to trade oil for wheat from Pakistan and Russia, according to media reports from the two countries.
#7 Iran And Russia
According to Bloomberg, Iran and Russia have decided to discard the U.S. dollar and use their own currencies when trading with each other….
Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow.
The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said.
#8 China And Chile
China and Chile recently signed a new agreement that will dramatically expand trade between the two nations and that is also likely to lead to significant currency swaps between the two countries….
The following is from a recent report that described this new agreement between China and Chile….
Wen called on the two nations to expand trade in goods, promote trade in services and mutual investment, and double bilateral trade in three years.
The Chinese leader also said the two countries should enhance cooperation in mining, expand farm product trade, and promote cooperation in farm product production and processing and agricultural technology.
China would like to be actively engaged in Chile’s infrastructure construction and work with Chile to promote the development of transportation networks in Latin America, said Wen.
Meanwhile, Wen suggested that the two sides launch currency swaps and expand settlement in China’s renminbi.
#9 China And The United Arab Emirates
According to CNN, China and the United Arab Emirates recently agreed to a very large currency swap deal….
In January, Chinese Premier Wen Jiabao visited the United Arab Emirates and signed a $5.5 billion currency swap deal to boost trade and investments between the two countries.
#10 China And Africa
Did you know that China is now Africa’s biggest trading partner?
For many years the U.S. dollar was dominant in Africa, but now that is changing. A report from Africa’s largest bank, Standard Bank, says the following….
“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”
#11 Brazil, Russia, India, China And South Africa
The BRICS (Brazil, Russia, India, China and South Africa) continue to become a larger factor in the global economy.
A recent agreement between those nations sets the stage for them to increasingly use their own national currencies when trading with each other rather than the U.S. dollar. The following is from a news source in India….
The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.
The two agreements that will enable credit facility in local currency for businesses of BRICS countries will be signed in the presence of the leaders of the five countries, Sudhir Vyas, secretary (economic relations) in the external affairs ministry, told reporters here.
The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, remains much below the potential of the five economic powerhouses.
So what does all of this mean?
It means that the days of the U.S. dollar being the de facto reserve currency of the world are numbered.
So why is this important?
In a previous article, I quoted an outstanding article by Marin Katusa that detailed many of the important benefits that the petrodollar system has had for the U.S. economy….
The “petrodollar” system was a brilliant political and economic move. It forced the world’s oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt, while essentially letting the US pretty much own the world’s oil for free, since oil’s value is denominated in a currency that America controls and prints. The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.
The US has reaped many rewards. As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights. But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount – the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.
So what happens when the petrodollar dies?
The following are some of the things we are likely to see….
-Oil will cost a lot more.
-Everything will cost a lot more.
-There will be a lot less foreign demand for U.S. government debt.
-Interest rates on U.S. government debt will rise.
-Interest rates on just about everything in the U.S. economy will rise.
And that is just for starters.
As I wrote about earlier today, the Federal Reserve is not going to save us. Ben Bernanke is not somehow going to pull a rabbit out of a hat that will magically make everything okay. Fundamental changes to the global financial system are happening right now that are impossible for Bernanke to stop.
We should have never gone into so much debt. Up until now we have gotten away with it, but when demand for U.S. dollars and U.S. debt dries up we are going to experience a massive amount of pain.
Keep your eyes and ears open for more news stories like the ones referenced above. The end of the petrodollar is going to be a very significant landmark on the road toward the total collapse of the U.S. economy.
So what do you think the fate of the U.S. dollar is going to be in the years ahead?
Please feel free to post a comment with your thoughts below….