Yellen’s Plan to Destroy the World’s Currency

Geese and ganders and pots and kettles and all that.

Remember all that rigmarole about the death of the euro back in the heady days of the Greek debt crisis? All that talk that the euro was doomed to fail because it wrapped its politically correct and antiseptic currency around a gaggle of nations that had little in common, save for continental boundaries.

How could a collection of random economies, in countries that have spent much of their history beating each other senseless, possibly survive under one interest-rate regime? What’s good for manufacturing-heavy Germany is horrible for tourism-dependent Greece. And what might be great for the Greeks would surely send Germans into a fit of hyperinflationary hysteria.

Well, that’s the goose.

Now, let me tell you about the gander…

We are sitting on the cusp of the Federal Reserve raising interest rates for, potentially, the second time in about a decade. “Sitting” and “cusp,” I realize, are inaccurate words. More like we’re standing on a ledge made of brittle sandstone, every footfall sending chunks of our perch into the chasm below.

No matter, the smart guys and gals with economics pedigrees tell us from their aeries overlooking Wall Street. We’re safe. Our footwork is sure. We have the dollar to guide us.

And it’s high time, they preach, for the arbiters of American monetary policy to raise rates in America! Just like American workers now demand $15 for flipping burgers and taking your order, American economists now demand 75 basis points because the millions of new jobs flipping burgers and taking your order are proof that the American economy is a brawny beast propelling our limp-wristed world ever forward.

We will easily absorb a mere 0.25-percentage-point bump in interest rates. The economy is certainly healthy enough for that. Wall Street wants it. And the Street, like any spoiled brat, always gets what it wants after throwing enough temper tantrums. So, just get on with it already.

But, see, that’s where the goose and the gander get hung up with the pot and the kettle.

The Bretton Woods Currency Hangover

Wall Street isn’t the only brat in this particular playpen. The American economy isn’t the only economy that cares what the Federal Reserve does.

Turns out that when the Allied nations gathered in Bretton Woods, New Hampshire, back in the summer of ’44 to crown the dollar king of the world, they wrote the script for the economic horror movie playing today.

The Bank of International Settlements tells us that nearly $88 of every $100 that trades hands in the Forex market these days is a greenback. We know, too, that 60% of the global economy happens in the “dollar zone,” or in currencies pegged to the buck directly or through “dirty floats” that see monetary policy makers manipulate their free-floating currencies to match or counteract the dollar in some fashion.

Sounds a lot like a euro problem…

Because what’s good for America isn’t necessarily good for a bunch of other nations who’ve tethered themselves to the buck in various ways. And what’s good for a bunch of nations tethered to the buck isn’t necessarily good for America.

But that’s where Bretton Woods has left us. It’s where it has left the Fed.

The dollar is the world’s currency, for better or worse, and the Federal Reserve is the world’s central bank – and I’m pretty sure that is for the worst. Tough spot to be in if you’re Janet Yellen – and be thankful you’re not. She’s on a no-win career path.

If she raises rates to keep America’s economists and Wall Street happy, her actions will strengthen the U.S. dollar… which will weaken every other key currency… which will make repaying dollar debts that much harder for all the foreign companies that have taken on trillions in dollar debts since the era of low-dollar rates began, but who still earn their incomes in local currencies that would be falling in value… which will beget an economic slowdown in various countries or maybe even a debt-inspired currency crisis (probably some place such as Ukraine or Brazil, maybe Southeast Asia)… which will spill over into most of the emerging markets… and circle back ’round to alight on the American economy because roughly half of all S&P profits happen overseas… and if overseas sales are plunging, then you can be pretty sure America’s largest companies are laying off workers here at home to make their profit targets for Wall Street… which means rising unemployment and even slower economic growth… forcing the Fed to then cut rates quickly and impose new forms of quantitative easing… that would ultimately lead to negative interest rates, and, potentially, something that smells of hyperinflation.

And if she doesn’t raise rates? Well, then, she risks the continued expansion of already excessive asset bubbles in stocks, bonds and real estate… which at some point must be deflated… only, as we all know, bubbles don’t deflate – they explode. And the next time they explode, they will do so with a force far greater than the Great Depression. Good reason to own gold, I should note. More specifically: physical gold.

So, getting back to the goose, the gander, the pot and the kettle…

At Least They Share a Border

If the euro must die as a pancontinental currency incapable of managing the disparate economic needs of 27 nations that, at the very least, share borders and a mutual history of managing their problems (even if it required guns)… why mustn’t the dollar die as a global currency incapable of managing the disparate economic needs of 60% of the world economy that generally shares no borders and has no meaningful history with one another?

Just a thought.

Collapsing Global Trade Growth Foreshadows Crash

The other week I took my son out to fly a drone we got him for Christmas – an aerial device that can hover and record video as it flies through the air.

We didn’t get him a top-of-the-line model – after all, he is just 7 years old – but it can still fly about 100 yards before you have to follow.

My son had flown the drone before, so I assumed he had piloting it down well enough to land it before entering the nearby woods… I was wrong.

I turned my back for literally 30 seconds, and he had already flown the drone as high as it could go, allowing it to drift directly over a wooded area about 50 yards from where he was standing. And, as if on cue, the drone plunged right into the middle of the woods.

At this point my son was pretty upset, as was I.

But I could only imagine how he felt as one of his favorite Christmas presents slipped farther and farther away before it was gone…

That feeling of seeing something you really enjoyed unexpectedly crashing is something I think central banks around the globe can relate to right now…

Global central banks have used every scrap of available monetary power to help the global economy take flight… yet nothing has gone quite according to plan.

The economy is now in the process of crashing back to earth, and central banks have no control and no buffer to even slow the situation down.

The result of this dangerous mix is a dire outcome for the global economy that will send us plunging into a stock market crash.

Into the Woods

As proof that the global economy is already on a downward spiral, the World Trade Organization (WTO) lowered its trade growth forecast for the year to just 1.7%, down from previous expectations for growth of 2.8%. The WTO also lowered its 2017 growth expectations.

Sure, 1.7% is still growth, but it’s modest and fading.

Trade growth is important to the global economy because it’s a signal of how healthy things really are. If trade is expanding, it leads to economic growth as countries buy more goods, thus creating new jobs and providing more money for corporations.

With trade growth slowing, we see yet another sign that the bull market is running out of steam.

But the important part that truly reveals how the situation has slipped out of central bankers’ hands is that trade growth is now less than global gross domestic product (GDP) growth, which is expected to come in at about 2.2%.

A five-tenths-of-a-point difference doesn’t sound like much, but it marks the first time global trade will grow at a slower pace than world GDP since 2001 – and that’s a big deal.

Don’t forget that when this same situation last occurred back in 2001, the S&P 500 shed 30% during the year and the Nasdaq Composite (tech stocks) plunged 50%.

Out of Options

It’s highly likely we will see a similar scenario play out really soon.

The markets are at the tail end of an eight-year bull market, and instead of major economic indicators pointing to overheated growth, we are experiencing modest growth at best… and even that is slowing.

What’s more, central banks have literally thrown everything at their disposal at the economy over the past few years in order to prop up growth – quantitative easing, low interest rates, negative interest rates, etc. With interest rates at all-time lows (and even negative in many places), central banks have left themselves with practically no room for additional accommodative policies. In other words, they have run dry on ways to help in times of economic turmoil.

So, as global central banks sit back and watch the buttons they have pressed fail to deliver the robust economic growth they were meant to create, it’s only a matter of time before the stock market experiences one of its worst plunges in history.

You need to crash-proof your portfolio now for when that day finally comes.

Is Gentrification The New Manifest Destiny?!

Manifest Destiny, What is it? Manifest Destiny was the 19th-century belief of the colonists that the expansion of the US throughout the American continents was both justified and inevitable. Colonists believed that it was God’s ordained wish that all of North America from ocean to ocean, including Mexico and Canada, soon belong to them. This was used as justification for US Domestic Policy towards the Natives while moving west. It was used as justification for violently seizing control of California and Texas from Mexico. It was also used as justification for invading and attacking Canada after 1812, which many Americans were never taught about. It would seem a tad bit harsh to compare this to gentrification.

Many see gentrification as the revitalization of poor inner city areas into thriving middle class urban communities. However, when it’s examined with a closer lens one can see that gentrification and revitalization are not quite the same. Gentrification comes with a price. Gentrification is the process in which high income investors buy into low income urban neighborhoods in an attempt to capitalize on low property values. This process results in an inflation of property values which displaces the low income inhabitants who all in entirety can no longer afford to live there. It also displaces the culture and character that bonded the community together. Displacing the people and erasing the culture of entire communities is the price of gentrification.

It would be a mistake to look at gentrification as a racial issue. Those who mention gentrification as the reversal of 20th century “White flight” do not quite have a complete understanding of the issue. However, due to fact that the low-income urban neighborhoods being gentrified are most often filled with Black and/or Hispanic inhabitants and replaced with middle class White inhabitants, race does make its way into the issue. Race removal is a result of gentrification but not a cause or reason for its initiation. Racism is not a heavy factor when it comes to the issue. Blacks are often on the opposition of gentrification for the reason that their neighborhoods & cultures are being erased and dispersed through it. Neighborhoods like Harlem, Washington D.C, Brooklyn, and Atlanta are losing their Black population as we speak. As well as so many other inner cities.

I’m an Atlanta native myself and I can recall around 2008 when the city forced thousands of Black families to move out without providing an alternative option for low income housing. They were simply kicked out and told to find somewhere else to live. Housing projects like Bowen Homes, Bankhead Courts, etc. were emptied and bulldozed down to the ground. Their plan was to turn the ghetto of Atlanta, Bankhead (a long highway in which these housing projects were located), into a middle class neighborhood by the near future. The city even changed the street name from Bankhead Hwy to Donald Lee Hollowell Pkwy to make it unrecognizable to those who knew it as their home. Instead of building up poor communities for the less fortunate who live there public and private investors are building neighborhoods up and forcing the poor who live there to find another home somewhere far away.

How does this change the culture of Atlanta? Simple, Atlanta for the last 20 years has been known as the “Black mecca” of America, much like Harlem was known during the Harlem Renaissance of culture. Atlanta has also been known as the international headquarters of this new music called Rap and Hip Hop, also much like Harlem with Jazz during the Harlem Renaissance. With the current gentrification trends it’s sad to say that this will not be the case 10 years from now. Atlanta’s Black population in 2000 was 61.4% and dropped all the way down to 54.0% by 2010 and is still dropping. In 2009, Atlanta was 714 votes short of electing its first non-black mayor since 1974. Intown Atlanta neighborhoods are being gentrified, such as East Atlanta and the Old Fourth Ward, ghettos are replaced with upscale homes. Whites are moving into these upscale homes & this causes a movement of blacks into rural cities and adjacent suburbs. Atlanta’s Black hip hop culture will be unrecognizable maybe even non-existent in the coming future.

What’s even more devastating than losing a culture is the disinvestment that is soon to come as a result of gentrification. We can take a quick view at history and it will give us insight on our near and far future to come. In the mid-20th century Blacks began to move away from the south and into inner cities looking for jobs and better opportunities at the American dream. This was the cause of “White flight” which was a migration of Whites out of racially mixed urban areas. As a result, disinvestment began in the racially mixed inner city communities. This was the time, as Spike Lee says, where the trash wasn’t picked up every day and the police didn’t make sure the communities were protected. Now, through gentrification these neighborhoods are being reinvested in and they are protected and have daily trash pickups but the poor no longer live there. The poor now are either homeless or are being moved to suburbs and back to the south. As a result of such focus on inner city communities suburban and rural areas are being dis-invested in and this will be the trend for decades to come. The suburbs will now become the ghettos with high crime and poor schools who get no investment from public or private sectors. The same maltreatment of the poor continues simply in a new location. It’s important to understand this. Gentrification is doing no good for the low income inner city families it claims to be helping.

What about the few households who don’t rent, the urban homeowners? Does not the property value increase benefit them? Before investors can rebuild a neighborhood there has to be a plan in place years ahead of time. These years before the matter is usually the time investors spend buying out the property in planned area. The majority of the property owned by the natives of the area is bought out before the gentrification even begins. The stubborn last minority are the ones aware of the property value increase soon to come. However, what also comes with the higher property values is higher prices on everything else. Gas, clothes, groceries, property tax, bills, even daily lunch becomes more expensive while income stays the same. They find themselves in a situation where they can no longer afford to live in the area and the property is sold before the full potential of the property value increase is met. Not even the minority of inner city homeowners benefit from gentrification.

What does all of this mean and how does it tie in with manifest destiny? As I stated before gentrification is not a racial issue although it may seem that way to many in America. It’s more of a western ideology problem. Gentrification is happening all across western civilization. San Francisco, East London, Berlin, Soho, Barcelona, Rio, Portland are just a few other cities to name. Many call this problem an effect of the “Columbus syndrome”. When you so-called discover something that the natives there already knew about you have Columbus syndrome. Symptoms of the Columbus syndrome are infiltrating the land in which the natives live because it interests you, forcing them out, making it your new home, taking things from their culture and calling it your own. If you experience any of these symptoms call your doctor. In all seriousness, it sounds a lot like what happened to the Natives of our country. At the same time, it sounds a lot like what’s happening via gentrification. Manifest destiny was the coherently evil and violent removal of inhabitants of newly found land. Gentrification is the incoherent economic removal of inhabitants of reinvested land. In this way the two don’t compare but the similarities are striking. I’ll leave you with this question. Do the benefits of gentrification outweigh the consequences? If not, let us fight to regulate the gentrification process.