Information For Thought.

Or as it is more conventionally known in the world not affected by 17 Moments of Spring and Stierlitz's thought process--food for thought. Let's start with a simple truism: by now only completely sublime (or complete morons) still think that US financial market is a viable part of economy. Of course, it is not, because it is a casino set up for enriching a very narrow group of people and financing their utterly destructive ponzi schemes by means of exporting otherwise insane inflation abroad by means of T-bills, yes, those US Treasuries which are the main instrument of US existence as a more or less functioning economy. More or less. Here is the "map" of the main holders of this, ahem, "treasure" as of today. I deliberately included only holders with $100 billion and above:

As you can see Japan and China are most "invested" into those papers today running a "balance" of more than $2.3 trillion combined. Ah, yes, about the balance. This is a hefty sum, even $1 trillion is a hefty sum and leads us to a very interesting conclusion which Russians, through a very reputable Ria.Ru arrived today and this conclusion will never make it to US media for a obvious reason. Get a load of this title: 

США готовятся объявить дефолт по долгам Китаю

The United States Are Preparing To Declare Default On Debt To China 

That's warmer and that is what largely behind anti-China campaign in the US in regards to Covid-19. I make a disclaimer immediately here: I don't know HOW Covid-19 originated, nor, at this stage, do I particularly care because I arrived to my personal conclusion that it is not any kind of bio-weapon and thus was not a deliberate act. But default on China's debt, and many things point in this direction, could be a desperate act of trying to save a collapsing pyramid of financial manipulations and issuing of worthless debt obligations which are... which are...so, nobody really knows if there is a serious interest for buying those anymore (especially short term) other than Fed and Fed is not talking. 

How probable is this scenario? I think it is fairly probable, and keep in mind, even financial information pouring out of US "analytical" financial orgs may still have a very low reliability, as it is generally he case with US economy whose statistics is simply a result of cooking the books for all kinds of rating agencies to present US economy as top of the line credible. Well, manipulation, you know. This is not to mention the United States demanding now some "compensations" from China for Covid-19. Remember US kangaroo court making Iran "guilty" for 9/11 instead of kicking Saudi's ass? Same shit, pardon my French. So, anyone has any doubts now on how it will all proceed? Mind you, China is not Iran, she is the largest economy in the world by far and she will be royally pissed. Well, she already is. But by now we know the quality of personnel in US "elites" who, as I state ad nauseam, can not properly juxtaposition cause and effect, it is totally conceivable that they will decide, possibly out of a complete stupidity, to push the pedal to the metal and destroy whatever is left of US economy by exposing it for what it is--a huge ponzi operation with zero trust (ahem, credit rating) and with it demolish whatever is left of US Dollar's attractiveness.

You may say, they are not THAT stupid. Actually, they ARE. Consider environment from which this cabal of financiers, analysts, economists and other moneyed people came from. I write about this non-stop. You think that they really know what is going on? I doubt it. They, certainly, can calculate debit and credit based on GIGO but most of them never worked a day in a productive capacity and never built anything of real value. This post-modern generation of Ivy League humanities sewer are all one-trick ponies fed non-stop monetary orthodoxy of laissez faire. They know how to "make money", maybe run a bank, what real economy is and how it works--no. They were not taught this intricate subject and that is why they think that defaulting on debt to China could be a good idea. Some common sense voices exist even there:

If the U.S. entered a steep recession or depression without dragging the rest of the world with it, users might leave the dollar. Another option would involve some major power, such as China or a post-European Union Germany, reinstating a commodity-based standard and monopolizing the reserve currency space. However, even in these scenarios, it is not clear that the dollar necessarily would collapse.

What is highlighted in yellow is precisely what is happening now and one of the major indicator of the new economic reality is the fact that in Russia, which also is affected by the whole clusterfvck, unlike it was the case in 2008, there is absolutely NO rush to buy USD, not even close compared to 2008. In fact, never in my life did I encounter such a condescending attitude towards USD, being given a title of "funny green papers" (zelyonye bumazhki). For years I wrote, economy and strength of a state is defined by a complex combination of factors among which currency and finances are but couple among huge number of factors defining national strength. I think now it is a good time to REITERATE Barnett's definition:

Needless to say, modern US meets fewer and fewer of those criteria. Simple as that, and that is an information for thought.       

When I Hear (Read) Term "Analyst".

Especially in the context of fraudulent Western "economics", my hand automatically reaches for a gun, so to speak. As I said it many times, financial "analyst" occupation should be one of the first to disappear as a viable occupation. It is down right fascinating when all those "analysts" (such as from Bloomberg, among others) begin to discover reality which was around for a while. 

(Bloomberg) -- Russian President Vladimir Putin has the U.S. Treasury Department to thank for helping his country prepare for a global economic crisis. A steady deluge of economic sanctions and the constant threat of more to come has pushed Russia’s authorities to boost reserves and strip back debt over the past five years. As governments across the globe prepare for what’s set to be the worst economic slump since 2008, the fortress approach that had been pushing Russia’s economy into stagnation is starting to look like good foresight. S&P Global Ratings maintained Russia’s credit rating at BBB- with a stable outlook on Thursday, even as it downgraded a raft of emerging markets due to a plunge in commodity prices. “Previous crises have taught Russia’s Finance Ministry and central bank how to prepare for this one,” said Karen Vartapetov, an analyst at S&P Global Ratings. “They have a lot of crisis experience.”

The title of the article itself, Putin’s Economic Isolation Suddenly Doesn’t Look So Bad, should be changed to "Duh!" It is obvious that all those fraudulent credit ratings are absolutely meaningless because they cannot account for the most important principle which economic activity of any modern large country is based upon: "a  belief that a nation should be generally self-supporting…" Obviously, for globalist girls and boys "educated" in the pseudo-economic white-board theories detached from real life, the whole notion that real national interests may, and often do, come into contradiction with profit or bottom line is inconceivable. They are simply not taught like this, in fact, most of them have no clue what nation is, how it forms and how it operates. Nor, most of them, understand what REAL economic growth, not some books' cooking, is. How can they--most of them never work a day in a productive sphere and do not understand even basic principles of industrial operations and management which require a combination of meta competencies which are not taught in MBA programs. You remember Mishustin's excellent observation recently, do you?

That is why for many in the West facts like this come as "sudden" and, often, shocking:  

One of Russia’s responses to sanctions in 2014 was to place restrictions on imports of certain foodstuffs from the U.S. and Europe. While the measure led to a sharp rise in domestic prices, it also increased farm production, leaving Russia more resilient to distruptions in global trade. “Russia is well prepared for this very new phase of closed borders and closure of international trade and financial processes,” said Sofya Donets, a Moscow-based economist at Renaissance Capital. “It has abundant state buffers and a higher share of local products than it had previously for many consumer goods.”

Yeah, what a concept--to be self-supporting. And then, of course, what is known today (wrongly, I may add) as geopolitics begins to factor in and this geopolitical thingy is altogether beyond the grasp of most Western "analysts" who are taught to think within only one framework, Wall Street framework that is. In this sense, Covid-19 pandemic does all of us a very good service--it exposes a complete incompetence of the globalist financial, managerial, military, academic and other institutions and the so called "elites". No really, would anyone entrust your lawn to be mowed by Christine Lagarde, Angela Merkel or Emmanuel Macron? Being a night-guard at some storage facility? Well, even that requires some skills. Peter Van Buren decries the change which already came:

Only two weeks ago, I had an hourly paid, part-time job. That made me a lot like the 60 percent of the American workforce who are also hourly employees, not to mention independent contractors, adjuncts, and the massive undocumented labor force behind our farms, hotels, and restaurants. The government ordered us to stop working and we did. Nobody is entirely sure if they can just do that, but they did. Now we wait like baby birds for that same government to drop checks into our mouths. Overnight we went from workers to dependent on handouts. The balance of power between Americans and their government just changed dramatically.

Van Buren may decry it whatever he wants and he may criticize Orwell for not giving us a detailed account of how 1984's society of IngSoc sprung into existence, but the question he is supposed to be asking is this: why it took a completely rigged and wasteful economic system to last this long? The question is really simple and the one which most in American "elites" dread to answer publicly-- World War Two and the extended lease on life this War gave the system which was able to recover primarily by US government's interference in the systemic decline stock exchange was generating since 1929. Going to war was also a government decision. As for balance of power between "Americans and their government", it should be clearly stated that now "government" is the ONLY institution which holds this country from disintegrating completely, even if "shifting" this balance, which was inevitable and was ongoing in a less dramatic form anyway before Covid-19 struck. Could then, as Van Buren worries, US society degenerate into some version of Orwell's dystopia--well, it already did to a degree by denying, thorough its utterly corrupt media, political class and Wall Street simple truths about reality. Russiagate damaged what's left of the Republic in a much more profound and lasting way than any government check could ever do. Economically, the Unites States is bankrupt and is facing reality no "analyst" could have predicted.

The Fed announced Tuesday morning that it would be establishing a repurchase agreement facility for foreign and international monetary authorities (FIMA) that have accounts at the central bank’s New York branch. Through the FIMA repo facility, other central banks and monetary authorities unable to make smooth trades in the open market will be able to temporarily liquidate their positions in Treasuries. “Stabilizing foreign dollar markets, in turn, will support foreign economic conditions and thereby benefit the U.S. economy through many channels, including confidence and trade,” the Fed said in a statement.

In other words, putting it bluntly, Fed will be buying back its paper junk nobody in the world wants. I like the term "temporarily", but as we know, hope dies last. 

Addendum To Two "No Shit" Moments In A Row.

It occurred to me that some explanations regarding US Treasuries and main holders of those financial "instruments" must be explored in a separate addendum. This will help understand the dynamics of Russian-American relations. The main question is WHY buy US treasuries or US Treasury Bonds? Let's give those a clear definition from financial "wizards" from Fidelity. 

Treasuries are debt obligations issued and backed by the full faith and credit of the US government. Because they are considered to have low credit or default risk, they generally offer lower yields relative to other bonds.  

So, as you can see, the United States treasury sells US debt to, actually, finance US economy. Foreign entities buy this debt because they think they can earn low yield but reliable buck on those. Buying US treasuries is also a good indicator of trust, or otherwise, in US not only economically, but even more so geopolitically. I repeat ad nauseam that Pax Americana's financial pyramid rests primarily with American military power mythology, not with US real economy. US real economy cannot generate enough growth to even scratch the surface of US debt obligations. Prior to roughly 2014 foreign governments' buying of US treasuries was based on US economic data which was, to put it mildly, not exactly connected to the reality and risk expectations were allayed primarily by the ideas that the United States, having enough military wherewithal, would be able to coerce a whole host of countries to "offer" their resources to the United States, thus providing enough fuel for continuation of the racket for a little bit longer. Then something got broken. Exactly around 2014. 

The US military "primacy" was called into a serious question. You all know what happened then. Then there was 2015, and then March of 2018, and on and on, and on. The only country in the world who can both wipe the United States off the map and defeat in conventionally in Europe simply stated that she doesn't really give a shit. Recall this:

Russia is continuing to diversify state reserves away from US debt. The latest data from the US Treasury shows that Russia's share hit an 11-year minimum and totaled only $14.9 billion.The share of US sovereign debt bonds in Russia's portfolio has been reduced dramatically in recent months. Russia held $96.1 billion in US Treasuries in March before selling half its holdings in April, dropping to 22nd place among major foreign holders of American treasury securities at $48.7 billion.In 2010, Russia was among the top 10 holders of US Treasuries at $176.3 billion. With its holdings falling to $14.9 billion in May, the country is now below the $30 billion threshold for inclusion on the Treasury Department’s monthly report of major holders. On Tuesday, the Treasury released a list of 33 countries which includes the biggest holder China to the smallest Chile. Russia is no longer on the list. 

Pay attention to the date of this report: 18 July 2018. About 100 days after Putin's address to Federal Assembly on March 1, 2018.  The dates are not accidental. As anyone can see, US treasuries are a bit more than just financial instruments (any government issues those) but they have more sacral meaning as world's admission, and a sign of belonging, to what was considered the global elite club based in Washington D.C. Now take a look at this graph:

Can you find Russia in it? Don't even try. Russia is not going to be financing the economy of a country which declared Russia an absolute evil. You just don't help people who viscerally hate and ready to kill you. So, as reputable Vesti reports (in Russian), Russia's "investment" in the US treasuries on December 2019 was exactly $9.974 Billion. In other words, Russia has 7 times fewer US treasuries than Bermuda, and 25 times less than mighty Luxembourg. You see, at issue here is what drives the American "elites" completely mad and desperate. Here is simple answer, unlike even China, not to speak of occupied Japan, Russia has an official receipt of being fully sovereign country. Even economically mighty China cannot have as much freedom as Russia does in China's economically symbiotic relations with the United States. 

Russia does have those freedoms not just because she has one of the most, if not THE MOST, undervalued economy in the world--a courtesy of swindlers from all kinds of Western ratings and economic "analysis" institutions--but because this grossly undervalued economy produces weapons which allow Russia to insulate herself from any kind of blackmail and be her own thing. One of those major things is Russia's refusal to get US financial "debt" as a sign of submission to the rules of self-proclaimed hegemon. Moreover, Russia, considering her global status, is leading the way in dumping US treasuries, and that is a deadly threat to existing regime in the West. As many observers within the Empire are noting, something really strange is happening to the symbol of the financial reign by the United States:

Under the impact of a stupendous spending binge peppered with juicy tax cuts, the Treasury Department has had to issue a flood of Treasury securities to fund the cash outflow. So, over the past 12 months, the US gross national debt has ballooned by $1.5 trillion to $22 trillion as of January 30, according to Treasury Department data. And these are the good times when the economy is hopping. At the next recession, this is going to get cute.But who the heck is buying all this debt? That question will grow increasingly important and worrisome as we move forward with this gigantic ballooning debt, fueled by deficits that Fed chairman Jerome Powell calls “unsustainable” at every chance he gets  

The answer is simple: 

American banks (very large holders), hedge funds, pension funds, mutual funds, and other institutions along with individual investors in their brokerage accounts or at their accounts with the US Treasury were huge net buyers, while nearly everyone else was selling, increasing their holdings by $1.36 trillion over the 12-month period. These American entities combined owned the remainder of the US gross national debt, $7.5 trillion, or 34.4% of the total!

The United States literally turns itself into the self-licking ice-cream cone and, eventually, she will lick herself into the empty cone, with no ice-cream left. Moreover, the United States has been denied her post WW II myth of military omnipotence thus showing very clear signs of weakness, like recent events with Iran, which indicate to many foreign US treasuries' holders that at some point of time they may submit those obligations for cashing without serious consequences for themselves and that is the big game and plan for them--big players, such as China, already doing this, however slowly (but then again, China holds more than a trillion worth of US treasuries) and the whole thing is already in progress and pass the point of no return. 

American "elites" know who drives this process--Russia. And China. And desperation shows: 

Speaking today at London's Royal United Services Institute, Esper said the political and economic leverage wielded by the Chinese is already eroding the sovereignty of some nations. And Russian invasion of Georgia, annexation of Crimea and violation of the Intermediate-Range Nuclear Forces Treaty, as it continued to build up its inventory of strategic arms, shows that Russia is unwilling to be a responsible international actor, he said. "[We] cannot stand idly by while authoritarian nations attempt to reshape the global security environment to their favor at the expense of others," Esper said. "Doing so would invite continued aggression and diminish our ability to deter future conflicts. As such, America's National Defense Strategy makes it clear that great power competition is once again the primary concern of U.S. national security."

Mark Esper and many people in Pentagon are not stupid, they can calculate and do operational planning, they know that the US military today is capable to fight only third world militaries, and even there success is not guaranteed. And yes, in Esper's definition of Russia "not willing to be a responsible international actor" is correct, precisely because she knows what kind of rogue state she is dealing with and that is why she was in a separation mode non-stop since 2014. But Russia is still in business with the US, as she should be, because Russians finally learned a good ol' capitalist truism--money doesn't smell, only business--nothing personal. Only hard cold cash--no treasuries. What a funny world we all live in.