Kudos To Herr Weidmann For Uttering Three Truths In One Speech

Once in a blue moon officials commit truth in public, but the intrepid leader of Germany’s central bank has delivered a speech which let’s loose of three of them in a single go. Speaking at a conference in Riga, Latvia, Jens Weidmann put the kibosh on QE, low-flation and central bank interference in pricing of risky assets.
These days the Keynesian chorus in favor of policy activism is so boisterous that a succinct statement to the contrary rarely gets through – -especially at Rupert Murdoch’s Wall Street yarn factory. But here’s what penetrated even Brian Blackstone’s filters:
‘The biggest bottleneck for growth in the euro area is not monetary policy, nor is it the lack of fiscal stimulus: it is the structural barriers that impede competition, innovation and productivity,’ he said.
Needless to say, that is not only the truth but its one that is distinctly unwelcome to the policy apparatchiks in Brussels and the politicians in virtually every European capital. Self-evidently, printing money and running up the public debt are pleasurable and profitable tasks for agents of state intervention. But reducing ‘structural barriers’ like restrictive labor laws, private cartel arrangements and inefficiency producing crony capitalist raids on the public till are a different matter altogether. In the political arena, they involve too much short-term pain to achieve the long-run gain.

This post was published at David Stockmans Contra Corner on October 17, 2014.

New Book: Senator Schumer Was Regular Visitor to Madoff Offices

New York City has 8.4 million people living in its boroughs. But when it comes to defending those charged with financial crimes, it’s a very small, clubby world of people who are either related to each other or have worked together in the past. And this clubby group has one more thing in common: most of its members seem to be lavishing huge campaign contributions on U. S. Senator Charles (Chuck) Schumer of New York – a man who is in a position to recommend Federal Judge appointments and the Justice Department’s U. S. Attorney who will prosecute the financial crimes – or not.
These are the findings in a new on-line book, JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook, being offered free as a chapter a month by attorneys Helen Davis Chaitman and Lance Gotthoffer. (Chaitman is a nationally recognized litigator who was swindled by Madoff and is passionate about getting an unabridged recital of facts out to the public, including details about the extensive involvement in the fraud by the big Wall Street bank, JPMorgan Chase, and Madoff clients that the authors believe to have been co-conspirators.)
Chapter 3 is now up on the web site and delivers this nugget: ‘Senator Schumer was a frequent visitor to Madoff in his office in New York’s Lipstick Building.’ This information came to Chaitman in 2009 from Madoff employees and is confirmed by a 2014 interview with Madoff himself by Politico’s MJ Lee, indicating that Schumer paid personal visits to Madoff to collect campaign contributions.
In the March Politico article, Lee adds this: ‘Approached in a Senate hallway last week, Schumer seemed willing to talk to a reporter – until the subject of Madoff came up. ‘I’m not commenting,’ the New York Democrat said as he walked away. ‘I am not commenting.’ ‘
The web of relationships unveiled in the book include the following:
The U. S. Attorney for the Southern District of New York, Preet Bharara, who agreed to a deferred prosecution agreement against JPMorgan Chase for their involvement in the Madoff fraud and who allowed the family of Madoff client Jeffry Picower to keep billions of dollars that very likely grew out of the fraud, was Senator Schumer’s former Chief Counsel and recommended for the prosecutor’s post in 2009 by Senator Schumer.

This post was published at Wall Street On Parade on October 15, 2014.

Performance of a Number of Global Stock Exchanges Year-To-Date

Except for a few Asian countries, and special situations not pictured perhaps, it looks like a global slump from here.
There are still a select few unbroken housing bubbles out there that may find some adjustment in a future capital crisis. Canada and Australia come to mind, among others.
Despite the billions of taxpayer funds poured into them, some if not quite a few of the troubled multinational Banks are still in trouble, and a few may be teetering.
Does anyone who is well informed not recognize that the policy errors of the Central Banks and their political cronies have failed to foster a sustainable recovery after five long years of enormous bank subsidies and public misery?
And the fruits of this selfish foolishness may likely be another crisis that is even more decisive?
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

This post was published at Jesses Crossroads Cafe on 14 OCTOBER 2014.

297 Congress Members Have Earmarked $3.8 Billion for Organizations Tied to Them or Family Members

Remember back when Democrat Congressman Jim Moran, U. S. Representative for Virginia’s 8th congressional district gave an interview where he said that Congress is underpaid at $174,000 a year and needs a raise because Americans need to understand that Congress is ‘the board of directors for the largest economic entity in the world’?
Well, check out what the ‘board of directors’ has been up to.
According to watchdog groups Legistorm and CREW – Citizens for Responsibility and Ethics in Washington – a total of 297 members of Congress have earmarked $3,776,001,807 for organizations that are connected directly to them or to their family members.
For just one example of how this works, check out this research into the conflicts of interest and crony dealings of Dem. Rep. Rosa DeLauro here – and she’s just one example.
Other interesting tidbits:

This post was published at The Daily Sheeple on October 11th, 2014.

Meet The World’s First “Undercover, Super-Secret Central Banker”

First a secret “Doomsday book“, and now this?
Flash back to those days in September 2008 when the financial system was on the verge of collapse and when first Lehman failed and then AIG was knocking on heaven’s door. While the story of the former has been written, it is the still incomplete history of the latter that is the reason why Hank Greenberg, the largest shareholder of AIG at the time, is suing the US government for bailing out AIG, alleging the US exorted shareholders when it provided a $182 billion bailout to the insurance company whose Joseph Cassano had seemingly sold insurance on every insolvent mortgage-related security: a strategy which worked in a rising market and led to a near systemic catastrophe when the market crashed.
We won’t debate the merits of Greenberg’s lawsuit, which is currently raging in court under STARR INTERNATIONAL COMPANY V. UNITED STATES, U. S. Court of Federal Claims 11-cv-00779 (it should be painfully clear by now that neither AIG nor crony capitalism as it exists now would have survived had Goldman and its NY Fed branch not extended several trillion in taxpayer funds to preserve the status quo), however we will note one thing: recall that when the terms of the AIG bailout first made waves in 2010 courtesy of Darrell Issa we found out something pecliar: none of the members of the Fed had any intentions on making their procedure public.
As Reuters reported back then:

This post was published at Zero Hedge on 10/09/2014.

Lois Lerner’s Revenge: Anti-Obamacare Filmaker is Hit with IRS Audit

There are many systemic reasons why America continues to circle the toilet bowl toward a full fledged oligarchic Banana Republic. I’ve spent the last couple of years highlighting many of them here on these pages. Nevertheless, all of them pale in comparison with the disappearance of the rule of law. When the rule of law ceases to apply to the rich and powerful, a society ends up suffocating within a culture of theft, an endless stream of cronyism and criminality.
At such a stage, politicians, Wall Street oligarchs, the military-industrial complex, police departments, government agencies, etc, all go hog wild with corruption. The IRS is a perfect example.
With the failure to hold Lois Lerner accountable for anything, the agency is now even more out of control than it was before. Recently, we heard about a plan to tax companies that provide free lunches to employees. Now it appears they are back to targeting people with whom they disagree politically…


This post was published at Liberty Blitzkrieg on Oct 8, 2014.

Getting Conned by CONs

In the healthcare industry, a certificate of need, also known by the acronym CON, is an anticompetitive licensing restriction allegedly designed to promote fair competition by requiring hospitals to demonstrate the need for certain projects and services in order to receive governmental permission for those projects and services.
Under a CON scheme, a hospital – -let’s call it Hospital X – -that wishes to expand its facilities applies to a state health planning agency for a CON. Nearby hospitals – perhaps Hospital X’s competitors, Hospital Y and Hospital Z – may oppose Hospital X’s CON application. An administrative law judge (ALJ) reviews Hospital X’s CON application and supporting evidence, holds a hearing on the matter, evaluates the parties and witnesses, and determines whether Hospital X has met the statutory criteria for the issuance of a CON. These criteria differ from jurisdiction to jurisdiction.

This post was published at Mises Canada on October 8th, 2014.

Crony Capitalism Is Kryptonite to Democracy and the Real Economy

When the machinery of governance is ruled by the highest bidders, democracy is dead.
Last week I described the sources of America’s America’s terminal political dysfunction. The engine of this terminal dysfunction is crony capitalism, the incestuous and oh-so-profitable marriage of the Central State and monied Elites.
Gordon T. Long and I continue our discussion of the perverse incentives and consequences of crony capitalism in a 25-minute video program.
Gordon argues that America’s Crony Capitalism closely resembles the Roman Tribute System, an arrangement that skims wealth and concentrates it at the top of the power pyramid.
Vast financial crimes are met with fines. Guilty parties do not go to jail but rather the corporation pays a fine. Billion-dollar crimes are assessed million-dollar fines– a percentage that closely mirrors a Tribute System. The government makes money through enforcement but not prevention. Corporations make illicit fortunes with the confidence that the government will settle for a small slice of the wealth stripmined from the people.
The fines for financial skimming operations act as a form of tribute to the Central State: the State and its corrupt elected officials and regulators turn a blind eye to the pillage of the citizenry via financialization schemes, and then skim a tribute via fines and campaign contributions.


This post was published at Charles Hugh Smith on SUNDAY, OCTOBER 05, 2014.

Monsanto’s ‘zombie wheat’ case reveals serious legal vulnerabilities in business model

Monsanto’s business model is falling apart right in front of their own face, because the biotech firm blatantly disrespects the property rights of farmers, contaminating their fields with unauthorized genetically modified seeds. These unapproved GMO seeds inevitably cross-contaminate farmers’ fields, effectively destroying their yields. That’s exactly what happened in Oregon last year when some unauthorized “zombie wheat” from the Monsanto Company went from the lab and intermixed with a farmer’s natural wheat. The debacle disrupted wheat exports as Japan and South Korea blocked shipments. A contingency of farmers have joined forces and sued Monsanto.
Monsanto may finally admit to cross-contaminating farmers’ wheat Although the details of the case have been kept private, Monsanto did acknowledge that an “agreement in principle has been reached, but not finalized.”
Dave Murphy, founder of Food Democracy Now, is encouraging the farmers not to settle but to stand their ground. This case could establish a new precedent forbidding Monsanto and other biotech firms from cross-contaminating farmers’ crops. “Monsanto never settles unless they’re seriously vulnerable, and the farmers and lawyers involved in this case should reject any settlement,” said Murphy. “Contamination of farmers’ crops has been an integral part of Monsanto’s business plan, and these farmers need to gain strong legal protections from future contamination events, which are happening daily in farmers’ fields all over the world.”

This post was published at Natural News on Monday, October 06, 2014.

‘Cancer Vortex’: Medical industry profits pre-empt healthcare

I’ve reviewed two of Ken Anton’s books:
Popsicle Man is a novel form to share real-world history of US oligarchs with Emperor’s New Clothes’ obvious crimes centering in war and money Cancer Vortex provides similar powerful history of the medical oligarchs who block medically and legally proven cancer cures in order to protect industry profits in the annual billions (here, here, here, here). Ken explains more in this article, reprinted with his permission:
Medical Industry Profits Pre-empt Healthcare
The US healthcare industry is run by a Medical Cartel which explains why it is the most expensive in the world, yet provides less services than other advanced economies.
A strict protocol was established for cancer treatment involving just three procedures: surgery, radiation and chemotherapy. Where innovators outside the tightly controlled Medical Cartel tried to introduce alternative treatments such as herbal formulas, special supplements, foods or complete nutritional programs, the AMA and FDA labeled these procedures quackery, harassing the owners, raiding their clinics and in some cases prosecuting them in the courts; whatever was necessary to shut them down.
Why such an aggressive attitude towards natural, non-invasive therapies? Basically, the cartel cannot tolerate competition from low cost, non-patentable therapies even those with scientific proof of actually curing cancer. The cozy relationship between the Food and Drug Administration (the primary government regulator) and Big Pharma is well known, as is the revolving door between the top echelons of each.

This post was published at Washingtons Blog on October 4, 2014.

Introducing ‘Car Condos’ – Wealthy Baby Boomers Embark on One Last Misallocation of Capital Binge by Purchasing $600,000 Garages

The most significant challenge of our times relates to the ongoing theft of society’s wealth across the board by a very small group of people known as ‘oligarchs,’ the ‘super rich,’ the ‘overclass,’ etc. Whatever you want to call them, this group is hellbent on using political cronyism in faux democracies across the global to aggregate all the world’s wealth and power, while concurrently implementing an Orwellian surveillance state spy-grid in order to protect their fiefdoms once the plebs finally become restless. This much we know.
While the above-mentioned clash between oligarchs and the demoralized and confused citizenry (a significant percentage of this class doesn’t even know the clash is happening) will be the defining battle of my lifetime, it is extremely important to understand another conflict that is almost equally important. This is the widening division between generations, which I believe will get quite ugly in the next severe economic downturn beginning sometime next year.
The reason this conflict is much more nuanced, is because millennials don’t dislike their parents, and baby boomers aren’t actively trying to harm their children’s future. Rather, both generations are going to experience a gigantic clash in the years ahead as these distinct generations’ collectively look to secure their own futures. For the boomers, this will quite singularly mean securing a comfortable retirement. For the millennials, it will mean a professional and family life that feels rewarding, higher standards of living, and political, cultural and economic self-determination. Notably, millennials have realized none of these things, due in large part to baby boomers holding firmly onto the reigns of political power and bailing-out their financial portfolios whenever they are threatened, and at any cost.
As millennials come into their own and realize how fucked they are, they are becoming more and more vocal. Thus, we see increased youth movements all over the world demanding self-determination, such as the massive gathering in Hong Kong known as #OccupyCentral. We also saw clear signs of generational fracturing in the recent Scottish independence referendum, which I discussed in the post, Fear and Loathing in Scotland – Why the NO’s Won and Lessons Learned from the Vote, in which I noted:

This post was published at Liberty Blitzkrieg on Oct 3, 2014.

Sports Stadiums: Temples to Crony Capitalism

The NFL is running one of its own games on the public, and as one of the most subsidized non-profit organizations in American history, the NFL excels at tackling the American taxpayer. It should be of no surprise that with its religious-like following, the NFL receives the same tax-exempt status as a church, exempted under the IRS 501 (c) 6 code from paying federal taxes. The legislation puts the NFL as a non-profit trade association which it has been under since 1942.
But over the past twenty years, 101 new sports facilities have opened in the United States – a 90-percent replacement rate – and lately there has been a rising tendency for renovation costs to skyrocket into the hundreds of millions, which, according to Harvard University urban planning professor Judith Grant Long, the taxpayer foots on average 70 percent of the bill, with often not a penny coming out of the pockets of the team or its owners. The rest of the funding comes from tax-exempt municipal bonds supported under the G4 stadium loan program, which provides loans in return for revenue generated from ticket sales and premium seating.
As is the case with ‘too big to fail’ financial institutions, the NFL is given politically-favored status, and protected by a trench of antitrust exemptions. But unlike the overpaid (read: taxpayer-subsidized) CEOs of Goldman Sachs and Chase Bank, NFL commissioner Roger Goodell earns twice as much as them, thanks to an NFL flush with taxpayer cash. Goodell earned more than $44 million in 2013, and in the past five years he has made over $105 million.

This post was published at Ludwig von Mises Institute on Friday, October 03, 2014.

Inflation over 270 years: It is hard to feel the tornado of price erosion when you are standing in the eye of the financial storm.

People tend to be creatures of habits. It always intrigues me how most of the people I speak with seem to already assume that prices will always go up. It is the default life position. They know the sun will rise, grass will typically be green, and prices over time will go up. While some are based in natural law, inflation is and will always be a human made condition. So it is important to step back from the day to day operations that guide us and actually look at where prices stand today in relation to history. I think most in the US really don’t have the fear of say South America or Europe when it comes to inflation because they have never witnessed a full crisis driven by out of control money policies. Today, we are told that inflation is low yet when we actually step back, inflation is already eroding the purchasing power of the middle class dramatically. It is usually helpful to look at history as to learn from our past.
270 years of inflation
I think we can learn a lot from looking at data. While we can learn a lot from history, you will also realize that people are still governed by greed, cronyism, and poor judgment. After all, the Great Recession was the worst financial crisis in the US since the Great Depression. Did we not learn the lessons from the past? Life is a live action situation and inflation is one of those components.
I found this chart to be extremely illuminating:

This post was published at MyBudget360 on October 2, 2014.

Kudos To Judge Lamberth: Bubkis Hedge Fund Claims Against Freddie/Fannie Get Heave-Ho

During the last year or two a passel of crony capitalist hucksters led by hedge fund operatives Bruce Berkowitz and Bill Ackman have been attempting to pilfer upwards of $40 billion from US taxpayers via a raid on Fannie Mae and Freddie Mac. Kudos to US District Judge Lamberth whose Tuesday ruling stopped them cold.
And don’t shed a tear for the hedge fund boys. Notwithstanding the collapse shown below, the FNMA stock plunge still has more to go; its real value is bubkis – just like their claims.

FNMA data by YCharts
Like in so many other cases during the post-crisis aftermath, these hedge funds scooped-up the worthless preferred and common stock of Freddie and Fannie – -expecting these penny stocks to soar as the Fed’s tsunami of liquidity rekindled speculative appetites and its free carry trade financing buoyed the markets for risk assets. In this particular case, the potential jackpot was to be powerfully augmented by an expected legislative or judicial ruling that owners of these beaten down equities were entitled to their pro rata share of the surging but entirely phony profits of Freddie and Fannie.
To its credit, the Obama administration had previously recognized that absent Uncle Sam’s bailout of the roughly $6 trillion of Freddie/Fannie mortgage guarantees and debentures, the junior equity securities in their capital structures would have been worthless. In fact, at the time Freddie/Fannie were essentially nationalized by the Bush Administration in September 2008, the thin layer of equity represented by these shares had been leveraged at approximately 100X, and would have been obliterated in a proper bankruptcy. Accordingly, the Obama folks had simply decided to treat the remnants of Freddie/Fannie as a wholly owned government investment fund, and swept 100% of the book profits posted each quarter.

This post was published at David Stockmans Contra Corner on October 2, 2014.

The Sources of America’s Political & Financial Dysfunction

The way to preserve great wealth is to buy political protection of that wealth. The way to protect great political leverage is to grease the machinery of governance with cash.
I confess that reading Francis Fukuyama’s latest cri du coeur in Foreign Affairs, America in Decay: The Sources of Political Dysfunction made me think Mr. Fukuyama has either been reading or channeling Of Two Minds.com , as his brutal assessment of America’s terminal political dysfunction reflects many of the themes I’ve been hammering on for the past 9 years.
Unfortunately for his readers, Mr. Fukuyama stops short of identifying the key dynamic in America’s dysfunction: the exhaustion of Central Planning and centralized government as a “solution” for every ill. Despite his failure to cross the goal line and put truly incisive points on the scoreboard, Mr. Fukuyama does the nation a valuable service in cogently describing the dynamics of our terminal political dysfunction.
Fukuyama describes the inevitable end-game of money capturing the political machinery of the central state: every big-bucks lobby/constituency has veto powerover Federal policies and budget priorities. In effect, every lobby can veto any initiative that crimps their power or share of Federal swag.
As a result, any serious reform that causes financial-political pain is soon reduced by entrenched interests to a toothless public-relations shell: the shell will still carry an idealistic-sounding label (“financial reform,” etc.) but the machinery of governance is unchanged.

This post was published at Charles Hugh Smith on THURSDAY, OCTOBER 02, 2014.

Four Other Lawyer Whistleblowers are Essential at the Carmen Segarra Senate Witness Table

Wall Street’s crime spree has been coming at the public for the past six years like a geyser spewing from a broken water main. It’s been tough for the public to keep tract of the twists and turns, and equally so for Congress.
What has been lost in all the media frenzy over the tapes released by Carmen Segarra, an attorney and bank examiner at the New York Fed who was fired for wanting to hold Goldman Sachs accountable, according to her lawsuit, is that four other regulatory lawyers have stepped forward from 2006 to earlier this year to report that their Wall Street regulator has been captured. In the case of those four, the captured regulator is the Securities and Exchange Commission.
When you have five Wall Street insiders with law degrees telling you that Wall Street regulators are not upholding the laws they are mandated to enforce while the nation is still struggling to recover from an epic financial crash this corrupt cronyism produced just six years ago, it’s time to allow the public to hear directly from all of these voices at one Senate witness table.
On March 27 of this year, a 28-year legal veteran at the SEC, James Kidney, used the occasion of his retirement party to deliver a blistering assessment of the regulatory capture at this key Wall Street watchdog. Kidney castigated upper management at the SEC for policing ‘the broken windows on the street level’ while ignoring the ‘penthouse floors.’ Kidney further noted that ‘On the rare occasions when Enforcement does go to the penthouse, good manners are paramount. Tough enforcement – risky enforcement – is subject to extensive negotiation and weakening.’

This post was published at Wall Street On Parade on October 1, 2014.

OBAMA’S ‘WE UNDERESTIMATED ISIS’ COMMENTS BLOWN AWAY BY US INTEL OFFICIALS

While the President was comparing ISIS terrorists to the Jayvee squad, US intelligence officials were warning that the threat was real and imminent, according to the head of the House Intelligence Committee.
Chairman Mike Rogers (R-Mich.) issued a statement Monday that directly contradicts Obama’s comments on in an interview Sunday, where the President suggested that an intelligence failure was to blame for the ‘underestimation’ of the rise of the ISIS group.
‘For over a year, U. S. intelligence agencies specifically warned that ISIL was taking advantage of the situation in Syria to recruit members and provoke violence that could spill into Iraq and the rest of the region,’ Rogers urged, using an alternate acronym for the group.
‘This was not an Intelligence Community failure, but a failure by policy makers to confront the threat,’ Rogers also noted.

This post was published at Info Wars on SEPTEMBER 30, 2014.

“How The Media Controls Britain”

We have yet to read Owen Jones’ “The Establishment… And how they get away with it“, although Russell Brand’s take of the author has certainly piqued our interest: ”Owen Jones may have the face of a baby and the voice of George Formby but he is our generation’s Orwell and we must cherish him.” We do know, however, that the young author and Guardian columnist is one of those who are not afraid to think critically while accepting there is far more than meets the eye, and certainly than the controlled media would like revealed. To wit, from the book’s official blurb:
Behind our democracy lurks a powerful but unaccountable network of people who wield massive power and reap huge profits in the process. In exposing this shadowy and complex system that dominates our lives, Owen Jones sets out on a journey into the heart of our Establishment, from the lobbies of Westminster to the newsrooms, boardrooms and trading rooms of Fleet Street and the City. Exposing the revolving doors that link these worlds, and the vested interests that bind them together, Jones shows how, in claiming to work on our behalf, the people at the top are doing precisely the opposite. In fact, they represent the biggest threat to our democracy today – and it is time they were challenged.

This post was published at Zero Hedge on 09/28/2014.

Big Pharma invents ‘Sluggish Cognitive Tempo’ disease to drug millions more children

The drug industry has come up with yet another phony mental illness that it says afflicts as many as 2 million children: “Sluggish Cognitive Tempo,” or SCT, one of the most ridiculous counterfeit diseases yet. According to a description of the “disease” published in the Journal of Abnormal Child Psychology, children with SCT are basically daydreamers, which Big Pharma is now using as a catch-net classification for children who can’t be declared as having attention-deficit hyperactivity disorder (ADHD). The emergence of SCT comes as parents, medical professionals and child psychologists increasingly question the validity of the millions of ADHD diagnoses that are really just cases of kids being kids. In order to keep these children drugged up and the cash flowing, the psychiatric and drug industries basically invented SCT as a fallback. In other words, when an ADHD diagnosis doesn’t fly, declare the child to have SCT. Many of the children currently diagnosed with ADHD don’t exhibit actual signs of hyperactivity, for instance. And yet some of them aren’t performing in school as well as their teachers or parents would like, which in years past may have been enough to make an ADHD diagnosis. But the public is wising up to the scam, hence the invention of SCT.

This post was published at Natural News on Tuesday, September 23, 2014.

The Counter-Intuitive Rise of the U.S. Dollar

As things get dicier globally, assets in periphery nations typically get dumped as mobile capital flees risk and migrates to lower risk core nations and currencies.
I received many thoughtful comments on Why the Dollar May Remain Strong For Longer Than We Think. Given the many weaknesses of the U. S.–ballooning social-welfare and crony-capitalist liabilities, free money for financiers monetary policies, etc.–a strengthening dollar (USD) strikes many as counter-intuitive. The dynamic complexities of fiscal and monetary policies, global capital flows and the foreign exchange (FX) market complicate any inquiry, so I try to keep it simple. In my view, the USD serves both transactional (global trade) markets and the global need for currency reserves (i.e. as a store-of-value). Sorting out the various influences on its relative value in each capacity is complex enough, but there is also the X Factor–the hard-to-quantify components of any currency’s relative value. For the USD, the X Factor is hegemony, which includes financial dominance based on debt issued/denominated in USD and what might be called the real-world assets of the issuing nation: that nation’s food, energy and water security (what I call the FEW resources), its proximity to potential enemies, its external environmental costs, its overseas financial assets, the strength of its legal system in protecting private assets, its demographic profile and of course its ability to project power to defend its interests. By these basic measures, the U. S. scores pretty well. We can get some perspective on this by putting ourselves in the shoes of wealthy people in periphery nations where the risks of capital controls, currency devaluation, etc. are perceived to be high, or in the shoes of corrupt elites in countries where they fear their ill-gotten gains might not survive blowback (hence the almost universal desire of elites to leave China with their loot).

This post was published at Charles Hugh Smith on SUNDAY, SEPTEMBER 21, 2014.