Category: zerohedge

Is China Days Away From Killing The Petrodollar?

Authored by Nick Giambruno via InternationalMan.com,

Not long ago, there was a popular joke in China that went something like, “Who is Xi Jinping?”

The answer was, “The husband of Peng Liyuan,” the famous singer Xi is married to.

Today, Xi is China’s president. He leads 1.4 billion people. And he’ll likely be the most powerful person in the world soon.

As I mentioned last Wednesday, Trump’s new steel and aluminum tariffs are part of a larger, escalating battle between the US and China.

China is rapidly displacing the US as the dominant global power. This shift is inevitable. China’s economy will be twice as large as the US economy by 2030.

This leaves the US with limited options…

  1. It could kick back and let China displace it as the most powerful country in the world.

  2. It could start a military war with China.

  3. And it could push the current trade battle into an all-out economic war against China.

I think a full-blown economic war is the most likely. Under President Trump, it’s all but certain.

That said, the Trump administration seems to underestimate China’s position—in both the short and long term.

For decades, the US has been able to exclude virtually any country it wants from international trade. Right now, if one country wants to trade with another, it basically needs US permission first.

That’s because (for a short while longer) the US dollar is the world’s most important currency. The US Navy also dominates the world’s oceans, controlling most major shipping lanes.

But China is building a new international system. Eventually, it will let China and its trading partners totally bypass the US.

And, as I’ll explain shortly, a key piece is set to fall into place on March 26…

History’s Biggest Infrastructure Project

The New Silk Road is the centerpiece of China’s new plan.

In the coming months and years, it will include high-speed rail lines, modern highways, fiber optic cables, energy pipelines, seaports, and airports. It will link the Atlantic shores of Europe to the Pacific shores of Asia.

China expects to have its New Silk Road fully up and running by 2025.

This is history’s biggest infrastructure project. The whole point is to completely re-draw the world economic map. If it’s successful—and it most likely will be—China will dominate Eurasia.

President Xi announced the $1.4 trillion plan in late 2013. When it’s done, a train leaving Beijing will be able to reach London in only two days.

Keep in mind, the Chinese are careful long-term planners. When they make a strategic decision of this magnitude, they totally commit.

Take their road system, for example. Between 1996 and 2016 China built 2.6 million miles of road, including 70,000 miles of highway. In just 20 years, it built far more highway than the US has in its entire existence.

In other words, the Chinese get things done. They have the political might—along with the financial, technological, and physical resources—to make the New Silk Road happen. With iron-willed President Xi at the helm, I have no doubt they’ll pull it off.

Not long from now, the New Silk Road will help China unseat the US as the world’s dominant global power and totally upend the geopolitical paradigm.

But before that happens—within the next couple of weeks, actually—China is introducing a way for anyone who buys or sells oil to opt out of the US-dominated global monetary system.

Why the Dollar Is Different Than the Peso

Most investors know that oil is the largest and most strategic commodity market in the world. As you can see in the chart below, it dwarfs all other major commodity markets combined.

Every country needs oil. And, for a short while longer, they need US dollars to buy it. That’s a very compelling reason to hold large dollar reserves.

This is the essence of the petrodollar system, which has underpinned the US dollar’s role as the world’s reserve currency since the early 1970s.

Right now, if Italy wants to buy oil from Kuwait, it has to purchase US dollars on the foreign exchange market to pay for the oil first.

This creates a huge artificial market for US dollars.

In part, this is what separates the US dollar from a purely local currency, like the Mexican peso.

The dollar is just a middleman. But it’s used in countless transactions amounting to trillions of dollars that have nothing to do with US products or services.

Since the oil market is so enormous, it acts as a benchmark for international trade. If foreign countries are already using dollars for oil, it’s just easier to use dollars for other international trade, too.

In addition to nearly all oil sales, the US dollar is used for about 80% of all international transactions.

This gives the US unmatched geopolitical leverage. The US can sanction or exclude virtually any country from the US dollar-based financial system at the flip of a switch. By extension, it can also cut off any country from the vast majority of international trade.

The petrodollar system is why people and businesses everywhere in the world take US dollars. Other countries have had little choice about it, until now…

China’s “Golden Alternative”

China does not want to depend on its main adversary like this. It’s the world’s largest oil importer. And it doesn’t want to buy all that oil with US dollars.

That’s why China is introducing a new way to buy oil. For the first time, it will allow for the large-scale exchange of oil for gold.

I’m calling this new mechanism China’s “Golden Alternative” to the petrodollar. It goes live on March 26.

Ultimately, I think people will look back and see the Golden Alternative as the catalyst that killed the petrodollar.

Here’s how it will work…

The Shanghai International Energy Exchange is introducing a crude oil futures contract denominated in Chinese yuan. It will allow oil producers to sell their oil for yuan.

China knows most oil producers don’t want a large reserve of yuan. So producers will be able to efficiently convert it into physical gold through gold exchanges in Shanghai and Hong Kong.

As of March 26, countries around the world will have a genuine, viable way to opt out of the petrodollar system. Now is the time to position yourself to profit.

Gold Will Soar

With China’s Golden Alternative, a lot of oil money will flow into yuan and gold instead of dollars and Treasuries.

I think the price of gold is going to soar.

China imports an average of around 8.5 million barrels of oil per day. This figure is expected to grow at least 10% per year.

Right now, oil is hovering around $60 per barrel. That means China is spending around $510 million per day to import oil.

Gold is currently priced around $1,300 an ounce. That means every day China is importing oil worth over 390,000 ounces of gold.

If we assume that just half of Chinese oil imports will be purchased in gold soon, it translates into increased demand of well over 60 million ounces per year—or more than 55% of gold’s annual production.

Of course, China won’t be the only country using the Golden Alternative. Anyone will be able to.

The increased demand for gold is going to shock the market. That’s why I think the price of gold will soar.

As the petrodollar dies, gold will be remonetized… and China will be another step closer to displacing the US.

*  *  *

Editor’s Note: Owning physical gold’s not the only way to turn the coming chaos into huge profits. There are other practical steps you can take before the US-China conflict reaches its boiling point. Get the details in our guide to Surviving and Thriving During an Economic Collapse.

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STRATCOM General Warns: US Is Powerless Against Hypersonic Missile Attacks From China, Russia

The United States is extremely vulnerable to future attack via hypersonic missiles and is falling behind in the technological know-how to defend the homeland from the threat, the commander of the United States Strategic Command told the Senate Armed Services Committee on Tuesday.

“The first, most important message I want to deliver today is that the forces under my command are fully ready to deter our adversaries and respond decisively, should deterrence ever fail. We are ready for all threats. No one should doubt this,” Air Force Gen. John Hyten, commander of U.S. Strategic Command said in his opening statement.

However, in a follow-on conversation with Sen. Jim Inhofe, R-Oklahoma, Hyten cautioned:

“we [U.S.] don’t have any defense that could deny the employment of such a weapon [hypersonic missiles] against us.”

What Hyten suggests, as of today, the U.S. is powerless against hypersonic weapon threats and has to rely on deterrence against these so-called hypersonic weapons.

Hyten added, “so our response would be our deterrent force which would be the triad and the nuclear capabilities that we have to respond to such a threat.”

In other words, if Russia or China launches a hypersonic missile attack on the U.S., the Pentagon will respond with nuclear war.

Sen. Inhofe then asked America’s top nuclear commander to describe what a hypersonic weapon is and what it does.

“A hypersonic threat is a system that starts out ballistic, so you will see it like a ballistic missile, but then it depresses the trajectory and flies more like a cruise missile or airplane,” Hyten said.

“It goes up into the low reaches of space and then turns immediately back down and then levels out and flies at a very high level of speed. That’s a hypersonic weapon,” he said.

Hyten told Inhofe, “both Russia and China are aggressively pursuing hypersonic capabilities. We have watched them test those capabilities.”

Earlier this month, we reported that Russia test-fired a high-precision Kinzhal (Dagger) hypersonic missile from a MiG-31 supersonic interceptor jet in the South Military District in Russia’s southwest.

“The launch went according to plan, the hypersonic missile hit its target,” the Ministry of Defence of the Russian Federation declared.  

The ministry released video footage showing the hypersonic missile air launch from the underbelly of the MiG-31 over the skies of Russia.

In late 2017, China conducted several tests of a hypersonic glide vehicle that could be used to defeat U.S. missile defense systems, nevertheless more recently, Russia’s hypersonic glider is one of six new strategic weapons announced recently via Russian leader Vladimir Putin.

In February, the U.S. Missile Defense Agency (MDA) requested the largest-ever budget increase of $9.9 billion in funding for the 2019 fiscal year. Within the request, we found the agency is demanding $120 million for “hypersonic defenses:”

Hypersonic Defense (PE 0604181C): MDA is requesting $120.4 million in FY 2019. MDA will execute a rigorous systems engineering process, identify and mature full kill chain technology, provide analysis and assessment of target of opportunity events, and execute near term sensor and command and control capability upgrades to address defense from hypersonic threats. This effort will execute the Defense Science Board’s recommendations to develop and deliver a set of material solutions to address and defeat hypersonic threats informed by a set of near-term technology demonstrations. An integrated set of enhancements will provide incremental capability measured by progress and knowledge points in the following areas: establishment of systems engineering needs and requirements to identify alternative material solutions; execution of a series of sensor technology

CNBC points out “it is clear that the U.S. lacks the means to combat hypersonics,” nevertheless has poorly allocated funds to develop the technologies over the years — thus enabling Russia and China to advance hypersonics to a higher degree.

Hyten has been on record — calling Russia the “most significant threat” to Washington, and emphasized the need for the Pentagon to modernize its nuclear weapon programs.

“I strongly agree with the need for a low-yield nuclear weapon,” he said of the Pentagon’s request for a low-yield warhead for submarine-launched ballistic missiles. “That capability is a deterrence weapon to respond to the threat that Russia, in particular, is portraying. President [Vladimir] Putin announced as far back as April of 2000 that the Russian doctrine will be to use a low-yield nuclear weapon on the battlefield.”

Hyten said the U.S. is somewhat ahead of Russia and China in some hypersonic technologies, but overall is severely behind the curve.

“As a whole, I’d say it’s a competition and it’s a competition, I believe, that we should have a goal of winning that competition; not tying, not losing, but winning the competition,” he said.

Hyten failed to address the exact areas where the U.S. is behind the eight ball in hypersonics when compared to Russia and China, in fear that such knowledge could jeopardize national security.

“The areas [we are] ahead in, we should accelerate further,” he said. “We need to make sure that that becomes a priority for our nation.”

The next phase is a U.S. response “and the first way to respond to it is to be able to see the threat, which, right now, is challenging. So we have to build capabilities to see what the threat is as well,” he added.

Hyten said defense companies and the Pentagon need to progress hypersonic technologies immediately. He mentioned the need for advanced technologies in sensors to track and identify the origin of a hypersonic threat.

“And right now, we have a challenge with that, with our current on-orbit space architecture and the limited number of radars that we have around the world,” he said.

“I’m going to advocate, as I’ve advocated for the last 30 years, that we need to move into space and be able to build sensors to conduct both the characterization of these new threats that are appearing, as well as discriminate better and earlier the midcourse element of the threat that exists today,” he said.

When asked about Russia and China improving strategic capabilities, including hypersonics, Hyten suggested both countries are “closing in” on U.S. advantages that have been the key building blocks of maintaining America’s global empire.

“I think we have stability with Russia on the nuclear side,” he said. “We have an advantage with China on the nuclear side. But they are gaining ground quickly, especially when you look at space and cyber.”

Unfortunately, the arms race in hypersonic weapons has ushered in the next Cold War between the United States, Russia, and China. It is a repeating cycle of madness where billions of dollars are being diverted to the military-industrial complex and frankly could bankrupt Washington.

Hypersonics will not make the world safer, but rather more dangerous with global superpowers having the capabilities of hurling projectiles at March five or greater. Americans, of the exceptional nation, see themselves as the dominant economic, political and technological power, but as we just discovered from the StratCom General — hypersonic technologies from Russia and or China could disrupt the American hegemony party rooted from a post World War II basis.

Nevertheless, you are starting to get the picture of how the next war will be fought…

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“The New World Order Is Targeting American Freedom…”

Authored by Mac Slavo via SHTFplan.com,

The target of the globalists is America, and the number one target is the “America First” president, Donald Trump.

Award-winning journalist Alex Newman recently sat down for an interview with USA Watchdog‘s Greg Hunter, and he revealed that the New World Order is “freaking out” about Trump.

“This has come through loud and clear, and they have made clear America, as we patriots understand it with “self-evident truth” and our Founders said we were “all created equal” and “we were endowed by our creator with certain inalienable rights,” is not going to fly with their little vision of a New World Order,” said Newman.

“They need to eliminate that idea, and they make very clear they are coming after that. What we see in their actions and what we see in their words is they are trying to break down this idea of America…

It’s very clear their vision for the New World Order is totalitarian to the core…

They really can’t stand this whole agenda articulated by President Trump. We are going to put America first. We are going to stop globalism. We are going to get out of these so-called trade deals that undermine our sovereignty. You can tell they are freaking out about this, and it came through in the speeches at the World Government Summit most recently.”

Newman begins by blasting social media as a propaganda arm of the globalists and deep state.

“It’s actually really hard to tell where the social media berms begin and where the deep state ends. They’re practically one in the same and this has been true from the start. A lot of these big social media companies ended up getting seed money from the intelligence community through In-Q-Tel the investment arm of the US intelligence community.

And what you see is that all these globalist con bags…the leading executives of Facebook and Eric Schmit of Google and Twitter and LinkedIn and Amazon and all these…of course they all have memberships with the Council on Foreign Relations…

they are undergoing a systematic campaign to censor, to silence, and to sideline conservatives, Christians, libertarians, people who say anything that contradicts the agenda.”

Hunter then says that so many people still believe the New World Order (one world government) is just a myth. However, the World Government Council met back in February and no one in the mainstream media dared to alert the public.

“This World Government Summit, which was the sixth one they have had, which takes place on the Arabian Peninsula… is all out in the open. 

It did not get any coverage in the American media, even though Sky News and CNN have cosponsored this event…

You had the heads of all these UN agencies, the Head of the IMF, the Head of the World Bank, you had top globalists and executives from social media companies, very senior government officials and the head of the United Nations last year.  So, this is very serious business.  They told us what their agenda was.  They came out with an official press release and said we need to realign our institutions to get ready for the New World Order.  

It’s not a conspiracy anymore because a conspiracy requires secrecy, and they are in the open now.  It’s not a theory, it’s a fact and you cannot argue with the facts.  They just haven’t told the American people their agenda.”

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Rick Saccone Concedes Pennsylvania Congressional Race To Conor Lamb

Republican Rick Saccone conceded defeat on Wednesday night to Democrat Conor Lamb in a Pennsylvania special congressional election.

The 33-year-old Lamb, backed by his district’s influential labor unions, beat Saccone by around 750 votes in a deeply Republican district that President Trump won by nearly 20 percentage points in the 2016 election. Saccone, a state lawmaker, had one of the most conservative voting records in the state legislature. 

In the race, Lamb downplayed opposition to Trump, who remains more popular in the district than nationally. He opposed sweeping new gun regulations and supported Trump’s steel tariffs, but he is a fierce critic of Republicans’ tax cuts and their economic and health care policies. –NBC

Saccone, meanwhile, embraced Trump – who offered ample support for the Republican over twitter, and appeared at a headline-generating rally the Saturday before the election. 

Lamb will succeed Republican Tim Murphy, and eight-term congressman who resigned in October while embroiled in a sex scandal.

Republicans mulled a recount and legal action over the Lamb’s razor thin lead, however the Democrat’s margin over Saccone, 60, continued to increase as officials continued to count votes. Outside Republican groups spent approximately $10 million on Lamb – around seven times as much as similar groups spent on Lamb’s endorsement. 

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Congress Reportedly Reaches Budget Deal, Averting Weekend Shutdown

After a third day of Republican and Democratic leaders emphatically insisting to any reporter who would listen that their long-promised $1.3 billion “omnibus” budget deal would be ready by Monday night (then Tuesday night, then some time Wednesday) it appears that a compromise has finally been attained.

The Washington Post  is reporting that the (tentative) deal does quite give President Trump everything he wanted on immigration (actually Republicans agreed to some major concessions on that front) but it does withhold funding for a tunnel connecting New York City and New Jersey – something that Trump had lobbied for out of what appeared to be pure spite for the inhabitants of his home town (and its suburbs), which have largely turned against him.

Trump

The deal appeared in jeopardy for a brief moment Wednesday afternoon when it leaked that Trump was reportedly considering withdrawing his support for the bill. But after a midday meeting with Paul Ryan, the White House confirmed that POTUS had changed his mind.

The text of the bill should be available early Thursday, lawmakers said.

WaPo’s story captures the excitement surrounding a deal – with lawmakers counting on Ryan to flip Trump back to a yes.

Top congressional lawmakers huddled in Ryan’s office in the morning. Leaving the meeting, Senate Minority Leader Charles E. Schumer (D-N.Y.) and House Minority Leader Nancy Pelosi (D-Calif.) both said a deal was close.

“We’re feeling very good about this,” Schumer said. “We’ve accomplished many, many, many of our goals. When it’s unveiled, you will see.”

Later in the day, with no bill introduced, House Majority Whip Steve Scalise (R-La.) played down any drama over Trump’s support: “Last I heard is the president supports this package,” he said. A Ryan spokeswoman issued a statement saying Trump “is supportive of the bill” following their meeting.

It is unclear how soon Congress might vote on the bill. The chairman of a House Appropriations subcommittee said Wednesday that the House would vote Thursday, though the vote could move to Friday.

It’s also worth reminding readers that, during the Trump era, it’s not done until the president signs.

When it came to border wall funding, Republicans caved and – just as Trump was prepared to do during his first post-election 60 Minutes interview – accepted a fence.

According to the three officials, who spoke on the condition of anonymity to describe sensitive negotiations, the spending deal also includes $1.6 billion in funding for construction of a wall along the U.S.-Mexico border — routing taxpayer funding to a key Trump priority. But the number is far short of the $25 billion the administration sought. Democrats also won tight restrictions on how that money can be spent, two officials said.

During a press conference Wednesday night, Paul Ryan assured his audience that there would be “many, many structures” along the border, raising the bar for Washington euphemisms.

Trump’s victory on the tunnel could potentially lead to commuters in a region that accounts for one-fifth of US GDP being permanently stranded from their work.

The Trump administration appears to have succeeded in blocking efforts to direct $900 million in planned seed funding to the $30 billion Gateway project to improve passenger rail service to and from Manhattan, including a new tunnel under the Hudson River.

The project has been a key priority for lawmakers of both parties, including Schumer and House Appropriations Committee Chairman Rodney Frelinghuysen (R-N.J.). But according to several officials familiar with his thinking, Trump was determined not to hand Schumer a win while Democrats stood in the way of his administration’s priorities, and he issued a veto threat. A Democratic aide said the project could still benefit from hundreds of millions of dollars in Transportation Department funding, though in some cases it would have to compete with other projects.

The deal will also include a compromise on guns.

One late-breaking deal surrounds gun laws: Democrats agreed to add bipartisan legislation to improve the National Instant Criminal Background Check System (NICS) for gun buyers and Republicans agreed to add language making clear that federal funds can be spent on research into gun violence — clarifying a long-standing restriction that has been interpreted as preventing such research.

Whether the deal is officially finalized is still far from certain. There are many factors that could derail it. A Freedom Caucus rebellion or another bout of cold feet from Trump are two possibilities that come to mind.

 

 

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US Building Military Garrison To Control Largest Syrian Oilfield

Via Southfront.org,

The US is reportedly establishing an at-Tanf-like military garrison in the Omar oil fields area in the province of Deir Ezzor.

Considering the US attempt to maintain a military presence in Syria for as long as possible, Washington may see the Syrian oil and gas resources as useful tool to gain an additional financial revenue from its occupation of the eastern part of the country.

A video has also appeared allegedly showing two US-led coalition Blackhawk helicopters landing in the area.

On March 19, the Syrian state-run news agency SANA accused the US-led coalition of evacuating four ISIS members from the area between the villages of al-Jissi and Kalu in southeastern countryside of Qamishli.

SANA also recalled that on February 26 the US allegedly evacuated a number of ISIS members to the Sabah al-Kheir center, 20 km south of Hasaka, which the US forces are using as center for training militant groups.

According to one version, the US is going to use the evacuated ISIS members to create “security threats” in Central Asia. In late 2017 and early 2018 reports appeared that the US had already redeployed some ISIS members from Syria and Iraq to Afghanistan. The ISIS threat will serve as justification for a continued US military presence in the country.

Following the military success of the Turkish Army and the Free Syrian Army in Afrin, Turkish President Recep Tayip Erdogan vowed to clear the entire Syrian north, from Manbij to Qamishli, of Kurdish militias, mostly the People’s Protection Units (YPG).

He also hinted that the Turkish Army may conduct a large-scale military operation against the PKK in northern Iraq.

The Kurdistan Workers’ Party (PKK) is a Kurdish militant separatist organization operating in southern Turkey, northern Syria and northern Iraq. The PKK has for a long time been involved in militancy against the Turkish government and de-facto seeks to establish an independent Kurdish state, which would include territories from Turkey, Syria and Iraq.

Ankara describes the YPG as a branch of the PKK. The YPG is at the core of the US-backed Syrian Democratic Forces. US support for the YPG is one of the reasons behind the current Turkish-US tensions in the diplomatic sphere.

In Eastern Ghouta, Syrian and Russian forces continued evacuating civilians from the militant-held areas. According to Chief of the Russian General Staff’s Main Operations Department Colonel-General Sergei Rudskoi, 44,639 people have been evacuated in recent days.

The Russian military has also warned that militants in Eastern Ghouta have not abandoned their attempts to stage false flag chemical attacks which they plan to blame on the Syrian government.

*  *  *

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“There’s No Cash To Spend” – Elorza Becomes Largest Venezuelan City To Launch “Community Currency”

With the IMF projecting an inflation rate of 13,000% next year, Venezuelans are abandoning the bolivar in droves as prices for necessities like bread and meat double every month.

After we reported back in December that a socialist collective in one Caracas neighborhood launched its own currency, the panal.

Here’s the Associated Press:

The panal, which means honeycomb in Spanish, can be spent in just a few stores. But residents of one neighborhood desperate for spending cash said they welcome the idea proposed by pro-government groups.

“There is no cash on the street,” said Liset Sanchez, a 36-year-old housewife who plans to use her freshly printed panals to buy rice for her family. “This currency is going to be a great help for us.”

Amid triple-digit inflation and a currency meltdown, there has been a run on cash in Venezuela.

Buying common items such as toilet paper, or paying a taxi driver, requires stacks of the official currency, called the bolivar.

Now, the local currency movement has claimed its biggest victory yet with the western Venezuelan city of Elorza, near the border with Colombia, launching its own currency featuring the face of a local independence leader, per Reuters.

A western Venezuelan city began to issue its own currency this week to alleviate the hyper-inflationary country’s cash crisis.

The “Elorza” currency, with bills featuring the face of local independence leader Jose Andres Elorza, will be valid in the city of Elorza, near Venezuela’s border with Colombia.

The bills are being sold in the municipality’s offices to ensure that thousands of tourists and residents can trade, said mayor Solfreddy Solorzano, a member of the ruling Socialist Party.

Venezuela’s national currency, the bolivar, has plummeted in recent years amid a crippling economic crisis. Prices are doubling nearly every month and basics such as food and medicine are nearly unavailable.

On top of that, there are shortages of cash itself making basic transactions impossible.

“People do not have bolivars to spend, so we created two denominations of notes,” Solorzano said, adding that some 2 billion bolivars’ worth of “Elorza” had been purchased — roughly $9,000 at the black market exchange rate.

Many in Venezuela earn the equivalent of just a dollar or two a month.

While the currency is still relatively limited in terms of circulation, it’s the latest sign that communities in economically devastated Venezuela are taking their economic fortune into their own hands. The idea of regional currencies was first proposed by former President Hugo Chavez. The Maduro regime has apparently adopted a policy of indifference.

The economic collapse was caused by falling oil prices and years of economic mismanagement that started when Maduro succeeded Chavez, who died of cancer in 2013. Maduro’s government blames US sanctions and a broader international conspiracy led by Washington for its problems.

Falcon

Henri Falcon

Meanwhile, with the country’s next election set for May 20, one of Maduro’s opponents, former state governor Henri Falcon, is promising voters a $25 monthly giveaway should he be elected, Reuters reported.

Delivering on such a promise would be, of course, impossible. Venezuela has less than $10 billion in foreign currency reserves. And strict capital controls and US Treasury Department sanctions make foreign currency difficult to come by.

But Falcon needs to promise voters something, because Maduro’s government has adopted a strategy of tying government benefits to individuals’ votes in the election. If you don’t vote socialist, you don’t get what paltry government benefits exist – including a food bag that many poor Venezuelans rely on.

In an equally far-fetched proposal, Falcon also suggested abandoning the bolivar entirely in favor of the dollar.

He also proposed a populist “solidarity card” which mimics a popular welfare benefit doled out by the Maduro regime.

Still, given Maduro’s hardball tactics – and the economic lifelines his country has received, and will likely continue to receive, from China and Russia – Falcon can make all the lofty promises he wants.

In a desperate bid to stave off insolvency, Maduro recently launched the Petro – billed as the first government-backed cryptocurrency. It’s backed by 5 billion barrels of oil.

In the end, the socialists will inevitably prevail.

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Tempe Police Release Disturbing Footage Of Fatal Self-Driving Uber Accident

The Tempe Police Department appears to have gotten over its initial reluctance and released video footage that was taken into evidence of the fatal accident involving one of Uber’s self-driving cars and a woman who was crossing the road with her bicycle…

 

 

The video depicts the final moments before the accident from two angles: One showing the view from the driver’s seat into the roadway, and the other showing a view of the inside of the car. The footage stops a split-second before the collision – but it’s disturbing nonetheless. Tempe police have said the initial investigation determined that the Uber wasn’t at fault, and that the victim abruptly stepped from the shadows into the road.

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China Trade War Begins at 1230ET Tomorrow

It’s official – barring a weather delay – the China trade war will commence tomorrow at 1230pm ET when President Trump will sign an executive order unleashing $50 billion worth of tariffs over Intellectual Property (IP) violations.

American officials have been raising their concerns about China’s IP practices since Bill Clinton was president, and Beijing has repeatedly failed to deliver on promises to reform, but now, as Bloomberg reports that the order will target more than 100 different types of Chinese goods, according to a person familiar with the matter, who spoke on the condition of anonymity.

The value of the tariffs was based on U.S. estimates of economic damage caused by intellectual-property theft by China, the person said.

“Tomorrow the president will announce the actions he has decided to take based on USTR’s 301 investigation into China’s state-led, market-distorting efforts to force, pressure, and steal U.S. technologies and intellectual property,” White House official Raj Shah said in an emailed statement on Wednesday.

This will be Trump’s first trade action directly aimed at China, which he has blamed for the hollowing out of the American manufacturing sector and the loss of U.S. jobs.

For decades, western companies have griped that Beijing is forcing them to hand over tech secrets and source code as a price of access to the Chinese market.

Now they have a White House prepared to act forcefully to stop it – starting tomorrow, Axios’ Jonathan Swan reports – but the fear is a costly tit-for-tat trade war.

But China is drawing up a reprisal list that includes soybeans, sorghum and live hogs, report the WSJ’s Lingling Wei, Yoko Kubota and Liza Lin.

Finally, as a reminder, China will begin trading its petroyuan futures contract next week (3/26) – so perhaps this action by Trump is a pre-emptive strike?

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The Four Triggers For The ‘Big Data’ Bubble To Burst

Following the earlier warning of the extreme valuation levels of the FANG-type stocks…

Nomura exposes the bubble you didn’t know about could be bursting without you knowing…

One of the challenges of identifying bubbles is that too often we use the playbook of the previous bubble.

Today’s asset bubble is in data and platforms. And yes, these are assets even though most economic data or even financial accounts do not classify them as such. The reason is that assets are things that can generate recurring income, and thanks to the revenues of many social media and tech companies we know that is the case. 

Data are an (intangible) asset

To understand this better, we take for an example a tech company that offers a service to micro-target consumers with customised “ads”. The way it does this is by hiring data scientists, providing a “free” service that allows it capture consumer data, and monitoring public profiles of consumers. The costs incurred in doing this would typically be classified as an operating expense, rather than a capital expenditure. The value of the data and algorithms would therefore not appear on the balance sheet as an asset, yet this “intangible asset” undoubtedly provided recurring revenues to the company. 

Markets know this and so value the company as if it did have these assets, while the “book value” (accounting value) would not reflect this – the end-result are tech companies with very high price-to-book ratios. The only time the book value would reflect the value of these intangible assets is when the company gets acquired by another company. In that case, the difference between the price paid and the book value gets booked as “goodwill”.  The other consequence of this is that all the comments about the lack of investment in developed economies may be misplaced. There may well have been lots of investment, but it has not been accounted for correctly in official statistics.

The four triggers for the data bubble to burst

But more important than the above are that four forces are coming together to potentially burst the data/platform bubble.

1. The cab-driver is talking data/platforms Returning to market valuations of these intangible assets, they have been surging in recent years. Investors are assigning more and more value to data and platforms (Figure 1). The number of books, articles and non-tech corporates talking about big data, AI and blockchain is also reflective of this. Even cab-drivers (or should I say Uber drivers) are talking about some of these trends. A classic sign of the late stages of a boom is when non-specialists start to become the most vocal advocates for the boom.

2. Politics is turning against the sector The more fundamental trigger of the bursting of this “bubble” is the shift in politics on the data/platform industry, especially in the US. President Obama could be thought of as the “Silicon Valley” President, with his tendency to embrace that sector and lean on the sector for economic and business strategy. After all, it was President Obama who was the first one to appoint a Chief Technology Officer. 

President Trump by contrast has been more sceptical and instead has focused on the manufactured sector. It is notable that whenever President Trump talks about the US trade deficit, he focuses on the goods balance, rather than trade in services or invisibles. Part of the reason for this is the fruits of the data/platform revolution has not been shared across the economy – if anything, it has seen income inequality widen as intangible asset-intensive industries tend to create winner-takes-all-dynamics. The thrust of US policy is therefore moving back towards tangible asset industries, such as manufacturing, and away from intangible asset industries, like data/platform companies.  

3. The perception of the accuracy and use of the data are being questioned Part of the explosion in the use of these platforms was the disruption of the conventional distribution and verification of information. Before social media, information was distributed and verified by particular institutions such as press/media companies, universities and government bodies. Social media allowed distribution to be wrestled away from these institutions thus allowing millions more “publishers” and importantly the verification was done by crowdsourcing the opinions of other individuals through user reviews.  

Today thanks to the increasing concerns that platforms and data-holders have been “gamed” by corporations and foreign governments to manipulate consumers and voters, there is a growing backlash from individuals and governments on how these platforms can operate. For individuals, this could be resulting in a shift from “crowd-sourced” information to “reputation-based”

Information and opinion. For governments, this could result in greater regulation on how and where the data/platform companies can operate. 

4. A move away from global towards regional standards Finally, there is a move to regionalise standards on big data/AI/platforms rather than globalise. The big three regions are the US, China and EU. China has a clear policy of a state-centric data/platform model, where Chinese data have to be held in China with oversight from the authorities. The EU is increasingly flexing its muscles on the rights of the consumer in relation to data/platform owners. That leaves the pioneering US companies with the most to lose as they have to retrench from these markets.

This year will be bumpy

The bottom line is that trade wars, populism, income inequality can be looked at in isolation, but together they all point to a reaction against the growth of fluid intangible intensive industries such as the data/platform companies. This means that these markets will come under increasing pressure on how they value data/platforms as the year unfolds. While the direct fall-out of this could be seen in equity markets, the currency markets could also be affected. The most obvious currency to benefit from these dynamics would likely be the yen, which is not at the centre of the tri-polar data/platform world and typically performs well in a volatile world. 

Source: Nomura

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