Mourners Chant “Death To America!” As Multi-Day Funeral Procession For Soleimani Begins
Multiple days of mourning for Shia in Iraq and Iran over the death of Iran’s most celebrated elite general, Qasem Soleimani, began on Saturday as his funeral procession began to make its way through the streets of Baghdad. Also being mourned is Abu Mahdi al-Muhandis, who was head of Iran’s Popular Mobilization Forces (PMF) and Iran-backed Kataib Hezbollah.
The procession passed near the Green Zone, where the US Embassy and other diplomatic compounds are located, while thousands chanted “Death to America”and “America is the Great Satan!”
Image via the BBC
The procession is now making its way south to the Shia Muslim holy cities of Karbala and Najaf, after which Soleimani’s body will be returned to Iran for a funeral and burial in his home town of Kerman in the country’s southeast.
The Revolutionary Guard announced earlier that his funeral is scheduled for Tuesday, amid three days of national mourning ceremonies across the Islamic Republic mandated by the Ayatollah.
Image source: AFP via Getty
Events in Baghdad quickly turned to scenes of protesting American troop presence in the country, which included mourners burning American and Israeli flags. One international report summarized the chaotic scenes of the procession as follows:
Mourners in the Iraqi capital today carried posters of Soleimani and flags of Muhandis’s Iran-backed Kataeb Hezbollah militia, which has committed brazen attacks against US bases in recent months, climaxing with a siege of the US embassy on Tuesday.
The procession began at the Imam Kadhim shrine in Baghdad, one of the most revered in Shia Islam before crowds headed south to a point near the Green Zone, the high-security district home to government offices and foreign embassies, including America’s.
Meanwhile thousands of angry demonstrators stood outside the UN offices in Iran’s capital, demanding retribution for the killing of Soleimani.
Image source: AFP via Getty
Next, Soleimani’s body is expected to arrive in Tehran at some point on Saturday nigh, after which a ceremony will be held at Imam Reza’s shrine.
Meanwhile, Iranian President Hassan Rouhani has vowed that Americans will “feel the impact” of their “criminal act… for years ahead”.
Image source: AFP via Getty
Indeed it appears Washington is taking the prospect for “severe” retaliation seriously given additional troops, possibly number in the thousands, have been deployed to Kuwait and other regional bases.
It is likely that the multiple days of mourning for Soleimani’s funeral will be the calm before the storm, as we could possibly see “revenge attacks” begin as early as next week.
For the United States to abandon proxy warfare and directly kill one of Iran’s most senior political figures has changed international politics in a fundamental way. It is a massive error. Its ramifications are profound and complex.
There is also a lesson to be learned here in that this morning there will be excitement and satisfaction in the palaces of Washington, Tel Aviv, Riyadh and Tehran. All of the political elites will see prospects for gain from the new fluidity. While for ordinary people in all those countries there is only the certainty of more conflict, death and economic loss, for the political elite, the arms manufacturers, the military and security services and allied interests, the hedge funds, speculators and oil companies, there are the sweet smells of cash and power.
Tehran will be pleased because the USA has just definitively lost Iraq. Iraq has a Shia majority and so naturally tends to ally with Iran. The only thing preventing that was the Arab nationalism of Saddam Hussein’s Ba’ath Socialist Party. Bush and Blair were certainly fully informed that by destroying the Ba’ath system they were creating an Iranian/Iraqi nexus, but they decided that was containable. The “containment” consisted of a deliberate and profound push across the Middle East to oppose Shia influence in proxy wars everywhere.
This is the root cause of the disastrous war in Yemen, where the Zaidi-Shia would have been victorious long ago but for the sustained brutal aerial warfare on civilians carried out by the Western powers through Saudi Arabia. This anti-Shia western policy included the unwavering support for the Sunni Bahraini autocracy in the brutal suppression of its overwhelmingly Shia population. And of course it included the sustained and disastrous attempt to overthrow the Assad regime in Syria and replace it with pro-Saudi Sunni jihadists.
This switch in US foreign policy was known in the White House of 2007 as “the redirection”. It meant that Sunni jihadists like Al-Qaida and later al-Nusra were able to switch back to being valued allies of the United States. It redoubled the slavish tying of US foreign policy to Saudi interests. The axis was completed once Mohammad Bin Salman took control of Saudi Arabia. His predecessors had been coy about their de facto alliance with Israel. MBS felt no shyness about openly promoting Israeli interests, under the cloak of mutual alliance against Iran, calculating quite correctly that Arab street hatred of the Shia outweighed any solidarity with the Palestinians. Common enemies were easy for the USA/Saudi/Israeli alliance to identify; Iran, the Houthi, Assad and of course the Shia Hezbollah, the only military force to have given the Israelis a bloody nose. The Palestinians themselves are predominantly Sunni and their own Hamas was left friendless and isolated.
The principal difficulty of this policy for the USA of course is Iraq. Having imposed a rough democracy on Iraq, the governments were always likely to be Shia dominated and highly susceptible to Iranian influence. The USA had a continuing handle through dwindling occupying forces and through control of the process which produced the government. They also provided financial resources to partially restore the physical infrastructure the US and its allies had themselves destroyed, and of course to fund a near infinite pool of corruption.
That US influence was balanced by strong Iranian aligned militia forces who were an alternative source of strength to the government of Baghdad, and of course by the fact that the centre of Sunni tribal strength, the city of Falluja, had itself been obliterated by the United States, three times, in an act of genocide of Iraqi Sunni population.
Through all this the Iraqi Prime Minister Adil Abdul-Mahdi had until now tiptoed with great care. Pro-Iranian yet a long term American client, his government maintained a form of impartiality based on an open hand to accept massive bribes from anybody. That is now over. He is pro-Iranian now.
Such precarious balance as there ever was in Iraq was upset this last two months when the US and Israelis transported more of their ISIL Sunni jihadists into Iraq, to escape the pincer of the Turkish, Russian and Syrian government forces. The Iranians were naturally not going to stand for this and Iranian militias were successfully destroying the ISIL remnants, which is why General Qassem Suleimani was in Iraq, why a US mercenary assisting ISIL was killed in an Iranian militia rocket attack, and why Syrian military representatives were being welcomed at Baghdad airport.
It is five years since I was last in the Green Zone in Baghdad, but it is extraordinarily heavily fortified with military barriers and checks every hundred yards, and there is no way the crowd could have been allowed to attack the US Embassy without active Iraqi government collusion. That profound political movement will have been set in stone by the US assassination of Suleimani. Tehran will now have a grip on Iraq that could prove to be unshakable.
Nevertheless, Tel Aviv and Riyadh will also be celebrating today at the idea that their dream of the USA destroying their regional rival Iran, as Iraq and Libya were destroyed, is coming closer. The USA could do this. The impact of technology on modern warfare should not be underestimated. There is a great deal of wishful thinking that fantasises about US military defeat, but it is simply unrealistic if the USA actually opted for full scale invasion. Technology is a far greater factor in warfare than it was in the 1960s. The USA could destroy Iran, but the cost and the ramifications would be enormous, and not only the entire Middle East but much of South Asia would be destabilised, including of course Pakistan. My reading of Trump remains that he is not a crazed Clinton type war hawk and it will not happen. We all have to pray it does not.
There will also today be rejoicing in Washington. There is nothing like an apparently successful military attack in a US re-election campaign. The Benghazi Embassy disaster left a deep scar upon the psyche of Trump’s support base in particular, and the message that Trump knows how to show the foreigners not to attack America is going down extremely well where it counts, whatever wise people on CNN may say.
So what happens now? Consolidating power in Iraq and finishing the destruction of ISIL in Iraq will be the wise advance that Iranian statesman can practically gain from these events. But that is, of course, not enough to redeem national honour. Something quick and spectacular is required for that. It is hard not to believe there must be a very real chance of action being taken against shipping in the Straits of Hormuz, which Iran can do with little prior preparation. Missile attacks on Saudi Arabia or Israel are also well within Iran’s capability, but it seems more probable that Iran will wish to strike a US target rather than a proxy. An Ambassador may be assassinated. Further missile strikes against US outposts in Iraq are also possible. All of these scenarios could very quickly lead to disastrous escalation.
In the short term, Trump in this situation needs either to pull out troops from Iraq or massively to reinforce them. The UK does not have the latter option, having neither men nor money, and should remove its 1400 troops now. Whether the “triumph” of killing Suleimani gives Trump enough political cover for an early pullout – the wise move – I am unsure. 2020 is going to be a very dangerous year indeed.
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Congress has never authorized the use of military force against Iran, and in the initial House version of the 2020 NDAA, it was explicitly noted that there is no authorization for that war. But Thursday night rolled around, and the Trump Administration attacked and killed Iran’s top general in a strike on Baghdad International Airport.
Senate Majority Leader Mitch McConnell (R-KY) is saying he’s trying to set up a classified, closed-door briefing about the attack. That’s well after the fact, and McConnell already followed the Senate hawks in endorsing the killing before even getting such a briefing. It’s not clear, then, what the point would even be.
More to the point, Sen. Tim Kaine (D-VA) is introducing a resolution aimed at blocking the war, saying that the administration must not attack Iran without an Authorization for the Use of Military Force (AUMF). There is no sign an AUMF is being considered.
The Kaine resolution would require a two-thirds majority in both the House and Senate in practice, otherwise it would face the fate of similar resolutions on the unauthorized Yemen War, being vetoed by Trump.
And while it may be an uphill battle to muster a two-thirds majority in the Senate to oppose the Iran War, the fact that they’re trying at all is at least indication that there is some debate that will be had on the new war. America may not have gotten this debate before the US attacked, but there will be a chance to express disapproval for the conflict.
The Trump Administration likely appreciates that this war they’re careening toward would be unpopular, which is why officials have styled their killings as “defensive” actions, and why President Trump’s statement claimed he attacked the Baghdad Airport to “stop a war.”
This will allow them to pretend this was something other than a plain war of choice.
Nearly 90 percent of Americans are in favor of legalizing marijuana, according to a September study conducted by Pew Research. As Statista’s Maria Vultaggio notes, at 69 percent of approval, marijuana legalization was most common among 18 to 29-year-olds. At 12 percent, it was least common among Republicans.
On January 2, the governor of Kansas said she would likely sign a bill to legalize marijuana. Though Governor Laura Kelly wouldn’t advocate for the bill, she’s not opposed to it.
“I haven’t really decided what I would do. This is something where what the people want is probably more what I will want on something like that,” Kelly told WIBW.
“I don’t have a personal ideology regarding it. If the folks want it and the legislature passes it, would I sign it? Probably.”
Currently, recreational marijuana is legal in Alaska, California, Colorado, Illinois, Massachusetts, Maine, Michigan, Nevada, Oregon, Vermont, Washington and the District of Columbia.
The President of the Council on Foreign Relations Richard N. Haass says that “the world will be the battlefield” following a dramatic escalation in tensions between the United States and Iran.
Fears of a wider war are rising after Iran’s Quds Force General Qasem Soleimani was killed during an airstrike near Baghdad’s airport.
Haass warned that those who thought any war with Iran would look similar to previous military campaigns were being incredibly naive.
Make no mistake: any war with Iran will not look like the 1990 Gulf war or the 2003 Iraq wars. It will be fought throughout the region w a wide range of tools vs a wide range of civilian, economic, & military targets. The region (and possibly the world) will be the battlefield.
“Make no mistake: any war with Iran will not look like the 1990 Gulf war or the 2003 Iraq wars. It will be fought throughout the region w a wide range of tools vs a wide range of civilian, economic, & military targets. The region (and possibly the world) will be the battlefield,” tweeted Haass.
He went on to assert that developments would lead to Iraqi authorities exerting great pressure on the U.S. to leave their country.
One sure result of the US strike is that the era of US-Iraq cooperation is over. The US diplomatic & mil presence will end b/c Iraq asks us to depart or our presence is just a target or both. The result will be greater Iranian influence, terrorism, and Iraqi infighting.
“One sure result of the US strike is that the era of US-Iraq cooperation is over. The US diplomatic & mil presence will end b/c Iraq asks us to depart or our presence is just a target or both. The result will be greater Iranian influence, terrorism, and Iraqi infighting,” said Haas.
Meanwhile, a source described as being in “close contact” with senior security officials in the Trump Administration said that Iran could respond to the killing of Soleimani by launching a massive cyberattack.
A cyberattack inside the U.S. is “the most likely way that Iran could retaliate stateside,” according to Axios.
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Baltimore County Homicides Jump 85% To Record High Amid Spillover In City Murder Crisis
The evolution of the Baltimore City murder crisis is now pushing out into Baltimore County, according to a new report from The Baltimore Sun.
About 50 homicides were recorded in 2019, surpassing the previous high of 42, set during the crack epidemic of the early 1990s, according to FBI statistics. On a yearly change, homicides in the county are up 85%.
Baltimore County homicides usually fluctuate in the low 20s. It wasn’t until the 2015 Baltimore City Riots when homicides in the county have jumped ever since.
The Sun also cited police data that recorded 54 nonfatal shootings in the county in 2019 and 56 in 2018.
There was even a mass stabbing in late September at a luxurious shopping center in Hunt Valley, where four people were randomly stabbed, and police eventually killed the attacker.
The primary reason for the explosion in homicides and violent crime in the county is due in part to the murder crisis in the city. Violent crime is being pushed out and is now spilling over in the communities five to ten miles from city limits.
“Any homicide is completely unacceptable to me and I’m devastated for every single family that lost a loved one to a murder in Baltimore County this past year,” Baltimore County Executive Johnny Olszewski Jr. said Thursday, citing domestic violence and drug-related crimes contributed to the wave of deaths in 2019.
Olszewski said to “keep things in context,” the county remains “a safe place to live, work and raise a family.”
He added, “any loss of life is one too many, and any increase in our rate is deeply concerning.”
The murder crisis in Baltimore City is spreading, now moving into the county, contributing to record amounts of homicides.
The Baltimore Metropolitan Area is descending into chaos – stay away if you value your life.
Be very thankful that you don’t live in China. Approximately one out of every seven people on the entire planet lives in China, and it has become one of the most dystopian societies that the world has ever seen. Surveillance cameras, government spies and facial recognition scanners are everywhere, and the totalitarian “social credit score” system that is currently being rolled out is an absolute nightmare. And the Chinese government is not content to simply control how people behave. They also want to literally control what people believe, and the ongoing crackdown on the Christian faith has been absolutely brutal.
Over the past several years, scores of pastors have been arrested, countless underground churches have been shut down, and thousands of Bibles have been burned. Unfortunately, that wasn’t enough for Chinese officials, and so they have now taken things to an entirely new level.
When the communists first came to power in China, it was a very dark time for Christians. But underground churches started blossoming even in the midst of the persecution, and eventually there were a few decades where the national government more or less tolerated unsanctioned gatherings. Today, it has been estimated that there are more than 100 million Christians in China, and it is being projected that China may actually have more Christians that any other nation on the planet by the year 2030.
Needless to say, the communists don’t like any threats to their power, and they see this underground movement as a very serious threat.
A new mandate entitled “Administrative Measures for Religious Groups” has been approved by the CPC and is comprised of six chapters and 41 articles dealing with the organization, functions, offices, supervision, projects and economic administration of religious communities.
The new rules also seek to ensure that religious leaders support, promote and implement total submission to the Chinese Communist Party at all times.
So what does that sort of “submission” look like?
Well, in some cases officials have required churches to take down pictures of Jesus and replace them with pictures of President Xi Jinping.
Yes, this is how twisted things have become in China.
According to International Christian Concern, Article 5 of the new ordinance reads that “religious organizations must adhere to the leadership of the Chinese Communist Party, observe the constitution, laws, regulations, ordinances and policies, adhere to the principle of independence and self-government, adhere to the directives on religions in China, implementing the values of socialism …”
In addition, Article 17 specifies that all religious organizations “must spread the principles and policies of the Chinese Communist Party” in everything they do.
Any church that does not go along is likely to be raided and shut down at any time.
For example, Pastor Wang Yi once led one of the most important underground churches in all of China, but his church was raided and he was arrested.
Wang Yi, a leader in one of the most well-known Christian congregations in China, has been quietly sentenced to nine years in prison, according to a statement on the website of the Intermediate People’s Court of Chengdu Municipality.
The sentencing is the latest incident in an ongoing crackdown on organized religion in China. Early Rain Covenant Church, which Wang founded in 2008, attracted about 500 followers and was considered one of the most influential “underground churches” in China, operating independently of the state.
According to Chinese officials, Pastor Yi received such a harsh sentence for “subverting state power”.
Of course it isn’t just pastors that are being arrested. Countless numbers of ordinary Chinese citizens have been swept up during the raids, and many are never seen or heard from again.
One Chinese Christian woman told the Los Angeles Times what happened to her when she was interrogated…
Li Chengju glared at her prison interrogator as he pressed her to renounce her Christian church and condemn her pastor.
Her captor warned she would not be so lucky as the pastor, who was locked in secret detention but at least might get a day in court.
“Look at you. You sweep the floors at church,” the interrogator said. “You think you’re getting a trial like your pastor? You don’t qualify.”
The way that the Chinese are treating their citizens is absolutely reprehensible, and unless they completely change course we should not be conducting any trade with them at all.
Sadly, the “five-year plan” that was launched in 2018 to indoctrinate churches all over China is not even halfway done…
The government calls its campaign “Sinicization” — a euphemism for turning faith into a tool for indoctrination in Chinese Communist Party ideology. The official five-year plan, issued in 2018, calls for inserting “patriotic education” and “socialist core values” into churches, revising the Bible and using church sermons to enforce party leadership and reject foreign influences.
The persecution of Christians is likely to get even worse in China, and this comes at a time when Christian persecution is on the rise all over the world. This is something that many of us have been anticipating because of the times in which we live, but it is still horrifying to actually watch it happen.
As I close this article, I would like to share a message from Pastor Wang Yi that was posted on Facebook after he was arrested. May his words inspire all of us to live every moment and to be the people that we were created to be…
“I hope God uses me, by means of first losing my personal freedom, to tell those who have deprived me of my personal freedom that there is an authority higher than their authority, and that there is a freedom that they cannot restrain, a freedom that fills the church of the crucified and risen Jesus Christ.”
“Regardless of what crime the government charges me with, whatever filth they fling at me, as long as this charge is related to my faith, my writings, my comments, and my teachings, it is merely a lie and temptation of demons. I categorically deny it. I will serve my sentence, but I will not serve the law. I will be executed, but I will not plead guilty.”
“Those who lock me up will one day be locked up by angels. Those who interrogate me will finally be questioned and judged by Christ. When I think of this, the Lord fills me with a natural compassion and grief toward those who are attempting to and actively imprisoning me. Pray that the Lord would use me, that he would grant me patience and wisdom, that I might take the gospel to them.”
“Separate me from my wife and children, ruin my reputation, destroy my life and my family – the authorities are capable of doing all of these things. However, no one in this world can force me to renounce my faith; no one can make me change my life; and no one can raise me from the dead.”
“Jesus is the Christ, son of the eternal, living God. He died for sinners and rose to life for us. He is my king and the king of the whole earth yesterday, today, and forever. I am his servant, and I am imprisoned because of this. I will resist in meekness those who resist God, and I will joyfully violate all laws that violate God’s laws.”
– Pastor Wang Yi, “My Declaration of Faithful Disobedience”
Colin Kaepernick Slams Trump’s Racist “Terrorist Attack On Brown People” In Iran, Twitter Users Respond
Former NFL quarterback and clearly current desperate-for-attention social justice warrior Colin Kaepernick just had his ‘Rose McGowan’ moment, somehow managing to play the race-card against President Trump’s decision to assassinate Qasem Soleimani.
In a double-tweet of utter ignorance, the sports-shoe-designer gushed forth the following words on to his Twitter feed…
“America has always sanctioned and besieged Black and Brown bodies both at home and abroad.
America militarism is the weapon wielded by American imperialism, to enforce its policing and plundering of the non white world.
There is nothing new about American terrorist attacks against Black and Brown people for the expansion of American imperialism.”
It appears the former football player may have taken one too many shots to the head as he seems unaware that the “brown” person he is defending killed many “black and brown” people all over the world.
Am fearful you have CTE but that typically only impacts players who saw game time. https://t.co/3yIjcRfxiS
Social media erupted over Kaepernick’s comments (and not in a good, progressive, supportive way)…
Siding with an Iranian Islamic terrorist who’s killed hundreds Americans, injured untold numbers more, and from a country that’s anything but progressive to trash America?
And it’s on.
Genius commentary from a guy whose only war experience includes social justice and who managed to screw up his own tryout because of his inflated ego.
Hey @Kaepernick7 you should see if Iran will start a team for you. About the only way you’re ever playing again. https://t.co/YuO7MH8B45
Siding with an Iranian Islamic terrorist who’s killed hundreds Americans, injured untold numbers more, and from a country that’s anything but progressive to trash America?
Given all of that, we wonder how long (actually, if ever), it will be before Kaepernick follows McGowan’s lead and apologizes.
Or is Nike happy to support a man who is implicitly supporting a terrorist-funding, American-killing military string-puller… just because he is ‘not an old white man’…
Soleimani was responsible for killing more “brown people,” especially Muslims, than almost any human being on the planet.
This article is an overview of the economic conditions that will drive the gold price in 2020 and beyond. The turn of the credit cycle, the effect on government deficits and how they are to be financed are addressed.
In the absence of foreign demand for new US Treasuries and of a rise in the savings rate the US budget deficit can only be financed by monetary inflation. This is bound to lead to higher bond yields as the dollar’s falling purchasing power accelerates due to the sheer quantity of new dollars entering circulation. The relationship between rising bond yields and the gold price is also discussed.
It may turn out that the recent extraordinary events on Comex, with the expansion of open interest failing to suppress the gold price, are an early recognition in some quarters of the US Government’s debt trap.
The strains leading to a crisis for fiat currencies are emerging into plain sight.
Introduction
In 2019, priced in dollars gold rose 18.3% and silver by 15.1%. Or rather, and this is the more relevant way of putting it, priced in gold the dollar fell 15.5% and in silver 13%.
This is because the story of 2019, as it will be in 2020, was of the re-emergence of fiat currency debasement. Particularly in the last quarter, the Fed began aggressively injecting new money into a surprisingly illiquid banking system through repurchase agreements, whereby banks’ reserves at the Fed are credited with cash loaned in return for T-bills and coupon-bearing Treasuries as collateral. Furthermore, the ECB restarted quantitative easing in November, and the Bank of Japan stands ready to ease policy further “if the momentum towards its 2% inflation target comes under threat” (Kuroda – 26 December).
The Bank of Japan is still buying bonds, but at a pace which is expected to fall beneath redemptions of its existing holdings. Therefore, we enter 2020 with money supply being expanded by two, possibly all three of the major western central banks. Besides liquidity problems, the central bankers’ nightmare is the threat that the global economy will slide into recession, though no one will confess it openly because it would be an admission of policy failure. And policy makers are also terrified that if bankers get wind of a declining economy, they will withdraw loan facilities from businesses and make things much worse.
Of the latter concern central banks have good cause. A combination of the turn of the credit cycle towards its regular crisis phase and Trump’s tariff war has already hit international trade badly, with exporting economies such as Germany already in recession and important trade indicators, such as the Baltic dry index collapsing. No doubt, President Trump’s most recent announcement that a trade deal with China is ready for signing is driven by an understanding in some quarters of the White House that over trade policy, Trump is turning out to be the turkey who voted for Christmas. But we have heard this story several times before: a forthcoming agreement announced only to be scrapped or suspended at the last moment.
The subject which will begin to dominate monetary policy in 2020 is who will fund escalating government deficits. At the moment it is on few investors’ radar, but it is bound to dawn on markets that a growing budget deficit in America will be financed almost entirely by monetary inflation, a funding policy equally adopted in other jurisdictions. Furthermore, Christine Lagarde, the new ECB president, has stated her desire for the ECB’s quantitative easing to be extended from government financing to financing environmental projects as well.
2020 is shaping up to be the year that all pretence of respect for money’s role as a store of value is abandoned in favour of using it as a means of government funding without raising taxes. 2020 will then be the year when currencies begin to be visibly trashed in the hands of their long-suffering users.
Gold in the context of distorted markets
At the core of current market distortions is a combination of interest rate suppression and banking regulation. It is unnecessary to belabour the point about interest rates, because minimal and even negative rates have demonstrably failed to stimulate anything other than asset prices into bubble territory. But there is a woeful lack of appreciation about the general direction of monetary policy and where it is headed.
The stated intention is the opposite of reality, which is not to rescue the economy: while important, from a bureaucrat’s point of view that is not the greatest priority. It is to ensure that governments are never short of funds. Inflationary financing guarantees the government will always be able to spend, and government-licenced banks exist to ensure the government always has access to credit.
Unbeknown to the public, the government licences the banks to conduct their business in a way which for an unlicensed organisation is legally fraudulent. The banks create credit or through their participation in QE they facilitate the creation of base money out of thin air which is added to their reserves. It transfers wealth from unsuspecting members of the public to the government, crony capitalists, financial speculators and consumers living beyond their means. The government conspires with its macroeconomists to supress the evidence of rising prices by manipulating the inflation statistics. So successful has this scheme of deception been, that by fuelling GDP, monetary debasement is presented as economic growth, with very few in financial mainstream understanding the deceit.
The government monopoly of issuing money, and through their regulators controlling the expansion of credit, was bound to lead to progressively greater abuse of monetary trust. And now, in this last credit cycle, the consumer who is also the producer has had his income and savings so depleted by continuing monetary debasement that he can no longer generate the taxes to balance his government’s books later in the credit cycle.
The problem is not new. America has not had a budget surplus since 2001. The last credit cycle in the run up to the Lehman crisis did not deliver a budget surplus, nor has the current cycle. Instead, following the Lehman crisis we saw a marked acceleration of monetary inflation, and Figure 2 shows how dollar fiat money has expanded above its long-term trend since then.
In recent years, the Fed’s attempt to return to monetary normality by reducing its balance sheet has failed miserably. After a brief pause, the fiat money quantity has begun to grow at a pace not seen since the immediate aftermath of the Lehman crisis itself and is back in record territory. Figure 1 is updated to 1 November, since when FMQ will have increased even more.
In order to communicate effectively the background for the relationship between gold and fiat currencies in 2020 it is necessary to put the situation as plainly as possible. We enter the new decade with the highest levels of monetary ignorance imaginable. It is a systemic issue of not realising the emperor has no clothes. Consequently, markets have probably become more distorted than we have ever seen in the recorded history of money and credit, as widespread negative interest rates and negative-yielding bonds attest. In our attempt to divine the future, it leaves us with two problems: assessing when the tension between wishful thinking in financial markets and market reality will crash the system, and the degree of chaos that will ensue.
The timing is impossible to predict with certainty because we cannot know the future. But, if the characteristics of past credit cycles are a guide, it will be marked with a financial and systemic crisis in one or more large banks. Liquidity strains suggest that event is close, even within months and possibly weeks. If so, banks will be bailed, of that we can be certain. It will require central banks to create yet more money, additional to that required to finance escalating government budget deficits. Monetary chaos promises to be greater than anything seen heretofore, and it will engulf all western welfare-dependent economies and those that trade with them.
We have established that between keeping governments financed, bailing out banks and perhaps investing in renewable green energy, the issuance of new money in 2020 will in all probability be unprecedented, greater than anything seen so far. It will lead to a feature of the crisis, which may have already started, and that is an increase in borrowing costs forced by markets onto central banks and their governments. The yield on 10-year US Treasuries is already on the rise, as shown in Figure 3.
Assuming no significant increase in the rate of savings and despite all attempts to suppress the evidence, the acceleration in the rate of monetary inflation will eventually lead to runaway increases in the general level of prices measured in dollars. As Milton Friedman put it, inflation [of prices] is always and everywhere a monetary phenomenon.
Through QE, central banks believe they can contain the cost of government funding by setting rates. What they do not seem to realise is that while to a borrower interest is a cost to set against income, to a lender it reflects time-preference, which is the difference between current possession, in this case of cash dollars, and possession at a future date. Unless and until the Fed realises and addresses the time preference problem, the dollar will lose purchasing power. Not only will it be sold in the foreign exchanges, but depositors will move to minimise their balances and creditors their ownership of debt.
If, as it appears in Figure 3, dollar bond yields are beginning a rising trend, the inexorable pull of time preference is already beginning to apply and further rises in bond yields will imperil government financing. The Congressional Budget Office assumes the average interest rate on debt held by the public will be 2.5% for the next three years, and that net interest in fiscal 2020 will be $390bn, being about 38% of the projected deficit of $1,008bn. Combining the additional consequences for government finances of a recession with higher bond yields than the CBO expects will be disastrous.
Clearly, in these circumstances the Fed will do everything in its power to stop markets setting the cost of government borrowing. But we have been here before. The similarities between the situation for the dollar today and the deterioration of British government finances in the early to mid-1970s are remarkable. They resulted in multiple funding crises and an eventual bail-out from the IMF. Except today there can be no IMF bail-out for the US and the dollar, because the bailor gets its currency from the bailee.
Nearly fifty years ago, in the UK gold rose from under £15 per ounce in 1970 to £80 in December 1974. The peak of the credit cycle was at the end of 1971, when the 10-year gilt yield to maturity was 7%. By December 1974, the stock market had crashed, a banking crisis had followed, price inflation was well into double figures and the 10-year gilt yield to maturity had risen to over 16%.
History rhymes, as they say. But for historians the parallels between the outlook for the dollar and US Treasury funding costs at the beginning of 2020, and what transpired for the British economy following the Barbour boom of 1970-71 are too close to ignore. It is the same background for the relationship between gold and fiat currencies for 2020 and the few years that follow.
Gold and rising interest rates
Received investment wisdom is that rising interest rates are bad for the gold price, because gold has no yield. Yet experience repeatedly contradicts it. Anyone who remembers investing in UK gilts at a 7% yield in December 1971 only to see prices collapse to a yield of over 16%, while gold rose from under £15 to £80 to the ounce over the three years following should attest otherwise.
Part of the error is to believe that gold has no yield. This is only true of gold held as cash and for non-monetary usage. As money, it is loaned and borrowed, just like any other form of money. Monetary gold has its own time preference, as do government currencies. In the absence of state intervention, time preferences for gold and government currencies are set by their respective users, bearing in mind the characteristics special to each. It is not a subject for simple arbitrage, selling gold and buying government money to gain the interest differential, because the spread reflects important differences which cannot be ignored. It is like shorting Swiss francs and buying dollars in the belief there is no currency risk.
The principal variable between the time preferences of gold and a government currency is the difference between an established form of money derived from the collective preferences of its users, for which there is no issuer risk, and state-issued currency which becomes an instrument of funding by means of its debasement.
The time preference of gold will obviously vary depending on lending risk, which is in addition to an originary rate, but it is considerably more stable than the time preference of a fiat currency. Gold’s interest rate stability is illustrated in Figure 4, which covers the period of the gold standard from the Bank Charter Act of 1844 to before the First World War, during which time the gold standard was properly implemented. With the exception of uncontrolled bank credit, sterling operated as a gold substitute.
Admittedly, due to problems created by the cycle of bank credit, these year-end values conceal some significant fluctuations, such as at the time of the Overend Gurney collapse in 1866 when borrowing rates spiked to 10%. The depression following the Barings crisis of 1890 stalled credit demand which is evident from the chart. However, wholesale borrowing rates, which were effectively the cost of borrowing in gold, were otherwise remarkably stable, varying between 2-3½%. Some of this variation can be ascribed to changing perceptions of general borrower risk and some to changes in industrial investment demand, related to the cycle of bank credit.
Compare this with dollar interest rates since 1971, when the dollar had suspended the remaining fig-leaf of gold backing, which is shown in Figure 5 for the decade following.
In February 1972 the Fed Funds rate was 3.29%, rising eventually to over 19% in January 1981. At the same time gold rose from $46 to a high of $843 at the morning fix on 21 January 1980. Taking gold’s originary interest rate as approximately 2% it required a 17% interest rate penalty to dissuade people from hoarding gold and to hold onto dollars instead.
In 1971, US Government debt stood at 35% of GDP and in 1981 it stood at 31%. The US Government ran a budget surplus over the decade sufficient to absorb the rising interest cost on its T-bill obligations and any new Treasury funding. America enters 2020 with a debt to GDP ratio of over 100%. Higher interest rates are therefore not a policy option and the US Government, and the dollar, are ensnared in a debt trap from which the dollar is unlikely to recover.
The seeds of the dollar’s destruction were sown over fifty years ago, when the London gold pool was formed, whereby central banks committed to help the US maintain the price at $35, being forced to do so because the US could no longer supress the gold price on its own. And with good reason: Figure 6 shows how the last fifty years have eroded the purchasing power of the four major currencies since the gold pool failed.
Over the last fifty years, the yen has lost over 92%, the dollar 97.6%, the euro (and its earlier components 98.2% and sterling the most at 98.7%. And now we are about to embark on the greatest increase of global monetary inflation ever seen.
The market for physical gold
In recent years, demand for physical gold has been strong. Chinese and Indian private sector buyers have to date respectively accumulated an estimated 17,000 tonnes (based on deliveries from Shanghai Gold Exchange vaults) and about 24,000 tonnes (according to WGC Director Somasundaram PR quoted in India’s Financial Express last May).
It is generally thought that higher prices for gold will deter future demand from these sources, with the vast bulk of it being categorised as simply jewellery. But this is a western view based on a belief in objective values for government currencies and subjective prices for gold. It ignores the fact that for Asians, it is gold that has the objective value. In Asia gold jewellery is acquired as a store of value to avoid the depreciation of government currency, hoarded as a central component of a family’s long-term wealth accumulation.
Therefore, there is no certainty higher prices will compromise Asian demand. Indeed, demand has not been undermined in India with the price rising from R300 to the ounce to over R100,000 today since the London gold pool failed, and that’s despite all the government disincentives and even bans from buying gold.
Additionally, since 2008 central banks have accumulated over 4,400 tonnes to increase their official reserves to 34,500 tonnes. The central banks most active in the gold market are Asian, and increasingly the East and Central Europeans.
There are two threads to this development. First there is a geopolitical element, with Russia replacing reserve dollars for gold, and China having deliberately moved to control global physical delivery markets. And second, there is evidence of concern amongst the Europeans that the dollar’s role as the reserve currency is either being compromised or no longer fit for a changed world. Furthermore, the rising power of Asia’s two hegemons continues to drive over two-thirds of the world’s population away from the dollar towards gold.
Goldmoney estimates there are roughly 180,000 tonnes of gold above ground, much of which cannot be categorised as monetary: monetary not as defined for the purposes of customs reporting, but in the wider sense to include all bars, coins and pure gold jewellery accumulated for its long-term wealth benefits through good and bad times. Annual mine production adds 3,000-3,500 tonnes, giving a stock to flow ratio of over 50 times. Put another way, the annual increase in the gold quantity is similar to the growth in the world’s population, imparting great stability as a medium of exchange.
These qualities stand in contrast to the increasingly certain acceleration of fiat currency debasement over the next few years. Anyone prepared to stand back from the financial coalface can easily see where the relationship between gold and fiat currencies is going. Most of the world’s population is moving away from the established fiat regime towards gold as a store of value, their own fiat currencies lacking sufficient credibility to act as a dollar alternative. And financial markets immersed in the fiat regime have very little physical gold in possession. Instead, where it is now perceived that there is a risk of missing out on a rise in the gold price, investors have begun accumulating in greater quantities the paper alternatives to physical gold: ETFs, futures, options, forward contracts and mining shares.
Paper markets
From the US Government’s point of view, gold as a rival to the dollar must be quashed, and the primary purpose of futures options and forwards is to expand artificial supply to keep the price from rising. In a wider context, the ability to print synthetic commodities out of thin air is a means of suppressing prices generally and we must not be distracted by claims that derivatives improve liquidity: they only improve liquidity at lower prices.
When the dollar price of gold found a major turning point on 17 December 2015, open interest on Comex stood at 393,000 contacts. The year-end figure today is nearly double that at 786,422 contracts, representing an increase of paper supply equivalent to 1,224 tonnes. But that is not all. Not only are there other regulated derivative exchanges with gold contracts, but also there are unregulated over the counter markets. According to the Bank for International Settlements from end-2015 unregulated OTC contracts (principally London forward contracts) expanded by the equivalent of 2,450 tonnes by last June, taken at contemporary prices. And we must not forget the unknown quantity of bank liabilities to customers’ unallocated accounts which probably involve an additional few thousand tonnes.
In recent months, the paper suppression regime has stepped up a gear, evidenced by Comex’s open interest rising. This is illustrated in Figure 7.
There are two notable features in the chart. First, the rising gold price has seen increasing paper supply, which we would expect from a market designed to keep a lid on prices. Secondly instead of declining with the gold price, open interest continued to rise following the price peak in early September while the gold price declined by about $100. This tells us that the price suppression scheme has run into trouble, with large buyers taking the opportunity to increase their positions at lower prices.
In the past, bullion banks have been able to put a lid on prices by creating Comex contracts out of thin air. The recent expansion of open interest has failed to achieve this objective, and it is worth noting that the quantity of gold in Comex vaults eligible for delivery and pledged is only 2% of the 2,446-tonne short position. In London, there are only 3,052 tonnes in LBMA vaults (excluding the Bank of England), which includes an unknown quantity of ETF and custodial gold. Physical liquidity for the forward market in London is therefore likely to be very small relative to forward deliveries. And of course, the bullion banks in London and elsewhere do not have the metal to cover their obligations to unallocated account holders, which is an additional consideration.
Clearly, there is not the gold available in the system to legitimise derivative paper. It now appears that paper gold markets could be drifting into systemic difficulties with bullion banks squeezed by a rising gold price, short positions and unallocated accounts.
There are mechanisms to counter these systemic risks, such as the ability to declare force majeure on Comex, and standard unallocated account contracts which permit a bullion bank to deliver cash equivalents to bullion obligations. But the triggering of any such escape from physical gold obligations could exacerbate a buying panic, driving prices even higher. It leads to the conclusion that any rescue of the bullion market system is destined to fail.
A two-step future for the gold price
It has been evident for some time that the world of fiat currencies has been drifting into ever greater difficulties of far greater magnitude than can be contained by spinning a few thousand tonnes of gold back and forth on Comex and in London. That appears to be the lesson to be drawn from the inability of a massive increase in open interest on Comex to contain a rising gold price.
It will take a substantial upward shift in the gold price to appraise western financial markets of this reality. In combination with systemic strains increasing, a gold price of over $2,000 may do the trick. Professional investors will have found themselves wrongfooted; underinvested in ETFs, gold mines and regulated derivatives, in which case their gold demand is likely to drive one or more bullion houses into considerable difficulties. We might call this the first step in a two-step monetary future.
The extent to which gold prices rise could be substantial, but assuming the immediate crisis itself passes, banks having been bailed in or out, and QE accelerated in an attempt to put a lid on government bond yields, then the gold price might be deemed to have risen too far, and due for a correction. But then there will be the prospect of an accelerating loss of purchasing power for fiat currencies as a result of the monetary inflation, and that will drive the second step as investors realise that what they are seeing is not a rising gold price but a fiat currency collapse.
The high levels of government debt today in the three major jurisdictions appear to almost guarantee this outcome. The amounts involved are so large that today’s paper gold suppression scheme is likely to be too small in comparison and cannot stop it happening. The effect on currency purchasing powers will then be beyond question. Monetary authorities will be clueless in their response, because they have all bought into a form of economics that puts what will happen beyond their understanding.
As noted above, the path to a final crisis for fiat currencies might have already started, with the failure by the establishment to suppress the gold price through the creation of an extra 100,000 Comex contracts. If not, then any success by the monetary authorities to reassert control is likely to be temporary.
Perhaps we are already beginning to see the fiat currency system beginning to unravel, in which case those that insist gold is not money will find themselves impoverished.
It Would Have Been ‘Utterly Irrational’ For Trump To Notify Democrats Of Soleimani Strike: Dobbs
President Trump would have been ‘utterly irrational’ to have shared plans to strike Iranian Gen. Qasem Soleimani, the country’s second-most powerful person, according to Fox Business Network host Lou Dobbs.
The Friday comments come amid outrage from Congressional Democrats, including Senate Minority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA).
“I think Chuck Schumer was born complaining,” Dobbs told White House press secretary Stephanie Grisham on “Lou Dobbs Tonight,”…
…adding “And I wouldn’t expect any quick change in his behavior. There is also, I think, a good case to be built that it would be utterly irrational of the Trump Administration to brief the very people who are trying to unseat him, remove him from power, to overthrow his presidency and to have done everything in their power to do so.”
Hilariously, on Saturday the White House delivered Congress notification of the Soleimani strike two days later.
The notification, required by law within 48 hours of introducing American forces into armed conflict or a situation that could lead to war, has to be signed and then sent to Congress, according to the officials with knowledge of the plan.
Lawmakers expected the document to publicly lay out the White House’s legal justification for the strike on General Suleimani, Iran’s top security commander, who officials have said has been behind hundreds of American deaths over the years. But the notification first sent to Congress late Saturday afternoon only contained classified information, according to a senior congressional aide, likely detailing the intelligence that led to the action. It is unclear whether the White House will send a separate, unclassified document. –NYT
In response, Pelosi said in a Saturday evening statement that the notification “raises more questions than it answers,” such as “serious and urgent questions about the timing, manner and justification of the administration’s decision to engage in hostilities against Iran.”
Pelosi added: “The highly unusual decision to classify this document in its entirety compounds our many concerns, and suggests that the Congress and the American people are being left in the dark about our national security.”
Pelosi added: “The Trump Administration’s provocative, escalatory and disproportionate military engagement continues to put servicemembers, diplomats and citizens of America and our allies in danger,” adding it was taken without the consultation of Congress
