- (Un)saved by the bell (RFK Jr.)
- The dollar’s unprecedented share of total global currency reserves
- Ain’t no stopping central banks buying gold
- Elon Musk’s twin blowups… The super-looming debt ceiling… A vulgar AI-generated “interview”… And more!
The timing was almost surely coincidental — or was it?
As you might or might not be aware, Robert F. Kennedy Jr. — son of Bobby, nephew of Jack — has embarked on a long-shot run for the Democrats’ presidential nomination. He made it official yesterday in Boston on Patriots’ Day — the anniversary of the “shot heard ’round the world” in 1775 that launched the American Revolution.
Ironically, his launch speech yesterday spotlighted the global trend of de-dollarization — just as we did in our main topic yesterday. Like us, he placed the blame squarely on the failures of U.S. leaders.
“They [China] are now displacing us as trade partners in most of the African nations, Latin America — Brazil just switched to the Chinese currency away from the dollar. Saudi Arabia just switched away from the dollar — ”
And then the fire alarm went off.
There was no danger and Kennedy was able to continue his speech moments later.
Anyway, we see still more signposts on the road to de-dollarization today. Let’s go…
The dollar’s share of total global currency reserves took an unprecedented drop last year, according to research from Eurizon SLJ Asset Management.
To be sure, the figure has been declining steadily since the start of the 21st century — from about 67% of global reserves in 2003 to 55% in 2021. But then it plummeted in 2022 to just 47%.
A one-year drop of eight percentage points? That’s “equivalent to 10 times the average annual pace of erosion in the USD’s market share in the prior years,” says the Eurizon report.
The report’s authors draw a direct causal link to the “exceptional actions” Washington and Brussels took against Russia after the invasion of Ukraine.
Meanwhile, the global headlong rush into gold proceeds apace.
Earlier this month, we mentioned how central banks around the world bought gold during January and February at the fastest clip for that time of year in over a decade.
Now we have complete figures for the first quarter of 2023, courtesy of the World Gold Council.
They don’t hold a candle to the third and fourth quarters of 2022 — again, driven by unprecedented sanctions targeting Russia — but they’re still more than respectable.
China alone accounts for 58 metric tons — nearly half of the global total for the quarter. And that’s just the official Chinese number; for well over a decade we’ve been saying the real Chinese totals are likely much higher.
But again, we caution that the dollar’s demise as the world’s reserve currency is a process and not an event.
“You cannot be a reserve currency without a large well-developed sovereign bond market,” explains Paradigm’s macro maven Jim Rickards. “No country in the world comes close to the U.S. Treasury market in terms of size, variety of maturities, liquidity, settlement, derivatives and other necessary features.
“Such a large liquid securities market requires the participation of underwriters (called ‘primary dealers’ in the U.S.), clearing banks as well as reliable and fast payment channels such as Fedwire and the Depository Trust & Clearing Corporation (DTCC) based in New York. The U.S. has had 230 years since Alexander Hamilton created the U.S. Treasury market to perfect these institutions. No other country comes close.
“Above all, investors require that the issuer of the securities have a good rule of law. Neither China nor Russia has adequate rule of law. Germany, Italy and Japan do, but those bond markets are not big enough to absorb global savings. The U.S. Treasury market (and therefore the dollar) win the reserve role by default. There is no sufficient alternative to the Treasury market for this purpose.”
Still, Washington is doing its level best to undermine that rule of law.
It comes back to what Jim’s been saying for over a year now: “By seizing the assets of the Central Bank of Russia, the U.S. has weaponized the dollar in a way that undermines the rule of the law in the United States and causes other countries to seek alternatives.”
Elaborates Ryan McMaken of the Mises Institute, “Economically, the dollar remains less turbulent than both the euro and yen. So long as Washington does continue to weaponize the dollar, however, other regimes will have good reason to escape the dollar system.
“It’s difficult to see how the U.S. regime will abandon this status quo anytime soon, however. Washington is addicted to deficit spending, monetary inflation and international meddling in the name of U.S. primacy and war. It won’t stop until domestic inflation becomes politically unbearable and foreign states finish building off-ramps from the dollar system.”
Yup. Kudos to RFK Jr. for drawing attention to the threat… but the system is too entrenched for him to do anything about it. Events have taken on a trajectory of their own.
With that in mind, we give the final word on the subject today to the Australian writer and media critic Caitlin Johnstone…
To the markets… where Tesla’s blowup is only slightly less spectacular than the blowup of the rocket launched this morning by one of Elon Musk’s other companies, SpaceX.
TSLA’s recent price cuts resulted in first-quarter profits sinking 24%. But that’s all part of the plan, says Elon: Tesla will “invest in growth as fast as possible.”
Wall Street isn’t buying what he’s selling — TSLA is down 8.5% on the day.
The major U.S. stock indexes are all in the red, but it’s nothing dramatic: The S&P 500 is down 20 points or half a percent to 4,134. The index has held the line on 4,100 for a week now.
Gold clings to the $2,000 level, barely. Silver remains a bit above $25. Crude is down nearly two bucks again today, a barrel of West Texas Intermediate now $77.26. Copper’s back down to $4.02 a pound.
Bitcoin is below $29,000 for the first time in a few days, but Ethereum is hanging tough at $1,966.
The day’s economic numbers? Not encouraging…
- The factory sector in the mid-Atlantic has shrunk for eight straight months now, the Philadelphia Fed Manufacturing Index surprising way to the downside at minus 31.3. That’s the lowest since lockdown in May 2020, when it was minus 43.2
- Existing home sales fell 2.4% in March, according to the National Association of Realtors. That translates to a year-over-year drop of 22%. Inventory is still super-tight at 2.6 months’ worth. Thus, the median price for an existing home is $375,700 — down less than 1% from a year ago. Pity the first-time homebuyer…
- The leading economic indicators from the Conference Board slipped another 1.2% in March, more than any Wall Street economist was expecting. This figure has been falling for six straight months, pointing to a recession starting this summer.
For the record: Uncle Sam is in danger of defaulting on the national debt sooner than previously thought.
With Congress at odds over how to raise the debt ceiling, the Treasury has been resorting to accounting tricks since Jan. 19 to stay below the ceiling — now $31.4 trillion.
But the tricks work for only so long. Until now, the thinking was the clock would run out in early August. Now a report from Goldman Sachs is pointing to “the first half of June,” blaming the accelerated timetable on “weak tax collections” this month.
Problems made possible by AI that we hadn’t started to think about yet…
That’s the cover of the German magazine Die Aktuelle and the headline “Michael Schumacher: The First Interview.”
Schumacher is the Formula 1 racing legend who suffered severe head injuries during a skiing accident in December 2013. He was put into an induced coma, came home with his family in September 2014 and hasn’t been seen since.
The magazine was up-front that the “quotes” from the “interview” were made up by an AI program called character.ai. “I can with the help of my team actually stand by myself and even slowly walk a few steps,” says one of the made-up quotes.
We’re not sure what the magazine’s editors were trying to accomplish here. Did they want to demonstrate AI’s capabilities to generate fakery? If so, it’s backfiring spectacularly: Schumacher’s family tells the Reuters newswire they plan to sue.
“Are you crazy?” writes one of our longtimers as readers sound off on the gold price…
“I feel like I am when I read comments that some readers make about all manner of things, Trump, Biden and even gold.
“People that have so much emotion tied up in the price of a metal (not calling it a ‘precious’ metal with the emotion of Gollum will probably raise their ire against me too) probably lose money on any investments they make. Emotions kill investment returns. I know from personal experience.
“I for one am glad that gold isn’t $10 or $20,000/oz as that would indicate some very bad things are happening. Similarly, I’m not looking forward to collecting on my homeowners insurance because my house burned down.
“Might as well kick one more stinky brown pile while I’m at it: If Trump and Biden are really the best candidates we can come up with, well, gold may hit $20,000 before you know it. Cheers!”
“Fair point, Dave, about complaining or doing something about the gold price manipulation,” a reader writes after I suggested looking upon each gold smashdown as a buying opportunity.
“But I will add that my position is pretty well staked out. I took full advantage of the big drop in ’15 and the resulting trough over the next couple years. I’m happy with where I am and likely will just make a small purchase here and there. I also will remind you of James Garner’s bit of perspective from The Great Escape: ‘A soldier’s got a right to grumble.’ Every now and again you need to get that stuff out, and it’s good to know there are people who understand and can relate.”
Then the reader pivots to another topic broached here on Monday: “As he often does, Matt Taibbi hit the nail on the head with his take on what will result from ‘the leaker.’
“I have no doubt it will unfold the way he laid it out, with the uniparty trying to ram the RESTRICT Act through. Just another power grab, which is what they do.
“Also, looking at the way the lamestream hacks and political war/chicken hawks are bleating on with their usual babble, this looks to be in the same league as the Snowden leaks. The reactions and the rhetoric sure have been the same — can’t imagine I’m the only one who’s noticed.”
The 5: It’s way worse now than it was with Snowden 10 years ago.
At least then there was extensive reporting about the newsworthy contents of the documents in question. Thus, Americans could have a vigorous dialogue about the National Security Agency’s “collect it all” approach to surveillance — even if that dialogue didn’t do a damn thing to change NSA policy.
Now? You have to actively seek out the real news — such as the confirmation that Washington and its NATO allies do have “boots on the ground” in Ukraine, putting the NATO countries in direct conflict with Moscow. Mainstream coverage has instead obsessed over “the leaker, his motives, his personal faults and what the government is doing to make sure this doesn’t happen again,” as Branko Marcetic writes at Jacobin.
Hell, The New York Times and The Washington Post did most of the FBI’s legwork in tracking him down. Get a load of this tweet from a NYT reporter a few days ago…
Yes, he subsequently deleted that. Because we peasants can’t handle the truth…
Best regards,
Dave Gonigam
The 5 Min. Forecast
