Financial Market Report for the Week Ending March 23, 2012
For the last forty years, the world has known neo liberal credit, which came via the Milton Friedman Free To Choose Script of floating currencies, where the US Dollar was the global reserve currency; and as a result capitalism thrived, which was experienced as a free market economy in the United States and socialism in Europe; with the standard of living of Republicans and European Socialists rising dramatically and the economic wannabes such as Libertarians salivating and whimpering.
But the global tectonic economic and political plates have shifted as fears of sovereign default, and fears of diminished global growth have arisen. The bond vigilantes a have called sovereign interest rates higher, as is seen in the Flattner ETF, FLAT, falling and the Steepner ETF, STPP, rising. And the currency traders are selling world currencies, DBV, and emerging market currencies, CW, with the result that the US Dollar, $USD, traded by the 200% ETF, UUP, is rising .
An authoritarian tsunami is on the way. Look and see, a coup d etat is underway in the EU, Revelation 6:1-2. Fate, Revelation 2:26-27, is passing the baton of sovereignty from sovereign nation states to the EU ECB and IMF Troika, with the result that the global governance of EU UK and US hegemony is ending, and a ten toed kingdom of regional global governance is forming, with the first toe being the Euro zone.
Export dependence has been a major characteristic of the Milton Friedman Free To Choose floating currency regime since its introduction in 1991, when the US went off the gold standard. For forty years, there has been an intensification of global integration through trade.
A global trade bubble has formed because the US Dollar has been the defacto reserve currency, and because a debt trade has recycled dollars into US Treasuries, ZROZ, EDV, TLT, with the result that a global government finance bubble has formed, as is seen in the ETFs, BWX, and EMB, growing over the years.
China, YAO, CAF, FXI, became an export super star. India, INP, and South Korea, EWY, rose to be export giants; the former because of low wages and the latter because of ingenuity. Brazil, EWZ, saw exports grow. Australia grew as a major exporter of commodities. Sweden became a major exporter to the EU. Russia, RSX, became a major exporter of oil and natural gas. Mexico, EWW, was a strong exporter. Hot money flowed in Brazil Banks, BRAF, and India Banks, EPI.
As inflationism has turned to deflationism, the bullwhip effect, cited by Lakshmah Achuthan of ECRI, writing in the Yo Yo Years, is at hand. Yoyo risk is at its maximum. Through trade synchronization, there is coming a strong unwinding of global trade, with asset price deflation, competitive currency devaluation, deleveraging out of commodities, and debt deflation in bonds.
Because of the yo yo effect, what was global trade will become regional trade, featuring regional bartering and currency exchanges.
Regionalization is the new direction of globalism. Regional blocs will form based upon regional framework agreements where leaders meet in summits, waive sovereignty, and pool sovereignty to establish regional global governance.
The dynamos of growth and profit that powered capitalism are winding down; and the dynamos of regional security, stability and sustainability are powering up regional global governance.
The ECBs LTRO created a short squeeze in Gold, GLD, causing a fall in its value, and a rise in Emerging Market Infrastructure, EMIF, CHXX, INXX, BRXX, seen in their rising, giving the bull market in US Infrastructure, PKB, legs.
Loosened neo liberal credit, that is easing central banks’ monetary policies, have reached their maximum benefit. Financialization of debt by Mortgage REITS, REM, such as Annaly Capital Management, NLY, has reached maximum benefit, with Mortgage Backed Bonds, MBB, trading lower. A slowdown in China, CHXX, CHII, CHIM, CHIX, HAO, and a smackdown of the BRICS, EEB, has commenced.
Deleveraging out of debt laden countries, such as Argentina, ARGT, has commenced. Camila Russo of Bloomberg reports Argentina’s budget deficit is swelling to the widest in at least a decade as government spending surges, eroding confidence in the outlook for economic growth and reducing demand for longer-term bonds. Argentina posted a 2.7 billion peso ($619 million) deficit in January and February, a record in data going back to 2000, after spending jumped 34% last month from a year earlier while revenue increased 30%.”
Global trade will be replaced to some extend by regional trade; the end of age of the long supply chain is at hand.
Greeks cannot be Germans, yet they will all be one in governance and in debt servitude, as they share a common currency, Target 2 imbalances, and are overseen by the ECB which has subordinated European Financial institutions, EUFN, to itself ; the regionalization of banks in the EU has created the ECB, as the regional monetary authority, and as the backbone for a soon coming Federal Euro zone government. A Federal Super state has already been born in Europe.
Out of a soon coming Financial Armageddon, Germany will rise as overlord to peripheral client states.
The PIIGS cannot be more like Germany as they are culturally, industrially, and fiscally night and day. Yet through the creative destruction of Neoliberalism, specifically through regionalization, a EU Super State, will arise and be the forerunner of regional global governance, in all of the ten world regions, as called for by the Club of Rome in 1974.
Regional statism and totalitarian collectivism is God’s fiat, that is God’s be, as foretold in bible prophecy of Revelation 13:1-4 and in Daniel 2:31-33. It’s polar opposite is the be of like precious faith and the additive process of 2 Peter 1:1-9 . The are only two experiences, the fiat of regional global governance, or the like precious faith of Jesus Christ and the practice of virtue, whereby one experiences the divine nature, and knows the exceedingly great and precious promises of God.
The soon coming sovereign default of the PIIGS will be most painful to Germany. Yet, never the less, Germany will emerge as a type of leader in a revived Roman Empire.
Ben Bernanke did not save the world. Soon the most credible of leaders will step onto the world’s stage. This seeming Little Authority, will emerge as a New Charlemagne, to rule Europe. Possibly Herman van Rompuy, will be Europe’s sovereign, Revelation 13:5-10. He will be accompanied by a European Banker, possibly Mario Draghi, Revelation 13:11-18. People will be amazed by this development and place their trust in their word, will and way. Yes the people will give their allegiance to their rule, Revelation 13:3-4.
The fiat money system is dying, and the diktat money system is rising in its place, where diktat will serve as both money and credit.
A global rebalancing is coming; a new fiat of regional global governance and diktat is coming to replace the old fiat of capitalism and choice. This is God’s so be it, as foretold by the Prophet Daniel in Daniel 2:31-33, and by John the Revelator in Revelation 13:1-18. Yes the Fiat of Choice is history and the fiat of Beast is the future; this monster is of God’s Judgment is rising up out of the profligate Mediterranean nation state of Greece