ECONOMIC UPDATE: When Interest Rates in the U.S. Decline, so will the Value of the Dollar
NOTE TO READERS: The following is our weekly Economic Update — Market Overview found in this week’s issue of The Trends Journal. Consider subscribing here for in-depth, independent geopolitical and socioeconomic trends and trend forecasts that you won’t find anywhere else.
Where is the U.S. economy headed? Will equities keep going up? Have gold prices hit their highs? Will inflation rise or fall?
On May 3rd we will know the answer to these and other socioeconomic trends shaping the future when the U.S. Fed announces whether it will hold interest rates where they are or raise them. There is barely a bet on The Street that the Fed will lower interest rates while the guess of hikes or no hikes keeps changing.
A few weeks ago, The Street was betting the Fed will hold interest rates… which pushed up gold prices and the equity markets. And with a stronger-than-expected earnings season, CME Group’s FedWatch tool shows that over 90 percent of The Street’s market players anticipate a 25 basis point increase when the Fed meets in May.
And they may even go higher, as predicted by Larry Fink, the BlackRock CEO whose firm manages some $10 trillion in assets.
“I think we’re going to have two to three more rate increases. The reason why is I believe interest rates need to go higher, especially in the short end, because we have stickier inflation” Fink told Fox Business.
The United States has become the nation the Founding Fathers fought against… the United Kingdom. Just as the UK destroyed its economic dominance by waging wars across the globe to insure that the “Sun never sets on the British Empire,” the United States endless wars have done the same. The facts speak for themselves. World War I inflicted incalculable spiritual, physical and financial destruction on the UK. -Celente
Coming from the head of the world’s #1 asset manager that Morgan Stanley says will exceed $15 trillion in five years—and a top member of the White Shoe Boys Club—Fink knows what’s next… or is just making this up to fink the people?
From Dollars to Dimes
Our April 4th Trends Journal cover by Anthony Freda was “Death of the Dollar.” Now it is making mainstream news.
On Sunday, U.S. Treasury Secretary Janet Yellen told CNN, The Cartoon News Network, “There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” and that the U.S. uses the dollar as “a very effective tool.”
There you have it: “hegemony” and a “tool” both of which much of the world has had enough of the United States economic and military “hegemony” and will not be a “tool” of Washington.
FOLLOW GERALD CELENTE ON YOUTUBE
Yesterday, the top story on Drudge Report was: Dollar under fire from rival nations. What if it loses world dominance?
From France to Brazil, from Saudi Arabia to South Africa, BRICs and other nations are forming “global strategic partnership with China.” Political leaders across the globe have loudly expressed that they are not “vassals” of America and ask themselves “why all countries have to base their trade on the dollar,” rather than “do trade based on our own currencies.” Indeed, recently the Saudi’s agreed to sell oil to China and get paid with their yuan.
After hitting its high last September, according to FactSet, the dollar has fallen 10 percent against its six largest rivals and is the worst performing currency among the G-10 according to Rabobank. Indeed, the down-tick of the dollar has been long coming. Back in the late 1990’s, at a time of the Asian currency crisis, the dollar accounted for some 70 percent of central bank foreign reserves according to the International Monetary Fund. As of last year it was down to 58.4 percent.
TREND FORECAST: Again, as we have long forecast, when the interest rates in the United States decline so too will the value of dollar.
And while 84.3 percent of global trade is dollar denominated and the Chinese yuan accounts for just 4.6 percent of trade, the currency game is changing. According to Swift, trading in the yuan was just 1.8 percent a year ago. And as the Financial Times headline blared last Wednesday, Renminbi’s share of trade finance doubles since start of Ukraine war.
As Gerald Celente has forecast, the 20th century was the American century and the 21st century will be the Chinese century. Thus, the stronger the Chinese economy grows, so too will it continue its ascent as the world’s largest trading partner that many more nations will be doing business with.
While the dollar will not collapse as the world reserve currency overnight, the dollar nightmare has begun and its erosion—minus a wild card such as the end of the petro-dollar—will be slow and steady.
TREND FORECAST: Gerald Celente has noted that a primary reason for America’s descent and China’s rise is that the business of China is business and business of America for some 75 years has been war.
Indeed, the United States has become the nation the Founding Fathers fought against… the United Kingdom. Just as the UK destroyed its economic dominance by waging wars across the globe to insure that the “Sun never sets on the British Empire,” the United States endless wars have done the same. The facts speak for themselves. World War I inflicted incalculable spiritual, physical and financial destruction on the UK.
It is well-known that World War I was expensive for Britain. The indirect economic costs were also huge. This column argues that the adverse implications of the Great War for post-war unemployment and trade – together with the legacy of a greatly increased national debt – significantly reduced the level of real GDP throughout the 1920s. A ballpark calculation suggests the loss of GDP during this period roughly doubled the total costs of the war to Britain.”
The ravages of WWI destroyed the lives, livelihood and the future of Great Britain. They go on to report that:
Britain incurred 715,000 military deaths (with more than twice that number wounded), the destruction of 3.6% of its human capital, 10% of its domestic and 24% of its overseas assets, and spent well over 25% of its GDP on the war effort between 1915 and 1918 (Broadberry and Harrison, 2005). Yet that was far from the sum of the losses that the Great War inflicted on the British economy; economic damage continued to accrue throughout the 1920s and beyond.
Again, history is repeating itself. And as we make clear, by their deeds America has become the warmongering nation of the UK that its Founding Fathers fought against. And like the UK whose “Sun never set on the British Empire,” the sun never sets on America’s 800 military bases in more than 70 countries. Thus, the nation has paid its price… a price that has severely damaged the nation itself.
As former Five Star General, Supreme Commander of the Allied Forces during WWII and two-term President Dwight D. Eisenhower warned:
“This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities.
“It is two electric power plants, each serving a town of 60,000 population.
“It is two fine, fully equipped hospitals. It is some 50 miles of concrete highway.
“We pay for a single fighter plane with a half million bushels of wheat.
We pay for a single destroyer with new homes that could have housed more than 8,000 people.
“This, I repeat, is the best way of life to be found on the road the world has been taking.
“This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.”