The "Fake" Economy

Oil, War, and the Petrodollar

The corona virus has upset the global economy, now the old normal. It has provided a distraction that has allowed for the transfer of trillions of tax dollars to the largest most corrupt corporations. The Fed has cranked up the presses and is pumping out dollars at an unprecedented rate. Now many people say the US dollar (USD) isn't based on anything and is just paper. However, it is based on something, oil. Ever since we cut the deal with the Saudis in the early '70's all countries must buy their oil (and many other commodities) in USD. Last week oil went negative because there is such a glut and lack of storage. So in comes the Fed propping up oil prices with our tax dollars, also boosted by Trump's threat to shoot down Iranian gunboats. How do we get out of this mess? How about a war or two?

For too long, people have equated the stock market with the US economy, but for almost forty years it has been rigged by corporations buying their own stock to drive up prices (and bonuses). Now we have the Fed buying it all and driving market gains as unemployment jumps, retail businesses collapse, and manufacturing is at a near stand still. I've been asking myself how can anyone believe this economy? It is a "fake" economy.

graph of dividends vs buy backs

... investors are plenty incentivized to buy stocks, and corporations are incentivized to make those stocks pay off. But we’ve broken the mechanism that makes sure that exchange leads to the actual creation of jobs and capacity.

As for CEOs, they've been roped into supporting this trend through changes to corporate governance law, and the fact that two-thirds of their compensation in the last decade has come via stocks and options. Meanwhile, carve-outs in the corporate tax rate make business financing via debt much cheaper than business financing via equity. So companies have been borrowing more since the 1980s to provide capital, while shareholders have, on balance, actually been extracting capital from companies.

All this should make it clearer why the stock market seems to keep performing fine even as the economy barely sputters along: Corporate stock performance has entirely disengaged from the underlying health of the economy.

https://theweek.com/articles/538864/evil-stock-buybacks-how-corporations...

So as we've discussed many times, it is a rigged game...and all that was before this massive Fed relief supplement for the elite... while not having enough for the working people nor the small businesses that employ so many. As Max Keiser often says, "You can't tapper a Ponzi".

To really grasp the nature of the "fake" economy, you have to understand the nature of the dollar, in particular, the petrodollar, for it props up this rotten system. All countries must buy oil in dollars and therefore must purchase dollars with goods and services, and so oil producing nations must do something with those dollars...How about US treasuries?

What's the Untold Story of Saudi Arabia's Debt Secret? (3.5 min)
https://www.bloomberg.com/news/videos/2016-05-31/what-s-the-untold-story...
Text here

Yet it is China and Japan that hold most US debt

With trillions of U.S. dollars, China has found the U.S. Treasury securities to offer the safest investment destination for Chinese forex reserves.
https://www.investopedia.com/articles/investing/040115/reasons-why-china...

Even if China were to proceed with the selling of these reserves, the U.S., being a free economy, can print any amount of dollars as needed. It can also take other measures like Quantitative Easing (QE). Although printing dollars would reduce the value of its currency, thereby increasing inflation, it would actually work in favor of U.S. debt. Real repayment value will fall proportionately to the inflation—something good for the debtor (U.S.), but bad for the creditor (China).
...
China, on the other hand, needs to be concerned about loaning money to a nation that also has the limitless authority to print it in any amount. High inflation in the U.S. would have adverse effects for China, as the real repayment value to China would be reduced in the case of high inflation in the U.S.

Perhaps this is part of our aggression towards China? Also as gjohn suggests...
https://asiatimes.com/2020/04/china-rolls-out-the-health-silk-road/
...they're making us look bad.

The bipartisan US establishment has coalesced around increased hostility to China in response to the coronavirus pandemic. China has faced numerous allegations including that it covered up the pandemic at the world’s expense, developed the virus in a lab, and has spread disinformation. Journalist and attorney Ajit Singh debunks some of the most widespread claims lodged against China and analyzes the parallels between the current climate and Russiagate. Aaron Mate'
https://www.youtube.com/watch?v=-SYl927vuWM (30 min)

EDIT to add: Azazello dropped this clip in the comments. As I wrote to him, this conversation with economist Hudson, Ben, and Max makes the point of the essay more powerfully than the essay. (45 min)
https://www.youtube.com/watch?v=paUgY6SGlgY
Transcript here:
https://moderaterebels.com/transcript-economics-american-imperialism-mic...
Part one on the bailout was great too.
https://moderaterebels.com/transcript-us-coronavirus-bailout-michael-hud...

Max and Stacy hit the nail on the head examining the failed unprofitable US fracking industry. Also an excellent interview in the 2nd half, so I recommend the entire episode. (26 min)

Another great take from Max and Stacy (1st 15 min)
https://www.youtube.com/watch?v=2N_WwZd-Mf8

Jimmy and Dylan discuss negative oil prices
https://www.youtube.com/watch?v=l1oERncbzPY (28 min)
They began the discussion by looking at the Fed's support of big corporations
https://www.youtube.com/watch?v=Ybc3dU-a80M (27 min)

And we should prepare for negative interest rates here in the US
https://www.youtube.com/watch?v=Tmj3VrNLst8 (10 min)

Gregory Mannarino explains the nature of the petrodollar.
https://www.youtube.com/watch?v=p7FFTMfzt0E (11.5 min)

Michael Pento is convinced that we are heading into "The Greater Depression" as the world is awash in 17 trillion dollars in negative-yielding debt. He says, "We are no longer living in reality; this is a fantasy created by massive monetization of debt from central banks." The middle class is being wiped out, having lost 25 million jobs in five weeks, and we are witnessing a new era of helicopter money and universal basic income
https://www.youtube.com/watch?v=Gj9cqog7nw4 (20 min)

The May WTI price crashed below -$40 a barrel in a little more than an hour. The Dow Jones is also crashing 570 points as a result of this historic drop in demand. This is rapidly becoming the worst economic collapse in history and this collapse in oil prices will truly touch every part of the market. The problem is the Fed is already at it's limits and interest rates are at 0% and we have just undergone the largest stimulus package in history. There has been a lot of articles recently attempting to get you to spend your stimulus checks on useless spending because money velocity has been grinding to a halt. The only thing that is certain at this point is the uncertainty. The rapid collapse suggests there was forced selling due to one or more oil trading giants going bust. https://www.youtube.com/watch?v=_BQ_DE3p5BA (4.5 min)

COVID Bailouts for The BIGS. Crumbs for Us - Gerald Celente
https://www.youtube.com/watch?v=HpYDwNQ5jrM (23 min)

Could the current crisis in the oil markets lead to war? Mike Maloney presents data that shows the true extent of the massive body blow received by US oil industry.
https://www.youtube.com/watch?v=XbMBJVgzJ8c (26 min)

Oil for war, and war for oil

The United States has a well-known history of fighting wars for oil.

Beyond accounting for fossil fuel consumption and greenhouse emissions, the U.S. military’s contributions to the climate crisis are even greater when considering that oil is the leading cause of war. An estimated one-quarter to one-half of all interstate wars since 1973 have been linked to oil. The U.S. military spends an estimated $81 billion a year to protect the world’s oil supplies.

In addition to causing war, the fossil fuel industry also relies on militarized state violence to uphold its operations around the globe. Those who fight to protect their lands from extractive industries and infrastructure are often branded as “eco-terrorists” and met with state-military or paramilitary violence.

https://ips-dc.org/climate-militarism-primer/ (Hat tip joe)

And it is an endless wide spread war...

“Far-flung” doesn’t describe America’s war reach. Our military personnel, technology, and taxpayers’ money are in so many places that the political and military brass no longer admit how many troops are where, much less why. The New York Times, Washington Post, and others, however, have done recent surveys confirming current deployment numbers for:

Afghanistan: 14,000 After adding 4,000 troops since taking office, Trump–now facing re-election–has tricked up a “truce” with the Taliban that, he wants us to believe, will end the fighting and let him bring home all those war-weary troops home.
Bahrain: 7,000 This oil-rich, oppressive regime is a close ally of Saudi Arabia.
Iraq: 6,000 Waged in a country the US supposedly “rescued” nearly 20 years ago, this endless war has cost the lives of nearly 5,000 US troops and hundreds of thousands of Iraqi soldiers and civilians. Iraq’s government now demands we leave.
Kuwait: 13,000 We treat this tiny, opulent oil kingdom as our own military base for protecting oil monopolies.
Oman: a mere 600 To do … what? Undisclosed, but pricey.
Qatar: 13,000 Why? To, of all things, battle Trump’s key ally in the Mideast: Saudi Arabia.
United Arab Emirates: 5,000 And now this Saudi ally–hello!–has begun siding with the Saudis’ (and Trump’s) most hated opponent, Iran.
US Africa Command: 7,000 Africom manages the Pentagon’s ill-defined “special operations” missions in nations like Chad, Mali, Niger, and Somalia. Why are we there? Don’t ask.

And for decades, we’ve routinely financed “legacy missions” that have been in place for decades, needed or not:

South Korea: 28,000 Even though Trump now declares the North’s despot, Kim Jong-un, his trusted buddy, US troops south of the DMZ face off North Korea.
Japan: 57,000 About half the US’s Japan-based troops are on the island of Okinawa, where local resentment runs high.
Europe: 65,000 The troops spread across Europe, supposedly to contain Soviet communism, which officially perished in 1991.
Don’t forget, among 171,000 troops deployed abroad, according to the DoD: Australia (284), Cuba (800), Norway (700), The Philippines (182), and “unknown.”
And–oh, yes–the 5,000 US Army soldiers Trump has stationed on our own southern border to battle desperate children crossing from Mexico!
Then there’s our “floating” military, consisting of untold thousands of troops quartered on ships so they can periodically be zipped to war … wherever.

https://hightowerlowdown.org/article/us-global-sprawl-177-nations-wide/

Maj. Danny Sjursen explains the historic nature of our endless war...
https://original.antiwar.com/danny_sjursen/2020/04/19/the-still-exceptio...

And then in the midst of a pandemic...

“I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea,” US President Donald Trump tweeted Wednesday in a startling threat that could trigger a catastrophic war throughout the Middle East and beyond.

The threat to launch a war 7,000 miles from US shores in the midst of coronavirus pandemic, whose death toll in the US is rapidly approaching 50,000, comes on the heels of Trump’s Monday night tweet announcing a suspension of all immigration into the United States, a transparent attempt to scapegoat immigrants for the ravages of the pandemic and the layoffs of tens of millions of workers.

There is in both of these actions an expression of desperation and a flailing about in the face of a national and global crisis for which the US ruling class has no viable solution. It is a crude attempt to change the subject and divert public attention from the catastrophic consequences of the criminal indifference of the government and the ruling oligarchy it represents to the lives and well-being of the vast majority of the population.
...
Nowhere does this war drive find more naked expression than in the massive government bailout that is being organized for the US arms industry. With tens of millions of workers unemployed, many facing hunger, and a drive by both the Trump administration and state governors to force a premature return to work, billions upon billions of dollars are being lavished upon military contractors to sustain their guaranteed profits and the obscene fortunes generated for their major shareholders.

https://www.wsws.org/en/articles/2020/04/23/pers-a23.html

Is there more to come?
"The Coming War on China" is Australian director John Pilger's 60th film. He said a movie that challenged the stereotypes and myths that undermined our understanding of the rise of China is long overdue, motivating him to spend two years filming this documentary across five potential flashpoints in the Asia Pacific. These places include the Marshall Islands, US military bases in Okinawa and Jeju islands, and cities in China. Through rare archives and powerful interviews, the two-hour documentary tries to make the point that after losing its economic prowess, Washington has turned almost obsessively to its military might, and the prospect of nuclear war is no longer unthinkable. Hat tip SOE
https://www.youtube.com/watch?v=mXNO_g4hlKw (27 min)
Two hour documentary here.

Time for Green New Deal?
For decades, fossil fuel companies have been burning through carbon reserves at the expense of everyday consumers. Propped up by profit-centric public officials and greedy Wall Street financiers, they have thrived even as their primary product is an unparalleled moral and financial hazard. Now, as Covid-19 shocks the world into realizing the depth of its addiction to oil, we are seeing just how destabilizing this reliance on fossil fuels is.
https://www.theguardian.com/commentisfree/2020/apr/22/oil-futures-fossil...

Like me, have you been thinking we could transition to non-polluting energy sources? I'm no longer certain. In fact I think we've been scammed. Did you watch Moore's new film, "Planet of the Humans"? I found it an eye opening revelation of the corporatization of the alternate energy industry. I continue to think solar and wind works on a homestead or community level, but probably won't power the grid. The other theme here was "less is best" It is well worth your less than two hours (IMO).

Michael Moore presents Planet of the Humans, a documentary that dares to say what no one else will this Earth Day — that we are losing the battle to stop climate change on planet earth because we are following leaders who have taken us down the wrong road — selling out the green movement to wealthy interests and corporate America. This film is the wake-up call to the reality we are afraid to face: that in the midst of a human-caused extinction event, the environmental movement’s answer is to push for techno-fixes and band-aids. It's too little, too late.

Removed from the debate is the only thing that MIGHT save us: getting a grip on our out-of-control human presence and consumption. Why is this not THE issue? Because that would be bad for profits, bad for business. Have we environmentalists fallen for illusions, “green” illusions, that are anything but green, because we’re scared that this is the end—and we’ve pinned all our hopes on biomass, wind turbines, and electric cars?

No amount of batteries are going to save us, warns director Jeff Gibbs (lifelong environmentalist and co-producer of “Fahrenheit 9/11” and “Bowling for Columbine"). This urgent, must-see movie, a full-frontal assault on our sacred cows, is guaranteed to generate anger, debate, and, hopefully, a willingness to see our survival in a new way—before it’s too late.

To me the real green deal is the garden...the ultimate solar collector.
Check out this Florida grower. He's at least a month ahead of us. This fellow is an excellent urban producer. https://www.youtube.com/watch?v=ii7cR9-FJfY (20 min)

The ultimate real green deal involves our relationship to the natural world. RA often suggest this is the time and opportunity to move to a new level of consciousness. This clip, Food, Earth, Happiness, talks with Japanese "natural" farmers who are walking my chosen path to that higher calling. It does require reading some subscripts to get the gist. (20 min)

What have we learned about COVID this week?

I like listening to Chris at Peak Prosperity. He had two excellent pieces on hydroxychloroquine illustrating how science is misinterpreted (as U.rip often explains)
Coronavirus: Debunking The Hydroxychloroquine 'Controversy' (Dr. Chris Martenson)
https://www.youtube.com/watch?v=dLSYRqcg0wo (40 min)

Coronavirus: Bad Science (Or Something Worse?) May Well Be Costing Lives
https://www.youtube.com/watch?v=rN_YpFhdii4 (44 min)

Chris also suggests a plan for the future...
Here's Everything We Should Be Doing Now To Beat The Coronavirus
https://www.youtube.com/watch?v=C-w8umI_IE8

Dr John Campbell is another source I like to watch. Here he explains a random study in NY that suggest up to 14% of people have already had the virus.
https://www.youtube.com/watch?v=ypsUIh41xUw&t=5m1s (about 5 min)
Later in the clip he talks about pre-existing conditions that seem to add severity to COVID
https://www.youtube.com/watch?v=ypsUIh41xUw&t=24m0s (about 4 min)

Georgia has reopened.

I think that this is about reducing the potential unemployment insurance costs to the state. The order to open these businesses supersedes an order that he made to close these specific businesses a few weeks ago. But earlier this week, we started to see projections about what the budget shortfall is going to look like in Georgia. We’re looking at $4 billion that we weren’t going to have before. And the unemployment fund has about $2.6 billion in it. That’s going to be a crisis in about a year. And I think the governor is trying to act now to avert that crisis later.

https://www.democracynow.org/2020/4/24/georgia_lifts_lockdown_coronavirus

One thing is for sure, the COVID pandemic insures nothing will be the same as Lee Camp explains. https://www.youtube.com/watch?v=XzCDXZBOI4w (10 min)

Jonathon Pie hasn't done well in lockdown. Here's his latest update https://www.youtube.com/watch?v=pYpxi0AN07w (7 min)

I think the failure of the US system is plain to see. We have become a corportocracy ruled for and by the oligarchs. It is neo-fuedalism as Max says. COVID-19 has provided the ideal vehicle to lock in the oligarchs control and create a perfect world of profit using the US government and peoples taxes to bankroll their take over. We are being force fed oil and war to float their profits, and when they lose we bail them out at the expense of the people... further locking us into servitude. Jimmy had a good interview with a union organizer one at 12 min and another at 30 min which I found insightful. However I wonder why workers should fight corporations. Why not create worker owned coops and side step the oligarchs? Much of the problem revolves around our education system which is being gutted while we watch states and cities go bankrupt as the economy crashes. Chris spoke with Cornell University Professor, Noliwe Rooks about America’s public education system last week, and in a 1.5 hour excellent interview with Jimmy Chris spoke about his experience teaching in prisons and how the prison system controls people. So in conclusion, we have a fake economy that is totally rigged to serve the oligarchs. What to do? We have to hit them in the pocketbook to make them take notice. Perhaps a gasoline boycott (which is underway as people stay at home), rent and mortgage strikes, and organizing self run and cooperative businesses are useful strategies. I look forward to your ideas in the comments below.

Have a good Sunday and a nice week!