• Tag Archives Derivatives
  • Ray Dalio Is Shorting The Entire EU

    A point BOE Governor Mark Carney made recently may be the biggest cog in the European Union’s wheel (or is it second biggest? Read on). That is, derivatives clearing. It’s one of the few areas where Brussels stands to lose much more than London, but it’s a big one. And Carney puts a giant question mark behind the EU’s preparedness.
    Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks
    Carney explained why Europe’s financial sector is more at risk than the UK from a ‘hard’ or ‘no-deal’ Brexit. [..] When asked does the European Council ‘get it’ in terms of potential shocks to financial stability, Carney diplomatically commented that ‘a learning process is underway.’ Having sounded alarm bells about clearing in his last Mansion House speech, he noted ‘These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.’
    Calling into question the continuity of tens of thousands of derivative contracts , he stated that it was ‘pretty clear they will no longer be valid’, that this ‘could only be solved by both sides’ and has been ‘underappreciated’ by Europe . Carney had a snipe at Europe for its lack of preparation ‘We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.’
    In Carneys view ‘It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…

    This post was published at Zero Hedge on Oct 19, 2017.


  • These Are The Wall Street Jobs Most Threatened By Robots

    Cashiers at fast food restaurants aren’t the only workers who should fear being imminently replaced by kiosks and artificial intelligence. Advances in machine-learning software could soon render many high-paying Wall Street jobs obsolete – jobs that will no doubt quickly disappear as electronic trading in equities and foreign exchange markets squeezes trading revenue, forcing banks to seek cost savings elsewhere.
    As Bloomberg points out, ‘the fraternity of bond jockeys, derivatives mavens and stock pickers who’ve long personified the industry are giving way to algorithms, and soon, artificial intelligence.’
    Indeed, firms are already rolling out machine-learning software to recommend trades and hedging strategies. And while many of these tools will undoubtedly help the employees who remain vastly improve productivity (if history is any guide), one day soon, the machines may not need much help.
    But as anyone in the industry has probably noticed, banks have stepped up recruiting of tech talent since the financial crisis. Of the jobs Goldman Sachs’s securities business posted online in recent months, most were for tech talent.
    Billionaire trader Steven Cohen is reportedly experimenting with automating his top money managers. Venture capitalist Marc Andreessen has said 100,000 financial workers aren’t needed to keep money flowing.

    This post was published at Zero Hedge on Oct 18, 2017.


  • The Power Players Behind Silencing Wall Street Reformers

    America has now been through various iterations of ‘it’s time to stop bashing Wall Street’ by writers who seem to easily get air time or plenty of print space to make their case. An OpEd in the New York Times today is the latest in this endless series. We’ll get to that column shortly, but first some necessary background.
    Wall Street did not accidentally run a barge aground and leave a small oil slick on the Hudson River. Wall Street did not accidentally release tainted lettuce that sickened a few dozen people. What Wall Street did was intentional and criminal: it financially engineered a toxic subprime house of cards which it knew from its own internal reviews was going to collapse; it then molded the toxic product into inscrutable bundles; it sold the bundles to unsuspecting investors around the globe while making side bets that it would all come crashing down. Then, after causing the greatest financial collapse in the United States since the Great Depression, Wall Street’s unrepentant scoundrels paid themselves billions of dollars in bonuses with taxpayer bailout funds.
    One of the largest wrongdoers of this era, Citigroup, received the largest taxpayer bailout in history (over $2.5 trillion in loans, cash infusions and asset guarantees) and while this was occurring, one of its executives, Michael Froman, was staffing up the administration of the next President of the United States, Barack Obama, including an accepted recommendation for the head of the Justice Department.
    The 2007-2009 financial crash was more than the product of greed. There was both knowing and criminal wrongdoing, but none of those responsible have gone to jail. None of the regulatory gaps that allowed this to happen have been rectified. The biggest Wall Street banks have grown even bigger and remain too-big-to-fail; Wall Street is still paying the rating agencies for their Triple-A ratings; highly speculative Wall Street firms are still allowed to hold trillions of dollars in taxpayer-backstopped insured deposits in the commercial banks that they are allowed to own under a Byzantine bank-holding company structure with thousands of far-flung subsidiaries around the globe; and a handful of Wall Street banks continue to house trillions of dollars of derivatives inside their insured depository banks – something the public was assured would end under the Dodd-Frank financial reform legislation.

    This post was published at Wall Street On Parade on October 18, 2017.


  • “One Of The Biggest Fears I Have Is I Miss It”: There Is A Sudden Rush To Open Long-Vol Funds

    Last month, Soc Gen analyst, Praveen Singh, analyzed evolving cross-asset volatility trends, and boldly went where so many have unsuccessfully gone before. Singh’s warning was that the market is “now entering dangerous volatility regimes.”
    The crux of Soc Gen’s argument was mean reversion, notably that the current low level of volatility happens less than 2% of the time for equities. Furthermore, Soc Gen found that when equity volatility has been this low in the past, it went on to rise by 3 points in the subsequent 12 months. This means that volatility is more likely to go up than fall further from current levels… at least in theory.
    Portfolio managers, however, are increasingly thinking along the same lines. While it’s rumoured that Brevan Howard will shortly launch a long volatility fund, according to a Bloomberg it appears that there is a surge of interest in launching long volatility funds.
    According to Bloomberg ‘Brevan Howard Asset Management, 36 South Capital Advisors, One River Asset Management and at least three other firms are rolling out new funds designed to protect investors from rising market turbulence.’ Former SAC Capital’s, Hamming Rao, opened a volatility fund with a long bias this June, based in Florida.
    While buying volatility has been a widowmaker trade in recent years, the fund managers Bloomberg spoken to by Bloomberg couldn’t be more optimistic: Jerry Haworth, the co-founder of 36 South who ‘tripled investor’s money’ during the GFC, launched the Lesidi Fund earlier this month. Haworth commented ‘This is a multi-decade opportunity to buy volatility’… To increase the appeal of his long-volatility strategy, Haworth focuses on reducing the ‘negative carry,’ or steady bleed of cash, that accompanies calm markets. That’s gotten easier these days as prices for options and other volatility-linked derivatives have fallen.’

    This post was published at Zero Hedge on Oct 17, 2017.


  • Gary Cohn is Concerned about Wall Street Clearinghouses – Blockchain is Already Fixing it

    Gary Cohn, chief economic adviser to the President, voiced concern over the weekend about risk posed by Wall Street clearinghouses that became systemically important following the 2008 financial crisis.
    As Bloomberg reported:
    As ‘we get less transparency, we get less liquid assets in the clearinghouse, it does start to resonate to me to be a new systemic problem in the system,’ Cohn, director of the White House’s National Economic Council, said at a banking conference in Washington on Sunday.
    Cohn isn’t the first to raise the risk. JPMorgan Chase & Co. and BlackRock Inc. have argued for years that clearinghouses pose their own threats, shifting risk to just a handful of entities. The Treasury Department’s Office of Financial Research has warned that clearinghouses used for derivatives trades can be vulnerable and potentially spread risks through the financial system.
    While it is worth noting that this is another example of how the government’s response to a crisis they created made the economy as a whole more fragile, the good news for Mr. Cohn is that there is an exciting technological breakthrough that allows people to transparently move money without relying upon third parties to guard against shady counterparties: blockchain.

    This post was published at Ludwig von Mises Institute on October 17, 2017.


  • Robert Gore’s “Hard Core Doom Porn”

    It will be a crash like we’ve never seen before.
    ***
    SLL has been accused of trafficking in ‘doom porn.’ Guilty as charged. If you don’t like doom porn, don’t read this article, it’s hard core. If you prefer feel good and heartwarming, there are plenty of Wall Street research reports and mainstream media stories about the economy available. Enjoy!
    In 1971, President Nixon closed the ‘gold window,’ which allowed foreign governments to exchange their dollars for gold. This severed the last link between any government and central bank-created debt and the real economy. Debt could be conjured at whim, and governments and central banks have done so for the last 46 years.
    Not surprisingly, credit creation without restraint has papered the globe with the greatest pile of debt mankind has ever amassed, measured in nominal terms or relative to the underlying economy. A measure of how extraordinary this situation is: most people regard it as normal, if they think of it all. Debt is a first mover, a financial constant. Any exigency small or large can be met from an unlimited credit pool that will always be with us. How to rebuild Houston, Florida, and Puerto Rico? No problem, borrow.
    Although fiat credit creation by governments and central banks is unconnected to the real economy, its effects are not. Their debt becomes an asset within the financial system. Through fractional reserve banking, securitization, and derivatives it become the basis for a multiplication of the original debt. That multiplication is many times the multiplier (the reciprocal of the reserve requirement) taught in introductory macroeconomics classes whereby the debt is contained within the banking system.

    This post was published at Zero Hedge on Oct 12, 2017.


  • Trading And Investing In Gold: Follow The Money

    The paper gold attack that I first suggested might occur in the September 7th issue has taken gold from $1360 down to $1270 (continuous contract basis). Technically, gold has moved from an ‘overbought’ condition to a mildly ‘oversold’ condition. The RSI and MACD indicate that gold is slightly ‘oversold’ but I believe both indicators will flash ‘extremely oversold’ before this price attack over. This should occur sometime in the next 2-3 weeks.
    I say this because I continue to believe the open interest in Comex paper gold, combined with the analyzing the weekly Commitment of Traders report, is the best indicator of gold’s next move, at least until the western Central Banks are unable to control the price of gold with paper derivatives. To be sure, the COT report is not always a perfect predictor but in the last 15 years the two reports combined have been around 90% accurate.
    Currently, the Comex banks’ net short position in paper gold is at the high end of its historical range. Concomitantly, the net long position of the hedge funds is also at the high end of its historical range. Per last Friday’s COT report, the banks began to reduce the short positions, thereby reducing their net short position, and the hedge funds began to reduce the long positions, thereby reducing their net short position (click to enlarge):

    This post was published at Investment Research Dynamics on October 11, 2017.


  • October Realized Volatility Is Now The Lowest On Record

    After September was declared the lowest volatility month on record, October is starting auspiciously, if only for the vol sellers.
    After last week stocks rose again on renewed hopes of a Trump tax deal and following a payrolls report which showed the hottest wage inflation since the financial crisis, the S&P 500 closed the week 1.19% higher, while the Russell 2000 added 1.30%, the NASDAQ 100 increased 1.43%, and the Dow gained 1.65%.
    And while implied vol limped up slightly week-over-week as the VIX increased 0.14 points to 9.65 last Friday, this was the eighth consecutive close below 10. However, on Thursday the VIX closed at 9.19, the lowest close of all time. The trend appears set to continue, because as Bank of America’s derivatives expert Benjamin Bowler writes while October tends to have the highs volatility of all months of the year, this time is different and currently the annualized month-to-date realized vol for the S&P is 5.22%, the lowest October we’ve seen on record spanning back to 1928. For comparison, the median SPX realized vol in October is 17.22%, while the 1st percentile is 6.15%. Interestingly, the other four lowest vol Octobers were all in the 1960s (’61, ’64, ’65, and ’68), the period prior to “The Great Inflation” and rapidly rising rates of the 1970s.

    This post was published at Zero Hedge on Oct 10, 2017.


  • Stocks Up and Yields Down

    Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?
    First, we think it’s a cop-out to say, ‘well it’s all subjective.’ If it were all subjective, then there would be no way to say that gold is good, and no way to say that it ‘should’ go up. It would be sufficient to say, ‘gold is $1,276.’ Indeed that is all that one could say, if everything were subjective.
    Why is gold trading at that price? Subjective preference, nothing more. Will it trade at $12,760? Maybe. If subjective preference changes. One might as well say ‘if God wills it.’
    But it is not all subjective. There is something objectively wrong with the dollar and all of its derivatives such as euro, pound, yuan, etc. They are all slowly failing. Gold is the alternative to holding the dollar.
    It is important to keep in mind that most people do not like to buy on speculation. This may be particularly difficult to understand if you are someone who bought gold as a bet on its price. Most people buy, not because they expect a discontinuous change, but simply because they have goals to achieve.

    This post was published at GoldSeek on Monday, 9 October 2017.


  • What the Hell Does ‘Smart Beta’ Mean?

    First things first – please check out my interview with derivatives professional Devin Anderson on The Monthly Dirtcast. You don’t get this type of intellectual discussion on TV. Just saying.
    Now, to smart beta. My first encounter with a smart beta ETF was a WisdomTree product over ten years ago. As you may know, WisdomTree uses index weighting methods other than market capitalization for its ETFs. This one in particular was weighted by earnings or dividends – I can’t remember.
    I thought that presented an interesting philosophical question. WisdomTree had, in essence, created its own index. An index it believed would outperform another index.
    But wait – isn’t the whole point of an index to track the market? Since when are we constructing indices to outperform the market?
    This is what is known as ‘smart beta,’ the idea that you can build an index that will provide superior returns at a lower cost, with perhaps reduced volatility.
    So how do people come up with these things?
    Building a Smart Beta ETF
    You backtest.
    You start from some economic premise – say, that companies with lower valuations will outperform over time. Next, you build a hypothetical index, and then you go back in time (using the computer) to see if that is true. If you find it to be true, you build an index around it.

    This post was published at Mauldin Economics on OCTOBER 5, 2017.


  • It Has Never Been Cheaper To Hedge A Market Crash Using This One Trade

    In mid-August, at the height of the North Korea geopolitical turbulence, and amid uncertainty about the Fed balance sheet unwind, fears of a government shutdown and the US debt ceiling, as well as the fate of Trump tax reform and Obamacare repeal, when the VIX soared following a series of missile launches by Kim Jong Un only to crash right back to near all time lows, we used an analysis from BofA’s derivatives analyst Benjamin Bowler to show “How To Hedge A Near-Term Market Shock: Here Are The Best Trades”
    As we said then “if the events from last week demonstrated something, it is that just when there appears to be virtually no risk, is when the likelihood of a historic surge in volatility is greatest, as many experienced first hand last Thursday. Hence the need to hedge. But what? And using which product?” As Bowler explained “the decision about whether it’s rational to hedge is really a matter of looking at the price of tail insurance embedded into option markets and asking if the probabilities they assign are ‘fair’ or not.” As he further wrote, when it comes to predicting what the next “severe tail event” could look like, “we find that not only are some markets like Gold pricing in a very low probability of Korean risk escalation, there are significant differences across assets in terms of what they imply about potential risks.”
    He then presented the chart below which shows how historical worst 3M drawdowns since 2006 are priced by 3M 25- delta options across asset classes; hedges that are most underpricing their historical drawdowns are at the top and those most overpricing their tails are at the bottom. What the chart shows is that gold call options imply less than a 1 in 100 chance of a severe tail event over the next month, despite being among the most reactive assets to rising Korean tensions last week. With record low Gold vol slaved to record low real rates vol, this represents a loose anchor which likely won’t hold in any significant geopolitical risk escalation. In contrast to gold, Nikkei is at the other end of the spectrum with options assigning over a 5% chance of a near term tail-event.

    This post was published at Zero Hedge on Oct 3, 2017.


  • Chris Whalen On The CDO-Redux & Inevitable “Catastrophic Systemic Risk Event”

    ‘The great wheel of circulation is altogether different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them’
    Adam Smith, 1811
    This week in The Institutional Risk Analyst, we return to one of our favorite topics – namely credit spreads – as we consider the most recent statement from the Federal Open Market Committee. Fed Chair Janet Yellen made a presentation last week to the National Association of Business Economists illustrating that while she is puzzled by low inflation, Yellen is entirely clueless as to the workings of the financial markets.
    For some time now, we have been concerned that the FOMC’s overt manipulation of credit spreads has embedded future credit losses on the balance sheets of US banks. But now we are starting to see even greater signs of stress as the large Wall Street banks again return to derivatives in order to manufacture the appearance of profitability.

    This post was published at Zero Hedge on Oct 1, 2017.


  • Peak Housing Bubble: The Big Short Is Back

    Wash, rinse, repeat. The American public never gets tired of the destructive abuse it suffers from Wall St. The deep sub-prime mortgage market is roaring back and, with it, the nuclear bomb-laden derivatives that triggered round one of The Big Short de facto financial system collapse:
    It’s an astonishing comeback for the roughly $70 billion market for synthetic CDOs, which rose to infamy during the crisis and then faded into obscurity after nearly destroying the financial system. But perhaps the most surprising twist is Citigroup itself. Less than a decade ago, the bank was forced into a taxpayer bailout after suffering huge losses on similar types of securities tied to mortgages.
    Citigroup is leading the charge this time around, instead of Bear Stearns and Lehman: Citi Revives The Trade That Blew Up The System In 2008. Oh, and do not be mistaken, the financial ‘safeguards’ legislated by Congress and widely heralded by Obama and Elizabeth Warren are completely useless.

    This post was published at Investment Research Dynamics on September 27, 2017.


  • Deutsche Bank: “The Fed’s ‘Transparency’ Killed Long-Term Investing”

    Two weeks ago, one of our favorite derivatives strategists, BofA Barnaby Martin wrote something we have said for years: “QE has been the most effective way for CBs to ‘sell vol’”, arguing that accommodative monetary policies across the globe amid QE have “clearly supported a strong rebound in fixed income markets.” This should not be a surprise: as Martin calculated, there is now some $51 trillion at risk should rates vol spike, not to mention countless housing bubbles that have been created since the financial crisis where the bulk of middle class wealth has been parked, which in turn have trapped central banks, preventing them from undoing nearly a decade of unprecedented monetary largesse that has pumped over $15 trillion in central bank liquidity.

    The BofA strategist showed that every time the Fed embarked on the different phases of its QE program, credit implied vols declined significantly, while during periods of no monetary easing or when the market started pricing the possibility of easing policy removal (tapering tantrum and the subsequent tapering phase) implied vols advanced.

    This post was published at Zero Hedge on Sep 23, 2017.


  • BIS Hunts for ‘Missing’ Global Debt, Inflation (Try Including Housing!)

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    Just like global central banks, the Bank for International Settlements can’t seem to find inflation and $114 trillion in off-balance sheet FX derivatives.
    ZURICH – Nonfinancial companies and other institutions outside of the U. S., excluding banks, may be sitting on as much as $14 trillion in ‘missing debt’ held off their balance sheets through foreign-exchange derivatives, according to research published Sunday by the Bank for International Settlements.
    These transactions, which resemble debt but for accounting purposes aren’t classified that way, aren’t new. Rather, researchers from the BIS – a consortium of central banks based in Basel, Switzerland – used global banking data and surveys to estimate the size of this debt for the first time.
    The implications for financial stability are unclear because FX swaps are backed by cash collateral and can be used to hedge exposure to currency swings, thus promoting stability. Still, the debt ‘has to be repaid when due and this can raise risk,’ the authors wrote.

    This post was published at Wall Street Examiner on September 19, 2017.


  • Global Debt Bubble Understated By $13 Trillion Warn BIS

    – Global debt bubble may be understated by $13 trillion: BIS
    – ‘Central banks central bank’ warns enormous liabilities have accrued in FX swaps, currency swaps & ‘forwards’
    – Risk of new liquidity crunch and global debt crisis
    – ‘The debt remains obscured from view…’ warn BIS
    ***
    Global debt may be under-reported by around $13 trillion because traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds, the BIS said on Sunday.
    Bank for International Settlements researchers said it was hard to assess the risk this ‘missing’ debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis.
    The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.

    This post was published at Gold Core on September 19, 2017.


  • Mother of All Bubbles: Global Debt May Be Understated By $13 Trillion

    The US national debt was in the news last week as Pres. Trump signed a spending bill that raised the debt ceiling limit for the next three months and added approximately $318 billion to the national debt. Officially, the US debt surged to to $20.16 trillion. Of course, the actual figure for government unfunded liabilities runs even higher. And Trump wants to do away with the debt ceiling altogether.
    The US debt makes up just one part of a rapidly growing worldwide debt problem. Earlier this summer, US Global Investors CEO Frank Holmes called global debt ‘the mother of all bubbles.’ Now we have a report from the Bank of International Settlements saying worldwide debt may actually be understated by $13 trillion. Reuters reports the understatement is because ‘traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds.’
    Bank for International Settlements researchers said it was hard to assess the risk this ‘missing’ debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis. The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.’

    This post was published at Schiffgold on SEPTEMBER 18, 2017.


  • GOLD HAS BROKEN OUT – DON’T BE LEFT BEHIND

    The coming gold and silver moves in the next few months will really surprise most investors as market volatility increases substantially.
    It seems right now that ‘All (is) quiet on the Western Front’ as Erich-Maria Remarque wrote about WWI. Ten years after the Great Financial Crisis started and nine years after the Lehman collapse, it seems that the world is in better shape than ever. Stocks are at historical highs, interest rates at historical lows, house prices are booming again and consumers are buying more than ever.
    HAVE CENTRAL BANKS SAVED THE WORLD?
    So why were we so worried in 2007? There is no problem big enough that our friendly Central Bankers can’t solve. All you need to do to fool the world is to: Print and expand credit by $100 trillion, fabricate derivatives for another few $100 trillion, make further commitments to the people in forms of pensions and medical, social care for amounts that can never be paid and lower interest rates to zero or negative.
    And there we have it. This is the New Normal. The Central Banks have successfully applied all the Keynesian tools. How can everything work so well with just more debt and liabilities? Well, because things are different today. We have all the sophisticated tools, computers, complex models, making fake money QE, interest rate manipulation management and very devious intelligent central bankers.
    Or is it different this time?

    This post was published at GoldSwitzerland on September 7, 2017.


  • Eight Crooks Against The World

    I’d like to share what may be a different way of looking at the gold and silver market, but still remain focused on what has been the primary driver of price – changes in the COMEX futures market structure. It has become fairly common knowledge that prices rise when the managed money traders buy and prices fall when these traders sell. So great is the effect on price of this COMEX derivatives positioning that it is discussed in more commentaries than ever before. And that is due to what has become a clearly observable pattern of cause and price effect.
    Let me first quantify the amount of gold in existence throughout the world in all forms as 5.6 billion ounces, an amount on which there is near universal agreement. Not all of this gold is thought to be available for sale at some price, such as religious and other artifacts and some jewelry, but much of it could find a way to the market depending on price. Quite arbitrarily, let me assert that 4 billion ounces of gold might find its way to market at some point, including all government holdings and the amount held by the earth’s 7.5 billion inhabitants. Don’t get caught up with the precise amount, as it doesn’t make much of a difference whether the number is 3 billion or 5 billion oz.
    Just like in any investment asset, those entities and individuals which hold gold would prefer and would generally be benefited by a rise in the price. Conversely, all the holders of gold would generally be adversely affected by lower prices. This is very basic stuff and in no way is intended to trick anyone; I’m just speaking in very simple terms. In addition to all the existing physical gold in the world, there is a large gold mining and production industry that extracts 100 million oz of new gold each year; which in turn, is owned by all types of investors, all of which would prefer to see rising gold prices for the obvious reasons.

    This post was published at SilverSeek on September 8, 2017 –.


  • WHY KOREAN TENSIONS SHOULD SOON EASE – effect on Dollar and Precious Metals…

    The tensions centered on the Korean peninsula should soon ease, leading to a rally in the dollar and a (mild) reaction in Precious Metals and other commodities like copper, for reasons that we will consider in this essay.
    There can be no denying that what we have previously referred to as ‘The Empire’ is intent on world domination. The evidence is there for all to see in the form of a vast network of military bases spread across the globe, and a history of invasion of various countries by the Empire in recent years in pursuit of its geopolitical objectives. The economic engine that drives the Empire and supports its imperialistic ambitions is the dollar, whose Reserve Currency status means that infinite quantities of it (or proxy derivatives like Treasuries) can be printed up and swapped for goods and services with any and all countries around the world, and it is this dynamic that supports the formidable US military machine.
    The last Empire that tried to take over the world was Nazi Germany, which recruited Japan to take over the Far East, so that together they became a global axis. As we know this led to an enormous titanic struggle for over 5 years to contain it and defeat it, resulting in immense destruction and loss of life. The reason that Hitler failed was good old fashioned imperial overreach – he didn’t know when to ‘call it a day’ and consolidate his gains, instead he tried to do what has been the undoing of most Empires in the past, take over the entire planet. Actually he got very close to creating a sustainable 3rd Reich, but made several key mistakes. The first was not overrunning Britain while he had the chance, instead he made the fatal mistake of leaving it and starting a war on a second front with Russia, which meant that, in addition to his logistical support being spread too thin, the US was later able to use Britain as an aircraft carrier to bomb Germany back into the Stone Age, which needless to say resulted in its defeat. The second mistake was permitting eastern henchman Japan to bomb Pearl Harbor, and thus bring the US into the war against both Nazi Germany and Japan. Perhaps due to parochial ignorance, Germany and Japan made the catastrophic miscalculation that they could somehow overcome the United States, which at the time was an emerging economic powerhouse. The bombing of Pearl Harbor awoke the sleeping giant and meant the beginning of the end for the Germany – Japan Empire.

    This post was published at Clive Maund on Tuesday, September 05, 2017.