Monday, 2 December 2024

Trump Threatens The BRICS. Dollar’s End In Sight Trump’s Fears?

Baltic Dry Index. 1354 -65          Brent Crude  72.27

Spot Gold 2623                US 2 Year Yield 4.13  -0.06

There may be a recession in stock prices, but not anything in the nature of a crash.

Irving Fisher, economist. The New York Times (5 September 1929).

In the stock casinos, business as usual.

But in reality, it’s far from business as usual, with Team Trump apparently starting to panic over the medium to long term fate of the US dollar, the world’s leading international fiat currency reserve medium of international trade.

Asia-Pacific markets rise as investors await key economic readings from the region

Updated Mon, Dec 2 2024 11:29 PM EST

Asia-Pacific markets traded slightly higher on Monday as the region kick-started a data-heavy week, with investors focused on economic readings from several countries, including Japan, South Korea and China.

Over the weekend, China released its official purchasing managers’ index reading for November. Manufacturing PMI came in at 50.3 — its highest level since April — beating the 50.2 expected by economists polled by Reuters. Manufacturing PMI came in at 50.1 in October.

China’s non-manufacturing PMI slipped to 50.0 from 50.2 in the previous month, while composite PMI held steady at 50.8.

A reading higher than 50 shows expansion in activity, while below that shows contraction.

On Monday, manufacturing PMI readings from S&P Global will be released for economies throughout Asia, including the Caixin PMI survey for China.

Australia’s retail sales rose 3.4% in October, its fastest year-on-year rise since May 2023.

Indonesia will disclose its inflation numbers for November later in the day.

South Korea’s Kospi was trading close to the flatline, and the small-cap Kosdaq advanced 0.13%. Over the weekend, South Korea’s preliminary trade data revealed exports grew at their slowest pace since September 2023.

Exports grew 1.4% year-on-year in November, missing expectations of a 2.8% growth from economists polled by Reuters and a sharp decline from the 4.6% rise in October.

However, Japan’s benchmark Nikkei 225 was marginally up, while the broad-based Topix was 0.68% higher.

Hong Kong’s Hang Seng index gained 0.21%, while mainland China’s CSI 300 was up 0.26%. The Hang Seng Mainland Properties Index advanced 0.5% after growth in China’s new home prices accelerated in November.

Australia’s S&P/ASX 200 started the day up 0.16%.

On Friday in the U.S., the Dow Jones Industrial Average and S&P 500 rose to new heights and recorded their best months of 2024 amid a shortened trading day.

The S&P 500 added 0.56%, while the Nasdaq Composite jumped 0.83%. The Dow climbed 188.59 points, or 0.42%. Both the Dow and S&P 500 notched new intraday and closing highs.

Some of the upward momentum came from chip stocks, which popped after Bloomberg reported that the Biden administration was considering additional barriers to the sale of semiconductor equipment to China that weren’t as strong as previously expected. Lam Research rallied more than 3%, while Nvidia jumped more than 2%. 

Asia markets live: China PMI, Caixin PMI, Australia retail sales

European markets expected to start December trading in flat to lower territory

Updated Mon, Dec 2 2024 12:46 AM EST

uropean markets are expected to kickstart the final month of trading this year in flat to lower territory Monday.

The U.K.’s FTSE 100 index is expected to open 2 points lower at 8,285, Germany’s DAX down 19 points at 19,606, France’s CAC down 41 points at 7,188 and Italy’s FTSE MIB down 167 points at 33,275, according to data from IG.

Data releases include European manufacturing purchasing manager’s index figures and Italian gross domestic product. There are no major earnings due Monday.

Asia-Pacific markets traded slightly higher overnight as the region kickstarted a data-heavy week. Over the weekend, China released its official purchasing managers’ index reading for November, which came in at the highest level since April.

U.S. stock futures were little changed Sunday night after a winning week and month for stocks in November which centered on a postelection rally after President-elect Donald Trump’s win.

U.S. investors will be keeping an eye on labor data due later in the week. On Monday, speeches are due from Federal Reserve Governor Christopher Waller and New York Fed President John Williams.

European markets live updates: stocks, news, data and earnings

In other news, is the USA now so financially compromised by over 36 trillion in official debt, that the dollar now can’t stand competition, even if from a second division team like the mostly nearly bankrupt BRICS?

If yes, just how bad will the dollars final collapse get? See the next section for the rising global risk of fiat money failure.

Trump threatens 100% tariff on BRICS countries if they pursue creating new currency

November 30, 2024

President-elect Donald Trump said he would require countries that are part of BRICS — a China- and Russia-backed group of emerging economies — to commit to not creating new currency or face 100% tariffs during his administration.

“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” Trump posted on Truth Social on Saturday afternoon.

BRICS had been made up of Brazil, Russia, India, China and South Africa since 2011. Earlier this year, Iran, Saudi Arabia, the United Arab Emirates, Ethiopia and Egypt formally joined — the first expansion in over a decade. Thirty-four countries have submitted an expression of interest in joining the bloc of major emerging economies, South African Foreign Minister Naledi Pandor said in February.

The leader of one member country, Brazil’s Luiz Inácio Lula da Silva, in 2023 proposed creating a common currency in South America to reduce reliance on the US dollar.

Using BRICS currencies and banking networks outside the US dollar-denominated system could allow member countries such as Russia, China and Iran to circumnavigate Western sanctions. But the chances of a new currency are probably slim due to the alliance’s economic and geopolitical differences.

The expanding group is valuable to China as it looks to forge closer partnerships with key players to challenge the United States’ global leadership. And it’s also a boon to Russia, which has been shunned economically and diplomatically by the West following its 2022 invasion of Ukraine. This year, Russia assumed rotating chairmanship of the group.

During a BRICS summit in October, Russian President Vladimir Putin and Chinese leader Xi Jinping sought to project the message that the West stands isolated in the world, while a “global majority” of countries support their bid to challenge American global leadership.

Trump’s latest economic threat comes days after he pledged massive hikes in tariffs on goods coming from Mexico, Canada and China starting on the first day of his administration. The move, Trump said, will be in retaliation for illegal immigration and “crime and drugs” coming across the border.

Since that announcement, Trump spoke with Mexican President Claudia Sheinbaum for the first time following the tariff announcement, but they have offered conflicting statements about the call. Canadian Prime Minister Justin Trudeau, meanwhile, traveled to Trump’s Mar-a-Lago estate in Florida to meet with the president. Trudeau said the Friday dinner with Trump “was an excellent conversation,” and the president-elect called it a “very productive meeting.”

Trump threatens 100% tariff on BRICS countries if they pursue creating new currency

What Are The BRICS Nations: Why Is Donald Trump Threatening Them With A 100% Tariff?

1 December 2024

President-elect Donald Trump has issued a stark warning to the BRICS nations, threatening a 100% tariff on their exports to the United States if they pursue plans to create a new currency. This bold move targets the bloc of emerging economies, comprising Brazil, Russia, India, China, and South Africa, alongside recently added members such as Saudi Arabia, the UAE, Egypt, Ethiopia, and Iran. Trump's statement, shared via Truth Social, highlighted his concerns over attempts to undermine the dominance of the US dollar in global trade.

Trump declared, "The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency nor back any other Currency to replace the mighty U.S. Dollar, or they will face 100% Tariffs."

The Role and Ambitions of BRICS

The BRICS alliance, representing nearly a quarter of the world's GDP, has been exploring alternatives to the US dollar for international trade, a move known as "de-dollarisation." Countries like China and Russia have voiced support for creating a payment system independent of the US-led financial structure. Russian President Vladimir Putin has criticised the dollar's "weaponisation," stating that Western sanctions force nations to seek financial alternatives.

The expansion of BRICS earlier this year to include nations like Saudi Arabia and the UAE has further amplified their collective economic clout. However, analysts believe significant economic and political differences among BRICS members could hinder the successful implementation of a shared currency.

Impact on the US Dollar and Global Trade

Despite the rhetoric surrounding de-dollarisation, experts suggest that the dollar remains unchallenged as the world's leading reserve currency. According to the IMF, the dollar accounts for 58% of global foreign exchange reserves. An Atlantic Council study reinforces that the dollar's dominance in global trade is secure for the foreseeable future.

However, BRICS members argue that the dominance of the dollar imposes economic risks on developing nations. By using non-dollar currencies and banking networks outside the US-led system, countries like Russia and Iran aim to bypass Western sanctions. This economic defiance adds fuel to Trump's hard-line stance.

Reactions and Broader Implications

Trump's threat comes amid escalating tensions with major trading partners. He has already proposed steep tariffs on imports from Mexico, Canada, and China to address illegal immigration and other concerns. While Mexican President Claudia Sheinbaum expressed optimism about averting a trade conflict, Canadian Prime Minister Justin Trudeau left recent talks without firm assurances from Trump.

The 100% tariff threat, if implemented, could significantly strain US relations with BRICS nations and disrupt global trade flows. Economists warn that such a policy could trigger retaliatory tariffs, affecting American businesses and consumers.

What Are The BRICS Nations: Why Is Donald Trump Threatening Them With A 100% Tariff?

Fiat Money: What It Is, How It Works, Example, Pros & Cons

By James Chen  Updated July 02, 2024

What Is Fiat Money?

Fiat money is a government-issued currency that's not backed by a physical commodity such as gold or silver. It's backed by the government that issues it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government rather than the worth of a commodity backing it.

Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies.

Understanding Fiat Money

The term "fiat" is a Latin word that's often translated as "it shall be" or "let it be done." Fiat currencies only have value because the government maintains that value. There's no utility to fiat money in itself.

Governments would mint coins out of a valuable physical commodity such as gold or silver before fiat currency came about. They might have printed paper money that could be redeemed for a set amount of a physical commodity. Fiat is inconvertible, however. It can't be redeemed because there's no underlying commodity backing it.

Fiat money isn't linked to physical reserves such as a national stockpile of gold or silver so it risks losing value due to inflation. It might even become worthless in the event of hyperinflation. The rate of inflation can double in a single day in some of the worst cases of hyperinflation, such as in Hungary immediately after WWII.1

The money will no longer hold value if people lose faith in a nation's currency unlike a currency backed by gold. This type of currency has intrinsic value because of the demand for gold in jewelry and decoration as well as in the manufacturing of electronic devices, computers, and aerospace vehicles.

History of Fiat Money in the U.S.

The U.S. dollar is considered to be both fiat money and legal tender. It's accepted for private and public debts. Legal tender is any currency that a government declares to be legal. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for debt repayment.

The country's currency was backed by gold and in some cases silver earlier in U.S. history. The federal government stopped allowing citizens to exchange currency for government gold with the passage of the Emergency Banking Act of 1933. The gold standard backed U.S. currency with federal gold but it ended completely in 1971 when the U.S. also stopped issuing gold to foreign governments in exchange for U.S. currency.23

U.S. dollars have been backed by the "full faith and credit" of the U.S. government since that time. They're "legal tender for all debts, public and private" but not "redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank," as the printing on U.S. dollar bills used to claim. U.S. dollars are "legal tender" rather than "lawful money" in this sense, which can be exchanged for gold, silver, or any other commodity.
more

Fiat Money: What It Is, How It Works, Example, Pros & Cons

My concern is that a BRICS CBDC is unstoppable and with a clearing mechanism based in HK, where one is already being tested. In about a decade, if it works, much of international trade may/will likely be conducted and settled via CBDCs.  

At present I don't see any way to prevent CBDCs from happening and eventually replacing the dollar's reserve currency role.  

My biggest fear though is that the G-7 gets a massive debt default crisis before a reliable dollar replacement reserve is in place.  Today's LIR covers in part the rising debt default pre-crisis in US commercial real estate debt and the growing pre-crisis in global auto manufacturing.

Either can turn into an instant crisis within the next five years. CBDCs need about ten years, probably longer.

I think it was a mistake to go public on this now, when the BRICS are barely organised, far from creating a BRICS currency, (if ever,) and clearly still very second division. Why needlessly attract attention to the dollar's long term failings now? Why point out to the Rest of the World, that long term, the dollar will go the way of the Pound, Franc, Peso and Lira?

London Irvine Report: CBDCs

To be an enemy of America can be dangerous, but to be a friend is fatal.

Henry A. Kissinger.

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

German Auto Supplier Faces Crisis with £900 Million Debt

30 November 2024

The automotive industry is facing significant challenges as it navigates a shifting landscape.

The transition to electric vehicles is progressing slower than expected. Rising living costs have also kept many consumers from purchasing new cars.

These pressures are not only affecting car manufacturers but also the suppliers who depend on their success.

One of those suppliers, the German company Webasto, is now in a serious financial crisis, according to Boosted.

Webasto, a major producer of sunroofs and heating systems, has been hit hard by the downturn in the automotive sector.

The company is struggling with €1 billion (£870 million) in debt, which urgently needs refinancing. The debt, accumulated in part during an ambitious expansion, has now become a heavy burden.

Negotiating New Loans

Webasto has started working with its lenders, including BayernLB and UniCredit SpA, to negotiate new loan terms. A restructuring officer has been brought in to oversee the process.

The company has also hired Rothschild & Co. to provide advice on handling its debt and exploring potential mergers or sales.

Earlier this year, Webasto renegotiated loan terms after failing to meet certain financial conditions. However, weaker-than-expected results have led to fresh talks.

Competition from Chinese suppliers has also made the situation worse. In 2023, Webasto saw sales in China decline significantly.

The company’s struggles reflect the broader challenges in the automotive industry. Consumers, facing rising costs, are holding off on buying new cars.

The shift to electric vehicles has been slower than predicted. Automakers like Ford and Volkswagen have announced major layoffs and are considering plant closures in Europe.

Webasto is taking steps to reduce its financial strain. In February, it sold most of its charging station business. The following month, the company announced that mass layoffs are under review.

At the end of 2023, Webasto had loans totaling over £900 million, including one loan worth £700 million. The company’s ability to restructure its debt will likely determine its future.

Like many others in the industry, Webasto is feeling the effects of a rapidly changing and challenging market.

German Auto Supplier Faces Crisis with £900 Million Debt

SNB chairman says Swiss industry feeling German weakness

30 November 2024

FRANKFURT (Reuters) - The current weakness in German industry is sapping demand in Switzerland's manufacturing sector, Swiss National Bank Chairman Martin Schlegel said on Saturday.

"When Germany has a cold, Switzerland gets the flu," he said, noting that there was significantly less demand among Swiss manufacturers owing to the downturn in Germany, Switzerland's top overall trade partner.

Schlegel was speaking at an event in Frankfurt organized by Germany's Bundesbank less than two weeks before the Swiss central bank is due to make its next interest rate decision.

So far in 2024, the SNB has reduced its benchmark rate three times to 1% now, with expectations of more cuts to come.

Markets currently give a 72% probability for a 25 basis point cut, and a 28% likelihood for a 50 basis point cut at the SNB's next monetary policy meeting on Dec. 12.

The rate cuts have followed slowing inflation, which has been within the SNB's 0-2% target range for nearly 18 months.

In October, Swiss annual inflation eased to 0.6%, its lowest level in more than three years.

SNB chairman says Swiss industry feeling German weakness

Business confidence in UK economy falls to lowest level since lockdown

30 November 2024

Optimism about the UK economy has plummeted to levels last seen at the start of the Covid pandemic following Labour’s tax-hiking Budget, according to a survey.

More than 600 bosses responded to the poll from the Institute of Directors (IOD), with many blaming Chancellor Rachel Reeves for their pessimism. 

IOD chief economist Anna Leach said: ‘Far from fixing the foundations, the Budget has undermined them, damaging the private sector’s ability to invest in their businesses and their workforces.’

The IOD called on Ms Reeves to inject positivity into the economy, saying: ‘We urge the Government to look for opportunities to ameliorate the negative impacts of the Budget and reposition the growth narrative more positively.’

Shadow business secretary Andrew Griffith said: ‘The survey shows a catastrophic loss of business confidence under this government.’

Business confidence in UK economy falls to lowest level since lockdown

Distress in Commercial Real Estate Bonds Hits All-Time High

11/22/2024

Commercial real estate continues to suffer despite the Federal Reserve’s attempt at ameliorating the capital markets with a 50-basis point rate cut in September.

The pain is especially apparent in the so-called “CRE-CLO” bond market. CRE-CLO bonds are packaged commercial real estate mortgages comprising short-term floating rate loans. These bridge loans were recently, and most notably, used to facilitate the biggest apartment investment bubble in history, but were also used in financing other commercial real estate sectors including office, retail, hotel, industrial, and self-storage.

Most of the current batch of bridge loans originated in the 2020-2022 period—when benchmark rates were near zero and commercial real estate prices were peaking—and carried maturities of three to five years. Benchmark rates are now much higher, prices much lower, and property performance far worse than anticipated. Thus, a wall of maturities is staring borrowers, lenders, and bondholders in the face, all while underlying property performance disappoints.

Despite attempts by lenders to extend and pretend—kicking the can down the road in the short term to avoid defaults until the Federal Reserve lowers rates enough to bail them out—their delusions of reprieve may be fading fast.

Apartment Investors Play Checkers Instead of Chess

At the end of Q3, the distress rate for CRE-CLO loans across all commercial real estate sectors reached 13.1 percent, an all-time high. Distress in this instance is defined as any loan reported 30 days or more delinquent, past the maturity date, in special servicing (typically due to a drop in occupancy or a failure to meet certain performance criteria), or any combination thereof.

While roughly one in seven loans meets these criteria, the weakness is concentrated in two or three sectors.

Unsurprisingly, office properties have the highest rate of distress, with nearly one in five CRE-CLO office loans experiencing current distress. This is to be expected after the covid panic of 2020, subsequent to which various “work-from-home” directives essentially made the office market obsolete.

For similar reasons, distress is also high in the retail segment, as all but the most well-heeled retailers were forced under by the maniacal and criminal government edicts of the time.

However, the real story here is in the apartment, or multifamily, sector. Seen in Figure 1, the distress rate for apartments touched 16.4 percent in August. An astonishing number, indicating that one in six apartment bridge loans were distressed. The improvement to 13.7 percent shown for September is seasonal, as renters settle in at the start of the school year.

While this picture is bad enough, the reality under the surface is far worse. As reported by the Wall Street Journal, using Q2 data from MSCI, the batch of currently distressed apartment bridge loans comprise roughly $14 billion in total loans, but there exists an additional $81 billion in potentially distressed loans. MSCI categorizes loans as “potentially distressed” if they have seen delinquent payments, forbearance (when the lender lets interest payments accrue rather than taking a default action), or where key performance metrics like occupancy and net operating income are dangerously low.

More

Distress in Commercial Real Estate Bonds Hits All-Time High | Mises Institute

Covid-19 Corner

This section will continue until it becomes unneeded.

Covid-19 may raise risk of developing multiple sclerosis

30 November 2024

Covid-19 may be a risk factor for multiple sclerosis (MS). This has been shown by new research at örebro University and örebro University Hospital, Sweden.

We saw a raised risk of MS among people who had severe Covid-19. However, only an extremely small number of people who had severe Covid-19 received a subsequent MS diagnosis."

Scott Montgomery, professor in clinical epidemiology, Örebro University

Scott Montgomery examined the records of all patients with Covid-19 that were admitted to hospital in Sweden between 2020 and 2022.

The results showed that nearly 26 per 100,000 patients with serious Covid-19 subsequently developed MS. This was more than double the risk than in those without a Covid-19 diagnosis.

"I want to make it clear that MS is an uncommon disease and very few people in this study had an MS diagnosis linked with Covid-19. Approximately 26 people with new-onset MS per 100,000 with serious Covid-19 is only 0.02%."

Scott Montgomery suspects that the number who are diagnosed with MS following severe Covid-19 will increase over the years after the pandemic.

"It can take up to 10 to 20 years until an MS diagnosis following a relevant exposure to the brain or spinal cord. The extent to which serious Covid-19 is a cause of MS will become clearer in several years," says Scott Montgomery.

He hopes that the research will result in earlier diagnosis of MS among those affected so they can be treated before development of more advanced disease.

"Since the majority of people who were infected will not develop diseases such as MS, they should not worry. However, people with symptoms should seek medical advice. The earlier patients with MS are treated, the better quality of life they will have, because treatments delay the worsening of the disease," says Scott Montgomery.

He also emphasises the importance of ensuring that everyone is up to date with their vaccinations to prevent infections.

"There is a connection with the severity of Covid-19. More serious Covid-19, is associated with greater risk MS, possibly uncovering latent MS."

Similar research is underway on other diseases that could be caused by Covid-19. Research results come continuously.

"If we can follow the patient group that has been admitted to hospital for severe Covid-19 and identify diseases that are more likely to develop subsequently, we may be able to monitor for these diseases and hopefully help patients in a timely manner."

The research is published in Brain Communications.

Covid-19 may raise risk of developing multiple sclerosis

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Five battery rules as a fire could cost you £420,000

28 November 2024

The average cost of fire-related claims involving lithium batteries is £50,000, with fires caused by leaking and damaged batteries and overcharged e-vehicles combusting at home. The Greater London area alone has seen 673 fires where a lithium battery or vehicle was involved since January 2023.

The largest claim received by Allianz for a fire started by a rechargeable lithium battery is for more than £420,000, after a battery-powered vacuum cleaner caught alight, causing a major fire in a property in London. Allianz fire-safety partner and Surrey firefighter, Angela Everington, says homeowners should be wary of the number and age of these batteries they have lying around which could start fires.

She said: “Old batteries aren’t just unnecessary to keep lying around but are more prone to damage and deterioration. The older the battery, the higher the chance of leaking, sparking or igniting a fire.”

To raise awareness of the dangers, Allianz has compiled a list of some of the top lithium-ion powered items people admit to holding on to for too long:

  • 1. Smartphones – 77%
  • 2. Laptops – 57%
  • 3. Digital cameras – 20%
  • 4. Power bank – 13%
  • 5. Electric toothbrush – 11%

Angela said: “Overcharging, or using incorrect wattage when charging, can damage the battery, causing it to overheat and even explode. Allianz’s research chimes with the trends we’ve witnessed when attending house fires, which are more frequently caused by lithium products.”

Caroline Johnson, Allianz personal lines claims director, said: “Fires caused by rechargeable lithium batteries can have devastating consequences, and it is important that people use good quality batteries from reputable retailers. Items such as mobile phones, tablets, cameras and other electronic devices are essential parts of modern living but we can all take precautionary steps to make sure we are charging, disposing and handling our devices correctly. People should look out for problems with their batteries such as wear and tear, overheating and bulging, and dispose of damaged batteries properly.

“Old tech should be recycled properly and it is also important that every house has smoke alarms fitted.”

The figures show that although most people own lithium battery-powered items, one third (34%) said they don’t know or are unsure of the risks they pose. More than 78% of people regularly charge their battery products overnight and almost half (45%) use uncertified chargers.

Angela is encouraging people to use, treat, and dispose of these products properly to help keep their homes and possessions safe and has shared some of her top tips to help avoid fires at home.

  • Avoid charging devices overnight or unattended.
  • Store lithium batteries in a cool, dry place, away from heat sources.
  • Always use certified chargers for your devices.
  • Look out for signs of battery damage - such as swelling or leaking.
  • Dispose of damaged batteries safely – do a quick Google search to find your nearest refuse centre.

Five battery rules as a fire could cost you £420,000

Next, the world global debt clock. Nations debts to GDP compared.

World Debt Clocks (usdebtclock.org)

The thief or swindler who has gained great wealth by his delinquency has a better chance than the small thief of escaping the rigorous penalty of the law.

Thorstein Veblen, economist.

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