The US economy and stock markets continue to perform well, unemployment is at record lows and wages are rising. That is not the case for the EU, whose economy and stock market are low and falling and whose unemployment is rising. The UK’s economy is preforming far better than the EU as a whole, but is hoping for some positive changes and a more decisive leader as Prime Minister May exits and Brexit architect Boris Johnston, her likely successor, takes the helm. The G-20 nations met and, for the first time, discussed global risk of aging populations and also took another step to towards enacting the first global tax.
U.S. Adds 224,000 Jobs in June, Exceeding Expectations (7.5.19) WSJ https://www.wsj.com/livecoverage/june-2019-jobs-report-analysis
U.K.’s Boris Johnson Strengthens Lead in Conservative Party Race (6.18.19) WSJ
G20 Digital Tax Takes Step Closer (5.31.19) https://phys.org/news/2019-05-g20-digital-tax-closer.html
In Historic First, G20 Weighs Ageing as Global Risk (6.9.19) https://www.france24.com/en/20190609-historic-first-g20-weighs-ageing-global-risk
Japan Has More People Over the Age of 80 Than Under the Age of 10 (6.20.19) SMC https://www.sovereignman.com/trends/yikes-japan-has-more-people-over-the-age-of-80-than-under-the-age-of-10-25304/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20190620_people_over_80
Central Banks & Crypto Currency
There is much action going on in the central banks of the world, with interest rates going up and down, chairmen being replaced and governments intervening and attempting to control them. Turkey’s President Erdogan just replaced his chairman for going against his wishes. Longtime Japanese Chairman Kuroda, once the rock star, is now being criticized and falling out of favor. Longtime ECB Chairman Mario Draghi will be retiring in fall and it looks like the current Director of the IMF, Christine Lagarde, will replace him. Last month, Mr. Draghi indicated a possible rate cut from the already negative interest rate of -.41 while most of the rest of the central banks of the world at -.1 have raised interest rates in 2017 and 2018 (save Japan). The US Federal Reserve has reversed course from their December meeting in 2018, and are now discussing lowering rates in the second half of 2019, under pressure from the Trump Administration. Many central banks in the Asia-Pacific region, including New Zealand and Australia, have already reduced interest rates over the last month.
Erdogan Dismisses Governor of Turkey’s Central Bank (7.6.19) WSJ
IMF’s Christine Lagarde Wins Backing to Run European Central Bank (7.2.19) WSJ
Fed Holds Rates Steady, Hints at a Possible Cut (6.19.19) WSJ
How Japan Turned Against Its Bazooka Wielding Central Bank Chief (6.17.19) https://www.reuters.com/investigates/special-report/boj-kuroda-economy/
ECB Signals Possible Rate Cut Prompting Trump Tweets (6.18.19) WSJ
How to Make Negative Interest Rates Work (2.6.19)
Banks & Crypto-Currency
In the second quarter, crypto-currencies both gained and lost ground. Bitcoin fluctuated, but despite volatility, central banks, commercial banks and governments/government organizations are moving toward digital currency. Deutsche Bank, the EU’s largest bank, has been struggling; its stock has been falling and it has had a difficult time securing financing to keep going. If Deutsche Bank were to default, it would severely cripple the EU banking system and create problems around the world. In his June 2019 article “Rejoice the End of Banking is Nigh,” Simon Black predicts the conventional banking system that has dominated the world for hundreds of years is drawing to a close as digital currencies gain prominence.
The IMF and World Bank are working together to establish a private blockchain network to create a Distributed Ledger Technology (DLT refers to the technological infrastructure and protocols that allows simultaneous access, validation and record updating in an immutable manner across a network spread across multiple entities or locations. – Investor Encyclopedia). Russia is looking to create its own crypto-currency and back it by gold to facilitate international settlements. Elvira Nabiullina, governor of the Bank of Russia, said that her institution is set to review a proposal for the development of the cryptocurrency. Fox News reported that, “Bank of America CEO Brian Moynihan spoke this week about embracing digital payment transactions while moving toward a cashless society. He said Bank of America “will continue to move” toward digital banking transactions. “We want a cashless society…” It also appears Facebook will be dipping its hands in another pot, as they announced they will be coming out with their own crypto called “Libra.” US Rep Maxine Waters fired back that Facebook should not be competing with the US dollar.
Bank of America CEO Says Company Wants a Cashless Society (6.28.19) Fox News
Rep. Maxine Waters Says US Can’t Let Facebook’s Libra Compete With the Dollar (6.19.19) https://www.coindesk.com/rep-maxine-waters-says-us-cant-let-facebooks-libra-compete-with-the-dollar
Rejoice the End of Banking is Nigh (6.19.19) SMC https://www.sovereignman.com/trends/rejoice-the-end-of-banking-is-nigh-25300/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20190619_crypto
Why Everyone Should Be Following Deutsche Bank (6.17.19)
Facebook’s New Cryptocurrency, Libra, Gets Big Backers (6.13.19) WSJ
The World Bank & IMF Floats a Joint Private Blockchain Network & Cryptocurrency (4.16.19) https://blockonomi.com/world-bank-imf-private-blockchain-network-cryptocurrency/
Russian Central Bank to Consider Gold-Backed Cryptocurrency (5.23.19)
World Economy, Debt, Recession
Many mainstream economists and commentators are starting to concede that a recession is likely in the next year or two, but most of them downplay its likely severity. The Zero Hedge view is, however, that “virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies.” They believe everything is lining up much like 2008, but worse.
A CNBC broadcast reported that, “DoubleLine CEO Jeffrey Gundlach is betting on gold. ‘I am certainly long gold,’ Gundlach said in an investor webcast Thursday. He added his trade is based on the expectation that the dollar will finish the year lower. When the dollar weakens, gold tends to appreciate as it becomes cheaper for investors holding other currencies. Gold prices hit a three-month high this month as investors flee to the safe-haven bullion amid escalated trade tensions. Meanwhile the dollar fell to a 11-week low on Wednesday as the market increasingly bet on a rate cut in the coming months.”
Bond King Jeffrey Gundlach Bets on Gold, Sees Rising Recession Chances, Dollar Decline (6.14.19) CNBC https://www.cnbc.com/2019/06/13/bond-king-jeffrey-gundlach-i-am-certainly-long-gold.html
Why You Should Not Underestimate the Severity of the Coming Recession (6.9.19) Zero Hedge
The intensity of ideological conflict is on the rise globally. The battle between socialism and capitalism, globalism and nationalism and liberalism and conservativism is being fought in many nations, especially the US. Simon Black wrote, “the Bolsheviks are already here.” The battle between the globalists and nationalists seems to be expanding and show no signs of waning. The WSJ reported: “New parties are finding success by addressing the concerns of voters who feel neglected and disdained by liberal elites. Mr. Salvini, the de facto head of Europe’s growing national populist family. “Marine Le Pen is the biggest party in France. Nigel Farage has the biggest party in Great Britain. It is a sign of a Europe that has changed.” Many people simply want more of a say over the decisions that affect their nations and their daily lives. A second key current is destruction: widespread fears that national identities, cultures and ways of life are slipping away. When eight in 10 Trump voters support building a wall on the southern border, or three in four Brexit voters, worried about how immigration is changing Britain, voted to “take back control,” they knew what they were supporting.”
It is doubtful that anything is going to calm down on the social-political front anytime in the near future. Iran declared they are breaking the agreement they made with the rest of the World on enriched uranium, which came as no surprise to those who had the foresight to oppose the deal from the beginning, but the sanctions are taking a toll on Iran’s economy. Greece just replaced their socialist Prime Minister and majority party, with a Conservative one, and the UK is about to vote on a new Prime Minister to replace Theresa May. The WSJ reported, “In the battle for influence within Europe, Angela Merkel is ceding ground to France’s Emmanuel Macron, who has emerged as an increasingly potent rival to the German chancellor. Ms. Merkel bowed to Mr. Macron this week after marathon talks to carve up the European Union’s top leadership positions in the clearest display to date of the German chancellor’s fading clout.”
The EU continues to fight with its own and is deciding whether it will take disciplinary action against Italy for not meeting the budget targets Brussel’s set for them. Continued chastisement from the EU may drive more member nations to follow the UK’s lead to exit the EU. There were also many demonstrations in Hong Kong to retain their freedom from Beijing. The US continued the trade war in its fight against the Chinese telecommunications company Huawei, a company many believe to be a spying tool of the Chinese government.
China is also being condemned by the rest of the world because of their crackdown on Islam and other religious groups. In a Fox News interview, Lt. Col Maginnis warned of the plans by China to dominate the world militarily and economically by the middle of this century, not to mention Russian intentions. President Trump and President Lopez of Mexico also struck a deal to stop the flow of illegal immigrants into the US.
Conservatives Regain Control in Greece (7.7.19) WSJ
Iran Plans New Breach of Limits of Nuclear Agreement (7.7.19) WSJ
Iranians Say Their Bones Breaking Under US Sanctions (6.24.19) AP https://www.apnews.com/9390faa746294f628b93beea57ba1e07?__source=newsletter%7Cmorningsquawk
EU Compromise Exposes Merkel’s Waning Influence (7.4.19) WSJ
EU Drills Into Italy’s 2020 Deficit Before Decision on Sanctions (6.25.19) Bloomberg
The Bolsheviks Aren’t Coming, They’re Already Here (7.1.19) SMC https://www.sovereignman.com/trends/the-bolsheviks-arent-coming-theyre-already-here-25335/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20190701_socialism
Europe’s Populists Are Here to Stay (6.15.19) WSJ https://www.wsj.com/articles/europes-populists-are-here-to-stay-11560524237
Putin Stands By China, Criticizes U.S., In Trade, Huawei Disputes (6.7.19) Reuters
Hong Kong Upheaval Puts Beijing in a Bind (6.16.19) WSJ
Lt. Col. Maginnis Warns of Xi’s China Dream of World Dominance by Mid Century (6.12.19) Fox News https://www.foxnews.com/world/lt-col-maginnis-xi-jinping-china-world-dominance
Crowds Turn Out to Cheer Mexico’s President & the Deal He Struck With Trump (6.919) WSJ
Former Goldman CEO Lloyd Blankfein Trump’s Tariffs Aren’t a Bad Idea (6.20.19) CNBC
As Trump Demands Major Concessions, Beijing Wants the World to Think That the US Will Blink First (6.14.19) CNBC https://www.cnbc.com/2019/06/14/us-china-trade-beijing-wants-world-to-think-washington-will-back-down.html
Large European Routing Leak Sends Traffic Through China Telecom (6.6.19) https://blogs.oracle.com/internetintelligence/large-european-routing-leak-sends-traffic-through-china-telecom
Pentagon working to reduce US reliance on Chinese rare earth minerals after trade war threat (5.29.19) CNBC https://www.cnbc.com/2019/05/29/pentagon-working-to-reduce-us-reliance-on-chinese-rare-earth-minerals-after-trade-war-threat.html?__source=newsletter%257Cmorningsquawk
Costco is looking at alternative sourcing and price hikes as tariffs loom (5.31.19) CNBC https://www.cnbc.com/2019/05/31/costco-is-looking-at-alternative-sourcing-and-price-hikes-as-tariffs-loom.html?__source=newsletter%257Cmorningsquawk