International Forecaster Weekly

3 Stories That Prove the Markets Have Changed Forever

We're in a new reality, and unless we get to work making it into a reality we actually want to live in we're going to be in a lot of trouble.

James Corbett | February 13, 2016

Toto, I have a feeling we're not in Kansas anymore. Heck, we're not even on the map.
    In case you haven't noticed, things are starting to get crazy out there. Not just economically (with another global contraction already well under way) or financially (with teetering European banks leading global stocks into volatile territory) or monetarily (with the global currency war reaching a rate-slashing crescendo) or geopolitically (with new Iranian/Iraqi/Russian cooperation in Syria throwing the NATO powers off balance), but even socially (with a sea change taking place in the American electorate, not to mention Europe, Latin America and elsewhere).

    Let's take a look at three stories that show clearly that this craziness isn't just a bit of turbulence, but a sign that we're moving into a new paradigm altogether.

1) Negative interest rates
    This week Sweden's Riksbank became the latest central bank to surprise people with a negative interest rate slash. But this time, they weren't going from a positive rate to a negative rate, but from a negative rate (-0.35%) to an EVEN MORE negative rate (-0.5%).
    Welcome to the new normal, where banks have to pay money to park their reserves at the central bank. And where Japan can assure the world that they have no plans to go negative...right before going negative. And where a Spanish bank which had pegged its mortgages to the (now negative) Swiss Libor had to pay customers for borrowing from them. Or where the Fed insists they're not planning to go negative...even while secretly stress testing banks for the possibility and confronting the (il)legality of such a move.

    For those still trying to wrap their heads around this idea, here's the skinny: central banks lower rates to encourage people to borrow (and money to circulate) when the economy is stagnating or contracting. So what do you do when you've been at or near zero percent interest for years (or, in Japan's case, decades) and you're still stagnating? Well there's only one way to go: negative!
    Or at least that's the official line. But as you might have guessed there is a deeper agenda at work here, and you don't have to dig very hard to find it.

    As Washington's Blog recently pointed out, Richard Werner, the economist who coined the term and the concept of quantitative easing, argues that negative rates are about driving small banks out of business and eliminating cash:

    As readers know, we have been arguing that the ECB has been waging war on the ‘good’ banks in the eurozone, the several thousand small community banks, mainly in Germany, which are operated not for profit, but for co-operative members or the public good (such as the Sparkassen public savings banks or the Volksbank people’s banks). The ECB and the EU have significantly increased regulatory reporting burdens, thus personnel costs, so that many community banks are forced to merge, while having to close down many branches. This has been coupled with the ECB’s policy of flattening the yield curve (lowering short rates and also pushing down long rates via so-called ‘quantitative easing’). As a result banks that mainly engage in traditional banking, i.e. lending to firms for investment, have come under major pressure, while this type of ‘QE’ has produced profits for those large financial institutions engaged mainly in financial speculation and its funding.

    The policy of negative interest rates is thus consistent with the agenda to drive small banks out of business and consolidate banking sectors in industrialised countries, increasing concentration and control in the banking sector.

    It also serves to provide a (false) further justification for abolishing cash.
    Conspiracy theory? Nope, just conspiracy fact. As Zerohedge notes, Morgan Stanley'
s head of EMEA equity, Huw van Steenis, recently gave a presentation which contained the following quotation attributed to an unnamed "policy-maker" at Davos this year:

    "We should move quickly to a cashless society so that we could introduce negative rates well below 1%."
    Cripple the banksters' competition and stop the difficult-to-track and hard-to-control cash economy all in one step? You betcha. Hence we have central bank after central bank turning rates negative or about to turn them negative for the first time in history.
    But wait, there's more...

2) End of the petrodollar
    I've been talking about the breakdown of the petrodollar system for some time at The Corbett Report, both in the pages of this column and in my various interviews and radio appearances. But it's one thing to hear it from me, it's another to hear it from the (Rothschilds') horse's mouth: the revered Financial Times.

    "The petrodollar age is no more but with it go old certainties" blares the dramatic headline over top of a no less dramatic op-ed from Philip Stephens, associate editor and chief political commentator for the City of London's favorite salmon pink news rag. In it, Stephens points out that not only has conventional wisdom about the economic boon of falling oil prices and turmoil in the Middle East propping up prices been upended in the current downturn, but a third rule (that prices may fluctuate but will always trend upwards) is also being broken:

    The accumulating evidence points to a structural shift that will keep prices relatively low. During the century before the great price shock of the early 1970s the real cost of a barrel of oil was between $10 to $40. Economists at Llewellyn Consulting in London make a convincing case that this trading range offers a rough template for the future.

    What is happening with this current oil price plunge, many argue, is no mere blip on the radar, but a fundamental shift that is taking place in the oil markets now. And as we've talked about before, that's not merely significant for the oil companies but the entire monetary system, which for the last few decades has been propping up the international monetary order via the "petrodollar." With America moving from a net importer to a net producer of oil and the Saudi-American axis in the Middle East showing signs of strain, it is entirely possible that we are about to see a severing of the Saudi petrodollar recycling system that has helped to undergird the US dollar since Nixon took the country off the gold standard.

    So what does this mean, exactly? No one knows...yet. But given the machinations that Kissinger undertook (at the behest of his boss, David Rockefeller) to create the petrodollar system in the first place, it would be naive to think that some new system isn't being devised right now. It would also be naive to think that whatever system comes along to take its place will be founded on peace, harmony and happiness.

    So the average Joe Sixpack and Jane Soccermom may have no idea what's going on in the international oil markets or its relation to geopolitics, but they do know something's wrong, which means...

3) The old political order is collapsing
    That we are heading into a new political order should not be surprising to followers of this column. Heck, it's becoming difficult for even the most brainwashed of the brainwashed to deny that a fundamental sea change is taking place in American politics, or European politics, or Latin American politics, or East Asian politics, or...

    But once again it's one thing to hear about this change from James Corbett of The Corbett Report, it's quite another to hear it straight from the horse's mouth. Or the horse's pollsters, as it were.

    Last week The Huffington Post published a remarkable piece by Patrick Caddell, a top Democratic pollster and strategist, and Bob Perkins, a top Republican strategist. The subject of their post? The results of the Iowa caucuses.

    You might be able to guess that old establishment party hacks would be a bit confused, perhaps even perturbed by the rise of populist forces in this election cycle and the dead-on-the-vine nature of "presumed nominees" Jeb "cold tuna sandwich" Bush and Hillary "exciting as a glass of warm water" Clinton, but that doesn't even begin to explain the tone of this piece. They start by quoting an exchange between Louis XVI and one of his ministers where the king asks if the storming of the Bastile is a revolt and the minister replies it is a revolution. Things only get gloomier from there.

    "Gloomy" from the perspective of the two-party duopolists, that is:

    "The upheaval and the explosion of discontent that have provided a launch-pad for outsider candidates from Donald Trump and Ted Cruz to Bernie Sanders are not, as so many establishment pundits suggest, just another episode in the long history of ad-hoc populist moments of discontent sure to fade away. Our survey data shows that the United States is in the midst of an evolving political revolution of historic proportions. In fact, this election could mark the beginning of the end of two-party duopoly in the United States."

    They then go on to back up that assertion with a series of data from a half dozen surveys that have taken place over the last three years. The result of those surveys a nothing short of startling:

84% of Americans believe political leaders are more interested in protecting their power and privilege than doing what is right
75% believe that powerful interests, from Wall Street to unions to interest groups, have used campaign and lobbying money to rig the system for themselves.
72% blame the stagnation of the American economy on corruption and crony capitalism in Washington
67% hold that the US government is not working in the interests of the people
78% agree that both parties are too controlled by special interests to create meaningful change
75% agree that the two party system is flawed and it's time to vote in new political parties with new ideas

    Now, none of these statements should be at all surprising or controversial to my regular readers. If anything, they're a bit weak in their critique of the current system. But the startling thing is that this is not a poll of International Forecaster readers or alternative media acolytes. This is a poll of Americans of all stripes across the meaningless left/right party lines.

    It is becoming more and more apparent by the day that the lie that we've been sold for decades -- that we're a marginalized, fringe minority and will never be taken seriously -- is just another lie that's been sold to the public through the PR vehicle of the mainstream news. In fact, the vast majority of Americans are completely fed up and are looking for fundamental change. Suddenly Sanders and Trump don't seem like minor blips on the political radar so much as the expression of a growing resolve by the American people to change the way the game is played.

    And this is by no means a solely American phenomenon. The migration crisis in Europe is causing a similar seismic shift in political discourse and sentiment across the continent. Merkel has gone from "Person of the Year" to fighting for her political life in record time. The inevitable reaction to political correctness and enforced pan-European multiculturalism is taking place right now and unleashing populist forces that are threatening to decimate the political order in Europe and perhaps the European Union itself.

    Latin America has likewise seen a profound shift taking place in recent months with the disintegration of what was left of the Chavez regime in the Venezuelan meltdown, the swing to the right in the Argentinian presidential election and the destabilization of Rouseff in Brazil. In fact, with the Middle East even more of a tinderbox than usual and the Asia-Pacific continuing to heat up along new economic and political fault lines, it's difficult to find an area of the globe where the political order is not at risk of being upended.

    Now this in and of itself is neither good news nor bad news. When the towers of the existing political order are toppled, revolutions tend to revolve back to the same spot one way or another and the "populist" forces that are being released have more than a slight stink of authoritarianism to them. All it takes is the right strong man to come along and galvanize public opinion for the political order to coalesce into something even more tyrannical. And in such revolutionary moments there is always the specter of the New World Order from chaos which has always been part of the plan of the globalists.

    But that this revolutionary moment is here is becoming more and more difficult to deny. The old political order is dissolving. The only question is what will take its place.

    No, we're not in Kansas anymore, but we're not over the rainbow, either. There's no Good Witch of the North to help us on our way and no Ruby slippers to whisk us back home. We're in a new reality, and unless we get to work making it into a reality we actually want to live in we're going to be in a lot of trouble.