I do think there was a "deep state" (read that in context as Federal Reserve Bank owners) plan to try to "take Trump out" by having the Fed raise interest rates... which they just tried to do without much success. Their ability to do that is conditioned by expectations in who is responsible... and Trump did all he needed to, and more, to ensure that everyone was fully aware that it was the bank who was making choices that were... against our interest. They backed down...
Still not clear what the consequences of the moves they did make will be... in part because no one in banking right now seems to understand what's happening in a world without free market functions... where they are responsible for functions the market used to take care of... when they have no clue how to relate choices to outcomes.
It is a known, still, that the global banking system is so weak now that having any systemically important bank fail... will very likely take down the entire system again... just as it was doing in 2008.
It is a known that the problems that caused the events of 2008 have not been corrected... nothing has been fixed.
What seems much less well known now is the nature of the distributions in the risks... which are not equal.
Two of the biggest risk factors...
One in China's unquantified risks in the commercial debt markets, including lending done by regional and local governments... but also the extent and nature of dollar risk exposure due to market based lending done that has to be re-paid in dollars... That's causing "a dollar shortage" globally, now, with something like 65% of global debt denominated in dollars... including China in that mix. Seems no one expected that the Fed raising rates would hurt everyone else more than it hurt the U.S., but that's what happened when they did it. So, perhaps "they" can take Trump out by raising rates... but, if they do, they're also going to take themselves, and/or everyone else out first, and faster... which they weren't expecting. That's not a limit in the China risks either... as the lack of accounting standards and "the rule of law" means a lot of open ended risks that a lot of investments made might just "evaporate"... and, of course, trade with China is increasingly problematic... and there are more than a few foreign policy risks emerging, too.
The second big risk... is Europe... which is barely hanging on as it is now. They've already gone deep into the tank on negative interest rates... and they have a large number of banks that are nearly insolvent... but a couple of larger banks that are insolvent to such a degree that they're unsalvagable... Deutsche Bank... The only reason it hasn't failed is that no one is willing to pull the plug... because they're so completely afraid of what happens when they do. Tack on to that the parallels in the Catalonian Independence movement, the Scottish Independence movement, or Brexit, with other anti-EU politics emerging everywhere... and winning elections ?
Europe is both an economic basket case... the gilet jaunes in France being one obvious expression... but also a political basketcase... with leadership refusing to recognize obvious realities in every sphere... but no where more dramatically than in relation to the immigration problems they've imposed... against the will of the people.
Hard to pick what's likely to happen next... but, big German banks failing will likely collapse everything...
Other than that... the problem is that black swans are the risks you don't know about... even if they do their worst damage when they fly into the engines of the problems you do know exist. The nature of the "black swan" problem still ends up in "realizing too late" that minor events that perhaps easily could have been managed previously (if leaders were honest and had the courage)... have instead taken control for themselves.
Flash points in Israel, Lebanon, Syria, Iran and the Persian Gulf... Ukraine... (Putin granting passports to Ukrainians seems it is knowingly done, and designed to cause a war), Venezuela... North Korea, of course, but, also, China has been behaving very aggressively... in Japan's Senkaku Islands, in threatening Taiwan, and perhaps most egregiously in the South China Sea...
It is increasingly likely that events taking place in one part of the world might act as triggers precipitating events in others...
Risks in Israel, Iran and the South China Sea most important to watch, IMO...
But, Putin seems to be losing it... I think he's in ill health... neurology involved... could stroke out any time... or just make an obvious but unrecoverable mistake.
Don't discount the risk inherent in U.S. political conflict, which will be coming to a head with major reversals and major events occurring over the next month, "open borders" risks... and "false flag" events intended to distract from what WILL OCCUR in any case... can't be a risk you ignore. |
