Why Putin Want’s Trump to Win

October 9, 2016

Dear Trumpkins, picture this: Trump has won. The Mexican wall is under construction, trade deals are being dismantled, the debate on immigration runs long on what quota and screening measures are appropriate.

The house and likely the senate are in democratic hands, so despite campaign promises very little gets done except the ratings at C-SPAN surge.

Twitter and the NYT are are bought by a consortium led by the Trump kids as an anchor for the Trump media empire they will build while dad is in office as a gift for his service.

We read dozens of platitudes in the media exchanged between Trump and Putin, their shared admiration, and the peace they have brought to the world working together.

The White House gets a face lift in Trump style at taxpayer expense using long standing contractors in the Trump network.

Do you think along side this type of change anyone is really paying attention to Putin?

Meanwhile, Syria falls into Putin’s fold – along with his spoils in the Ukraine and Crimea – and he is emboldened. (Look at a map for a moment: http://bit.ly/2dWVC2L.) From Syria he makes covert inroads (InfoOps and special forces) into Iraq, building a front along Saudi Arabia. Iran is literally and figuratively behind him. Upon completion of securing the Saudi border, or possibly sometime before He then takes a stake in Lybia.

All along the way his info operations allow him to win enough local popular support that democratic processes fail to slow or stop him.

In a few years, he controls the Middle East, African Peninsula, and threatens or already has waged war on the west.

Maybe I’m crazy, or maybe there is a master plan. Doesn’t need to be exactly as I’ve laid it out, but the gist of it is the mass wave of protectionism will create a huge window for Russia to jump through as we are all occupied with our own unrest.  Their expansionist policy, can only come if no one is looking.  Much like our own bombing in Yemen went unnoticed today.

This is the US playbook, but now it’s being used against us. If we don’t wake up to it soon, we will lose a great deal more than what was once a noble election process.

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Follow Up to “He Who Owns the Mortgage Owns the House”

February 13, 2009

Thanks to Unconventional Notions for this Excellent ping back and follow up to my earlier post: He Who Owns the Mortgage Owns the House.  You can get a nice slice of history circa 1956 when the U.S. used it’s large position in UK debt to force its own agenda and foreign policy.  His post is available here: Flexing financial muscle and why we are in deep sh*t…

Thanks for the great insight!


China Needs U.S. Guarantees for Treasury Bond Holdings, Yu Says

February 10, 2009

I could not help but post this story, just a day after my last post (He Who Owns the Mortgage Owns the House) talking to this specific issue.  I wonder if the Chinese are reading my blog?  Hah.

Feb. 11 (Bloomberg) — China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.

The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.

Benchmark 10-year Treasury yields climbed above 3 percent this week on speculation the government will increase borrowing as President Barack Obama pushes his $838 billion stimulus package through Congress. Premier Wen Jiabao said last month his government’s strategy for investing would focus on safeguarding the value of China’s $1.95 trillion foreign reserves.

China may voice its concerns over U.S. government finances and the potential for a weaker dollar when Secretary of State Hillary Clinton visits China on Feb. 20, according to He Zhicheng, an economist at Agricultural Bank of China, the nation’s third-largest lender by assets.

“In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.”

Chinese Foreign Ministry Spokeswoman Jiang Yu said yesterday that talks with Clinton would cover bilateral relations, the financial crisis and international affairs, according the Xinhua news agency.

Treasury Returns

U.S. government bonds returned 14 percent last year including price gains and reinvested interest, the most since rallying 18.5 percent in 1995, according to indexes compiled by Merrill Lynch & Co. Concern that the flood of bonds would overwhelm demand caused Treasuries to lose 3.08 percent in January, the steepest drop in almost five years, Merrill data show. The yield on the benchmark 10-year U.S. Treasury has risen to 2.83 percent from 2.21 percent at the end of last year.

China’s loss of more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007 may increase its demand for the relative safety of Treasuries.

“The government will be a net buyer of Treasuries in the short-term because there’s no sign they have changed their strategy,” said Zhang Ming, secretary general of international finance research center at the Chinese Academy of Social Sciences in Beijing. “But personally, I don’t think we should increase holdings because the medium- and long-term risks are quite high.”

Currency Reserves

China’s foreign-exchange reserves, the world’s biggest, grew about $40 billion in the fourth quarter, the smallest expansion since mid-2004 as an end to yuan appreciation since July prompted investors to pull money out.

The world’s third-biggest economy grew 6.8 percent in the fourth quarter, the slowest pace in seven years. Policy makers cut interest rates by the most in 11 years and announced a 4 trillion yuan ($585 billion) economic stimulus plan in November to spur domestic demand.

Yu said China won’t channel its reserves toward stimulating the economy because its trade surplus is sufficient to fund any import needs. China’s trade surplus was $39 billion in December, the second-largest on record.

A decline in reserves “isn’t likely because of China’s huge twin surpluses,” Yu said. China “should diversify its reserves away from U.S. Treasuries if the value of China’s foreign- exchange reserves is in danger of being inflated away by the U.S. government’s pump-priming,” he said.

Linking Disputes

China may try to link trade and currency policy disputes to its future investment in Treasuries, said Lu Zhengwei, an economist in Shanghai at Industrial Bank Co., a Chinese lender partly owned by a unit of HSBC Holdings Plc.

U.S. Treasury Secretary Timothy Geithner accused China on Jan. 22 of “manipulating” the yuan to give an unfair advantage to its exporters in the global market. The currency has dropped 0.14 percent since the start of this year to 6.8326 per dollar, following a 21 percent gain since a peg against the dollar was abandoned in July 2005.

“China can also use this opportunity to get a promise from the U.S. not to make inappropriate requests on bilateral trade and the Chinese yuan,” Lu said. “We can’t afford more yuan appreciation as the economy is facing a serious slowdown.”

Source:
China Needs U.S. Guarantees for Treasury Bond Holdings, Yu Says
Belinda Cao and Judy Chen, Bloomberg, February 10, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_dsDz145J_A&refer=home


He Who Owns the Mortgage Owns the House

February 10, 2009

As too many homeowners are learning, when someone else owns debt against your assets, they in fact own your assets.  Homeowners, many of which who have been in their homes for a long time are finding that banks are calling in debt as the reign in their balance sheets.  When that happens, if the homeowner does not have the cash to pay down the debt the bank can in fact repossess the property.  Or, if they like, they can use their bargaining power to force the homeowner into a repayment program on their terms with a good number of potentiality intrusive stipulations.

Why am I bothering with the obvious?  Well think about our newly financed bailout.  It will be interesting to track ownership of US Treasury securities over the next couple of years because the same rules hold true for the good old US of A.  The chart below uses data as of January 2009, and lists the largest holders of US Sovereign debt by size, the largest of which is of course China, followed by Japan and then the United Kingdom.  In fact those three countries alone own more than half of all of our foreign debt outstanding, which is a bit more than 50% of all of our sovereign debt outstanding, or to be clear, China, Japan and the UK own 25% of America’s debt.   Forget the recent bugaboo about inflation for a minute, or what happens if countries decide they no longer want to finance our bailout which is generally to their benefit anyway.  These would be serious issues, creating more real economic drama, but they would pass in relatively short order, as did the massive inflation that erupted through the 1980’s.

The bigger problem here is that we are offering tremendous bargaining power to other developed and developing nations, some friendly and some potentially unfriendly.  Throughout our own history we have used such leverage to the benefit of our own foreign policy, and it would be naive to think the process won’t work in reverse.

We are offering a once in a lifetime opportunity to give significant leverage away to foreign powers, not just financial leverage, but certainly political, economic and possibly even social leverage.  At the  moment our biggest three creditors are friendly nations, with China being the largest and largest “unknown”.  The staggering level of debt we are creating to rightfully steady the economy is going to place a burden on our children far greater than future interest payments.  We are giving away pieces of our democracy, foreign trade bargaining power, and potentially our national security.

All this talk of treasuries imploding if other nations decide to stop buying them, or worse begin to sell them is probably overdone.  While current yields on US debt is probably unsustainably low, the bargaining power premium foreign sovereigns are gaining by absorbing our relentless need to issue new debt more than makes up for the paltry yield.  Imagine if you had enough money to lend without limit to Donald Trump just before bankruptcy.  At the very least you’d own a few buildings for pennies on the dollar, at the very best you’d negotiate an exclusive on a good chunk of his future business.

What happens if we need debt forgiveness?  What pieces will China ask us to take off the chess board?  What favors will they call in?  Which assets will they select?  Will they negotiate a one sided deal to secure future energy demands?  Once the banker sits in the drivers seat there is little limit to what he can require if it means he has the power to kick you out of or to keep you in your home.

This will have deep implications for foreign policy for at least a generation.

The chart below uses data from www.treas.gov.  I simply dumped it into excel and created the chart below.  The outer ring is the most recent data from November 2008.  The inner ring is from November 2007.  The rings in between represent each month in between.  Apparently the UK has been one of our largest supporters, more than doubling their ownership of our debt over the last year. China increased their ownership by nearly 50%, and even some of our enemies have grown their holdings of dollars by nearly 50% as noted by the oil exporting countries which includes Iran.

Major Foreign Holders of Treasury Securities (Chart)

Major Foreign Holders of Treasury Securities (Chart) as of January 2009

The raw data is shown in the table below and available at: http://www.treas.gov/tic/mfh.txt

Major Foreign Holders of Treasury Securities (Table)

Major Foreign Holders of Treasury Securities (Table) as of January 2009

Will foreign governments seize power from the US through debt covenants?  Countries that hold 25% of all of our outstanding debt wield massive power.  If this bailout ends up costing what folks like Roubini estimate, that number will be getting much larger.

Let’s not forget that he who owns the mortgage owns the house.

Source:
Major Foreign Holders of Treasury Securities
http://www.treas.gov, Accessed February 7, 2009
http://www.treas.gov/tic/mfh.txt

Report to The Secretary Of The Treasury from The Treasury Borrowing Advisory Committee of The Securities Industry and Financial Markets Association
Keith T. Anderson, Chairman; Rick Rieder, Vice Chairman, US Treasury, November 4, 2008
http://www.treas.gov/press/releases/hp1238.htm