Friday, June 3, 2016

The Global Minotaur: Exorbitent Idiocracy

In Yanis Varoufakis' tome by the same name, he explains that the US reserve currency is the Global Minotaur that extracts "tribute" (seigniorage) from the world's trading nations. Charles Hugh Smith calls it the "exorbitent privilege".

I call it the Faustian Bargain. Because ultimately, fiat-issued dollars are totally worthless. Whereas, factories, jobs, and intellectual property have enduring value. A fact not lost on China, Germany, Japan, Korea, Taiwan, Vietnam, Malaysia, stop me any time. In other words, an economist is an idiot who thinks that a cappuccino is the same as a semiconductor.  

Nevertheless, in a related sense, since 2014, the U.S. has diverged from the entire world with respect to the fake-believe recovery. Global deflation yielded dollar strength under the fake-believe premise that the U.S. economy would make good on the promise of "lift-off". Unfortunately, it was all a massive circle jerk and now the money has to go home.

I think we all see where I'm going with this...

The S&P 500 is the true exorbitent privilege. The dollar reversal is way ahead of fake-believe...

"That's not a stampede, this is a stampede"

Rule #1: When you begin to believe you're exceptional, count the days until you realize you're just Joe Kernen.

"Shame on the Fed for not believing in 0% forever, as recovery falters"