Compiled by Walter Sorochan Emeritus Professor: San Diego State University
Posted July 12, 2016; updated July 30, 2016. Disclaimer This article is work in progress.
The nature of world money outlook was sparked by British exit from the European Union, known as BrExit. Britain’s vote on June 23, 2016, to leave European Union [EU] sent global markets into chaos. Investors looked at this major refashioning of the global landscape and found it, on June 23 and 24, uncertain, scary and perilous — or at least so uncertain at the moment, that many speculators preferred to pull their money out of risky places like stock markets and commercial bank investments. This decision of investors to pull their money out of an unstable country and its uncertain investments and stocks caused the stock markets to loose money. It caused a domino effect on the rest of the world stock markets.
What most persons learned from TV coverage on June 24, 2016, was that the stock market dropped 611 points! Grandiose speculation was an immediate psychological hick-up more so than a genuine long-term currency market reaction. This simplistic view does not explain what caused the stock market to drop, or how the world money machine works nor how it is linked to the stock market.
What is a currency market?
Two money terms need to be understood .... currency and financial markets. Although linked, these are separate in how these systems function. Currency market is a foreign or exchange market that each sovereign country has. The world currency market was created to trade currencies or money of different countries. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of volume of trading, it is by far the largest market in the world.
The currency market is made up of central banks from all countries. A central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency, which usually serves as the state's legal tender.
When there is a money or stock market crisis in a country, the Central [national] Bank of that country is always the first line of defense; the central banks can do something to stabilize the situation but they can’t fundamentally alter a negative trajectory.
A government has to work to keep their pegged currency rate stable. Their national bank must hold large reserves of foreign currency to make changes in supply and demand. If a sudden demand for a currency were to drive up the exchange rate, the national bank would have to release enough of that reserve currency into the market to meet the demand. They can also buy up currency if low demand is lowering exchange rates." Grabianowsk: Exchange rates work
When the reserve currency is in short supply, and the country cannot add more to stabilize the currency in short supply, then the value exchange of that currency goes down and becomes less valuable and even worthless. The country is bankrupt! This has happened to Argentina in the past. But as yet not in United States!
The key point is that foreign central banks regulate both the currency or money and also the movement of currency or money between countries; causing stocks to go up or down. This is the forest of world economics.
Financial markets & Commercial banks: Central bank of a country lends money to smaller banks referred to as commercial banks. These make up the financial market of a country.
Globalization: Time out to point out that the currency market is part of world globalization.
We and the world now live in a united or globalized world and a New World Order. Gahary: Ruling bank families 2015 Globalization allows movement of food, commodities, computer technology, information, medicine and currency to take place between countries. Such movements of goods are beneficial to all the people, including the middle class and small businesses as well as billionaires and corporations.
Although the original intent of the global currency market was to streamline the world economy, in recent years the currency market has been taken over by the politics of those at the top of the money ladder. Governments became over-zealous and began initiating a world central government where ruling politicians and bureaucracies would make decisions that bypassed representing the will of the citizenry.
In an attempt to unify countries to facilitate movement of goods and money, those running the global machinery, the bank cartel, did not represent the people, nor the middle-class in particular. The recent grass-roots movement by people against their governments is a rebellion by people against those in power making decisions that do not benefit working people. People are rebelling against the government of privileged classes telling them what to do. The world wide uprising is not just a national issue; it is a global issue. The United Kingdom 'Brexit' is an example where the British people voted against non-representative bureaucrats in Europe telling the sovereign British people what to do. The Brexit should rightly be taken as a signal that the political support for global integration is at best waning and at worst collapsing. Although global integration may be sputtering, it is not going away!
The World Bank Cartel is hidden but works as a shadow government in Washington, DC. Giambruno: Hillary Clinton and Deep State 2016 Whitehead: Unelected Deep State to stay 2015 Most Americans are disenchanted and frustrated with Washington Gridlock and and American politics. But although they cannot seem to put their finger on what is causing all the political mess, numerous analysts have linked it to money and the American Deep State. It is worthwhile diverting a few paragraphs to explain deep state and the importance of this relationship in order to understand the world banking system and how it works.
Published on Apr 15, 2014 Mike Lofgren, a congressional staff member for 28 years, joins Bill Moyers to talk about what he calls Washington's "Deep State," in which elected and unelected figures collude to protect and serve powerful vested interests. "It is how we had deregulation, financialization of the economy, the Wall Street bust, the erosion of our civil liberties and perpetual war," Lofgren tells Moyers. Lofgren: Anatomy of Deep State 2014
Bill Moyer - Mike Lofgren Deep State length= 26:46 mns.
Bill Bonner recently issued an alarming video on this topic, including some footage from Eisenhower’s farewell address. In spite of Bonner's video having a vested interest of enticing you to invest in his investment report, the video is worth viewing. You can watch this new video right here
How World national banking systems work: The world banking system is controlled by the world banking Cartel. [ a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics. ] The illustration below displays how all the banking systems are tied together:
The world banking cartel [at the top of the illustration above] is a hidden and secret group of eight initial family members that began about 1811 when the Bank of United States was founded, with the Rothschilds as main owners. Henderson: Fed Res Cartel Since this early beginning, the Cartel runs the central banks of all countries. This author-researcher was able to find the secret members that originally formed the cartel [J.P. Morgan, Rothschild Rockefeller, and so on]. Ofcourse, the original families have passed on the cartel legacy to their children and grandchildren.
The illustration above displays [ arrows pointing down ] how the chain of command of the cartel controls the Bank for International Settlements [BIS], The International Monetary Fund [IMF] and the World Bank; all private entities. These entities, under the control of the international cartel, facilitate the movement of money and lending money to central banks of national governments and private enterprises.
The Bank for International Settlements [BIS] is a corporate central bank, located in Basle, Switzerland, that loans money [6% interest] to all major central banks in the world. Being private, it does not have to disclose who the members are. It is privately owned by central banks themselves, most of whom are also private. It is BIS that controls global monetary affairs and not the federal government nor the central bank of a country. The BIS is the world central bank to country central banks. The BIS has greater immunity than a sovereign nation, is accountable to no one, and runs the global economy. Wood: IBS 2005
The original intent of the currency market was to facilitate exchange of goods between countries that had different currency values. The cartel impacts on countries by manipulating the availability of money to governments. Basically hidden from view [although the cartel is displayed above], the cartel impacts on what politicians can and cannot do .... through campaign donations, lobbying and providing government loans.
The branches of the international banking cartel are:
The Banking Cartel sells money to Central banks of countries, which, in turn, loan money to the commercial banks within the country that should make money available as loans to businesses and people.
United States banking system: Below is an example of how banking works in United States. The USA Central bank, referred to as the Federal Reserve, is different from other government Central banks in that other governments usually have just one central bank whereas United States has 12 central regional banks. The USA Federal Reserve is neither federal nor a reserve. It is a network of banks, with the main reserve bank in New York, all of them privately owned, but made to appear like an official government agency. The Federal Reserve does not need congressional approval and officials are appointed by the reserve banks, not elected, and Congress has no role in their selection. Reserve Banks control the nation’s money and credit. The Fed Reserve loans money to the US Central bank as needed, which can print money as needed.. As no economy is pegged to a gold standard, central banks can increase the amount of money in circulation by simply printing it. The Federal Reserve Bank in United States is divided into privately owned Twelve Federal Reserve Districts: Mullins: Fed Reserve secrets 2011 Edward F. Mrkvicka, Jr Plutocracy Cartel
Federal Reserve Branches: Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Board
The 12 Federal Reserve banks making up the Central or National Bank of United States are referred to as currency banks:
These 12 district reserve banks are connected to the world currency market [banking cartel]. The 12 central banks are also connected to smaller commercial banks and are referred to as financial markets; where most of the everyday people banking takes place. Commercial banks need to have a reserve amount of cash on hand [3%] to cover customer chequeing but not savings account. Deposits at United States banks are insured by the FDIC up to $100,000. So if your bank was to fail, you would get your money back, up to $100,000, from the bank eventually.
How world currency market works:
The world currency market is much, much bigger than the US market. But the TV commentators explaining what happens on the US stock exchange are totally blind and oblivious to the fact that the world currency market controls and affects the US stock exchange and not the investors on Wall Street! US currency is regulated by big world central banks. So is the currency of other world countries. The central banks in each country make up the world economy [currency market] and set the exchange price on all goods traded and sold in the world. So when the speculators gamble on Wall Street and cause stocks to go up or down, they are really trading paper internet or digital money between other countries. This is the catch .... between other countries. And this is important because it is the foreign big banks in other countries that control such trading in the US. No, not the USA banks nor Wall Street although commentators make it appear as though they can control the stock prices.
The Forex, short for Foreign Exchange [forex market], is the international market place where currencies from all over the world are traded against each other in the form of pairs. We call exchange rate the price of exchange between two currencies. Thus, if we take the example of EUR / USD rating at 1.50, it means that with 1 euro, you can get 1.50 US dollars as exchange. Investors buy and sell currencies in real time and continuously. The exchange rate thus changes constantly based on supply and demand of a particular currency. Forex: Foreign exchange market
"All the above information about how the world economy works is the tip of the iceberg. The bigger picture is how can we use all this information to predict what may happen in the stock market and world economy in the future. It would be nice to prevent not just money loss in the stock market but also be able to protect oneself from a housing or auto bubble!
Now fast pace to the banking system of Great Britain and Brexit. The Bank of England is the central bank of England. When Brexit was announced, the political and economic uncertainty caused many investors to withdraw their invested money [in stocks, bonds, etc.,] from the country's commercial banks. Such massive withdraws caused a temporary depletion of backup money, causing instability in the country's 'reserve' or collateral currency in the central Bank of England. When investors withdrew their money [investments] from the various banks in England in large numbers, then the central Bank of England had to replace the loss in order to keep the bank [England] solvent or liquid. But the pound lost much of its world value, as against the American dollar. To regain stability or liquidity, the central Bank of England had to sell off some of it's country's currency, causing the value of their country's currency to go down. The English example illustrates that central banks, the stock market and currency market all work together.
The situation now: There is an alarm of fear about what may happen to the economy of Great Britain and the rest of the world. TV pundits cover the stock market as if stocks crashing on the stock exchange or Wall Street is a rare event. This is totally incorrect. Stock market crashes occur regularly somewhere in the world every day.
Since Great Britain announced Brexit, the stock markets have been up and down ... signifying a volatile or unstable stock market. Although this may signify currency market instability in the world, it does not portray an imminent stock market or currency market crash.
Brexit isn't an economic problem right now, it's a political one that instantly impacts on the financial markets [like stocks and bonds]. Plumer: Economist views on Brexit 2016 Keep in mind that the strongest historical prerequisites [ conditions ] for a market crash have been already in place in most countries before the announcement by Brexit. Hussman: Moment in history 2015 Such pre-existing unstable conditional trends include rate hikes by the USA Federal Reserve or monetary tightening, excessive credit buying in auto and home credit loans, low bank credit ratings, a political change in a country, a war, or a major environmental catastrophe.
So the announcement that Great Britain will be leaving the European Union did not cause major chaos in the world economy at this time. Many weak financial markets in Europe, South America, Asia and North America have been brewing for a long time [since 2000]. Brexit just ignited economic uncertainty and created a smoldering mess! The mess is two-fold. One is the failing European Economy and its possible break-up and the other is the sovereign control of Great Britain. In both instances, there is psychological uncertainty that fuels financial [stock] markets. Plumer: Economist views on Brexit 2016
At this time the psychological uncertainty is slowly igniting the currency market. The decline in business confidence and a rise in uncertainty, paired with limited responses by central banks, makes a recession a major risk in Britain and something of a risk in the rest of Europe and the United States. But recent local stock market shifts of up and down in local stock markets, will continue to happen overnight for some time.
Central banks are not making any drastic "fix" measures at this time. Thus, we can expect economic shifts in central banks to happen slowly over the next several years. If and when reserves of collateral cash in a country dry up as that country continues to stabilize its currency, then there will be a speeded up reaction by world central banks.
As of July, 2016, there is a 'wait and see'!
Where are we headed next? What can we expect? With this anticipation, Doug Casey researchers and John Hussman have studied the world economic trends for over 100 years. Both have come up with similar good evidence to support their graphic claims that:
Predicting a Currency Market Event:
All single important financial events that have happened in the world over the last 100 years [listed below] … all had economic problems that impacted in a similar manner on the world currency market.
The above events all followed a familiar currency market trend that Doug Casey illustrated for a single 2014-2015 event: Casey: Cause of US depression 2016
As you can view from the graph, the currency market has already fallen by as much as 16%. [meanwhile the stock market is stuck in an up-down mode] What we see now is as clear as daylight: The currency market has fallen a long way, more than 15% over a long period of time. However, central banks have been able to stabilize the currency market by printing paper money that has no collateral behind it. This generational shift of 15+% projects a possible future world-wide currency crisis. It has not happened as yet but...
Why may this generational shift be important? The currency market, world-wide, is much bigger than the stock market. The chart below illustrates the size of this global currency market: Casey: Cause of US depression 2016
It shows the world market size of several items you see—or hear about—every day. For example:
And yet, we almost never hear of it! Most people don’t realize this, but daily trading in this huge market of currencies affects every aspect of our financial life .... from our homes and cars… to the coffee and milk we drink every day. And of course all our investments [stocks, bonds, options, precious metals, etc.]. But the significance of all this generational shift is important when anticipating an economic disaster:
Currency Market, the Single Most Important Economic Force In the World, is Changing Direction.
The global currency market is 40-times larger than the stock market or the US dollar.
Currencies [in each country] are the largest market on the planet. Four trillion dollars’ worth trade hands every single day.
Each and every day, there is 500 TIMES more money traded in the currency market than on the U.S. stock market!
The shift in currency market is very slow compared to the fast responding stock market crash. Why, slow? Because a monstrous volume changes direction slowly. Think of the stock market as a small boat compared to that of a big cargo ship representing the currency market. It takes the big ship longer to make a change in direction compared to a small boat. And a heavy object [big cargo ship] in motion stays in motion for a long time compared to a smaller object.
Casey gives numerous examples to support the claim that the world currency market is the largest economy in the world today. Casey: Cause of US depression 2016 John Hussman likewise supports Casey's claims:
Hussman, of Hussman Funds, uses the S&P market fluctuations over various years, to provide a chart below that impacts on a long term currency market. He shows this in the crash in 1987 and subsequent crashes. Same pattern. Down about 10% to 20% from the top, some failed recoveries, and then, blam!
The above chart predicts that future markets follow the pattern of the 1928 crash, as well as similar patterns in 1987 and 2009. Hussman's conclusions: Blodget: Hussman's Market prediction 2016
Hester, from Hussman Funds, displays a graph below that substantiates the previous graph over a long period of time. Hester adjusted for price-earnings ratio [P/E Ratio]. P/E is the ratio for valuing a company that measures its current share price relative to its per-share earnings. The graph below shows the 10-year moving average of the P/E Ratio for the S&P500 Index: Hester: International Market Valuations 2010 Hester: CAPE 2013
"The combination of three factors ---- unfavorable variation, unfavorable trend uniformity and unfavorable yield trends is what Hussman identifies as a CRASH WARNING. This does not mean that a crash is certain, but that it does place the market in a condition of time, and from which every major stock market crash has emerged." Hussman: Moment in history 2015
Will you see these trends in the most recent Brexit crisis? Well, the NY Stock Market did crash 611 points in one day immediately after the Brexit announcement while the currency market was reasonably calm. So probably not immediately, as the British, European and US stock markets will fluctuate up and down in attempts to recover and do business . But it is what happens in the long run that is important. And no one can accurately predict when or how the currency market will unravel.
Conclusion — What We Are Witnessing Is the Biggest, Most Important Trend Change in the History of Modern Capitalism. This most recent shift in the currency market has put into motion a major trend in all of the other, smaller financial markets; and that this could affect the American economy (and all others) in a devastating way.
Brexit is purely a monetary shock .... in real terms it makes little difference whether the UK is in or out of the EU [especially in places like the US and Japan]. It’s monetary. That means the ultimate effect depends ENTIRELY on how the central banks react. Do they show imagination and leadership, or . . . do they keep acting the way they’ve been acting since 2007. Plumer: Economist views on Brexit 2016
Hussman's observational analysis is worth noting: "While the full attention of financial market participants is focused on “Brexit” - last week’s British referendum to exit the European Union - the singular factor to recognize here is that the vulnerability of the financial markets to steep losses has very little to do with Brexit per se. Rather, years of yield-seeking speculation, encouraged by central banks, had already brought the financial markets to a precipice prior to last week’s vote. It’s not entirely clear whether Brexit is a sufficient catalyst to burst the bubble, as we recall that the failure of Bear Stearns in early-2008 was followed by a period of calm before the crisis was sealed by Lehman's failure, and numerous dot-com stocks had already been obliterated by September 2000, when the tech bubble began its collapse in earnest. We’ll take the evidence as it comes, but we’re certainly defensive at present, for reasons that have little to do with Brexit at all. The high-level churning in global financial markets since late-2014 represents what we view as the top formation of the third speculative bubble in 16 years." Hussman: Brexit and possible bubble 2016
Cartel Banking cover-up: There are numerous controversies about the banking cartel. Like postulating that the cartel regulates the stock market, controls national governments, or provides loans to both parties in a war. Henderson: Fed Res Cartel The truth is hidden! These controversies will exist as there is total lack of transparency about the banking cartel and how the United States Federal Reserve really works! Is there a world banking cover-up?
It is your call .... bubble will burst, recession, depression or?
For more health information: Go to main menu
Feedback to author: E-mail
Blodget Henry, "One smart stock market analyst thinks this is where we're headed ... (gulp),"Business Insider, February 20, 2016. Blodget: Hussman's Market prediction 2016
Brown Richard, "A simple explanation of how money moves around the banking system," Pieria, May 1st 2014. Brown: How money moves around 2014
Casey Doug, "The Precise Cause of America’s Coming Depression," Casey Research, June 23, 2016. Casey: Cause of US depression 2016
Casey Research group predicted the following:
Federal Reserve Bank Minniapolis, "A History of Central Banking in the United States." Fed Res Bank Minniapolis: History US banking
Forex, "Forex - The Foreign Exchange Market," ForexTribe. Forex: Foreign exchange market
Freeman Richard, "The Windsor's' Global Food Cartel: Instrument for Starvation," Executive Intelligence Review, December 8, 1995. Freeman: Food cartel 2016
Gahary Dave, "Dynastic Banking Families Rule the World," Pragmatic Witness, June 07, 2015. Gahary: Ruling bank families 2015
Giambruno Nick, ""Doug Casey on President Hillary Clinton… World War III… and the Deep State," Casey Research -International Man, July 27, 2016. Giambruno: Hillary Clinton and Deep State 2016
Grabianowski Ed, "How Exchange Rates Work," How Stuff Works Money. Grabianowsk: Exchange rates work
Gwatkin Josh, "The Men that Rule America," UNveiling America, April 4, 2015. Gwatkin: Rulers of America 2015
Henderson Dean, The Federal Reserve Cartel: The Rothschild, Rockefeller and Morgan Families," Humans are Free. Henderson: Fed Res Cartel
Hester Bill, "An Update on International Market Valuations," Hussman Funds, May 2010. Hester: International Market Valuations 2010
Hester William, "Does the CAPE Still Work?" Hussman Funds, December 2013. Hester: CAPE 2013
Hussman John P., "A Brief Economics Primer - There's no such thing as free money," Hussman Funds, Hussman: Economic Primer
Hussman John P., "Brexit and the Bubble in Search of A Pin, Hussman Funds, June 27, 2016. Hussman: Brexit and possible bubble 2016
Hussman John P., "When You Look Back On This Moment In History," Hussman Funds, June 15, 2015. Hussman: Moment in history 2015
Kaplan Paul D., et la, "The History and Economics of Stock Market Crashes," The Research Foundation of CFA Institute, 2009. Kaplan: Stock market crashes 2009
Lofgren Mike, "Essay: Anatomy of the Deep State." The Blaster, Moyers and Company, February 21, 2014. Lofgren: Anatomy of Deep State 2014
Lofgren Mike, "The Deep State: The Fall of the Constitution and the Rise of a Shadow Government," Book Hardcover – January 5, 2016. Lofgren: Deep State & Shadow Government 2016
Mullins Eustace, "Charts - Secrets of the Federal Reserve," Barefoot, 2006. Mullins: Charts- Fed Reserve 2006
Mullins Eustace, George Stimpson and Ezera Pound, "Secrets of the Federal Reserve - The London Connection," The Book [Out of print, Published in 1952 by Kasper and Horton, New York], 2011. Mullins: Fed Reserve secrets 2011
Plumer Brad, "How bad will Brexit get? Here's what top economists are saying," MSN Market News, June 27, 2016. Plumer: Economist views on Brexit 2016
Schlossberg Boris, "The Stupidity of Brexit," Money & markets, June 29, 2016. Schlossberg: Brexit stupidity 2016
Spinney Chuck, "Deconstructing America’s ‘Deep State’" ConsortiumNews.com., February 12, 2016. Spinney: Deconstructing deep state 2016
Third world traveler, "THE PLUTOCRACY CARTEL". Plutocracy Cartel
Wang Christine, "Alan Greenspan says British break from EU is just the tip of the iceberg," MSN Money, June 24, 2016. Wang: Greenspan Worst world market 2016
Weiss Martin D., "6 Big Eurozone Banks on the Brink," Money and Markets, June 27, 2016. Weiss:World banks rated 2016
Whitehead John W., "The Deep State: The Unelected Shadow Government Is Here to Stay," The Rutherford Institute, November 10, 2015. Whitehead: Unelected Deep State to stay 2015
Wikipedia, "Cartel." Wiki: Cartel
Wikipedia, "Foreign exchange market. Wiki: Foreign exchange market
Wood, Patrick M., "The IBS- The International Bank for Settlements," October 14, 2005. Wood: IBS 2005