Executive Intelligence Review


Financial Blowout Before the U.S. Midterm Elections in November?

Aug. 15, 2018 (EIRNS)—Today is the 47th anniversary of Richard Nixon’s Aug. 15, 1971 announcement that he was taking the dollar off the gold exchange standard, which de facto meant the destruction of the post-war Bretton Woods system.

First of all, it opened the floodgates to the creation of a London-based “dollar” currency for global speculation, which was the cancer that ended up taking over the U.S.-based dollar itself. It also was the end of the entire fixed-exchange rate system, which meant that, for developing sector nations, the wall between international speculation and their national currencies was demolished. This was in fact the first step towards wiping out the international Glass-Steagall regime of separation between productive and speculative banking. Then that was done officially in the U.S. itself in 1999, by the repeal of Glass-Steagall—with the known consequences.

As a result, a global speculative bubble was unleashed over this last half-century, but especially beginning in 1999—a bubble which today has grown to over $1.5 quadrillion in derivatives and other financial aggregates. One of the ruses used by the British Empire since the 2008 financial blowout to try to keep that bubble afloat, has been the so-called “carry trade” fueled by zero-cost liquidity pumped into the system by quantitative easing, which was then shipped to high-interest emerging markets such as Brazil, Turkey and other countries—where those economies were looted.

With the beginning of the Fed’s “tapering” of QE and rising interest rates in 2015, the whole financial system has been touch-and-go, as this triggered waves of “reverse carry trade” financial flows out of emerging markets back to supposedly safer havens, such as the dollar. This, in large measure, is what we are seeing in the various manifestations of the financial crisis in Turkey, Argentina, Russia, Brazil, etc. Bloomberg has reported a 6% loss across the carry trade in the first quarter of 2018 alone.

Now, the trans-Atlantic sector may well be staring down the barrel of a global financial blowout, perhaps in October, which has historically been a prime month for such explosions, as Lyndon LaRouche has frequently observed.