Social Unrest And The US Dollar

Social Unrest and Fiat are Interlinked

Look at the chart below and notice how the masses have become more and more aggressive over time. What’s the common theme? Fiat. Throughout all this time the money supply has continued to increase and the net effect is that we have a world that is completely polarized. So today’s social unrest is simply a manifestation of a bigger problem. A problem that seems to be deeply rooted in inequality and the charts below clearly indicates that as the money supply has risen only the very few at the top have benefited.

For deep-down most individuals know that no matter how hard they work, they will not be able to make as much as the elite. For example, the average CEO now makes 361 times more than the average worker

Last year, CEO pay at an S&P 500 Index firm soared to an average of 361 times more than the average rank-and-file worker, or pay of $13,940,000 a year, according to an AFL-CIO’s Executive Paywatch news release today.

Despite increasing protests from unions and consumer groups, the average CEO pay climbed 6% last year. Meanwhile, the average production worker earned just $38, 613, according to Executive Paywatch.

Is that fair and yet the public debt keeps rising and the average workers share of this debt rises but his/her paycheck is not keeping up with inflation. Is it any wonder then that there are so many disgruntled individuals.

Source: www.usgovernmentspending.com

CEO compensation has grown 940% since 1978

Average pay of CEOs at the top 350 firms in 2018 was $17.2 million—or $14.0 million using a more conservative measure. (Stock options make up a big part of CEO pay packages, and the conservative measure values the options when granted, versus when cashed in, or “realized.”) CEO compensation is very high relative to typical worker compensation (by a ratio of 278-to-1 or 221-to-1). In contrast, the CEO-to-typical-worker compensation ratio (options realized) was 20-to-1 in 1965 and 58-to-1 in 1989. CEOs are even making a lot more—about five times as much—as other earners in the top 0.1%. From 1978 to 2018, CEO compensation grew by 1,007.5% (940.3% under the options-realized measure), far outstripping S&P stock market growth (706.7%) and the wage growth of very high earners (339.2%). In contrast, wages for the typical worker grew by just 11.9%. EPI.org

Social unrest is due to an unfair economic landscape

The only way to keep inflation in check is to keep enslaving large portions of the populace. You destroy industries, you wreak just enough havoc to create the impression that everything is about to fall apart, but the only thing that falls apart is another chunk of the middle to upper-middle class; these guys now join the ranks of the poor. They are now forced to work in sectors that pay less. When you factor inflation a $15 per hour job still pays a lot less than $3 an hour in the 1970’s or $5 per hour job back in the 1980s.

Fiat is the root of all evil, and with this much hot money flooding, the world once can expect a massive surge in immoral behaviour and civil disorder is going to become the new norm. Hence expect to see things you have never seen before.

So you can see how cunning the guys at the top are. They create the impression they are paying you more, but when inflation is factored in you, are getting next to nothing. This is how the Fed will keep inflation in check, and this is the game the Gold bugs have not figured out yet. They are focussing on the absolute definition of the inflation, which is an increase in the money supply, but the Fed is 10X smarter than its given credit for. They were smart enough to provide the patient, with sufficient medicine to prevent the symptoms of the disease from manifesting. The symptoms of inflation is an increase in prices, and they controlled this by only including a certain basket of goods in their equation.

Why would they do this?

The answer is obvious because they can manipulate those sectors freely. This is why farmers are dumping millions of gallons of milk as they don’t want to lower the price anymore. However, milk in the store still costs quite a bit. Why is this? Because of the middlemen, that make more money than the farmers. AI will change this, suddenly these middlemen will be killed, and farmers will be able to sell their products directly to supermarkets or individuals. While everyone will celebrate and call this a fantastic win, guess what, it will be another force of deflation, and this will allow the Feds to increase the money supply even more. The Fed’s are not master chess players; they are master Go players. https://bit.ly/2Z2Ueni

While we will have bouts of inflation (rising prices), the overall long-term trend for inflation is down, and that’s because machines will keep replacing humans, forcing prices to drop and allowing governments to control a larger swath of the population.

According to the daily beast, things will worsen

But increasingly, lawmakers are concerned that Capitol Hill’s response to protesters’ demands for racial justice will be severely limited if it doesn’t include measures to address another powerful undercurrent of the nationwide protests: pervasive economic inequality that’s left black communities behind.

That long-standing inequality has been put into an even starker light by the circumstances of George Floyd’s death—his killer, Derek Chauvin, stopped him over an allegedly fake $20 bill—and by the coronavirus outbreak, which has put low-wage workers of colour on the front lines of the pandemic, ravaged minority-owned businesses, and sparked massive levels of unemployment in their communities.

What’s The outlook for the dollar

The dollar by logic should drop as the Fed is pumping out insane amounts of money, but let’s not forget that the Fed has forced almost every other nation to take the same route. Now another argument that one could make is that the US debt is just too high. Well, that argument could have been made decades ago. Once upon a time, the deficit was less than a billion dollars

Around 1901 the total debt was 4.1 billion dollars, hence in comparison, today’s debt is already insane. It all comes down to perspective. We now live in an era where the masses are asleep; in fact, they are in a deep coma. Hence, as we have stated before, they are unlikely to notice anything until the debt touches the 100 trillion mark.

The US dollar is trading in a wide channel formation. Notice that when Greenspan increased the money supply, instead of the dollar losing its value, it surged, so there goes the hard money argument. The most illogical analysis would be to suggest that the dollar is building a base to rise to new highs: that would be utterly preposterous. And, that is why this outlook is more likely to come to pass than the one that states the dollar is destined to crash.

In the interim Competing currencies are expected to outperform the dollar

In the intermediate time frames, the dollar is likely to continue consolidating. Currencies such as the Oz dollar and loonie should outperform the USD, but if one these factors the gains one can lock in the US markets, the profits might not amount to anything unless you are investing in equally strong stocks in Canada or Australia

Having said that we expect the dollar to bottom out and trend higher after the current consolidation is over. A monthly close above 105.00 will pave the way for the dollar to test the 116.70 to 118 ranges with a very strong possibility of trading to or past 120.00. Everyone forgets the impact AI, and AI-related technologies will have on earnings going forward, and the US dominates this sector. Let’s not forget the Medical industry, especially the biotech sector, where AI is going to be used to create a host of new life extension therapies. All in all, the dollar is toast story that’s been broadcasted for over five decades, is getting old. Sadly the odds of the gold bugs having their day in the Sun are quite slim.

For them a day in the Sun means Gold surging past 5K and at this point, we can’t see Gold trading past 2.5K and this is an extreme target. Precious metals, when examined from a long-term perspective, will continue to trend upwards, hence allocating a portion of one’s cash to bullion is fine, but betting the house on this sector is an indication that one might require shock therapy.