A Crisis of Capital Flight: The SUM Report 12-11 | QPOL Issue #27
Where global capital will flee in an economic crisis and why.
Salutations, ladies and gentlemen. This week’s SUM Report is a bit late and all over the place, so we’re just gonna cover one topic and cram as much relevant shit in there as possible. Everything is all connected in some way or another. It’ll work (trust me).
Onward…
Which Way, Western Man?
The above is a Q&A between Martin Armstrong and a reader that covers the question on where capital flight will go during an economic crisis and when sovereign nations default.
Capital always moves to where it’s treated best. I have the assumption that capital flight will always move back to America because treasuries have generally been the safest place to park large amounts of capital (other than gold and Bitcoin). The question then becomes “will that always be the case? What could prevent America from being the safe-haven for wealth preservation/creation?”
The world is drastically changing as we witness a true bifurcation of global powers via the creation of BRICS. Before jumping to some reasonable conclusions, let’s look above at what happened during the Great Depression.
Although capital flowed into America, it started flowing out because they believed the sovereign debt crisis would happen within the states. In reality, the US was already hedged for capital flight via protectionism and raising the dollar “in terms of gold.” The only way capital flight doesn’t leave the US if private assets don’t collapse. The dollar was backed by private assets (gold), or as Zoltan Pozar calls it, “outside money”, or money that’s outside of the control of governments and over-financialized assets (gold, bitcoin, oil).
So does this imply that in order to retain investor confidence and preventing capital flight out of America, the Fed/treasury needs to back the dollar/treasuries by a trusted commodity like gold, oil, or Bitcoin?…
All That Glitters Is Paper Gold
The move to gold via the BRICS nations may be the kick in the gonads the US needs in order to stay competitive and keep credibility high, but not yet. As the price of gold increases drastically from where it’s at now, that signals a lack of confidence in financial institutions (especially America). If the price of gold goes up before America (the Fed and commercial banks primarily), then capital will flee away into Europe and support Davos in their efforts to fund their Great Reset. This is exactly why Team Fed are more than happy to keep manipulating gold prices down because the ECB’s exposure to gold is the only thing they have to stay solvent, and is also why they want the price of gold to rise sooner than America does. I’ve explained this very relationship in detail in QPOL Issue #9 “All That Glitters Is Paper Gold,”
Basically Basel III let’s the ECB’s paper exposure to gold “count” as real gold on their balance sheet, and therefore is why they desperately need a higher gold price sooner than later. The ECB is virtually bankrupt. Their assets are dog shit (trashy euro debt). The only thing they got going for them is to offset said poor assets with their gold holdings. However, that only keeps the ECB solvent if the price of gold is high. Team Fed (Commercial banks) understands this and that’s why they’re manipulating gold markets to keep the price of gold down and to keeps rates high in order to bankrupt the euro commies. Until they destroy the ODM (offshore dollar markets) and fully bankrupt the euro commies, only then will they allow the price of gold to truly appreciate because capital flight will flee to the US and not the EU (ergo, money moves to where it is treated best).
Golden Tug of War
The question still becomes who will move to gold (or a sounder currency) first. It comes down to how fast can the Fed bankrupt the euro-commies at Davos and then allow the price of gold to appreciate. With Saudi Arabia making the recent infrastructure deal with China, they are slowly gaining independence away from the petro-dolllar, which may speed up this process. China will explore with the Arab side the feasibility of 5 billion yuan (about $719 million) worth of assistance projects in development cooperation, and include 30 suitable Arab project programs in the pool of Global Development Initiative projects.
The BRICS nations’ dependence on the West is quickly decreasing, and as they keep piling up gold, it may motivate Team Fed to strike the Davos crowd even harder with tightening policies. This could ultimately end up being a capital flight competition between the BRICS nations and Team Fed. Hopefully the “lag” in monetary policy will kick in sooner than later. We’re already seeing its effectiveness in the demand destruction in the housing market and the overall economy. The only things that are benefiting from the recession seem to be gold and the industrial metals, as well as US treasuries and the DOW as a whole, which is signalling capital flight fleeing Europe and into the US because…you guessed it! Money moves to where it’s treated best.
However, it’s not beyond the realm of possibility that Team Fed is working directly with BRICS to help draw capital out of Europe and to further the EU’s collapse. As I’ve explained in The Rise and Fall of Sam Bankman Fried: The SUM Report 11-13 | QPOL Issue #21, I could see a scenario where the Fed worked with Binance (China) to take out FTX in an effort to destroy the creation of offshore dollars via crypto and end the money laundering fiasco through Ukraine that helped steal/rig the midterm elections. That operation was a continued apparatus of Davos money creation. The only way the euro-commies lose this financial war is that their source of capital is destroyed (AKA, the Fed breaks their money printer). There are no partnerships in geopolitics, only interests and incentives. This tacit coordination between the Fed and BRICS may be the only maneuver where global communism via Davos’ Great Reset is put to an end.
~ Phil Gibson