Monday , September 23 2019
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Thomas Luongo



Articles by Thomas Luongo

Will the Yemen War Be the End of Saudi Arabia?

3 days ago

The attack on Saudi Arabia’s major oil processing station in Abqaiq over the weekend was a major turning point in global politics. It may be even bigger than many of us realize.
While forces within U.S. political circles, Israel and Saudi Arabia keep trying to shift the blame to Iran, the most likely scenario is that the Houthis in North Yemen were responsible for the attack as a follow up to last month’s hit which showed off the capabilities of their new drones.
That attack set the stage for the latest one in a classic case of the past being prologue. By showing the world it was capable of throwing drones anywhere in Saudi Arabia rebels in Yemen created plausibility for last weekend’s attack.
And as I said the other day this

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Questions, Not Answers, Surround US Push to War on Iran

5 days ago

When President Trump fired National Security Adviser John Bolton last week rational people the world over cheered.
When there was news that Trump would meet on the sidelines of the U.N. General Assembly with Iran’s President Rouhani in a few weeks there were sighs of relief.
When Benjamin Netanyahu goes to Moscow to get Vladimir Putin’s blessing to continue airstrikes in Syria and was told no, the world said, “Finally! Enough is enough.”
The problem is that there were also very powerful people who were not happy about these things.
Moreover, there are a lot of nervous people out there worried that Tuesday’s election in Israel will not go the way they want it.
A lot of people have invested a lot of time and money in ensuring

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Turkey Exposes Central Bank Incompetence

7 days ago

Last year I asked whether Turkey would be “City Zero in Global Contagion.” That question was based on the crisis unfolding in the Turkish lira which materially threatened a number of major European banks, especially those in Italy.
This week highlighted something really interesting for me that, I think, sets in motion a similar thesis about Turkey but for much different reasons. The sovereign debt crisis will come about purely because of a failure of confidence in institutions.
Competence is the key to staying at the top of human dominance hierarchies, not force. Those built on competence tend to last and those built on force are, at best, meta-stable for a specific period of time.
The difference between what’s happening in

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Trump Thumping Bolton Is a Good Start

12 days ago

Donald Trump finally fired National Security Adviser and all-around disgraceful human being John Bolton.
Good riddance.
Bolton was a diversity hire by Trump. His allegiance to the Israeli Firsters who helped get Trump into power, namely Sheldon Adelson, got him the job.
The strongest Iran hawk in Washington in the wake of John McCain’s brain tumor valiantly giving up its life to end McCain’s, Bolton’s role was to keep Trump on program delivering maximum force and intimidation to everyone who so much as looked sideways at the U.S.
He was the proxy in the White House for liar and war criminal, Benjamin Netanyahu.
The turning point was Trump’s refusal to take Bolton’s bait to retaliate against Iran for shooting down the Global Hawk

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Who Is Holding Back the Russian Economy?

14 days ago

Russia’s economy has been a sore spot for more than two years now. Since the ruble crisis of late 2014 the role of the Bank of Russia has been to apply IMF-style counter-cyclical tightening to stabilize the situation in the wake of the decision to allow the ruble to float freely on the open market.
That was the right decision then. It was the move the US did not expect President Vladimir Putin to make. It was expected Putin would hold to his natural conservatism and keep the ruble trading in the 30’s versus the US dollar as opposed to risking a collapse in exchange rate in the face of an historic drop in oil prices over the eighteen months between July 2014 and the low made in late January 2016.
Oil dropped from $120+ per barrels

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Boris Johnson – Brexit Hero in the Making or Goat?

16 days ago

This week’s Brexit drama was vitally important for Boris Johnson. And intentional or not he has maneuvered events to a very interesting inflection point.
The random acts of vandalism performed by Remainers on all sides of the political aisle in the House of Commons were, I think, invoked by Johnson himself strategically.
And I come to that conclusion for a number of reasons. The most compelling of which is that it saves the Conservative party and also potentially shores up the British ruling class which are in danger of losing their popular mandate. Achieving a meaningful Brexit is of secondary importance.
Brexit is the defining issue of the age. It has split the people and their government. This was the strategic plan of the

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Brexit Has Devolved into Random Acts of Vandalism

18 days ago

Some men just want to watch the world burn.–The Dark Knight
Brexit has destroyed British politics. That was the goal of the EU’s non-negotiating strategy. And it has succeeded brilliantly.
Understand that the mindset of The Davos Crowd and their quislings across Europe is that the EU is inevitable. The EU is the future and nothing the people say or want will change that course.
And they will do everything they can to implement it.
While watching another two hours of pathetic virtue signaling and strident desperation known as British Parliament I came to the only conclusion any rational person could come to.
The Remain coalition in the U.K. parliament have become vandals.
They would destroy everything about their government,

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When Losing Is Winning in Germany for AfD

19 days ago

Germany held the first two of three important state elections over the weekend. And the results were striking. Leading up to the elections polls had the current opposition party in the Bundestag, Alternative for Germany (AfD), neck and neck with the ruling parties in both Saxony and Brandenburg.
Chancellor Angela Merkel’s ruling coalition was battered by the results but not beaten. In Brandenburg, her partners, the Social Democrats (SPD), beat AfD by 5 points, 26.3% to 23.5%, while in Saxony Merkel’s Christian Democratic Union (CDU) held onto 32% of the vote while AfD took 27.5%.

Germany (Saxony), prelim. final results:
CDU-EPP: 32% (-7)AfD-ID: 28% (+18)LINKE-LEFT: 10% (-9)GRÜNE-G/EFA: 9% (+3)SPD-S&D: 8% (-4)——FDP-RE: 5%FW-RE:

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Is World of Warcraft Classic a Cash Grab or Much Needed Rebirth?

27 days ago

So today is the launch day for World of Warcraft Classic. A reboot of the game to its state circa late 2005 but with 2004’s content. There is real excitement in the community for the first time in years.
And it’s of the type that tells me there’s much more here than nostalgia for a past long gone. There’s something deeper and richer here than I think any one of the vocal players who fought so hard for this understand.
I played World of Warcraft from the very beginning. I was on one of the oldest and more unstable servers, Dalaran.
At times we joked it was a 286 running, forgotten, in the basement of Blizzard’s offices. If memory serves it was the last of the original servers to get upgraded hardware. And because of that it still

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Freaky Friday Foments Furious Fed Fusillade From Trump

28 days ago

Friday night used to be the ‘best night on television.’ But today Friday afternoon is becoming the best soap opera we could hope for as President Trump pulls out all the stops to keep us both horrified and entertained.
It’s better than reruns of Dallas, for sure, though the hair is just as ludicrous.
Trump laid into FOMC Chairman Jerome Powell again musing aloud on Twitter as to who the bigger enemy of the U.S. was, The Fed or China.

….My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?
— Donald J. Trump (@realDonaldTrump) August 23, 2019

Now, far be it for me to get upset with anyone criticizing the Federal Reserve. The FOMC, is really just a Politburo of Ivory Tower intellectuals with neither the practical experience nor the specific

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Italy and Salvini Face Real Crisis Now

August 22, 2019

With the resignation of Prime Minister Giuseppe Conte the future of Italy is now up in the air. There are many things that come into play with Conte resigning before the No-Confidence vote tabled by Lega Leader Matteo Salvini could take place.
The euro popped 40 pips, back above support at $1.11 on the news. The forex markets realize this was a Brussels-friendly move.
Conte didn’t want to chance getting voted out of office. That makes it difficult for President Sergei Mattarella to call for a new government without snap elections. The Italian Senate would have formally rebuked Mattarella’s compromise pick for Prime Minister, Conte.
Conte was there to effectively keep the children in line – Euroskeptics Lega and Five Star Movement

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The Battle of the ‘Flations Has Begun

August 17, 2019

Inflation? Deflation? Stagflation? Consecutively? Concurrently?… or from a great height (apologies to Tom Stoppard).
We’ve reached a pivotal moment where all of the narratives of what is actually happening have come together. And it feels confusing. But it really isn’t.
The central banks have run out of room to battle deflation. QE, ZIRP, NIRP, OMT, TARGET2, QT, ZOMG, BBQSauce! It all amounts to the same thing.
How can we stuff fake money onto more fake balance sheets to maintain the illusion of price stability?
The consequences of this coordinated policy to save the banking system from itself has resulted in massive populist uprisings around the world thanks to a hollowing out of the middle class to pay for it all.
The central

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Can Salvini Beat the Italian Troika?

August 13, 2019

Italian leader Matteo Salvini is in the headlines again, now openly threatening divorce with his coalition partner, Five Star Movement (M5S).
Salvini unleashed another round of rhetorical bombs at M5S to get on them board with his part of the agenda. But that seems to have failed and he is now prepared to go to Parliament and withdraw his party, Lega, from the coalition government which will lead to new elections.
He had put off any kind of talk of new elections in the past because the opinion polling wasn’t strong enough to grant Lega the kind of majority it needed to govern without strings.
The coalition is dead but it may not matter.
The biggest problem Salvini faced, however, wasn’t M5S’s internal strife and contradictions.

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Big Signals From Gold and Silver

August 12, 2019

After nearly eight years of torment, gold and silver are back.  The global political picture is spinning out of control quickly.  And the precious metals are here to tell us just how quickly.
Before I get to the charts, however, I think it’s important we review everything that happened this week just to get some context.
Last weekend two gruesome murder sprees were committed in El Paso, Texas and Dayton, Ohio.  Both shooters apparently radicalized by the current political climate. The usual suspects used these events to call for gun control, pre-crime prevention straight out of a Philip K. Dick novel while blaming them on the tyranny of white people and Donald Trump’s racism.
Then on Monday morning to the news India revoked

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Trump’s Fed Bashing is a Self-Inflicted Wound

August 10, 2019

Donald Trump is an economic ignoramus. I say this all the time.
I keep hoping I’m wrong, but every time he opens his mouth he confirms my worst impression of him.
Trump isn’t dumb, he’s very smart. But, like so many smart people, including myself and FOMC members, he’s over-confident in applying that which he’s been mis-educated about.
Trump is surrounded by monetarists, like Larry Kudlow. Kudlow still believes the Phillips Curve has validity for pity’s sake. Behind the curve doesn’t begin to describe the situation in the White House.
And yet that’s what they think of the Fed.
The Fed is staffed by Keynesians, or more accurately Samuelsonians. All of them have truly bonkers ideas about how markets actually work in the real world

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Forget Iran. Maximum Pressure Has Shifted to China

August 8, 2019

In the past week the pressure on China by the U.S. has escalated daily. Since the trade delegation came back from China with lunch barely digested the Trump Administration has gone into over drive on demonizing China here at home.
From finally declaring China a currency manipulator after years of threats on Monday the latest is now a planted story in Axios that Vice-President Mike Pence bringing forth a list of Chinese officials to sanction for Human Rights violations under the Global Magnitsky Act.
This is based on a lie, of course. A lie helped along by Bob Fu, the head of ChinaAid, an NGO working, nominally, to alleviate the horrors of the Chinese government. Or, at least, that’s what you’re supposed to believe.
Vice President

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And “The Rock” Cried Out… No Hiding Place

August 1, 2019

There’s no hiding place down hereYou know, there’s no hiding place down hereI went to the rock to hide my faceBut the rock cried out, no hiding place, nowNo Hiding place down here
–Gospel Standard
I really like Dwayne “The Rock” Johnson. His work ethic, attitude and humility are an inspiration.
In an age when it seems every third person attached to the entertainment industry is a pedophile at worst and a scumbag at best, Johnson’s superhero persona on and off screen is exactly what this society needs.
And no one knows this better than Dwayne Johnson himself.
But even Dwayne Johnson is not immune to the toxicity of the Twitterati on both sides when it comes to politics. And his recent dust-up over a tweet about Boris Johnson

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Deal or New Deal, Brexit Dooms the Euro

July 30, 2019

Deal or No-Deal, when it comes to Brexit, the euro is toast. Markets, however, believe the fantasy of its survival. As we approach the end of July the euro clings to support at $1.11, mere pips away from a technical breakdown.
That breakdown will trigger a wave of asset liquidation and another round of negative headlines emanating from troubled German banks.
With 10 Downing St. now saying No-Deal is acceptable, the hard line negotiating tactics of the European Union have hit a rocky shore.
Because it looks like Boris Johnson is ready to give as good as he gets.
I’ve been saying this for a long time. The EU is not a tough nut to crack. They have no leverage in these Brexit negotiations.
What they had was a stacked deck of British

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Gabbard Going After Google Is Double Plus Good

July 29, 2019

Tulsi Gabbard (D-HI) is suing Google. It’s about time someone did. It’s one thing to for conservatives and libertarians to be outraged by their treatment by the tech giant, it’s another for them to go after a female Democrat.
Since Trump’s election the campaign to curtail free speech has went into overdrive and we are now far beyond Orwell’s dystopian vision in 1984 in terms of technological infrastructure.
Google makes Big Brother look like George Carlin’s the Hippy Dippy Weather Man with the “hippy dippy weather, man.” The drive to stamp out all forms of political division has only one thing animating it, protecting the drive of the elites I call The Davos Crowd to erect a transnational superstate to herd humanity to their

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Europe is Dying on a Cross of Gold

July 25, 2019

Gold is calling out the insanity of the European Union. It is also calling out the insanity of the global economy. But really it’s all about the euro at this point.
Since breaking through the post-Brexit high of $1375 per ounce, gold has pushed higher. Yes, it’s been volatile. Yes, the forces of control keep trying to stuff gold back inside the box, as it were.
And they keep failing.
Last week’s price action was impressive, even if the close was less than stellar. In the world of financial commentary everyone is looking for proximate causes for spikes and dips.
But most of that is simply noise. I don’t care why gold touched $1450 last week, only that it did.

Because a bull market that shakes off a number of big intra-week

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Is This Project Mayhem?

July 15, 2019

Only Donald Trump knows.
From the moment I heard Jeffrey Epstein had been arrested I knew none of us had anything close to the real story. And, by the time this is over, I don’t think we’ll have anything close to the real story either.
That shouldn’t, however, keep us from picking through the bread crumbs and see where they lead us. I wrote previously that I thought this story would lead to Hillary Clinton. The MAGA crowd loved that.
Regardless of whether Hillary winds up being the target is irrelevant. What I wrote the other day I still feel is the most likely situation.
I was cautiously optimistic that Trump would turn the corner on his presidency now that Mueller, impeachment and the rest of it would lift from his shoulders.

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Peak Swamp?

July 8, 2019

Dear,
“Bernie Birnbaum is a horse of a different color, ethics-wise that is….… as in he ain’t got none!”
— Johnny Caspar, “Miller’s Crossing”
Serial pederast Jeffrey Epstein is going to be arrested again.
The big questions are why?  And why now?
I never doubted Donald Trump’s sincerity in wanting Hillary in jail.  But the reality is that Trump was not in any position to do so.  Until a few months ago.
When Attorney General William Barr ended the Mueller investigation back in February that was a turning point.  I talked about it back then in a piece called “The Old Political Order is Just Old.”
Mueller, his staff of hatchetmen, the Obama administration and the rest of the corrupt old-guard in D.C. fully expected to be allowed free

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Where Does Trump Go From Here on Iran?

July 4, 2019

Donald Trump has boxed himself into a corner. His maximum pressure campaign on Russia, China, Iran and the Palestinians isn’t working. Time is ticking by and we are now, officially, into campaign season for 2020, when these operations were supposed to have been resolved by now.
While Trump still draws nearly unfathomable crowds for his rallies he is staring at an abyss of bad decisions in front of him which will see him either reverse course on all of his signature wins with his base over the past year – getting tough on Iran and China, going after evil socialists in Venezuela – or face a global economic meltdown which his daily Surreality Show is fomenting.
Trump refuses to take responsibility for anything that is happening.

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Only Trump Could Go to North Korea

July 2, 2019

Donald Trump did the unthinkable. He went to North Korea. He stepped over the line in the sand demarked by Washington protocol for nearly seventy years.
And that Washington establishment, predictably, hates him for it. It can be felt from all sides of the political rotunda. They hate that Trump realizes their position, one of maximum pressure, isn’t working.
They despise that Russia and China will benefit from ending this frozen conflict not to mention Koreans on both sides of the DMZ.
The cynic in me thinks they are angry that the American people will benefit as well.
So this weekend was a good one for peaceniks around the world. Trump and Chinese Premier Xi Jinping agreed to back down on the worst of his trade war demands.

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Bitcoin is Back

June 24, 2019

Back during the cryptocurrency mania of 2017 I explored Bitcoin as a foundational asset of a different monetary system. Built on blockchain I put together a crude crypto-version of Exter’s Pyramid to visualize this.
Today with Bitcoin soaring past $11,000 we may be entering a new mania phase but this time for completely different reasons than in 2017-18.
However, before I get started, let’s review what Exter’s Pyramid is and why Bitcoin, necessarily, today sits at the bottom of it in the crypto-space.
John Exter visualized the global financial system as an upside down pyramid.

Exter’s Inverted Pyramid of the Monetary System
For the crypto-space I see it similarly (if we ever get to a true private crypto-based monetary system.

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Libra: Facebook’s Crypto Trojan Rabbit

June 19, 2019

Cryptocurrencies are winning. If you need proof look no further than Facebook’s proposed Libra stablecoin. While the details are scant, the salient point is Libra is another attempt by the current banking establishment to slow the flow into the world of hard money.
In this respect Libra is no different than Ripple or dollar-settled Bitcoin futures contracts. These are products designed to slow the exodus out of the shadow banking system. Ripple is a way to lower foreign exchange fees and off-chain futures settlement is a way to control Bitcoin prices and exacerbate volatility to slow crypto-adoption by so-called normies.
Now we have Facebook and Libra. As Caitlin Long points out in her excellent Forbes’ article, Libra will get

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What Happens If Salvini Goes Mini-BOT on the EU?

June 14, 2019

Since the idea was first floated there has been rampant speculation about how/when Lega Leader Matteo Salvini would introduce the Mini-BOT parallel currency to assist Italy’s fiscal situation.
Mike Shedlock has a great post on the subject that brings up a number of points about this subject. Well worth the read. Let’s go back and start at the beginning.
The mini-BOT or Mini-Bill of Treasury, is a small denomination bond that the treasury can sell which can be used by businesses and people as an alternative domestic currency.
As Mike brings up, without mandating their usage Italy skirts the letter of EU law prohibiting any country from issuing its own currency.
The big question is, will there be a bid for these mini-BOTs? Very

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Germany Slides Towards Instability

June 10, 2019

At first blush the results in Germany for the EU elections looked like nothing of significance had happened. The media trumpeted the regression of the right. Alternative for Germany’s (AfD) 11% after polling as high as 18% in 2018 made it look like Angela Merkel had weathered the storm against her chancellorship from the right.
But, in doing so, she opened herself up to attack from the Left. The combined results for the ruling coalition in Germany was only 45% with the Social Democrats (SPD) under-performing even their recent bad polling data, garnering just 15.8% of the vote.
It was the loss for the SPD in Bremen which voted for both the EU parliament but its own, however, that was most disturbing as the SPD lost to the Merkel’s

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Gold Makes Its Grievances Heard

June 5, 2019

Gold is getting its revenge. Try as he might Mr. Tariff Man can’t dominate all the headlines all the time. Everyone once in a while something more important than the Trump Man-Baby Show should take center stage.
Gold has moved more than $50 in just under three trading sessions, blowing past near term resistance and, more importantly, reminding everyone just how quickly the reserve asset of the world economy can call bullshit on the proclamations and machinations of the morons who think they run the world.
You always know when you’re reaching the end of a bear market.
Last week I tweeted out:

I think we’re reaching Peak Gold Bearishness. If the dollar is an attractive safe-haven asset, which it isn’t, just a necessary evil after

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In Today’s Politics Messages Are Sent

May 31, 2019

This weekend’s European Parliamentary elections sent a lot of messages around the continent. The Euroskeptics gained while at the same time, their threat was met with a similar show of support for the European project.
The message was clear. The European Union isn’t working for many of the people in specific countries around Europe. From the U.K. to Hungary, Italy to Poland, there is a hardening of the dissatisfaction with the direction Brussels is going.
But is anyone there listening? No. They are all so committed to their planned future Europe and their smarmy version of cheap communism that all they can do is see the positives.
By gaming the outcomes through tying local elections to the European vote, for the first time in

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