Showdown on the Prairie

  1. 43 Days Away: Russia confirms BRICS currency countdown
  2. Prairie showdown: Farmers vs. climate-change hustlers
  3. This week: A pre-earnings season buying opportunity
  4. Child discovers money printer go brrr…
  5. How Joe Biden helped create the student debt debacle

1Russia Confirms the Countdown to a BRICS Currency

As the saying goes, “It’s on now!”

Jim Tweet

Late on Friday, Russia’s state-run English language news channel RT confirmed what Paradigm’s Jim Rickards told his Strategic Intelligence readers in late May.

Brics

That is, the BRICS bloc of Brazil, Russia, India, China and South Africa will unveil plans for a common trading currency with some sort of link to gold. The date: Aug. 22, when leaders of the BRICS nations convene in Durban, South Africa.

And Treasury Secretary Janet Yellen remains in denial.

“All the data of which I’m aware shows that the dollar is overwhelmingly, close to 90%, used in international transactions,” she said this weekend, “and I don’t think that there is an alternative that could possibly displace that for the foreseeable future.”

Notice she said “transactions,” not “reserves.”

Once more, we reiterate the figures we cited in April: The dollar’s share of global reserves declined slowly from 67% in 2003 to 55% in 2021… and then plunged to 47% last year alone. That’s the global reaction to Washington freezing the dollar-based reserves of Russia’s central bank, and other countries wondering Uh, could we be next?

Events are starting to move quickly, even if it’s not showing up in the market action yet.

Among other developments, India’s foreign minister Subrahmanyam Jaishankar is trying to pump the brakes — suggesting Delhi’s priority remains the rupee and not a BRICS currency.

We’re even seeing buzz that India might back out of the BRICS altogether — which wouldn’t be altogether surprising. India’s government remains on more or less good terms with Washington… and it has long-standing grudges with China, including an unresolved border dispute.

We won’t dwell on the subject today, but rest assured it will be a regular presence in our 5 Bullets in the run-up to Aug. 22. In the meantime, if you’re not yet a subscriber to Rickards’ Strategic Intelligence

  1. You can acquaint yourself with Jim’s BRICS currency thesis in the June 7 edition of 5 Bullets
  2. You really should become a Strategic Intelligence subscriber. There’s no long video to watch at this link.

2“There Have Been Rebellions in This Country for Less”

“This is a private company. Have you ever heard of a private company using eminent domain to take property?” asks South Dakota farmer Jared Bossly.

Well, under the Supreme Court’s horrible Kelo ruling in 2005, it happens all the time.

But there’s something about Bossly’s case that’s uniquely enraging.

Sometimes we run across a story that transcends our money-and-markets beat — and speaks to bigger issues about everyday people and their livelihoods.

Strap in for a story where the climate-change hustle intersects with property rights, crony capitalism and the rule of law — or lack thereof.

He didn’t plan it this way, but Bossly has become the poster child for a resistance movement in the Upper Midwest.

Bossly, 42, is a fourth-generation farmer who works 2,000 acres of corn, soybeans, alfalfa and millet, along with 200 head of mother cows. “It’s just my kids, my wife and I,” he tells the ag-news site The Fence Post. “We don’t have a hired man.”

Last Thursday, Bossly pulled himself away from his duties just long enough to join several hundred people who converged on the capitol building in Pierre — to protest a blatant land grab.

Dominik

The primary villain in this saga is an outfit called Summit Carbon Solutions.

Summit is a leader in the field of “carbon capture.” If you’re not familiar with it, the idea is to take the carbon dioxide generated by industry and then pump it into storage underground, where presumably it won’t contribute to “climate change.”

Summit intends to take the CO2 from ethanol plants in Iowa and nearby states and carry it via pipeline to a site in North Dakota where it would be stashed underground. Here’s a map from Summit’s website…

Map

Of course, there’s no organic demand for Summit’s services in the private sector. Summit’s business model depends entirely on a federal tax credit called 45Q.

“They are a private company. The capital to build the pipeline is from private investors,” says South Dakota farmer and former Democratic legislator Craig Schaunaman. “The payments for capturing the CO2 comes in the form of tax credits,” he tells The Fence Post, “so their income comes from the federal government.”

Last year’s misnamed Inflation Reduction Act expanded the available tax credits for carbon capture: As much as $210 billion is up for grabs.

Obviously Summit needs access to land, and a lot of it, to build these pipelines. And if landowners object to eminent domain proceedings, Summit is not afraid to resort to strongarm tactics and intimidation.

One day last spring, Summit surveyors came calling on Bossly’s house. He was elsewhere on the property; his wife was in the shower. They opened the front door and yelled, “Hello.” She called Bossly to ask if he was expecting anyone; he was not. She got dressed and headed downstairs to see who was there.

By that time the men had walked over to Bossly’s shop next door. His wife confronted them, phone in hand with Bossly on the other end of the line. He told them they were not welcome unless they were accompanied by the sheriff.

Later that day, Bossly’s wife called to tell him a detective arrived on the property to investigate a complaint that Bossly had threatened to kill the surveyors.

Nonsense, says Bossly. “I had a six-second conversation with them over the phone,” he tells independent journalist Greg Price. Bossly had to go to court at the end of May to fight off Summit’s request for a restraining order and contempt citation, which he did successfully.

“This is just one of the tactics that Summit is using to intimidate landowners who do not agree to sign away their property rights,” Price writes. “Even more sinister: They’re coming with armed security guards like something out of Blazing Saddles or Yellowstone.”

At Bossly’s request, the sheriff accompanied the surveyors when they returned on June 20.

You would think in red-state South Dakota that the legislature and the governor would be rallying to the farmers’ side. But no, they’re totally in the tank for Summit.

As Price reports, Summit has tentacles deep in the Republican Party — starting with the fact its senior adviser is Terry Branstad, formerly the six-term governor of ethanol-intensive Iowa.

Even more relevant, Summit was a “platinum sponsor” of South Dakota Gov. Kristi Noem’s second inauguration this past January.

The following month, Summit lobbyists made sure that several bills written to protect landowners from eminent domain got squashed in committee.

Thus, the protest last Thursday — demanding lawmakers convene a special session.

“This situation has all the ingredients for an actual violent conflict,” warns a blogger at a gun-rights site called Gun Free Zone.

“Politicians fund carbon capture subsidies. Carbon capture company funds politicians. Politicians allow carbon capture company to seize land from farmers to build carbon capture facility that gets more in subsidy money. Carbon capture company donates more to politicians. Farmers get kicked off their own land.

“There have been rebellions in this country for less.”

Let’s hope it doesn’t come to that. Although it won’t surprise us at all if it does. To be continued…

3Setting a Low Bar for Earnings Season

As earnings season gets underway later this week, “expectations are low,” points out Paradigm value-and-dividend hound Zach Scheidt.

“Many investors expect a corporate earnings recession, and they’re keeping cash on the sidelines in case of a pullback. This is just another example of the wall of worry the market is up against.”

But to Zach’s mind, now is the time to buy: “When investors are already skeptical, they tend to have smaller positions and plenty of cash on the sidelines.

“If things turn out to be as bad as expected, stocks may simply hold steady. That’s because investors already expected the worst, so any bad news won’t be a surprise. On the other hand, if things turn out better than expected, these pessimistic investors will have to adjust. And as cash comes flowing back into the market, stocks trend higher.”

This is the proverbial “wall of worry” that Wall Street climbs at times like these. “There may be concerns on the horizon,” Zach allows. “But for now, it makes sense to keep your capital invested, ride the trend higher and stay vigilant for when that trend starts to turn.”

That turn is not today: The major U.S. stock indexes are treading water as the new week begins.

The S&P 500 closed the old week just under 4,400 and that’s where it remains as we write. The Nasdaq is microscopically in the red; the Dow is up about a quarter percent.

Gold is steady at $1,922; silver is down a nickel at $23.01. Crude is down less than a quarter to $73.63.

Apart from the start of earnings season, the big economic number to watch is inflation, due Wednesday.

For the record, the Federal Reserve’s balance sheet is back to where it was before Silicon Valley Bank blew up in March.

Along with raising interest rates, the Fed has been trying to shrink its balance sheet for over a year now. But that effort hit a huge speed bump this spring with the failure of SVB, Signature and First Republic — the second-, third- and fourth-largest bank failures in U.S. history.

The Fed’s rescue efforts ballooned its balance sheet by nearly $400 billion in three only weeks. But now, finally, at $8.3 trillion, the total is lower than it was before the crisis started.

chart

Still, that’s about four months’ interruption to an important facet of the Fed’s inflation-fighting efforts. And given the stresses emerging in commercial real estate, another interruption brought on by a bank crisis seems more likely than not.

4Money Printer Go Brrrr…

We spotted the following on Twitter, and it really needs no additional comment…

sophie tweet

5Student Debt… and Joe Biden

To the mailbag, and an impassioned plea to make student debt dischargable in bankruptcy once again…

“If bankruptcy was the grace America extended to eliminate debtor's prisons and indentured servitude, then student loan debt should never have been allowed to have been carved out in the first place.

“Your quote of a previous reader’s feedback — ‘If there were any justice these days, “institutions of higher education,” especially those with endowments larger than the net worth of many developing countries, would have to eat the student debt themselves — not the taxpayer’ — was spot-on, and what inspired me to send this. It doesn't take in quite enough territory, though.

“Seeing the bipartisan decision by Congress to perpetrate this whole student loan fiasco at the beginning was what awakened me to the fact that both political parties were corrupt as all get-out. I'd love to see an investigative journalism-type expose showing particularly the connections between the politicians and the banks and those banks' boards, tracing who received/receives the windfall from the expansion of lending brought about by the change in student loan guarantee laws.

“I don't have the memory or the resources for such but I do remember there being some exceedingly sketchy associations at the time. Bankruptcy would cut into some of those ill-gotten profits a mite. And it would relieve those who have no hope of ever being able to get out from under their debt.

“Thanks for your well-written, timely insights.”

Dave responds: Alas, we’re not equipped for the sort of deep-dive undertaking you suggest.

However… we can tell you the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 bears many fingerprints of one Joseph Robinette Biden.

Out of 44 Senate Democrats at the time, Biden was among only 18 who voted in favor — and he had a major say in how the legislation was written.

Recall, this was a time when most student debt was still held by the private sector — before Barack Obama federalized the bulk of it after the 2008 financial crisis.

“Biden was an absolute hard-ass for banning discharge of student loans in bankruptcy,” recalls Paradigm’s Byron King.

Byron would know well: In addition to his chops as a geologist and Navy flight officer, he practiced bankruptcy law at the very time this legislation was passed.

“He fought for the banks, tooth and nail,” Byron tells me. “And even I, in Pittsburgh, where I cared not one bit who was the senator from Delaware, was astonished” at Biden’s insistence that student loans not be dischargeable in bankruptcy, except in the most extreme hardship cases like terminal cancer.

Of course, the banks had sought for many years to be on good terms with Biden. Their credit card operations were based in Delaware — as was the major student lender MBNA (acquired by Bank of America in 2006).

“In so many ways,” says Byron, “the 2005 Joe Biden Bankruptcy Reform Act has created a permanent debtor class in the USA — people who (foolishly, yes) borrowed too much, and now can't earn sufficient income to repay, let alone win the Powerball lottery.

“So they go through life, perpetually burdened, with no way out.”

Obviously Biden doesn’t bear full responsibility. But he absolutely midwifed this Bush-Cheney project through the Senate — much as he did three years earlier with the Iraq War resolution.

Helluva legacy…

Best regards,

Dave Gonigam

 

 

 

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets

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