In a surprisingly strong-worded speech, President Obama lashed out against the media and the Russians, as the latter are still perceived to be the main culprit of Hillary Clinton’s loss in the presidential race. We’re now just one month away from Donald Trump being installed in the Oval Office, but it looks like the current president is wildly kicking around with unfounded accusations and allegations.
Not only did Obama declare he now knows ‘with certainty’ Russian hackers have helped Trump to win the presidential elections, but once again stirred things up with provocative statements like ‘Russia is a much weaker country’ and ‘Russia doesn’t produce anything anybody wants to buy’.
Funny. These are the exact same statements Obama made all the way back in 2014, so you can hardly say he’s being original here as it’s the same recycled statement. We are always wondering why the USA, as self-proclaimed peace keeper of the world, is now trying to provoke Russia, as no evidence about the Russians rigging the elections has been produced. And oh, keep in mind these type of remarks are quite spectacular for someone who has won the Nobel Peace Prize. Let’s take a look at why exactly Obama originally won the award, and what the jury thought:
‘Dialogue and negotiations are preferred as instruments for resolving even the most difficult international conflicts.’.
So when someone who apparently doesn’t have anything to gain from lashing out at Russia, 5 weeks before leaving office, is doing so, we’re always wondering what the ‘real’ story is. Sure, the Federal Reserve has just hiked the interest rates, as expected, and this might have a negative effect on the labor market as a higher cost of debt will reduce the appetite of companies to commit to certain investments.
Perhaps even more important is the issue the Fed now thinks it will be able to increase the interest rate by an additional three steps in 2017, which could mean we will see an interest rate of 1.5% by the end of next year. The impact of this (expected) rate hike was immediately visible in the interest rate on the 10 year government bond yield:
This increase of 0.8% (since the elections) means that in the theoretical case of the US government debt being refinanced on a 10 year term, the total interest expenses would increase by $160B (yes, one hundred sixty BILLION dollar) per year, or $500 per citizen. Imagine an additional 0.5-1% would be added to this interest bill…
Perhaps that’s why Obama was so anxious to find a different ‘enemy’, to draw the attention away from the domestic problems in the USA. After all, the higher interest expenses will have to be paid somehow and there are only two ways to do this. The first option is to issue even more debt, which reinforces the current vicious circle as issuing more government debt increases the debt burden even more, and will result in an even higher interest expense in the next year.
The second option is pretty much political suicide, as it would mean the US government would have to find a way to increase the tax income per member of the US population by $500/year (and this would be the equivalent to $1000 per employed person).
Perhaps that’s why the USA is looking for an enemy, and then Russia is the easy ‘victim’, as it has been in the past 70 years. But Russia is playing it smart. Most realistic people know a monetary reset is now pretty much inevitable, and even though most eyes have been on China, Russia continues to spend boatloads of US Dollars on purchasing more and more gold. In September and October alone, Russia added exactly 2.5 million ounces of gold (for a face value of approximately $3B) to the central bank’s vaults. That’s a bold monetary statement, as the value of the gold as of at the end of October represented in excess of 16% of the total foreign reserves of the Russian state.
The increasingly provocative stance against Russia could very well be a smoke screen to divert the attention away from the real problems.
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