- America is currently trying to build a bipartisan definition of “Common Prosperity” that is both domestic and global.
- The bipartisan definition of common prosperity creates a large fiscal burden that the Fed must mitigate and manage with monetary inflation.
- The global definition of “Common Prosperity” is being hotly contested, with China, in Asia, Latin America, and Cryptocurrency.
- The American bipartisan definition of “Common Prosperity” is slowly legislating US Treasury and Federal Reserve regulatory governance and interpretation of the words into life.
- The financial stability threat to the American bipartisan definition of “Common Prosperity” will be framed as a national security threat in 2022.
“Common Prosperity” is in the eyes, and hands, of the holders ….
“Common Prosperity” is in the eye of the beholder and, also, the holders of fiat and Cryptocurrencies. All holders are, currently, evaluating the rate of creation of the various currencies of “Common Prosperity” versus the rate of increase of the prices of the goods, services, and assets that they can purchase with them. That’s a lot of potential definitions that need discounting through the price discovery process. The ultimate definition is one that involves central banks, and especially the Federal Reserve.
Chinese “Common Prosperity”….
(Source: the Author)
The last report described the limits, from the impact of the Chinese definition of “Common Prosperity”, on the Fed’s plans for an accelerated taper.
Bipartisan American “Common Prosperity”….
The US version of “Common Prosperity” is now setting its own limits on the Fed’s scope for tapering.
(Source: the Author)
A previous report suggested that the new old news about Chinese hypersonic missile intentions and capabilities was a useful bipartisan consensus-building tool.
This tool has recently been applied, in the form of Congress’s proposed spending on defense to dovetail with “Build Back Better” spending in a traditional, “guns and butter”, bipartisan political initiative. Secretary Yellen has also sweetened the deal, by promising onshoring, to guarantee that the ensuing spending stays at home, allegedly, in order to strengthen supply chains and national security. The ripple effects from this, innately, protectionist lurch will be felt by America’s allies and enemies alike.
Clearly, the Fed will be required to make sure that this bipartisan political initiative is not too fiscally burdensome on the Federal Government. The tapering of the Fed’s balance sheet and the hiking of interest rates will, therefore, be driven by the bipartisan political imperative. The domestic economic boom, from the onshored fiscal stimulus, will militate for higher interest rates. The Fed must appear to deliver on these higher interest rates, to make sure that the pressure on long-term borrowing costs is mitigated through a flatter yield curve. Perceived US Dollar strength will also mitigate the need for higher bond yields. The Reagan era playbook will be instructive for those policymaking executives charged with managing this economic policy agenda.
(Source: Reuters, caption by the Author)
Whilst the bipartisan consensus on American “Common Prosperity” is, currently, under construction focus is being lost on the definition that is developing closer to home from America’s neighbors to the South.
The Fed’s “Bay of Pigs Moment” turns Banana Republics into Bitcoin Republics ….
(Source: Bloomberg, caption by the Author)
This author has already made the logical assumption that if America, allegedly, interferes in ASEA China will interfere in Latin America, in retaliation. These two theatres of, alleged, interference have recently become, discernibly, linked.
China is exerting pressure on Latin American nations to unfriend (and unrecognize) Taiwan as a nation-state. Nicaragua has become a recent Taiwan unfriender. Other countries in the region may follow Nicaragua. Some would argue that the Fed is pushing them towards making this move, into China’s arms, by following a monetary policy that causes capital flight, in the form of US Dollars, away from them.
(Source: The Sun)
Readers should also note that the Chinese unfriending Taiwan initiative appears to be aligned with a local environment that is undermining the US Dollar’s primacy. El Salvador, for example, is now on the Bitcoin Standard. Other nations, in the region, with wobbly US Dollar Pegs, and rapidly dwindling US Dollar reserves, are watching the developments closely. Economic momentum, accelerated by the Fed, is driving these countries off the US Dollar standard. A further round of capital flight, into the US Dollar, prompted by the Fed’s monetary policy tightening, may tip these nations onto the Bitcoin Standard and/or even the Yuan Standard.
Thus, American hegemony and the US Dollar’s status in Latin America are now under serious threat. The American experience of waves of immigrants, from Latin America, is developing into a similar scenario to President Putin’s sponsorship, of similar migration strategies, from the Middle East and Africa to the European Union.
JFK didn’t stand for it, so neither will Joe Biden. Janet Yellen will have to own it, since she is responsible for the US Dollar, and so will Jay Powell since he is a major influencer of the currency’s value.
Chairman Gary Gensler is busy extending the chain of regulatory ownership, for the US Dollar-Crypto trading pairs, through the bi-partisan “Common Prosperity” consensus supply chain, from exclusively the SEC to the Treasury Department and the Federal Reserve.
Once the legal and regulatory status of Cryptocurrencies, and their mediums of exchange and economic transmission, have been legislated into statutory Federal Governance, Yellen and Powell can officially take ownership of the problem.
For the American public, the issue has been framed as one of financial stability risk. Said risk is, by default, a threat to the bipartisan definition of “Common Prosperity”. Clearly, there is an implied national security threat, by way of economic risk, but the geopolitical dimension has not yet been fully framed in the public domain. Readers should expect this framing to occur in the New Year.
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