We’re talking about America’s Great Reorganization this week.
For those just joining us – the thesis is rather simple. Virtually every aspect of our economy has been “financialized” over the past 50 years. This caused some major distortions that threaten to sink the entire dollar-based financial system.
Most of the mainstream financial analysis I’ve seen largely ignores this dynamic. It takes the position that nothing has broken yet… therefore nothing big is likely to break going forward.
At the same time, much of the alternative financial commentary out there seems to employ single-variable analysis. It looks at the increase of fiscal debt and deficits and presumes that they will continue apace until the system collapses under its own weight.
But what if that variable isn’t fixed? What if it changes?
As we discussed yesterday, the US Congress has shown no desire to cut spending and get its fiscal house in order. But a major sea-change at the heart of the dollar-based financial system could force the issue.
That sea-change stems from the Secured Overnight Financing Rate (SOFR) replacing the London Interbank Offered Rate (LIBOR) as the interest rate benchmark for dollar-denominated loans and derivatives.
SOFR allowed the Federal Reserve (the Fed) to break ranks with the global central bank cartel. It’s what enabled Fed Chair Jerome Powell to raise interest rates at the most aggressive pace in history.
The financial media covered that story daily. They said it was all about combatting inflation. But that was just part of the story – a small part.
Continue reading “The Great Reorganization – Part 3”