Russia Pledges to Shoot Down U.S. Allied Warplanes in Syria as French Unions Prepare to Battle Macron
This past weekend saw the relatively calm situation in war-torn Syria explode as the Iranians launched six missiles at the country, the U.S. shot down a bombing Syrian warplane, and the Russians announced that they will now target all United States and allied planes in Syria they track to the West of the Euphrates River.
Meanwhile in France, Emmanuel Macron won a parliamentary majority on an all-time low French voter turnout. The unions are already lining up against his labour market reforms which this youngest president in the history of the Fifth French Republic aims to force through now.
In the United States, the Federal Reserve raised interest rates a quarter percentage point in a widely anticipated move. More alarming to analysts and observers were the Fed's plans to withdraw the stimulus that has been driving U.S. asset prices to insane highs for years now.
In the United Kingdom, the nearly year long-awaited Brexit talks finally begin in earnest today. A massively weakened Prime Minister Theresa May is plowing ahead in typical British “Keep calm and carry on” fashion. These are all the latest reasons to keep your gold close. Gold is the ultimate time-tested first, last, and best line of defense against the geopolitical chaos roiling the world today. Do you know your gold IRA storage options yet?
Russia Threatens to Shoot Down All US and Allied Warplanes West of the Euphrates River in Syria
Though it is hard to believe that the war-torn nation of Syria with its tragic ISIS and civil war crises could get any worse, it became considerably more dangerous over the weekend. In a trifecta of perilous geopolitical events, the Iranians launched six missiles at targets in Syria, the U.S. military shot down a Syrian government warplane bombing forces friendly to the United States in Syria, and the Russians upped the ante by making their most escalating threat in the region so far.
The Russian defense ministry announced that as of today, it will start considering all U.S.-led coalition and American warplanes in Syria (west of the Iraqi Euphrates River) as war targets. They pledged this in retaliation for the U.S. military downing the Syrian Air Force SU-22 bomber jet Sunday.
Russia closely supports the Syrian outlaw regime of President Bashar Al Assad as they have during the reign of his father before him. They have provided him with critical air and missile support as well as advanced radar tracking capabilities since the year 2015. It is only thanks to the ongoing Russian air and sea support that Bashar has managed to cling to power and retake large swaths of Syria offensively from both the Syrian freedom fighting rebels and the Islamic State caliphate.
French President Macron Faces Latest Test in Dealing With Mighty French Unions
French President Emmanuel Macron may have won the parliamentary elections in the General Assembly over the weekend (albeit with the poorest voter turnout in the history of the whole Fifth Republic by far), but his struggles to force his agenda through are only beginning. His principal rivals still standing at the moment are the mighty French labour unions who are still smarting from the stinging defeat of their long-time political allies in this weekend's elections.
While he may have the necessary General Assembly majority he needs to ram through his controversial reforms' agenda on an angry and divided French electorate, the labour unions have already promised a fight to the finish if he proceeds with the massive changes to the labour laws which his manifesto has proposed. His 350 seats gain from the 577 seat lower house of the assembly gives him almost unlimited legal powers. Defeating the French labour unions is another battle still yet to be fought though.
Right now the policy they oppose is his desire to create labor market flexibility. If he manages to get these through the promised protests and strikes of the unions, he will then set his sights on the overhaul of the treasured French retirement and jobless benefits policies. So far, the government of Macron has carefully consulted with the unions on the issues at stake. He has pledged that he will provide them with specific proposals in the next few weeks. Force Ouvriere (FO) Head Jean-Claude Mailly, leader of the third largest union, asked warily:
“Is he going to say, ‘you don't agree, well, I'm going to push (the reform) through by force'?” If so, one thing's for sure, his presidency is going to get off to a bad start on labour relations and there will be tensions.”
This is the story coming from the other unions as well, even the most reform-minded CFDT (largest private sector labour union). Laurent Berger, CFDT head, told Reuters:
“We reserve the possibility like everyone to give our point of view democratically. If we have to hold protests, we will. If we have to mobilize in companies, we'll do it.”
The struggle to reform the French economy along the lines of Macron's ambitious vision is only beginning, as Jean-Luc Melenchon of the France Unbowed far-left party attested to in a fiery speech about the upcoming “social struggle” over the weekend after he won his first-time parliamentary seat in the General Assembly (from Marseille):
“I hereby inform the new powers that be not a foot of ground will be given up in the labor law struggle.”
Judging by the determination of the powerful labour unions and the far-left firebrand Melenchon, Macron had better be made of sterner stuff than he looks from his pictures.
U.S. Federal Reserve Raises Interest Rates as Expected and Plans “Balance Sheet Reduction”
Last Wednesday ended the long-anticipated Federal Reserve two-day meeting to decide on the latest interest rate increase. As widely expected, the Fed boosted the rate by another quarter percentage point to a new range of from one percent to 1.25 percent. This marked their third consecutive interest rate increase, the last one having come in March. They did this despite the fact that their projection for the inflation target is that it will be significantly short of the two percent target for the year 2017.
More worrisome than this were the details on their pledged end to easy money and their commitment to unwinding the massive $4.5 trillion sized balance sheet. This enormous portfolio has been holding up the U.S. Treasuries market all by itself, the government agency debt market, and the mortgage-backed securities market since the end of the Global Financial Crisis and Great Recession of 2007-2009 nearly a decade ago. Senior Fixed Income Strategist Kathy Jones of Charles Schwab warned:
“The combination of a rate hike and shrinking the balance sheet equates to a tightening monetary policy at a time when inflation is lower than expected.”
The committee has fleshed out its plans on both when and how it will go about pulling out the stimulus from these and other markets. The statement released post-meeting declared:
“The committee currently expects to begin implementing a balance sheet normalization process this year, provided the economy evolves broadly as anticipated.”
Wednesday's released information stated that there will be a roll-off cap level amounting to an initial $6 billion each month on the amount of principal payments it will not re-invest in Treasuries. This cap will be raised by $6 billion once per quarter for 12 months to bring the cap to $24 billion higher or $30 billion per month within a year from when they start.
With mortgage and agency debt, they will institute a $4 billion per month roll-off principal cap level that will grow by $4 billion each quarter until it climbs to $20 billion per month not reinvested. This means that there will eventually be $50 billion per month total that they will not reinvest in the asset classes they have been supporting.
A few different Federal Reserve officials publically stated that they anticipate the non-reinvesting process to go on all the way until the Fed balance sheet drops to a range of between $2 trillion and $2.5 trillion. The Fed has chosen to move forward with this economic tightening measure although the economic data has been lackluster lately. Growth will not achieve the high goal of three percent the White House was hoping for this year and going forward. Lately the payrolls' growth has substantially slowed down at the same time the retail sales data has demonstrated that consumers are still struggling.
The real question you should ponder is who is going to buy all those Treasuries that long-time buying foreign investors like Japan and China have already reduced their purchases of and which the Fed was holding up as an additional buyer. This dramatic change in fiscal and monetary policy will impact your investment and retirement portfolios in the not so distant future. It helps to remind you why gold makes sense in an IRA. Make sure you have IRA-approved gold on hand to protect your assets. It might be a good idea to review the Top 5 gold coins for investors now too.