The Russians have a not-so-secret weapon that would devastate the U.S.: back the ruble with gold. From Alasdair Macleod at goldmoney.com:
We have confirmation from the highest sources that Russia and the Shanghai Cooperation Organisation (SCO) are considering using gold for pan-Asian trade settlements, fully replacing dollars and euros.
In an article written for Vedomosti, a Moscow-based Russian newspaper published on 27 December, Sergey Glazyev, a prominent economic adviser to Vladimir Putin who is heading up the Eurasian Economic Union committee charged with devising a replacement for dollars in trade settlements sent a very clear signal to that effect. It appears he will drop earlier plans to design a new commodity-linked trade currency because it has been superseded.
Furthermore, increasing numbers of nations have joined or have applied to join the SCO as dialog members, including Saudi Arabia and other important Gulf Cooperation Organisation members. The economic benefits of discounted energy, China’s investment capital, and sound money are the ingredients for a new, Asia-wide industrial revolution, while the economies of the western alliance sink under rising prices, rising interest rates, collapsing financial markets, and collapsing currencies.
While it will mark the end of the road for the western alliance and its fiat currencies, Putin must be careful not to take the blame. Now that the alliance is racking up tanks and other equipment for the Ukrainians, they are actively promoting a new battle, with NATO getting almost directly involved. It is that action which will drive up commodity prices, undermine western financial markets, undermine government finances, and ultimately collapse their currencies.
Putin is likely to use NATO’s impetuous action in defence of Ukraine as cover for securing Russia’s future as an Asian superstate, which will be the west’s undoing.
We forget, perhaps, that from 1 March 1950 the Soviet rouble was on a gold standard at 4 roubles 45 kopecks for 1 gram of pure gold until 1961, when Khrushchev devalued it and refixed it to the dollar. Stalin had been a signatory to the Bretton Woods agreement but refused to join it and make the rouble subservient to the dollar as its intermediary for a gold standard.
Without the reserve currency, U.S. power will be greatly diminished and the government will have to come to terms with a multipolar world. From Alastair Crooke at strategic-culture.org:
The U.S. government is hostage to its financial hegemony in a way that is rarely fully understood.
It is the miscalculation of this era – one that may begin the collapse of dollar primacy, and therefore, global compliance with U.S. political demands, too. But its most grievous content is that it corners the U.S. into promoting dangerous Ukrainian escalation against Russia directly (i.e. Crimea).
Washington dares not – indeed cannot – yield on dollar primacy, the ultimate signifier for ‘American decline’. And so the U.S. government is hostage to its financial hegemony in a way that is rarely fully understood.
The Biden Team cannot withdraw its fantastical narrative of Russia’s imminent humiliation; they have bet the House on it. Yet it has become an existential issue for the U.S. precisely because of this egregious initial miscalculation that has been subsequently levered-up into a preposterous narrative of a floundering, at any moment ‘collapsing’ Russia.
What then is this ‘Great Surprise’ – the almost completely unforeseen event of recent geo-politics that has so shaken U.S. expectations, and which takes the world to the precipice?
It is, in a word, Resilience. The Resilience displayed by the Russian economy after the West had committed the entire weight of its financial resources to crushing Russia. The West bore down on Russia in every conceivable way – via financial, cultural and psychological war – and with real military war as the follow-through.
More and more countries are signalling that they no longer want to trade real commodities, particularly oil, for pieces of paper or computer entries. From Brandon Smith at alt-market.com:
The decline of a currency’s world reserve status is often a long process rife with denials. There are numerous economic “experts” out there that have been dismissing any and all warnings of dollar collapse for years. They just don’t get it, or they don’t want to get it. The idea that the US currency could ever be dethroned as the defacto global trade mechanism is impossible in their minds.
One of the key pillars keeping the dollar in place as the world reserve is its petro-status, and this factor is often held up as the reason why the Greenback cannot fail. The other argument is that the dollar is backed by the full force of the US military, and the US military is backed by the US Treasury and the Federal Reserve – In other words, the dollar is backed by…the dollar; it’s a very circular and naive position.
These sentiments are not only pervasive among mainstream economists, they are also all over the place within the alternative media. I suspect the main hang-up for liberty movement analysts is the notion that the globalist establishment would ever allow the dollar or the US economy to fail. Isn’t the dollar system their “golden goose”?
The answer is no, it is NOT their golden goose. The dollar is just another stepping stone towards their goal of a one-world economy and a one-world currency. They have killed the world reserve status of other currencies in the past, why wouldn’t they do the same to the dollar?
Globalist white papers and essays specifically outline the need for a diminished role for the US currency as well as a decline in the American economy in order to make way for Central Bank Digital Currencies (CBDCs) and a new global currency system controlled by the IMF. I warned about this years go, and my position has always been that the derailment of the dollar would likely start with the end of its petro status.
There’s not an important area of the economy into which the government does not meddle, which means those areas are mixed economy, not capitalist. Nowhere is this more evident than in banking. From Ryan McMaken at mises.org:
It’s a sure bet that as the economy worsens, unemployment surges, foreclosures rise, defaults climb, and economic misery ensues, we’ll be told it’s all capitalism’s fault. The question one must ask, however, is, “What capitalism?”
The claim that “too much” capitalism drives every economic calamity is standard among anticapitalists on both the left and the right. They have many bullet points claiming government programs and government spending are everywhere retreating while free-market capitalism is experiencing a resurgence. This can be easily shown to be empirically false. Evidence can be found in everything from the continual flood of government regulations to rising per capita taxation and spending to the growing army of government employees. That’s all in the United States, mind you, the supposed headquarters of “free-market capitalism.” We might also point to how the US welfare state, including the immense amounts of government spending on healthcare and pensions, is on a par with European welfare states in terms of size. The supposed lack of social benefits programs in the US has long been a myth. The trend in spending, taxation, and regulation is unambiguously upward.
In recent years, though, one additional indictor of just how little capitalism is actually going on has surfaced: central banks around the world are buying up huge amounts of financial assets in order to subsidize certain industries, inflate prices, and generally manipulate the economy. This is certainly true of the American central bank, the Federal Reserve.
How the Federal Reserve Came to Dominate Financial Asset Markets
While the Fed has long bought government debt in its so-called open-market operations to manipulate the interest rate, wholesale buying of financial assets began in 2008. This included both US government Treasurys and—in a new development—private-sector mortgage-backed securities (MBSs). This was done to prop up banks and other firms that had bet on the lie that “home prices always go up.” The value of mortgage-backed securities was falling fast, so beginning in 2008, the Fed bought up MBSs to the tune of $1.7 trillion. That was all before covid.
It’s inevitable that sovereign bond markets of bankrupt sovereigns will fall apart. From Matthew Piepenburg at goldswitzerland.com:
The slow but steady implosion of global bond markets is no longer a debate but fact. Knowing this, investors can better brace themselves for the policy and market reactions to come.
Below, we once again follow the patterns of math and cycles (as well as the open failure of policy makers) to foresee the direction of risk assets, currencies and gold.
The End of Negative Yields: Anything but a Good Sign
Recently, Bloomberg happily announced that the era of “negative yielding” (which technically means “defaulting”) USD bonds is over as yields are now “nominally positive.”
“Great news!” they tell the huddling masses.
Nothing, however, could be further from the truth.
Let me repeat that: Nothing could be further from the truth.
Yields are only outpacing already embarrassing inflation metrics because bond prices, which move inversely to yields, are tanking in a world which no longer wants or trust USD-based IOUs.
In other words: All this means is that bonds are tanking and inflation is roaring at the same time.
Furthermore, this so-called “return to normalcy” in positive nominal yields is in fact a neon-flashing sign (or needle) pointing toward the end (and bursting) of a global debt bubble in government bonds.
What’s worse, and as the following graph makes objectively clear, is that it’s not just sovereign bonds that are tanking, but the entire credit asset class, from CMBS to Investment Grade.
The world has grown tired of U.S. hegemony and its reserve currency exorbitant privilege. From Adam Dick at ronpaulinstitute.org:
Interviewed Tuesday at Bloomberg, Saudi Arabia Finance Minister Mohammed Al-Jadaan indicated that Saudi Arabia would be open to conducting trade, including involving oil, in various currencies — mentioning in particular the euro and the Saudi riyal — instead of the United States dollar. This is the latest in a series of developments suggesting the Middle East nation and large oil producer is shifting away from supporting US dollar hegemony through trade.
In February of 2006, then US House of Representatives member Ron Paul (R-TX) discussed the history of US dollar hegemony and its looming doom in a House floor speech titled “The End of Dollar Hegemony.” Paul began his speech with his assessment that the dollar dominance, called dollar hegemony more recently and dollar diplomacy in earlier decades of the prior hundred years, “is coming to an end.”
The full history and analysis Paul related in the speech is fascinating. But, there is a particular portion of Paul’s speech that relates to the Saudi finance minister’s comment. This is when Paul focused on the key role the trade of oil has played in supporting dollar hegemony and the related position of the US dollar as the world reserve currency.
Is the Fed deliberately causing a financial and economic crisis? From Brandon Smith at alt-market.com:
As the Federal Reserve continues its fastest rate hike cycle since the stagflation crisis of 1980, a couple vital questions linger in the minds of economists everywhere – When is recession going to strike and when will the Fed reverse course on tightening?
The answers to these queries are at the same time simple and complex: First, the recession has already arrived. Second, the Fed is NOT going to reverse course, though they will probably stop tightening for a time.
The technical definition of a recession in the US is two consecutive quarters of negative GDP growth. We already experienced that in 2022, which led the Biden White House and puppet economists within the mainstream media to change the definition. The Federal Reserve also ignored deflationary signals throughout the last year and evidence suggests the central bank along with the Biden Administration even tried to hide the downturn with false employment numbers.
For a few years I have predicted that the establishment would shift into a monetary tightening phase and they would continue with interest rate hikes and balance sheet reductions until markets break and the system destabilizes. That prediction has proven accurate so far, and the evidence shows that elements of a financial black hole have already been created.
The St. Louis Fed has quietly published data indicating that the US is now entering a recession. This admission was posted right before the new year, clearly as a means to avoid wider media attention. The news also comes not long after the Philadelphia Fed revised their 2nd Quarter labor growth numbers, erasing a whopping 1 million jobs from their original estimates.
It’s time to start calling the World Economic Forum by its true name—World Technocracy Front, or WTF!
Upon listening to decades of dopey ideas that emanate from the megalomaniacs who make the annual winter pilgrimage to Davos, Switzerland one would be rightly excused for hearing such asinine proclamations of deliberate social engineering and manipulation of humanity and screaming: WHAT THE F**K!
After decades of congregating psychopaths at the sulfur-polluted alpine town, there has never been a single idea proffered that doesn’t increase centralized power and control to this self-fellating borg that arrives on private jets for a gathering of “save the world” fluffery, that when properly translated through the technocratic jargon dictionary is nothing less than a plot the accelerate the demise of western civilization through chaos and crises of their own fabrication while nibbling caviar, philandering with whores, and sipping champagne.
Their pretensions of caring during their publicly transmitted discussion forums are laughable farces. No serious person could possibly look at this collection of private-public pompous assholes and not chortle hysterically at their silly self-importance, their unbridled arrogance wrapped in insane ideas and proclamations for the future of our species that 99.9% of it doesn’t want because anyone with an IQ above room temperature knows it will trample the basic human rights of those who do not fly on private jets or smell their own turds after a BM because it makes them weep with joy.
Keep in mind that a currency isn’t “gold-backed” unless it’s exchangeable for gold from the issuer. We’re still a long way from that. From Pepe Escobar at thecradle.co:
The adoption of commodity-backed currencies by the Global South could upend the US dollar’s dominance and level the playing field in international trade.
Photo Credit: The Cradle
Let’s start with three interconnected multipolar-driven facts.
First: One of the key take aways from the World Economic Forum annual shindig in Davos, Switzerland is when Saudi Finance Minister Mohammed al-Jadaan, on a panel on “Saudi Arabia’s Transformation,” made it clear that Riyadh “will consider trading in currencies other than the US dollar.”
So is the petroyuan finally at hand? Possibly, but Al-Jadaan wisely opted for careful hedging: “We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the US and we want to develop that with Europe and other countries.”
Second: The Central Banks of Iran and Russia are studying the adoption of a “stable coin” for foreign trade settlements, replacing the US dollar, the ruble and the rial. The crypto crowd is already up in arms, mulling the pros and cons of a gold-backed central bank digital currency (CBDC) for trade that will be in fact impervious to the weaponized US dollar.
A gold-backed digital currency
The really attractive issue here is that this gold-backed digital currency would be particularly effective in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea.
Astrakhan is the key Russian port participating in the International North South Transportation Corridor (INTSC), with Russia processing cargo travelling across Iran in merchant ships all the way to West Asia, Africa, the Indian Ocean and South Asia.
The success of the INSTC – progressively tied to a gold-backed CBDC – will largely hinge on whether scores of Asian, West Asian and African nations refuse to apply US-dictated sanctions on both Russia and Iran.
The Japanese bond market is a financial time bomb whose fuse has been lit. From Christoph Gisiger and Jim Grant at themarket.ch:
Speculation is mounting that the Bank of Japan is losing control of the bond market. Jim Grant, editor of «Grant’s Interest Rate Observer», believes this could trigger a shock to the global financial system. He also explains why he expects further surges in inflation and why gold should be part of your portfolio.
The news caught markets off guard: On December 20th, the Bank of Japan surprisingly extended the target range for the yield on ten-year government bonds to plus/minus 0.5%. A move that not a single economist had expected.
This week, the Bank of Japan could announce a major policy shift amid rising government bond yields and a strengthening yen. Although barely a month has passed since the BoJ’s last meeting, the bond market is already testing the new upper limit of the yield curve control regime.
«To us, Japanese interest rate policy resembles the Berlin Wall of the late Cold War era, a stale anachronism that must sooner or later fall,» says Jim Grant. For the editor of the iconic investment bulletin «Grants’ Interest Rate Observer,» recent developments in Japan pose an underestimated risk to global financial markets. Not least because virtually no one is talking about it.
In an in-depth interview with The Market NZZ, which has been slightly edited for clarity, Mr. Grant explains what it means for financial markets if the Bank of Japan is forced to scrap its yield curve control policy. But first, he says why he doesn’t believe inflation will end soon, why bonds may be at the start of a long bear market, and why he believes gold is the best choice as a store of value.
What do you observe when you look at the financial world today?
Well, it’s always the same, and – here’s the catch – it’s always a little different. The trick is to identify the unique or unusual feature of a familiar cycle. In this regard, it helps to know a little bit of financial history, and to just that extent it helps to be a little old. But what is not helpful is to mistake the past for a certain roadmap to the future.