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 It appears he will drop earlier plans to design a new commodity-linked trade currency because it has been superseded.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.
John Kerry’s extraterrestrial delusions of grandeur, the middle-class gets whacked and more readings from the Church of “The Science”…
Bill Bonner, reckoning today from Normandy, France…
Earth to John Kerry: yes, you are a lunatic.
Mr. Kerry is in Davos, Switzerland with the rich and the famous. We will return to him in a minute. First, an update.
The middle class is getting crushed. It has only two major assets – time and houses. It earns its living by selling its time. It keeps its wealth at home, under its own roofs.
For the last 22 months, real wages have fallen. Over the last year, for example, the average working stiff got a 5% wage increase. But adjusted for inflation of 6.5%, the gain turned into a loss.
Meanwhile, his store of wealth – his house – is in the early stages of a sell-off. It goes like this: first, houses become too expensive, so the typical middle-class family can no longer afford the typical middle-class house. Then, naturally enough, sales fall. Builders stop building. And finally, prices drop. We are just in the beginning of the final stage. Here are the figures:
At the peak of the housing bubble in 2006, the median family spent 42% of its income on housing. Now the figure is 46%. And two years ago, you could get a 30-year mortgage at 2.77%. Today, the rate is more than twice as high.
Soil exhaustion, deforestation, and pollution—which abetted plagues—were problems for Rome. As was lead poisoning, in that the metal was widely used for eating and drinking utensils and for cookware. None of these things could bring down the house, but neither did they improve the situation. They might be equated today with fast food, antibiotics in the food chain, and industrial pollutants. Is the U.S. agricultural base unstable because it relies on gigantic monocultures of bioengineered grains that in turn rely on heavy inputs of chemicals, pesticides, and mined fertilizers? It’s true that production per acre has gone up steeply because of these things, but that’s despite the general decrease in depth of topsoil, destruction of native worms and bacteria, and growing pesticide resistance of weeds.
Perhaps even more important, the aquifers needed for irrigation are being depleted. But these things have all been necessary to maintain the U.S. balance of trade, keep food prices down, and feed the expanding world population. It may turn out, however, to have been a bad trade-off.
I’m a technophile, but there are some reasons to believe we may have serious problems ahead. Global warming, incidentally, isn’t one of them. One of the reasons for the rise of Rome—and the contemporaneous Han in China—may be that the climate cyclically warmed considerably up to the 3rd century, then got much cooler. Which also correlates with the invasions by northern barbarians.
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.
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.
Charles Hugh Smith has a pretty good handle on how currencies work. From Smith at oftwominds.com:
Rather than cheer the concept of a new currency, we’re better served to look at the velocity of that currency and the cycles of investing that currency in assets denominated in that currency for a low-risk return.
Longtime readers know not to expect me to rubber-stamp anything, be it the status quo or proposed alternatives. Our interests are best served by screening everything through the mesh of independent analysis, a.k.a. contrarianism. Which brings us to the two sources of alt-media excitement in the currency space, the petro-yuan and another wave of proposed gold-backed currencies.
I’m all for competing currencies. The more transparent and open the market for currencies, the better. In my view, everyone should be able to buy and trade whatever currencies they feel best suits their goals and purposes.
In all the excitement over de-dollarization, some basics tend to get overlooked.
1. The yuan remains pegged to the US dollar, so it remains a proxy for the USD. It will only become a true reserve currency when China lets the yuan float freely on the global FX market and yuan-denominated bonds also float freely on global bond markets. In other words, a currency can only be a reserve currency rather than a proxy if the price and risk of the currency is discovered by global markets, not centralized monetary/state authorities.
2. Most commentators stop on first base of the oil-currency cycle: China buys oil from exporting nations by exchanging yuan for oil. So far so good. But what can the oil exporters do with the yuan? That’s the tricky part: the petro-yuan has to work not just for China but for the oil exporters who will be accumulating billions of yuan.
The oil exporters can hold some yuan as reserves, but the global market for yuan is not very large. What assets can they buy with yuan? Again, the global market of assets denominated in yuan is limited. The oil exporters can buy assets in China, of course, but with China’s property bubble finally popping, deglobalization sapping its export sector and Xi’s widespread disruption of private capital, the bloom is off the China Story in fundamental ways.
Why would oil exporters invest billions of yuan while Chinese wealth is leaving China?
When political figures talk about “cooperation,” it’s code for, “Do as I say or else.” From Pepe Escobar at presstv.ir:
The self-appointed Davos “elites” are afraid. So afraid. At this week’s World Economic Forum meetings, mastermind Klaus Schwab – displaying his trademark Bond villain act – carped over and over again about a categorical imperative: we need “Cooperation in a Fragmented World”.
While his diagnosis of “the most critical fragmentation” the world is now mired in is predictably somber, Herr Schwab maintains that “the spirit of Davos is positive” and in the end we may all live happily in a “green sustainable economy.”
What Davos has been good at this week is showering public opinion with new mantras. There’s “The New System” which, considering the abject failure of the much ballyhooed Great Reset, now looks like a matter of hastily updating the current – rattled – operating system.
Davos needs new hardware, new programming skills, even a new virus. Yet for the moment all that’s available is a “polycrisis”: or, in Davos speak, a “cluster of related global risks with compounding effects.”
In plain English: a perfect storm.
Insufferable bores from that Divide and Rule island in northern Europe have just found out that “geopolitics”, alas, never really entered the tawdry “end of history” tunnel: much to their amazement it’s now centered – again – across the Heartland, as it’s been for most of recorded history.
They complain about “threatening” geopolitics, which is code for Russia-China, with Iran attached.
But the icing on the Alpine cake is arrogance/stupidity actually giving away the game: the City of London and its vassals are livid because the “world Davos made” is fast collapsing.
Davos did not “make” any world apart from its own simulacrum.
It won’t work, for billions of reasons. From Robert Blumen at brownstone.org:
In the coming technocratic dystopia, life will be grim for most of us. For those who survive the preliminary depopulation, a technological control grid run by AI and robots will keep tabs on our every movement. You notice that your pantry cube is running a bit low on freeze-dried bug burgers, fake meat, and cockroach milk.
You time your break to fall outside of your three daily hours of wind-powered internet. Forbidden by the World Economic Forum from owning your own car, you flag down a quick ride share from your leased living quarters in a stacked shipping container on the near side of your 15-minute city. After dropping off the seven other people in your ride share, you arrive at the fake meat distribution point, where you wait in a long queue, hoping to trade in a few of your remaining carbon ration credits for more provisions.
You worry that your transaction might be rejected by the central bank digital currency network. After all, there was that one moment where your wrinkled brow showed slight unhappiness. You wonder if the facial recognition AI picked it up during one of your masked Zoom calls.
But for the elites, things will be better than ever. Private jets, cars, ultra wagyu beef tenderloin (for their dogs), and large estates. Life-extension drugs will make them nearly immortal. They will vacation at 5-star hotels, a short limo trip from the Louvre, but without the crowds.