Tag Archives: Dollar

Cancel the Funeral for the US Dollar: The “Patient” Just Leaped Out of the Coffin, by Charles Hugh Smith

Posted on March 30, 2022 | Leave a comment

Before the dollar is laid to rest, a new global reserve currency will have to found, and that’s not that easy. From Charles Hugh Smith at oftwominds.com:

Sealing the USD’s coffin requires conjuring up a replacement reserve currency, and that turns out to be a lot more challenging than many understand.

You know the scene in movies where the body-bag is being zipped up or the coffin lid slid into place when the recently deceased startles everyone by suddenly sitting upright? That’s an analogy for the funeral currently being planned for the US dollar–a funeral that has been cancelled.

OK, I get it: there are plenty of reasons why so many expect the dollar to die: it’s a fiat currency, for goodness sakes, and those always die sooner than expected; US debt is soaring like an Elon Musk rocket; its purchasing power is in freefall; America’s unipolar moment is history in a multi-polar world, and let’s face it, it’s simply not as pretty as other currencies.

Die, dollar, die!

But sealing the USD’s coffin requires conjuring up a replacement reserve currency, and that turns out to be a lot more challenging than many understand.

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All That Glitters Is Not Necessarily Russian Gold, by Pepe Escobar

Posted on March 19, 2022 | Leave a comment

Is the unipolar world already a thing of the past? From Pepe Escobar at thesaker.is:

The “rules-based international order” – as in “our way or the highway” – is unraveling much faster than anyone could have predicted.

The Eurasia Economic Union (EAEU) and China are starting to design a new monetary and financial system bypassing the U.S. dollar, supervised by Sergei Glazyev and intended to compete with the Bretton Woods system.

Saudi Arabia – perpetrator of bombing, famine and genocide in Yemen, weaponized by U.S., UK and EU – is advancing the coming of the petroyuan.

India – third largest importer of oil in the world – is about to sign a mega-contract to buy oil from Russia with a huge discount and using a ruble-rupee mechanism.

Riyadh’s oil exports amount to roughly $170 billion a year. China buys 17% of it, compared to 21% for Japan, 15% for the U.S., 12% for India and roughly 10% for the EU. The U.S. and its vassals – Japan, South Korea, EU – will remain within the petrodollar sphere. India, just like China, may not.

Sanction blowback is on the offense. Even a market/casino capitalism darling such as uber-nerd Credit Suisse strategist Zoltan Poznar, formerly with the NY Fed, IMF and Treasury Dept., has been forced to admit, in an analytical note: “If you think that the West can develop sanctions that will maximize the pain for Russia by minimizing the risks of financial stability and price stability for the West, then you can also trust unicorns.”

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Posted in Currencies, Debt, Economics, Economy, Eurasian Axis, Foreign Policy, Geopolitics, Governments, History, Politics, Propaganda

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Say Hello to Russian Gold and Chinese Petroyuan, by Pepe Escobar

Posted on March 16, 2022 | Leave a comment

The U.S. government is pushing Russia and China away from using the dollar and undermining its reserve currency status. From Pepe Escobar at unz.com:

Russia says half its gold assets were frozen – is this for real or a slick play by Moscow?

It was a long time coming, but finally some key lineaments of the multipolar world’s new foundations are being revealed.

On Friday, after a videoconference meeting, the Eurasian Economic Union (EAEU) and China agreed to design the mechanism for an independent international monetary and financial system. The EAEU consists of Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia, is establishing free trade deals with other Eurasian nations, and is progressively interconnecting with the Chinese Belt and Road Initiative (BRI).

For all practical purposes, the idea comes from Sergei Glazyev, Russia’s foremost independent economist, a former adviser to President Vladimir Putin and the Minister for Integration and Macroeconomics of the Eurasia Economic Commission, the regulatory body of the EAEU.

Glazyev’s central role in devising the new Russian and Eurasian economic/financial strategy has been examined here. He saw the western financial squeeze on Moscow coming light-years before others.

Quite diplomatically, Glazyev attributed the fruition of the idea to “the common challenges and risks associated with the global economic slowdown and restrictive measures against the EAEU states and China.”

Translation: as China is as much a Eurasian power as Russia, they need to coordinate their strategies to bypass the US unipolar system.

The Eurasian system will be based on “a new international currency,” most probably with the yuan as reference, calculated as an index of the national currencies of the participating countries, as well as commodity prices. The first draft will be already discussed by the end of the month.

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Here’s Why US Threats Against Russian Gold Reserves Mean a Monetary Reset Is Imminent, by Nick Giambruno

Posted on March 13, 2022 | Leave a comment

U.S. sanctions against Russia may well be the death rattle of the dollar as the world’s reserve currency. From Nick Giambruno at internationalman.com:

Russian Gold Reserves

“It’s possible to have more than one reserve currency.”

These are the recent words of Jerome Powell, the Chairman of the Federal Reserve.

It’s a stunning admission from the one person who has the most control over the US dollar, the current world reserve currency.

It would be as ridiculous as Mike Tyson saying that it’s possible to have more than one heavyweight champion.

In other words, the jig is up.

Not even the Chairman of the Federal Reserve can go along with the farce of maintaining the dollar’s supremacy anymore… and neither should you. (This has profound consequences for you and your savings, more on that in a moment.)

Powell’s comments occur in the context of what could prove to be one of the most short-sighted and self-destructive acts in history… the US government’s economic war against Russia.

In the wake of Russia’s invasion of Ukraine, the US government has launched its most aggressive sanctions campaign ever.

Exceeding even Iran and North Korea, Russia is now the most sanctioned nation in the world.

“This is financial nuclear war and the largest sanctions event in history,” said Peter Piatetsky, a former Treasury Department official.

He went on to say, “Russia went from being part of the global economy to the single largest target of global sanctions and a financial pariah in less than two weeks.”

Here’s a brief rundown of what has happened.

The US and European governments froze the US dollar and euro reserves of Russia—the accumulated savings of the nation—worth around $300 billion.

Russian banks have been kicked out of SWIFT, the system to send international wire transfers.

A stampede of Western companies have left Russia and are banning average Russian citizens from using their platforms.

Popular cryptocurrency exchange Coinbase blocked over 25,000 accounts linked to Russia.

Visa, MasterCard, and American Express have cut off Russia from their networks.

Even formerly neutral Switzerland joined the orgy of sanctions.

These are just a few examples of how Russia is being cut off from the US-dominated global financial system.

Of course, all this comes as no surprise to the Russians. They have prepared for this exact outcome for many years together with China. The Chinese Communist Party understands that if the US can take down Putin, they will be next. That’s why the Chinese are unlikely to abandon their strategic partnership with Russia.

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Fiat Currencies Are Going To “Fail Spectacularly”: Lawrence Lepard, by QTR Fringe Finance

Posted on March 13, 2022 | Leave a comment

Fiat currencies have already failed spectacularly. The dollar is worth about 2 percent of what it was when the Federal Reserve began in 1913. The debasement picked up speed after Nixon cut the last vestige of the gold standard in 1971. Fiat currencies always fail, and for the same reasons. From QTR Fringe Finance via zerohedge.com:

Friend of Fringe Finance Lawrence Lepard released his most recent investor letter a few weeks ago with his updated take on the monetary miasma spreading across the globe.

Larry had joined me for several interviews last year and I believe him to truly be one of the muted voices that the investing community would be better off for considering. He’s the type of voice that gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.

Lawrence Lepard (Photo: Kitco)

Larry was kind enough to allow me to share his thoughts heading into 2022.

Before Russia invaded Ukraine, Larry predicted that a “crack up boom” could be on its way and also offered his take on gold, inflation, monetary policy, bitcoin, fiscal policy, the ongoing supply chain crunch, and much, much more. That analysis is included.

Now, the invasion of Ukraine has helped catalyze a number of his predicted scenarios.

Here are several Fringe Finance excerpts from Larry’s thoughts on the Ukraine invasion and the markets heading into 2022, from prior to the invasion.

Russia Invading Ukraine Has Caused A ‘Monetary Earthquake’

What just happened in the last two weeks is enormously important and misunderstood by many investors.

The Russian invasion of Ukraine and the corresponding Western sanctions and seizure of Russian FX reserves are nothing short of a monetary earthquake. The last comparable event was Nixon’s abandonment of the gold standard in 1971.

Russia, with the backing and support of China, just told the world that it is no longer going to sell its oil, gas and wheat for Western currencies which are programmed to debase.

The West in its response just said to all countries around the world: “If you have foreign exchange reserves, held in our system, they are no longer safe if we disagree with your politics.”

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The Dollar: A Victim of Its Own Success, by James Rickards

Posted on February 26, 2022 | Leave a comment

Many nations are chafing at the U.S. dollar standard and are devising ways around it. From James Rickards at dailyreckoning.com:

America’s most powerful weapon of war does not shoot, fly or explode. It’s not a submarine, plane, tank or laser. America’s most powerful strategic weapon today is the dollar.

The U.S. uses the dollar strategically to reward friends and punish enemies. The use of the dollar as a weapon is not limited to trade wars and currency wars, although the dollar is used tactically in those disputes. The dollar is much more powerful than that.

The dollar can be used for regime change by creating hyperinflation, bank runs and domestic dissent in countries targeted by the U.S. The U.S. can depose the governments of its adversaries, or at least blunt their policies without firing a shot.

Consider the following. The dollar constitutes about 60% of global reserves, 80% of global payments and almost 100% of global oil transactions. European banks that make dollar-denominated loans to customers have to borrow dollars to fund those liabilities.

Being based in Switzerland or Germany does not allow you to escape from the dollar’s dominance.

The U.S. not only controls the dollar itself. It controls the dollar payments system. This consists of the Treasury’s digital ledger of holders of U.S. debt, the Fedwire payments system among U.S. Fed member banks and the Clearing House Association (successor to the New York Clearing House and proprietor of CHIPS, the Clearing House Interbank Payments System) composed of the largest U.S. banks.

A dollar payment going from a bank in Shanghai to another bank in Sydney runs through one of these U.S.-controlled payments systems. In short, the dollar is the oxygen supply for world commerce and the U.S. can cut off your oxygen whenever it wants.

The list of ways in which the dollar can be weaponized is extensive. The U.S. uses the dollar to force its enemies into fronts, crude barter or the black market if they want to do business.

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The Contrarian Trade of the Decade: The Dollar Refuses to Die, by Charles Hugh Smith

Posted on November 10, 2021 | Leave a comment

The Deep State does not want the dollar’s value to go to zero. The dollar is one of the U.S. government’s most powerful weapons. From Charles Hugh Smith at oftwominds.com:

Which is more valuable: Wall Street’s debt/asset bubbles or the global empire? You can’t have both, so choose wisely.

The consensus makes sense: the U.S. dollar is doomed because the Federal Reserve and the Treasury will conjure trillions of new dollars out of thin air to prop up the status quo entitlements, monopolies, cartels and debt/asset bubbles, and since little of this issuance actually increases productivity, all it will accomplish is the dilution / devaluation of the currency.

Put simply, the dollar will lose its purchasing power as the inevitable result of the need to print and borrow ever-increasing sums to pay interest on existing debts, fund Bread and Circuses to keep the masses placated and keep inflating the asset bubbles in stocks, housing, bat guano, etc. to maintain the illusion of prosperity.

This destruction of the dollar is TINA writ large: there is no alternative. The only way to keep the status quo from imploding is to print as many trillions as are needed, and this inevitably devalues the currency to the point of worthlessness.

OK, we get it: TINA so the dollar dies. But let’s consider TINA from the perspective of the Deep State. Destroying the purchasing power of the dollar destroys the engine of America’s power, which is the ability (“exorbitant privilege”) to conjure “money” out of thin air and be able to trade this “money” for cobalt, steel, semiconductors, etc. supplied by other nations.

If the dollar is destroyed by over-issuance, then how do we buy the cobalt and other goodies we need to keep the aircraft carriers and all their aircraft in working order? This is a problem, for if we can’t conjure “money” out of thin air and persuade everyone it still have value, then America’s global influence dissipates into thin air.

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Posted in Currencies, Debt, Economics, Economy, Financial markets, Foreign Policy, Geopolitics, Government, Military

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A tale of two civilisations, by Alasdair Macleod

Posted on October 24, 2021 | Leave a comment

China is trying to rediscover its old-time religion while Americans have abandoned theirs. From Alasdair Macleod at goldmoney.com:

In recent years, America’s unsuccessful attempts at containing China as a rival hegemon has only served to promote Chinese antipathy against American capitalism. China is now retreating into the comfort of her long-established moral values, best described as a mixture of Confucianism and Marxism, while despising American individualism, its careless regard for family values, and encouragement of get-rich-quick financial speculation.

After America’s defeat in Afghanistan, the geopolitical issue is now Taiwan, where things are hotting up in the wake of the AUKUS agreement. Taiwan is important because it produces two-thirds of the world’s computer chips. Meanwhile, the large US banks are complacent concerning Taiwan, preferring to salivate at the money-making prospects of China’s $45 trillion financial services market.

The outcome of the Taiwan issue is likely to be decided by the evolution of economic factors. China is protecting herself against a global credit crisis by restraining its creation, while America is going full MMT. The outcome is likely to be a combined financial market and dollar crisis for America, taking down its Western epigones as well. China has protected herself by cornering the market for physical gold and secretly accumulating as much as 20,000-30,000 tonnes in national reserves.

If the dollar fails, which without a radical change in monetary policy it is set to do, with its gold-backing China expects to not only survive but be able to consolidate Taiwan into its territory with little or no opposition.

Introduction

On the one hand we have America and on the other we have China. As civilisations, America is discarding its moral values and social structures while China is determined to stick with its Confucian and Marxist roots. America is inclined to recognise no other civilisations as being civilised, while China’s leadership has seen America’s version and is rejecting it. Both forms of civilisation are being insular with respect to the other, and their need to peacefully cooperate in a multipolar world is increasingly hampered.

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Posted in Banking, Business, Capitalism, Civil Liberties, Currencies, Debt, Economics, Economy, Eurasian Axis, Financial markets, Foreign Policy, Geopolitics, Military, Politics, Trade

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The dollar’s debt trap, by Alasdair Macleod

Posted on August 20, 2021 | Leave a comment

How debt kills fiat currencies, from Alasdair Macleod at goldmoney.com:

On the fiftieth anniversary of the Nixon Shock, this article explains why fiat currencies have become joined at the hip to financial asset values. And why with increasing inevitability they are about to descend into the next financial crisis together.

I start by defining the currencies we use as money and how they originate. I show why they are no more than the counterpart of assets on central bank and commercial bank balance sheets. Including bonds and other financial issues emanating from the US Government, the individual states, with the private sector and with broad money supply, dollar debt totals roughly $100 trillion, to which we can add shadow banking liabilities realistically estimated at a further $30 trillion.

This gives us an idea of the scale of the threat to asset values and banking posed by higher interest rates, which are now all but certain. The prospect of contracting financial asset values is potentially far worse than in any post-war financial crisis, because the valuation base for them starts at zero and even negative interest rates in the case of Europe and Japan.

I focus on the dollar because it is everyone’s reserve currency and I show why a significant bear market in financial asset values is likely to take down the dollar with it, and therefore, in that event, threatens the survival of all other fiat currencies.

Introduction

Dickensian attitudes to debt (Annual income twenty pounds, annual expenditure twenty pounds ought and six, misery) reflected the discipline of sound money and the threat of the workhouse. It was an attitude to debt that carried on even to the 1960s. But the financial world changed forever in 1971 when post-war monetary stability ended with the Nixon shock, exactly fifty years ago.

Micawber’s aphorism was aimed at personal spending. It was advice given to a young David Copperfield, rather than a recipe for life. But since money’s transmogrification into pure fiat and as soon as youngsters in the fiat-currency world began to earn, Micawberism no longer held. Figure 1 shows the decline in purchasing power of fiat currencies in which earnings are paid relative to the sound money (gold) that had underpinned the post-war Bretton Woods agreement.

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The Real Russian Threat,by James Rickards

Posted on June 25, 2021 | Leave a comment

Slowly but surely, the dollar is losing clout, and eventually it will lose it’s place as the world’s reserve currency. From James Rickards at dailyreckoning.com:

I’ve written for years about different nations’ persistent efforts to dethrone the U.S. dollar as the leading global reserve currency and the main medium of exchange.

At the same time, I’ve said that such processes don’t happen overnight; instead, they happen slowly and incrementally over decades.

The dollar displaced sterling as the leading reserve currency in the twentieth century, but it took thirty years, from 1914 to 1944, to happen. The decline started with the outbreak of World War I and the UK’s liquidation of assets and money printing to finance the war.

It ended with the Bretton Woods agreement in 1944 that cemented the dollar’s link to gold as the new global standard.

Even after the gold link was broken in 1971, the dollar standard remained because there was no good alternative. Then the 1974 deal with Saudi Arabia (along with other OPEC cartel members) to price oil in dollars created increased global demand for the dollar.

Because of the deal, dollars would be deposited with U.S. banks, so they could be loaned to developing economies, who could then buy U.S. manufactured goods and agricultural products.

This would help the global economy and allow the U.S. to maintain price stability. The Saudis would get more customers and a stable dollar, and the U.S. would force the world to accept dollars because everyone would need dollars to buy oil.

By the way, behind this “deal” was a not so subtle threat to invade Saudi Arabia and take the oil by force.

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