Posted on 04/10/2022 5:20:34 PM PDT by delta7
People who speak out openly with concern about the potential death of the U.S. dollar have been written off as conspiracy theorists for the better part of the last few decades.
But looking back, unfortunately, I’m sure history is going to be kind to these people and their prognostications. They will have been the ones who sounded the alarm in a relatively short amount of time before ultimately being proven right.
I don’t say this to brag or boast in advance in any way, I say it because I truly believe we are at the “beginning of the end” of the Keynesian economic experiment.
Less than two weeks ago, I wrote an article proclaiming that Russia would back the ruble with gold as a way to fight back against Western economic sanctions. I also made similar predictions about the new digital Chinese currency last summer when I first started Fringe Finance.
To me, since I began piecing together my understanding of macroeconomics and the global economy about a decade ago, it had become painfully obvious that the fiat system the U.S. plays by, which hinges on the dollar being the global reserve currency, had its days numbered.
The catalyst that is helping hurl us toward our monetary rude awakening faster than ever has been the war in Ukraine. Actually, it hasn’t been the war so much as it has been the West’s reaction to the war. As only blindly arrogant believers in the Keynesian dog-and-pony show could do, we rushed to cut Russia off the SWIFT system, limited investing in Russia companies and sanctioned the country’s oligarchs.
To which Russia basically replied, “OK. We still have the oil.”
And that has been the attitude the Kremlin has adopted, for the most part. They are falling back on their country’s productive capacity when it comes to oil, continuing to do business with the Chinese, and are adding to their gold reserves. After small shocks lower in Russian markets and in the ruble, things have stabilized relatively quickly - except now, Russia has used the opportunity to make clear that they do not want to be participants in the global fiat system any longer.
And it looks like China (and likely India) feel similarly situated.
Just this weekend, the Kremlin said that sanctions against Russia would “accelerate the erosion of confidence in the dollar and Euro”. Russian propaganda or not, I think they’re right.
Russia, China and the rest of the world - having seen billions in FX reserves essentially seized without due process globally - now understand they must get off the same monetary system as the rest of the world. Russia and China, in my opinion, will be leading the charge, once again, to a new era of sound money that I believe is going to bring the U.S.’s Keynesian experiment to its knees.
Economists and strategists globally are starting to understand what I have been pointing out for months.
Precious metals analyst Ronan Manly of Bullionstar.com, said in an interview with RT.com this past weekend that it could eventually blow up the paper metals markets:
“By playing both sides of the equation, i.e. linking the ruble to gold and then linking energy payments to the ruble, the Bank of Russia and the Kremlin are fundamentally altering the entire working assumptions of the global trade system while accelerating change in the global monetary system. This wall of buyers in search of physical gold to pay for real commodities could certainly torpedo and blow up the paper gold markets of the LBMA and COMEX.”
And continued by pointing out the obvious: that if Russia leads the way by backing their currency with gold, other countries “may feel the need” to follow suit:
“Other non-Western governments and central banks will therefore be taking a keen interest in Russia linking the ruble to gold and linking commodity export payments to the ruble. In other words, if Russia begins to accept payment for oil in gold, then other countries may feel the need to follow suit.”
I contend that other countries will have to follow suit.
Source: RBTH.com This led him down a road that I - and many other Austrian economists - have been predicting would happen since we first understood how the system works today: that the consequences could be crushing for the dollar:
“Since 1971, the global reserve status of the US dollar has been underpinned by oil, and the petrodollar era has only been possible due to both the world’s continued use of US dollars to trade oil and the USA’s ability to prevent any competitor to the US dollar.
But what we are seeing right now looks like the beginning of the end of that 50-year system and the birth of a new gold and commodity backed multi-lateral monetary system. The freezing of Russia’s foreign exchange reserves has been the trigger. The giant commodity strong countries of the world such as China and the oil exporting nations may now feel that now is the time to move to a new more equitable monetary system. It’s not a surprise, they have been discussing it for years.
While it’s still too early to say how the US dollar will be affected, it will come out of this period weaker and less influential than before.”
In fact, all I’ve talked about recently is how I believe the U.S. dollar is going to be challenged and how what’s going on in Russia, India and China is actually a challenge to the way that all Western countries run their respective economies - it’s a challenge to Keynesian and Modern Monetary Theories.
I’ve often noted that Keynesianism works great for the people that it truly works for: mostly elites, elected officials and politicians. It has worked that way for the “Davos crowd”, or anyone that benefits from a fiat system, not just in the United States, but globally.
The beneficiaries don’t just include politicians and central bankers, they also include all of those who have been “bailed out” along the way; namely, a lot of bankers who saw their respective corporations survive using other taxpayers’ purchasing power in the form of TARP and quantitative easing…..
Good. No more cheating by artificially reducing the exchange rate of mercantile powers in East Asia. We’ll have to make more here and extract more of our own resources. If the US elites try to stop that, they’ll simply be bulldozed out of the way.
Watch the dollar strengthen as the Fed begins QT. $95 billion a month, causing bond yields to grow - the mighty ruble and RMB will both weaken over the next quarter.
The Fed has one tool to cool inflation, interest rate hikes. Stocks will suffer. House prices will dip. Those who weren’t around for the Carter years will get to see how it felt back then.
Nice fantasy about reserve currency status - common among your group who cheer Russia.
Another trigger is that we have a mildly stupid President and we have been printing money mindlessly.
Given that the ruble is tied to gold, we will see a sea change in monetary policy.
You are correct. The US dollar as the reserve currency is an advantage that the Democrats have squandered away. Joe Biden has greased the skids.
“The ‘Crisis of the Third Century’ (235–284 AD) is most notable for its political disorders, a period when the empire was ruled by well over twenty men over a fifty-year period. However, this steady decay of the Roman state could also be tracked by the condition of its coinage, not just its politics. Though steady monetary debasement was a common and perhaps unavoidable feature of the Roman economy, it destructively accelerated during that period of crisis.”
And Rome never really recovered.
No Peace for Emerging Market Currencies as Mighty US Dollar Reigns
” We’ll have to make more here and extract more of our own resources. If the US elites try to stop that, they’ll simply be bulldozed out of the way.”
I hope you are right but I’m a big skeptic. It takes leadership to get us there and frankly we have not had leadership in many, many years. Look at the shape we are in now. The totally asinine decisions of the sanctions are just the latest of a long string of unmitigated disasters.
Frankly, I am beginning to doubt our way of governing and the structure of our society. Our path since the 19th century has been very spotty at best and we are heading toward a cliff if we don’t get it corrected.
I’m not smart enough to know the answer. But I do know that smarter people than I have told us that “insanity is doing the same thing over and over and expecting a different result.”
I guess there is always hope that we end up with the outcome you imply. That is one possible outcome. I shudder to think of the other possible outcomes.
Russia is the underdog in every respect.
But... They have been seriously preparing for this day for years.
What do you think BRICS is about? And which one of those nations is voluntary playing along with our sanctions? https://en.m.wikipedia.org/wiki/BRICS
Years ago, 2015 I believe, the Russians already required that all their federal employees not hold any foreign assets.
They made additional deals with China and planned to use Belarus as their back door (no sanctions on them I believe).
They know our game and they have been getting ready for this day.
We are the big boy, especially if all our European allies, Japan, S. Korea, Singapore, Taiwan and Australia stand with us.
We shall see what happens. I suppose the winner is the one that ends up less damaged?
Living by and inside the dollar world, the prospect of it becoming another Peso isn’t really appealing.
“The Dollar Dethroned: We Have Reached The End Of Monetary Policy.”
NOT A PROBLEM, as long as we ‘stick it’ to Putin on the way down.
Take the Federal debt and divide it — not by the U.S. population — but by the number of WORKING Americans. By my calculation, that comes to a debt of about $190,000 hanging over the head of every employed person in this country. A person entering the work force today is effectively obligated to pay off a mortgage, and doesn’t even have a home to show for it.
If you think “QT” to the tune of $95 billion per month is going to fix this disaster, I think you’re delusional.
“They know our game and they have been getting ready for this day.”
ROFLOL!! Oh so that’s why they held a paltry $132 billion in gold in country and all the rest of their reserves in Western banks in dollars and euros.
.
Good. No more cheating by artificially reducing the exchange rate of mercantile powers in East Asia. We’ll have to make more here and extract more of our own resources. If the US elites try to stop that, they’ll simply be bulldozed out of the way.
Oh, you don’t think they’ll “cheat” or “artificially” manipulate their new currency, to suit their needs??
Seriously?
And, clue to you….the elites ARE doing just that, stopping anything from being produced, here, right now. Who’s stopping, or, “bulldozing” them ??
They can’t raise interest rates. That’d mean government borrowing would be almost impossible. Also business investment would grind to a halt. Massive unemployment, private and public sectors.
So, the next step they’ll want is Digital Currency. So they can regulate every single transaction, and create money only for the compliant.
Great Depression II or Great Reset Slavery. Pick One.
What do you think would happen if Americans could no longer afford sneakers or TVs? The enormous fall in living standards would cause a political tidal wave.
Burn it all down. I have a sizable garden, a fishing rod, and a rifle. I’ll feed my family.
Russia doesn’t have the economy to back a reserve current. Neither do the chicoms and that will be evident to the world sooner than later. The chicoms couldn’t even muster the gravitas to strike out on their own delusion while the world was occupied by the petulant dwarf’s antics in corruptocrat Ukraine. They know that even with the decrepit pedophile fraud in the white hut, they would have gotten their asses handed to them by the combined forces of Eastern nations, likely lead by Japan which would wake up the next day with a host of nukes and bad attitude.
So no, they can chatter all they want, where do you think the elites are going to put their money where they believe it will still exist the next day? Who here would trust their money in a chicom bank?
Maybe some day there will be a problem, but not now, it any time soon.
Bitcoin billionaires pushers are pushing this.
Funny. Only one billionaire did anything worthwhile to help the Ukraines. These billionaires are as useless as the governments they despise.
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