Posted on 03/28/2022 2:21:31 PM PDT by delta7
I have been involved in financial markets for roughly 40 years, the news out this past Thursday was in my opinion more important than ANY announcement during those years. In fact, when I heard it, I thought of it as “the shot heard ’round the world”! But here we are Sunday and almost no discussion nor coverage of “Russia will demand trade payment from the unfriendly countries (the West) in gold…or rubles if they wish”. Are people so dumbed down they do not understand what was said?
First a little background. Russia has been sanctioned by the West and even had some of their FOREX reserves “frozen” (read STOLEN) in an effort to bleed them dry financially and stall military efforts. The freeze came several years after the US very mistakenly began threatening Russia with a cutoff from the SWIFT system. If anyone believes that Vladimir Putin has not used these years since the original threats, to prepare, I believe you are grossly mistaken. You see, the West absolutely needs Russian trade material more than Russia needs dollars.
Russia does not need the dollars to survive because they are not highly indebted. In fact, they are only 14% debt to GDP whereas most western nations are well above 100%. Besides, who does Russia owe money to that requires dollar payments? Western financial institutions? Do you see where this goes? By using SWIFT and the dollar as a weapon versus Russia, the US just blew a hole under the waterline in the USS Dollar!
To explain, if Russia demands either gold or rubles from the West, then recipients of trade will need gold and or rubles to make settlement. Some nations still have gold (poor Canada) but few have any rubles held in their reserve accounts. (In fact, the US has very small foreign reserve balances as it was not needed with the dollar itself being the world’s reserve currency and dollars can and are simply printed). How will the US settle trade with Russia? By sending Ft. Knox gold…which may or may not be there as no audit has been done since the 1950’s? Or by paying with rubles which we do not own? Or will we just forego the many natural resources we import from Russia?
The net result is severe dollar weakness and a strong bid under gold AND the ruble because any western nation wishing to import Russian material will need to either buy gold or rubles for payment. Another way of saying this is; they will need to sell either their local currency (or their dollar reserves held) in order to procure gold/rubles to make payment. Do you remember when supply and demand used to “matter”?
In the same way that Russia views the Ukraine as we did the Cuban missile crisis, Russia’s demand for payment in gold/rubles is to Kissinger arranging for Saudi Arabia to ONLY accept dollars for oil. Settlement flows are huge and not just on the margin. They are not just huge, they are “contagious” if you will? There are many countries who today use dollars because they have to, they have been forced to. I also believe much of the current trade settlement in dollars would be done in other currencies if it was “allowed”. It will not be a shock to see dollar trade flows shrink dramatically as many nations will use this as an opportunity to shed their dollar hegemony shackles!
Let’s finish with an overview. The US has for years relied on “King dollar” to support living well beyond our financial means. Having the privilege of issuing the world’s reserve currency (and the most powerful military) allowed the US to borrow $ trillions upon trillions. This is now changing after our bungled retreat from Afghanistan…and now Russia challenging the trade dollar. Can you imagine what US GDP would have been all these years without massive deficit spending? Can you imagine the levels where equity markets would be trading if not for all the easy and free credit thrown around? Can you imagine where interest rates would have been (and will be) if it wasn’t for reserve currency privilege? And thus, can you imagine what the US standard of living would have been? Unfortunately, we are about to find out the answers to all these questions!
Lastly, please understand the coming problems as they will entail every facet of life. US (and global) financial markets will be greatly affected as lower dollar demand will create a de facto margin call on an already struggling Ponzi scheme. Also, trade balances will be forced back into relative realignment. Meaning those with the greatest trade deficits will feel the pain the most. Especially those nations that allowed their manufacturing and production to leave and instead import. Is the current predicament because of poor judgement/decisions/planning…or, was it the plan all along?
Standing watch,
Bill Holter
Probably accurate analysis.
When you shoot someone, they typically never hear it until sometime AFTER it goes through them, doing the damage... because the bullet travels faster than the speed of sound.
You saw the muzzleflash.
Light travels faster than the bullet.
(sorry for splitting hairs)
Senile Joe just shot us in the foot
Actually a bit higher and more significant, testicles of what little were left.
But, let's be honest, virtually all other countries devalue their currency worse than we devalue ours. Brandon's activities of devaluing his nation's currency is extreme for us, but the norm just about everywhere else. Even with Brandon it's hard to imagine other currencies taking the place of the US dollar.
Take with a tablespoon of salt. This is yet another site that wants to sell you gold, like the ones that litter Zero Hedge.
Many, including MYSELF are looking for ways out of our corrupted, insecure banking system.
When NYC bank *thugs* start shutting down anyone they don’t like - gun sellers, truckers, Russians, municipalities and now even entire countries, people rightfully start to think money isn’t safe... and they’re correct.
Yep, what exactly is going to replace the dollar:
* The Euro - will it even exist in ten years?
* The Yuan - China plays far more games with its currency than we ever do
* The Ruble - Laughable
* Gold - Not until someone figures out how to move a billion in gold electronically
* Bitcoin - Not until it is reversible
Yes, other countries are using Chinese Yuan instead of dollars to buy and trade for oil from the middle east now. Meanwhile the dumbest politician in the universe has cut off our supply from Canada and stopping any drilling so we became dependent on other countries for our fossil fuels.
Actually, I need to correct myself. Biden and his cohorts in crime, namely the Obama contingent who are running the biden admin, are sort of calling the shots; not slow pamper-clad joe the sniffing fidiot. The real shot callers are those who are not now nor ever been elected. These oligarchs own most of the dems, rino`s, and establishment squishes. They are who is running the USA right now. They are literally running it into the ground on purpose to defeat us from within.
It`s so obvious even a brainwashed leftist should be able to see it.
I posted on another thread days ago, a link from Russia central bank accepting gold and the exchange rate, and also another link with their announcement they would accept bitcoin.
Need little biden stickers, “I destroyed this” for our paper currency.
The dollar is dead. Where else to store your wealth? Bitcoin? US Treasuries? Paper currency of some foreign nation? If you don’t hold it ,you don’t own it, that is currently underway. Prepare accordingly and choose wisely. A lot of pain and suffering is heading our way.
This is yet another site that wants to sell you gold, like the ones that litter Zero Hedge.
I heard it was just Rubles, and that was bad news for the West.
If it was Gold and Rubles, that is even worse.
Many, including MYSELF are looking for ways out of our corrupted, insecure banking system
———-
The world is noticing the corrupted US system and wants nothing to do with it.Take nickel trading, it shot up vertical on news of the sanctions, many would have made millions, yes millions…what did the LME do? They stopped all trading and cancelled all orders before they could be settled.
Yes, other countries are using Chinese Yuan instead of dollars to buy and trade for oil from the middle east now.
———-
Exactly, The Sauds just stated they will take Yuan for oil, petro dollar has been destroyed. Russian Bank said they will take rubles, gold AND Bitcoin instead of dollars……India started trading in the Ruble and Yuan….Vlad says: checkmate, dollar hegemony finished, done.
A note to senile Joe( and those war cheerleaders that supported sanctions), you just destroyed the USD, destroyed global trade, and put another nail in the US economy.
Slow Joe is fragging the whole nation.
Nothing
The US$ will continue to be the standard
This analysis presupposes wholesale abandonment of the Dollar as the world’s reserve.
While the dollar will come under some pressure on the margins, there’s no reason to believe it will no longer be the premier currency.
We are Rome. The world depends on Rome’s system of commerce.
Only elimination of hegemon status would change that. And it’s hard to envision that happening without a worldwide conflagration that makes the point moot.
Although the USA has a hugely bloated government and dependent class who absolutely need printed money and manipulated interest rates to exist, we are still more energy and resource self-sufficient than Europe, which is really screwed
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