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The Weaponization Of The Dollar

300 H and H

Bronze Member
GOLD Site Supporter



Patrick Boyle


279K subscribers

The sanctions on Russia’s central bank use the reserve currency status of the US dollar to punish an American adversary. Will the US dollar lose its exorbitant privilege? What currency might replace the US Dollar as a reserve currency?
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Will the dollar stay as the World's reserve currency?
I hope so!
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
I don't think so, I think that we are at the start of the end.



 

300 H and H

Bronze Member
GOLD Site Supporter
I don't think so, I think that we are at the start of the end.



It is a matter of opinion. Two Latino Billionaires are not the only ones who decide. By pumping Bitcoin they enrich themselves.
It is not a question that the USA gets to answer. But for now there are strong reasons the Dollar will remain.
For now...
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
It is a matter of opinion. Two Latino Billionaires are not the only ones who decide. By pumping Bitcoin they enrich themselves.
It is not a question that the USA gets to answer. But for now there are strong reasons the Dollar will remain.
For now...
True

And there are plenty of bitcoin/crypto contrarians.

But I suspect we are going to lose the dollar as the reserve currency and it is likely that money will go back to the time tested commodity based (think gold standard) valuation. But probably not limited to gold based standards. Russia is now selling and demanding payment in Rubles, which are now backed by a combination of gold & commodities. The Ruble, which crashed in value a month ago when we put sanctions on Russia, has now fully regained its value. The Dollar and the Euro both are in a battle to see which will crash next, and my bet is it will be the Euro.

Just some more to think about:

 

300 H and H

Bronze Member
GOLD Site Supporter
One has to wonder if there will a division of the currency trade is done in.
By that I mean one part of the world, the countries who are freedom loving doing business as usual with the US Dollar.
The others under communist or totalitarian rule use some thing else.

Maybe I am wrong but could that system develop at least for a time?
I do not have the time, or I could find you several articles the explain why the US dollar has advantages and will be very hard
to replace. My point is there are two sides to this argument. One side I think is just propaganda and a narrative to try and persuade
that the dollar is "doomed".

Tesla has been "doomed" for 10 years now. Mary Barra has been saying GM will crush Tesla.... And that is simply propaganda for stock holders as GM slowly goes Bankrupt. :whistling:
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
GM destroys everything it touches, I expect them to fail again

I'm not sure the dollar is doomed, but it is clearly heading down the path full of potholes. There are ways to fix the problems if the government has the stomach to do so.

A 2 currency system is probably reasonable but ultimately doesn't seem practical and there are many different alliances in the world. India trades with both Western nations and with Russia/China. What currency would it use . . . Lots of other similar scenarios around the world.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Thought this was interesting and topic related. Link to source in the text.

The Commodity-Currency Revolution Begins...

We will look back at current events and realise that they marked the change from a dollar-based global economy underwritten by financial assets to commodity-backed currencies. We face a change from collateral being purely financial in nature to becoming commodity based. It is collateral that underwrites the whole financial system.
The ending of the financially based system is being hastened by geopolitical developments. The West is desperately trying to sanction Russia into economic submission, but is only succeeding in driving up energy, commodity, and food prices against itself. Central banks will have no option but to inflate their currencies to pay for it all. Russia is linking the rouble to commodity prices through a moving gold peg instead, and China has already demonstrated an understanding of the West’s inflationary game by having stockpiled commodities and essential grains for the last two years and allowed her currency to rise against the dollar.
China and Russia are not going down the path of the West’s inflating currencies. Instead, they are moving towards a sounder money strategy with the prospect of stable interest rates and prices while the West accelerates in the opposite direction.
The Credit Suisse analyst, Zoltan Pozsar, calls it Bretton Woods III. This article looks at how it is likely to play out, concluding that the dollar and Western currencies, not the rouble, will have the greatest difficulty dealing with the end of fifty years of economic financialisation.

Pure finance is being replaced with commodity finance

It hasn’t hit the main-stream media yet, which is still reporting yesterday’s battle. But in March, the US Administration passed a death sentence on its own hegemony in a last desperate throw of the dollar dice. Not only did it misread the Russian situation with respect to its economy, but America mistakenly believed in its own power by sanctioning Russia and Putin’s oligarchs.
It may have achieved a partial blockade on Russia’s export volumes, but compensation has come from higher unit prices, benefiting Russia, and costing the Western alliance.
The consequence is a final battle in the financial war which has been brewing for decades. You do not sanction the world’s most important source of energy exports and the marginal supplier of a wide range of commodities and raw materials, including grains and fertilisers, without damaging everyone but the intended target. Worse still, the intended target has in China an extremely powerful friend, with which Russia is a partner in the world’s largest economic bloc — the Shanghai Cooperation Organisation — commanding a developing market of over 40% of the world’s population. That is the future, not the past: the past is Western wokery, punitive taxation, economies dominated by the state and its bureaucracy, anti-capitalistic socialism, and magic money trees to help pay for it all.
Despite this enormous hole in the sanctions net, the West has given itself no political option but to attempt to tighten sanctions even more. But Russia’s response is devastating for the western financial system. In two simple announcements, tying the rouble to gold for domestic credit institutions and insisting that payments for energy will only be accepted in roubles, it is calling an end to the fiat dollar era that has ruled the world from the suspension of Bretton Woods in 1971 to today.
Just over five decades ago, the dollar took over the role for itself as the global reserve asset from gold. After the seventies, which was a decade of currency, interest rate, and financial asset volatility, we all settled down into a world of increasing financialisation. London’s big bang in the early 1980s paved the way for regulated derivatives and the 1990s saw the rise of hedge funds and dotcoms. That was followed by an explosion in over-the-counter unregulated derivatives into the hundreds of trillions and securitisations which hit the speed-bump of the Lehman failure. Since then, the expansion of global credit for purely financial activities has been remarkable creating a financial asset bubble to rival anything seen in the history of financial excesses. And together with statistical suppression of the effect on consumer prices the switch of economic resources from Main Street to Wall Street has hidden the inflationary evidence of credit expansion from the public’s gaze.
All that is coming to an end with a new commoditisation — what respected flows analyst Zoltan Pozsar at Credit Suisse calls Bretton Woods III. In his enumeration the first was suspended by President Nixon in 1971, and the second ran from then until now when the dollar has ruled indisputably. That brings us to Bretton Woods III.
Russia’s insistence that importers of its energy pay in roubles and not in dollars or euros is a significant development, a direct challenge to the dollar’s role. There are no options for Russia’s “unfriendlies”, Russia’s description for the alliance united against it. The EU, which is the largest importer of Russian natural gas, either bites the bullet or scrambles for insufficient alternatives. The option is to buy natural gas and oil at reasonable rouble prices or drive prices up in euros and still not get enough to keep their economies going and the citizens warm and mobile. Either way, it seems Russia wins, and one way the EU loses.
As to Pozsar’s belief that we are on the verge of Bretton Woods III, one can see the logic of his argument. The highly inflated financial bubble marks the end of an era, fifty years in the making. Negative interest rates in the EU and Japan are not just an anomaly, but the last throw of the dice for the yen and the euro. The ECB and the Bank of Japan have bond portfolios which have wiped out their equity, and then some. All Western central banks which have indulged in QE have the same problem. Contrastingly, the Russian central bank and the Peoples Bank of China have not conducted any QE and have clean balance sheets. Rising interest rates in Western currencies are made more certain and their height even greater by Russia’s aggressive response to Western sanctions. It hastens the bankruptcy of the entire Western banking system and by bursting the highly inflated financial bubble will leave little more than hollowed-out economies.
Putin has taken as his model the 1973 Nixon/Kissinger agreement with the Saudis to only accept US dollars in payment for oil, and to use its dominant role in OPEC to force other members to follow suit. As the World’s largest energy exporter Russia now says she will only accept roubles, repeating for the rouble the petrodollar strategy. And even Saudi Arabia is now bending with the wind and accepting China’s renminbi for its oil, calling symbolic time on the Nixon/Kissinger petrodollar agreement.
The West, by which we mean America, the EU, Britain, Japan, South Korea, and a few others have set themselves up to be the fall guys. That statement barely describes the strategic stupidity — an Ignoble Award is closer to the truth. By phasing out fossil fuels before they could be replaced entirely with green energy sources, an enormous shortfall in energy supplies has arisen. With an almost religious zeal, Germany has been cutting out nuclear generation. And even as recently as last month it still ruled out extending the lifespan of its nuclear facilities. The entire G7 membership were not only unprepared for Russia turning the tables on its members, but so far, they have yet to come up with an adequate response.
Russia has effectively commoditised its currency, particularly for energy, gold, and food. It is following China down a similar path. In doing so it has undermined the dollar’s hegemony, perhaps fatally. As the driving force behind currency values, commodities will be the collateral replacing financial assets. It is interesting to observe the strength in the Mexican peso against the dollar (up 9.7% since November 2021) and the Brazilian real (up 21% over a year) And even the South African rand has risen by 11% in the last five months. That these flaky currencies are rising tells us that resource backing for currencies has its attractions beyond the rouble and renminbi.
But having turned their backs on gold, the Americans and their Western epigones lack an adequate response. If anything, they are likely to continue the fight for dollar hegemony rather than accept reality. And the more America struggles to assert its authority, the greater the likelihood of a split in the Western partnership. Europe needs Russian energy desperately, and America does not. Europe cannot afford to support American policy unconditionally.
That, of course, is Russia’s bet.

Russia’s point of view

For the second time in eight years, Russia has seen its currency undermined by Western action over Ukraine. Having experienced it in 2014, this time the Russian central bank was better prepared. It had diversified out of dollars adding official gold reserves. The commercial banking system was overhauled, and the Governor of the RCB, Elvira Nabiullina, by following classical monetary policies instead of the Keynesianism of her Western contempories, has contained the fall-out from the war in Ukraine.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
I'm not suggesting the Reuben will overtake the US Dollar as the world reserve currency but this is more evidence that the Dollar is losing ground as the reserve currency and commodity based currency (think in terms of the old gold standard) is far more sound than fiat currency.


Russia Put in Gold

April 08, 2022
While Gold continues to hit the snooze button, trapped in a range from 1900-1967, I thought I would talk about something that should have gotten a lot more attention than it has: Russia announcing that it will only accept payment for natural gas in rubles or Gold and its decision to effectively peg Gold to the ruble at 5000 rubles per gram. This could be applied to all the other commodities it sells too.
I have been saying “Follow the Smart Money” since 2016 in reference to both China and Russia. Both have been steadily buying Gold since the Global Financial Crisis in 2008. They are two of the biggest producers of Gold in the world. China has been buying mining operations all around the world too. It is also illegal to export 1 oz. of Gold from China. At the same time, they have been reducing their dollar FX reserves and selling U.S. Treasuries. Why? Putting it all together, they’re hedging against the collapse of the dollar. Recent sanctions on both countries have only served to accelerate their preparations for such an event.
The latest salvo from Russia means that Gold is tied to the ruble and both are tied to commodity prices for natural gas and potentially many other commodities that Russia exports. Payments for natural gas must be in rubles or Gold. This is a huge development because it could signal the end of the dollar as the global reserve currency, especially when you consider that the dollar’s hegemony has been based on the ‘petrodollar’ arrangement whereby it has been effectively backed by oil since the closure of the gold window in 1971. Now it’s the turn of the ruble and perhaps the yuan next if China attacks Taiwan.
What does this mean for Gold in practice?
If Gold is pegged to the ruble at 5000 per gram, that’s equivalent to 156k rubles per troy ounce of Gold. By taking 156k and dividing it by the USD/RUB exchange rate, you get the dollar price of Gold. Assuming the USD/RUB is 80, then 156k divided by 80 equates to a Gold price of 1950. If the ruble goes up in value, i.e., the USD/RUB falls, then Gold should rise in price. For example, if USD/RUB is 70, then the Gold price should be 2229. Whereas if the USD/RUB rises to 90, the Gold price should be 1733.
Right now, the USD/RUB is 75.75, which would put Gold at 2060. But the going rate for Gold on the COMEX is 1930. Perhaps there is a discount given that this regime is new and needs to establish its credibility, or the COMEX is supressing the paper price, whereas the physical metal with premium included is closer to 2060. Either way, I am less focused on the rationale for the difference in price but the direction in which the ruble is headed and its effect on Gold.
 

300 H and H

Bronze Member
GOLD Site Supporter

A New Monetary System is Coming and Sooner Than You Think​

14:53 min.


Steven Van Metre
102K subscribers

Monetary plumbing expert Zoltan Poszar is calling for a Bretton Woods III commodity-based monetary system as he believes the dollar's day of supremacy is coming to an end and inflation is likely to remain high.
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Good presentation on why the US dollar as a reserve currency will likely stay just as it is.
Many around the globe are trying to inject the idea that the Dollar as a reserve currency is dead. Far from the truth.
Propaganda is more present today than at any time in recent history.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
In an opposing view, QTR's Fringe Finance is reporting a rather sensational headline that Israel is "dumping the dollar" but the reality is it is actually "reducing" the dollar and adding 4 other currencies to its portfolio.

India, China, Saudi Arabia and several other nations have already embarked on various paths that reduce the US Dollar as their reserve currency. The Dollar has a long way to go before it will be eliminated as a reserve currency but there is little doubt that a change is in the wind.

Here is only a portion of the blog, but you can follow the link to QTR for this full story

Israel Dumps The Dollar For China's Renminbi, Beijing Starts Quietly Acquiring Russian Energy Assets​

The bedrock of the global monetary system continues to shift, including two profound pieces of news over the last 24 hours that no one seems to have noticed.​

9 hr ago​
Over the last 48 hours, China and Russia have taken big steps toward separating themselves from the monetary policy and economies of the west – and nobody has even noticed.

Those who have been reading my blog for the last couple of weeks know that I have been predicting that China and Russia would grow far closer economically, creating, in essence, a second global monetary system where the US dollar is no longer the reserve currency.​
A few 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.

This shift is happening as a result of the United States and the rest of the western economies foolishly thinking that they’re going to be able to effectively sanction Russia economically, despite the fact that Russia is a massive producer of oil and the country seems prepared to back its currency, the ruble, with this productive capacity. . .​
. . .​
First, it was little noticed yesterday when Bloomberg reported that “Israel’s central bank has made the biggest changes to its allocation of reserves in over a decade, adding the Chinese yuan alongside three other currencies to a stockpile that last year exceeded $200 billion for the first time ever.”​
The report read:​
Starting this year, the currency mix will expand from the trio of the U.S. dollar, the euro and the British pound to include the Canadian and Australian dollars as well as the yen and the yuan, which is also known as the renminbi. The additions mark a change in the Bank of Israel’s “whole investment guidelines and philosophy,” Deputy Governor Andrew Abir said in an interview.​
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300 H and H

Bronze Member
GOLD Site Supporter
Kind of predictable for a while now.
Russia and China are going it alone.
India is the free agent for Moscow, definitely not China.
Europe? That depends on several elections. If France goes La Penn, the situation changes.
Two World currencies presents an opportunity for those who can exchange them in large scale.
It will be interesting to see how this shakes out. More money printing will not end well.
 
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