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The MoA Week In Review – OT 2022-31 (NOT Ukraine)
Last week's posts at Moon of Alabama:
(Another week of all out Ukraine. I'd love to write on other stuff, but it is the world moving story of these day.)
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Other issues:
Covid-19:
bigger
ISS:
Middle East:
Torture:
Empire of hypocrisy:
Use as open (NOT Ukraine) thread …
Alastair Crooke’s essay at Al-Mayadeen net reviews the events that will lead to the demise of the dollar system and rise of a new international financial order, hence the title, “Canceling Russian reserves boomerangs to a new international monetary system.” There’s really not much new to tell barflies since we’re very well informed on this matter. Indeed, Crooke’s first paragraph tells all [all emphasis mine]:
“The reality is that the present military operation in Ukraine, in due time, will be relegated to little more than a footnote in global history, yet the total financial war which has repercussed onto Russia will be key in defining the upcoming new world order. In fact, we may have already witnessed the moment economic history changed tracks: On 26 February, the collective West seized all the foreign exchange reserves of the Central Bank of Russia that were held in the West.”
So, what makes that crime “historic”? Crooke continues:
“In gist, the West decreed that the Russian sovereign reserve holdings in Euros, dollars and US Treasuries were no longer ‘money good’. They were valueless as ‘money’ with which to pay Russian debts to foreign creditors. And by sanctioning too, the Russian Central Bank, it became impossible for those buying goods, energy, or commodities to transact what they owe through the Bank….
“So we thought that US sovereign bonds (Treasuries) were ‘money’ and inviolate? Well, the US just declared those Russian Central Bank-held, US debts effectively to be null and void. Maybe – like Russia’s Imperial Bonds that decorated European bathrooms as colourful, but worthless wallpaper – the Russian central bank will now use its US Treasury bond holdings as bathroom wallpaper (albeit in a less than colourful decoration).”
The word Crooke avoids is default, as in the Outlaw US Empire defaulted on its debt obligations to Russia just as the Bolsheviks did. And that’s not the only reason it’s historic:
“The magnitude of this event is underlined by the fact that during an earlier conflict centered on Ukraine – the Crimean War of 1854–1856 – Britain and France were at war with Russia. Yet throughout the war, the Russian government continued paying interest to British holders of its debt, and the British government also kept paying its debts to the Russian government.”
And of course there’s more to the Empire’s suicidal actions:
“In proposed legislation in the US Senate, the gold reserves held by the Central Bank of Russia will be frozen and seized. There is a big problem to this legislation, however. The gold exists. It is in physical gold bars (about 2,300 metric tonnes of it), worth about $150 billion, BUT they are stored in Russia. They can’t actually be frozen or seized at all.
“So what is this all about if the gold cannot actually be seized? It is all about secondary boycott sanctions on any party that assists Russia in transporting or transacting in gold. So if Russia were to import, say by way of example, Chinese semiconductor chips and to settle the transaction in gold, then, theoretically the US could sanction the receiving entity in China.”
As many barflies have noted and commented, the Outlaw US Empire’s actions have imperiled the Petrodollar system:
“The geo-political consequence, however, has been nuclear. The petro-dollar based trading system that flowed from it, has allowed America to ‘nuke’ the world with sanctions and secondary sanctions (through claiming jurisdiction over any, and all, trade denominated in dollars, or which in any way passed through a dollar clearing process).
“US hegemony over the so-called ‘rules-based order’ has been financial (and not so much military). That is to say, one imposed by threatening any miscreants with a US Treasury, sanction ‘neutron bomb’.”
The Outlaw has pulled its guns and said to the world–trade in dollars and nothing else or else! But this time around, the world had already had enough and is now calling the Outlaw’s bluff. But there’s more to it than mere oil and gas; there’s a large portfolio of commodities from foodstuffs to rare earth minerals, to nuclear fuel that are also money/collateral which was the underlying point to Poszar’s essay Crooke helps to explain:
“And on 26 February, that system [petrodollar] began its’ decease, when the Russo-phobic Washington ‘hawks’ stupidly picked a fight with the one country, Russia, that has the commodities needed to run the world, and to trigger the shift to a different monetary system — one that is anchored in something other than fiat money.
“Clearly, the Yuan or Rouble can reflect the underlying value of their large gold reserves. But also, commodities are collateral, and collateral is money. And Russia has the lion’s share of key commodities“….
“Zoltan Poszar, one of Wall Street’s most respected voices, argued that this present monetary system worked so long as commodity prices oscillated predictably within a narrow band – i.e. are not under extreme stress (precisely because commodities are collateral for other debt instruments). However, when the entire commodity complex is under stress like it is now – the berserk commodity prices drive a wider ‘no-confidence’ vote in the system. And that’s what we are witnessing now.
“Did the Russia hawks not foresee these ‘unexpected consequences’? Was there some grand strategy behind the seizing of the Russian reserves, beyond visceral malice directed at Russia?”
The short and long answers are both no; they knee-jerked and didn’t bother consulting the bankers, the ones that have jiggered the system for their own benefit and understand how easily it will fall. Oops! Crooke again:
“In short, the western monetary system based on the US dollar as a reserve currency is about to end in an inflationary supernova, as the US loses the ability to use Chinese savings to finance its budget and trade deficits. And, this is happening as the Boomer generation retires and their entitlement handouts soar. Defence, interest and non-discretionary entitlements already eat 100% of tax revenues. So now, there is no choice: the Fed will print most of the huge additional spending.”
Kiss goodbye the idea of making America great again. Historians will marvel at the biggest ever geopolitical own goal ever committed. What we’ll soon witness is an event of creative destruction so momentous it will define the Putin Doctrine as the dollar system gets junked and replaced by a hybrid hard currency that destroys the remaining fiat currencies, meaning the Outlaw US Empire can’t simply print and then buy what it needs.
Now you know why Xi and Putin are confident.
Posted by: karlof1 | Mar 20 2022 23:06 utc | 83
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