World Economic News and Discussion

If they can't reverse this trend line and I doubt they can, this is the start of the end of the EU.



German companies are ready to withdraw investments from Germany because of gas prices

Germany's largest producers are ready to cut thousands of jobs and withdraw investments to the United States, since Berlin "will not be able" to provide them with energy at prices that were Russian gas, writes Bloomberg

"We are no longer competitive in Germany, but our investments for further growth will be directed to more competitive places, such as the USA," said Matthias Zahert, head of the Lanxess chemical company.

The largest chemical producer BASF and the international company Dow are also among the companies ready to lay off workers and withdraw investments from Germany.

https://www.bloomberg.com/news/articles/2023-02-04/german-energy-reprieve-too-little-too-late-to-save-factory-jobs?/

But everything is OK now because Berlin is sending Leopard I tanks to Kiev, which is all that matters...

Will be interesting for it to all go to the US because I rather doubt the US has got an energy surplus to support a lot of industry going there, but I guess when you print your own money...

Of course when other countries stop accepting that money because you just print it and have nothing to back it up meaning it is just paper... how long can you continue when no one accepts your currency any more?

You are right on both counts Garry.

Over the next 5 or so years the use of the US$ as the international currency for trade will reduce significantly. This will have two big effects, the first that is well talked about, the US won't be able to just print some $ at zero cost and buy stuff abroad and the second, less talked about, is that the level of hate of the US will rise exponentially around the world as the value of the savings of millions holding $ falls. Almost certainly there will be a panic move into something else safe like gold and silver.

On the energy front few seem to realise that the fracking boom is over and yields are falling. This will really screw those who are becoming dependent on US energy exports, like Europe.

Whichever way you look at it, US strategy, particularly after 2013/4, will be viewed by history (if it gets written) as the greatest strategic blunder ever made by a then dominant power. Shame we have to live through it.

I was listening to a few things in Youtube the other day and I heard the most astounding thing... it was a blog for that bald guy... Rogan? But his very white guest was trying to say that it is all about the equator and that civilisation actually started a long way away from the equator in the cold places of Europe because you had to be smart and to plan for winter, you couldn't just wander around and pick fruit and berries to survive like you could in Africa.

The enormous irony is that while massive cities with populations bigger than most of Europe were being built in Egypt and Iraq and Iran and dozens of other places not just in Africa and Asia but also central and south America, the people of Europe were living in caves... but even they developed and what did their amazing civilised culture manage to achieve?

World wide genocide of people and cultures they didn't approve of... and now they claim to be the civilised ones... yet they don't see the hypocrisy of condemning Putin and others for their conservative views on sexuality and children, while proclaiming tolerance for the things they approve of.

Yesterday a woman on Australian news was talking to another woman speaking from Sweden talking about the freedom of Speech issue of burning the Koran, but they were cut off but the woman in Australia said she wished she had the chance to ask the woman in Sweden why Muslims will protest and block entry into HATO for Sweden over the burning of a book while staying silent over millions of Muslims being oppressed and genocided in China by the Chinese.

The irony is that she is right but equally the west has done more to murder Muslims around the world than China has so why not protest and bomb and shoot westerners in general in protest?

Amusing how selective the west is regarding human rights, it was a conservative Australian news programme and they were criticising Sweden for allowing all those immigrants into their country... like they are not immigrants too.

What the US does as fewer and fewer countries use US dollars and alternative options expand and gain traction will be interesting... they have a massive military but it has been exposed as being rather hollow with weapons that are not world class any more, and without the money to grease the wheels and cogs how long could it possibly last in its current state... it can only be more and more expensive or things will really start to fail... it is an example and proof that the best solution to deal with corruption is not to pump more money into the system than the thieves could steal... you just keep increasing your "defence" budget with less and less return... but as long as Hollywood keeps pumping out material showing them in super stealth planes everything will be fine... till it isn't.

The amusing thing is that even poor countries can buy a drone and fly it into US airspace off a ship or something... or put it in a balloon... 18km altitude is nothing... modern balloons could fly much much higher.

Moveable Multipolarity in Moscow: Ridin’ the ‘Newcoin’ Train, by Pepe Escobar for Strategic Culture Foundation. 03.12.2023.

Ah, the joys of the Big Circle Line (BKL, in Cyrillic): circumnavigating the whole of Moscow for 71 km and 31 stations: from Tekstilshchiki – in the old textile quarter – to Sokolniki – a suprematist/constructivist gallery (Malevich lives!); from Rizhskaya – with its gorgeous steel arches – to Maryina Roscha – with its 130 meter-long escalator.

The BKL is like a living, breathin’, runnin’ metaphor of the capital of the multipolar world: a crash course in art, architecture, history, urban design, tech transportation, and of course “people to people’s exchanges”, to quote our Chinese New Silk Road friends.

President Xi Jinping, by the way, will be ridin’ the BKL with President Putin when he comes to Moscow on March 21.

So it’s no wonder that when a savvy investor at the top of global financial markets, with decades of experience, agreed to share some of his key insights on the global financial system, I proposed a ride on the BKL – and he immediately accepted it. Let’s call him Mr. S. Tzu. This is the minimally edited transcript of our moveable conversation.

Thank you for finding the time to meet – in such a gorgeous setting. With the current market volatility, it must be hard for you to step away from the screens.

S. Tzu: Yes, markets are currently very challenging. The last few months remind me of 2007-8, except instead of money-market funds and subprime mortgages, these days it is pipelines and government bond markets that blow up. We live in interesting times.

The reason I reached out to you is to hear your insights on the “Bretton Woods 3” concept introduced by Zoltan Poszar. You’re definitely on top of it.

S. Tzu: Thank you for getting straight to the point. There are very few opportunities to witness the emergence of a new global financial order, and we are living through one of those episodes. Since the 1970s, perhaps only the arrival of bitcoin just over fourteen years ago came close in terms of impact to what we are about to see in the next few years. And just as the timing of bitcoin was not a coincidence, the conditions for the current tectonic shifts in the world financial system have been brewing for decades. Zoltan’s insight that “after this war is over, ‘money’ will never be the same again…” was perfectly timed.

Understanding “external money”

You mentioned bitcoin. What was so revolutionary about it at the time?

S. Tzu: If we leave aside the crypto side of things, the promise and the reason for bitcoin’s initial success was that bitcoin was an attempt to create “external” money (using Mr. Zoltan’s excellent terminology) that was not a liability of a Central Bank. One of the key features of this new unit was the limit of 21 million coins that could be mined, which resonated well with those who could see the problems of the current system. It sounds trivial today, but the idea that a modern monetary unit can exist without backing of any centralized authority, effectively becoming “external” money in digital form, was revolutionary in 2008. Needless to say, Euro government bond crisis, quantitative easing, and the recent global inflationary spiral only amplified the dissonance that many felt for decades. The credibility of the current “internal money” system (again, using Mr. Poszar’s elegant terminology) has been destroyed long before we got to the Central Bank reserve freezes and disruptive economic sanctions that are playing out currently. Unfortunately, there is no better way to destroy credibility of the system based on trust than to freeze and confiscate foreign currency reserves held in Central Bank custody accounts. The cognitive dissonance behind the creation of bitcoin was validated — the “internal money” system was fully weaponized in 2022. The implications are profound.

Now we are getting to the nitty-gritty. As you know, Zoltan argues that a new “Bretton Woods 3” system will emerge at the next stage. What exactly does he mean by that?

S. Tzu: I am also not clear on whether Mr. Poszar refers to the transformation of the current Western “internal money” system into something else, or whether he hints at the emergence of the “Bretton Woods 3” as an alternative, outside of the current financial system. I am convinced that a new iteration of the “external money” is unlikely to be successful in the West at this stage, due to the lack of political will and to the excessive government debt that has been building up for some time and grew exponentially in recent years.

Before the current Western financial order can move to the next evolutionary stage, some of these outstanding liabilities need to be reduced in real terms. If history is any guide, it typically happens via default or inflation, or some combination of the two. What seems highly likely is that the Western governments will rely on financial repression in order to keep the boat afloat and to tackle the debt problem. I expect there will be many initiatives to increase control over the “internal money” system that will likely be increasingly unpopular. Introduction of CDBC’s, for example, could be one such initiative. There is no doubt in my mind that we are in for eventful times ahead in this respect. At the same time, it also seems inevitable at this stage that some sort of an alternative “external money” system will emerge that will compete with the current “internal money” global financial order.

And why is that?

S. Tzu: The global economy can no longer rely on the “internal money” system in its current weaponized state for all its trade, reserve, and investment needs. If sanctions and reserve freezes are the new instruments of regime change, every government out there must be thinking about alternatives to using someone else’s currency for trade and reserves. What is not obvious, however, is what the alternative to the current flawed global financial order should be. History does not have many examples of successful “external money” approaches that could not be reduced to some version of the gold standard. And there are many reasons why gold alone, or a currency fully convertible into gold, is too restrictive as a foundation of a modern monetary system.

At the same time, recent increases in trade in local currencies unfortunately have a limited potential as well, as local currencies are simply a different instance of “internal money.” There are obvious reasons why many countries would not want to accept other’s local currencies (or even their own, for that matter) in exchange for exports. On that I fully agree with Michael Hudson. Since “internal money” is a liability of a country’s Central Bank, the lower the credit standing of the country, the more it needs investable capital, and the less willing other parties become to hold its liabilities. That is one of the reasons why a typical set of “structural reforms” that IMF demands, for example, is aimed at improving credit quality of the borrower government. “External money” is badly needed precisely by the countries and the governments that feel they are hostages to the IMF and to the current “internal money” financial system.

Enter the “newcoin”

A lot of experts seem to be looking into it. Sergey Glazyev, for instance.

S. Tzu: Yes, there were some indications of that in recent publications. While I am not privy to these discussions, I certainly have been thinking how this alternative system could work as well. Mr. Pozsar’s concepts of “internal” and “external” money are a very important part of this discussion. However, the duality of these terms is misleading. Neither option is fully adequate for the problems that the new monetary unit – let’s call it “newcoin” for convenience – needs to solve.

Please allow me to explain. With the weaponization of the current US dollar “internal money” system and a simultaneous escalation of sanctions, the world has effectively split into the “Global South” and the “Global North,” slightly more precise terms than East and West. What is important here, and what Mr. Pozsar immediately noticed, is that the supply chains and commodities are also getting weaponized to some extent. Friend-shoring is here to stay. The implication is that the newcoin’s first priority would be facilitating intra-South trade, without relying on currencies of the Global North.

If this were the only objective, there would have been a choice of relatively simple solutions, ranging from using renminbi/yuan for trade, creating a new shared currency (fashioned after euro, ECU, or even Central African CFA franc), creating a new currency based on the basket of participating local currencies (similar to the SDR of IMF), potentially creating a new gold-pegged currency, or even pegging existing local currencies to gold. Unfortunately, history is full of examples of how each one of these approaches creates their own host of new problems.

Of course, there are other parallel objectives for the new currency unit that neither of these possibilities can fully address. For example, I expect that all participants would hope that the new currency strengthens their sovereignty, not dilutes it. Next, the challenges with the Euro and previously gold standard demonstrated the broader problem with “fixed” exchange rates, especially if the initial “fix” was not optimal for some members of the currency zone. The problems only accumulate over time, until the rate is “re-fixed,” often through a violent devaluation. There needs to remain flexibility in adjusting relative competitiveness inside the Global South over time for participants to remain sovereign in their monetary decisions. Another requirement would be that the new currency needs to be “stable,” if it were to become successful unit of pricing for volatile things like commodities.

Most importantly, the new currency should be able to become an “external money” storage of capital and reserves down the road, not just a settlement unit. In fact, my conviction that the new monetary unit will emerge comes primarily from the current lack of viable alternatives for reserves and investment outside of the compromised “internal money” financial system.

Do considering all these problems, what do you propose as a solution?

S. Tzu: First allow me to state the obvious: the technical solution to this problem is a lot easier to find than to arrive at the political consensus among the countries which might want to join the newcoin zone. However, the current need is so acute, in my opinion, that the required political compromises will be found in due course.

That said, please allow me to introduce one such technical blueprint for the newcoin. Let me start by saying that it should be partially (I suggest a share of at least 40% of value) backed by gold, for reasons that will soon become clear. The remaining 60% of the newcoin would be composed of the basket of currencies of the participating countries. Gold would provide the “external money” anchor to the structure and the basket of currencies element would allow the participants to retain their sovereignty and monetary flexibility. There would clearly be a need to create a Central Bank for the newcoin, which would emit new currency. This Central Bank could become a counterparty to cross-swaps, as well as provide clearing functions for the system and enforce the regulations. Any country would be free to join the newcoin on several conditions.

First, the candidate country needs to demonstrate that it has physical unencumbered gold in its domestic storage and pledge a certain amount in exchange for receiving corresponding amount of newcoin (using the 40% ratio mentioned above). Economic equivalent of this initial transaction would be a sale of the gold to the “gold pool” backing the newcoin in exchange for proportional amount of the newcoin backed by the pool. The actual legal form of this transaction is less important, as it is necessary simply to guarantee that the newcoin that is being emitted is always backed by at least 40% in gold. There is no need to even publicly disclose the gold reserves of each country, as long as all participants can be satisfied that sufficient reserves are always present. An annual joint audit and monitoring mechanism may be sufficient.

Second, a candidate country would need to establish a gold price discovery mechanism in its domestic currency. Most likely, one of the participating precious metals exchanges would start physical gold trading in each of the local currencies. This would establish a fair cross-rate for the local currencies using “external money” mechanism to set and adjust them over time. The gold price of the local currencies would drive their value in the basket for the newly-emitted newcoins. Each country would remain sovereign and be free to emit as much of local currency as they choose to, but this would eventually adjust the share of their currency in the newcoin’s value. At the same time, a country would only be able to obtain additional newcoin from the central bank in exchange for a pledge of additional gold. The net result is that the value of each component of newcoin in gold terms would be transparent and fair, which would translate into the transparency of newcoin’s value as well.

Finally, emissions or sales of newcoin by the central bank would be allowed only in exchange for gold for anyone outside the newcoin zone. In other words, the only two ways external parties can obtain large amounts of newcoin is either receiving it in exchange for physical gold or as a payment for goods and services provided. At the same time, the central bank would not be obliged to purchase newcoin in exchange for gold, removing the risk of the “run on the bank.”

Correct me if I’m wrong: this proposal seems to anchor all trade inside the newcoin zone and all external trade to gold. In this case, what about the stability of newcoin? After all, gold has been volatile in the past.

S. Tzu: I think what you are asking is what could be the impact if, for example, the dollar price of gold were to decline dramatically. In this case, as there would be no direct cross-rate between newcoin and the dollar, and as the central bank of the Global South would be only buying, not selling gold in exchange for newcoin, you can immediately see that arbitrage would be extremely difficult. As a result, the volatility of the currency basket expressed in newcoin (or gold) would be quite low. And this is exactly the intended positive impact of the “external money” anchoring of this new currency unit on trade and investment. Clearly, some key export commodities would be priced by the Global South in gold and newcoin only, making the “run on the bank” or speculative attacks on newcoin even less likely.

Over time, if gold is undervalued in the Global North, it would gradually, or perhaps rapidly, gravitate to the Global South in exchange for exports or newcoin, which would not be a bad outcome for the “external money” system and accelerate the broad acceptance of newcoin as reserve currency. Importantly, as physical gold reserves are finite outside of the newcoin zone, the imbalances would inevitably correct themselves, as the Global South will remain a net exporter of key commodities.

What you just said is packed with precious info. Perhaps we should revisit the whole thing in the near future and discuss the feedback to your ideas. Now we’ve arrived at Maryina Roscha, it’s time to get off!

S. Tzu: It would be my pleasure to continue our dialogue. Looking forward to another loop!

https://www.unz.com/pescobar/moveable-multipolarity-in-moscow-ridin-the-newcoin-train/

But that is a good thing, when rates were low borrowing was easy and cheap and so they have borrowed too much and now that inflation is pushing interest rates up the interest rates on the money they borrowed will go up too and those that have borrowed too much... like most western countries and apparently many US banks, they will find their income during a recession does not meet the levels of income needed to pay their debts and interest rates on borrowed money and some companies and banks will collapse.

As mentioned about that American bank that collapsed first, its board members were alphabet people who spent more money than they created... they had a great old time being owners of a bank, but it seems they will be taking a lot of idiots with them.

Tucker Carlson did a piece on them... they were making adverts to tell their customers how to be responsible... who looks to a bank to learn how to be responsible?

This is natural selection.

Shame about all the retirement funds that will be totally destroyed by this...

Its one thing when notionally 'unaligned' albeit petro$ countries do this but when a G7 member and key US ally France does

Glenn Diesen
@Glenn_Diesen
De-dollarisation update:

Chinese national oil company CNOOC and France’s TotalEnergies have completed China’s first yuan-settled liquefied natural gas (LNG) trade

https://businesstimes.com.sg/international/

If Biden has any brains... and I don't think he has... he will announce a new 10 trillion dollar drive on infrastructure and roads and rails and airports in the US for the next five years... rebuild everything... knock down old houses and build new houses... rebuild cities, bridges, roads, rail lines etc etc.... because soon your money is going to be worthless and you are going to have to live with what you have and right now that is not in great shape for the majority of people.

Once the US dollar is not worth anything you are going to have to sell products in trade... and what do you have... that is not smoke and mirrors...

Saudi Arabia and now France... the US is really in trouble... expect some blowback on those two states... the US is not nice when you get on their wrong side.... ask anyone.

French newspaper: using its currency as an instrument of pressure, US leads countries to abandon the dollar, 04.04.2023.

The United States has itself provoked a situation in which the world is moving towards an inevitable de-dollarization, wrote French columnist Renaud Girard in an article for Le Figaro newspaper.

"By making their currency an instrument of political pressure on other countries, the Americans have unwittingly launched a global movement to overthrow the dollar king," he said.

The French analyst described de-dollarization as an irreversible process.

In his opinion, the fact that countries are abandoning the dollar is explained by Washington using its currency as a lever of pressure on other actors in international relations. For this reason, Girard notes, many prefer to switch to transactions in national currencies.

"In addition, the BRICS countries are planning to create their own currency for international trade," Girard noted.

He also cited as an example China's electronic Interbank Settlement System, which competes with the Western-controlled SWIFT system.

As Russian President Vladimir Putin pointed out, sanctions have inflicted a serious blow on the entire global economy, and the main goal of the West is to aggravate the lives of millions of people.

However, according to the head of State, Russia's financial stability was not harmed, and Europe itself came to a standstill as a result of sanctions.

Yandex Translate from Portuguese

https://sputniknewsbrasil.com.br/20230404/jornal-frances-usando-sua-moeda-como-instrumento-de-pressao-eua-levam-paises-a-abandonar-o-dolar--28301314.html

The irony of the US dollar as a weapon is that if you ever actually use it as a weapon then it breaks and becomes useless as both a weapon and a source of income, which it has been all these decades for the US...

They used the goose that lays the golden egg to make soup... and it wasn't even a very nice soup.

Western figures are low because they don't make anything any more, and most of their economies are smoke and mirrors with BS like Hedge Funds, and other BS... it was really revealed with Covid lockdowns where everyone stayed at home and the economy didn't really change very much at all... because most people don't matter to most western countries economies.

The US dollar is a solid gold sword, but the US politicians just saw a sword and thought it was a weapon, but anyone who knows anything about swords and gold know that gold is soft and would never hold a sharp edge and would be totally useless as a weapon... a gold sword is a decorative object and not a weapon because if you try to use it as a weapon it will break first try.

The US dollar was the golden goose that laid the golden eggs that kept the US rich... and they have made goose soup... and it is bitter.

De-Dollarization Kicks Into High Gear, by Pepe Escobar for The Cradle, 04.28.2023.

It is now established that the US dollar’s status as a global reserve currency is eroding. When corporate western media begins to attack the multipolar world’s de-dollarization narrative in earnest, you know the panic in Washington has fully set in.

The numbers: the dollar share of global reserves was 73 percent in 2001, 55 percent in 2021, and 47 percent in 2022. The key takeaway is that last year, the dollar share slid 10 times faster than the average in the past two decades.

Now it is no longer far-fetched to project a global dollar share of only 30 percent by the end of 2024, coinciding with the next US presidential election.

The defining moment – the actual trigger leading to the Fall of the Hegemon – was in February 2022, when over $300 billion in Russian foreign reserves were “frozen” by the collective west, and every other country on the planet began fearing for their own dollar stores abroad. There was some comic relief in this absurd move, though: the EU “can’t find” most of it.

Now cue to some current essential developments on the trading front.

Over 70 percent of trade deals between Russia and China now use either the ruble or the yuan, according to Russian Finance Minister Anton Siluanov.

Russia and India are trading oil in rupees. Less than four weeks ago, Banco Bocom BBM became the first Latin American bank to sign up as a direct participant of the Cross-Border Interbank Payment System (CIPS), which is the Chinese alternative to the western-led financial messaging system, SWIFT.

China’s CNOOC and France’s Total signed their first LNG trade in yuan via the Shanghai Petroleum and Natural Gas Exchange.

The deal between Russia and Bangladesh for the construction of the Rooppur nuclear plant will also bypass the US dollar. The first $300 million payment will be in yuan, but Russia will try to switch the next ones to rubles.

Russia and Bolivia’s bilateral trade now accepts settlements in Boliviano. That’s extremely pertinent, considering Rosatom’s drive to be a crucial part of the development of lithium deposits in Bolivia.

Notably, many of those trades involve BRICS countries – and beyond. At least 19 nations have already requested to join BRICS+, the extended version of the 21st century’s major multipolar institution, whose founding members are Brazil, Russia, India, and China, then South Africa. The foreign ministers of the original five will start discussing the modalities of accession for new members in an upcoming June summit in Capetown.

BRICS, as it stands, is already more relevant to the global economy than the G7. The latest IMF figures reveal that the existing five BRICS nations will contribute 32.1 percent to global growth, compared to the G7’s 29.9 percent.

With Iran, Saudi Arabia, UAE, Turkey, Indonesia, and Mexico as possible new members, it is clear that key Global South players are starting to focus on the quintessential multilateral institution capable of smashing Western hegemony.

Russian President Vladimir Putin and Saudi Crown Prince Mohammad bin Salman (MbS) are working in total sync as Moscow’s partnership with Riyadh in OPEC+ metastasizes into BRICS+, in parallel to the deepening Russia-Iran strategic partnership.

MbS has willfully steered Saudi Arabia toward Eurasia’s new power trio Russia-Iran-China (RIC), away from the US. The new game in West Asia is the incoming BRIICSS – featuring, remarkably, both Iran and Saudi Arabia, whose historic reconciliation was brokered by yet another BRICS heavyweight, China.

Importantly, the evolving Iran-Saudi rapprochement also implies a much closer relationship between the Gulf Cooperation Council (GCC) as a whole and the Russia-China strategic partnership.

This will translate into complementary roles – in terms of trade connectivity and payment systems – for the International North-South Transportation Corridor (INSTC), linking Russia-Iran-India, and the China-Central-Asia-West Asia Economic Corridor, a key plank of Beijing’s ambitious, multi-trillion-dollar Belt and Road Initiative (BRI).

Today, only Brazil, with its President Luiz Inácio Lula Da Silva caged by the Americans and an erratic foreign policy, runs the risk of being relegated by the BRICS to the status of a secondary player.

Beyond BRIICSS

The de-dollarization train has been propelled to high-speed status by the accumulated effects of Covid-linked supply chain chaos and collective western sanctions on Russia.

The essential point is this: The BRICS have the commodities, and the G7 controls finance. The latter can’t grow commodities, but the former can create currencies – especially when their value is linked to tangibles like gold, oil, minerals, and other natural resources.

Arguably the key swing factor is that pricing for oil and gold is already shifting to Russia, China, and West Asia.

In consequence, demand for dollar-denominated bonds is slowly but surely collapsing. Trillions of US dollars will inevitably start to go back home – shattering the dollar’s purchasing power and its exchange rate.

The fall of a weaponized currency will end up smashing the whole logic behind the US’ global network of 800+ military bases and their operating budgets.

Since mid-March, in Moscow, during the Economic Forum of the Commonwealth of Independent States (CSI) – one of the key inter-government organizations in Eurasia formed after the fall of the USSR – further integration is being actively discussed between the CSI, the Eurasia Economic Union (EAEU), the Shanghai Cooperation Organization (SCO) and the BRICS.

Eurasian organizations coordinating the counterpunch to the current western-led system, which tramples on international law, was not by accident one of the key themes of Russian Foreign Minister Sergey Lavrov’s speech at the UN earlier this week. It is also no accident that four member-states of the CIS – Russia and three Central Asian “stans” – founded the SCO along with China in June 2001.

The Davos/Great Reset globalist combo, for all practical purposes, declared war on oil immediately after the start of Russia’s Special Military Operation (SMO) in Ukraine. They threatened OPEC+ to isolate Russia – or else, but failed humiliatingly. OPEC+, effectively run by Moscow-Riyadh, now rules the global oil market.

Western elites are in a panic. Especially after Lula’s bombshell on Chinese soil during his visit with Xi Jinping, when he called on the whole Global South to replace the US dollar with their own currencies in international trade.

Christine Lagarde, president of the European Central Bank (ECB), recently told the New York-based Council of Foreign Relations – the heart of the US establishment matrix – that “geopolitical tensions between the US and China could raise inflation by 5 percent and threaten the dominance of the dollar and euro.”

The monolithic spin across western mainstream media is that BRICS economies trading normally with Russia “creates new problems for the rest of the world.” That’s utter nonsense: it only creates problems for the dollar and the euro.

The collective west is reaching Desperation Row – now timed with the astonishing announcement of a Biden-Harris US presidential ticket running again in 2024. This means that the US administration’s neo-con handlers will double down on their plan to unleash an industrial war against both Russia and China by 2025.

The petroyuan cometh


And that brings us back to de-dollarization and what will replace the hegemonic reserve currency of the world. Today, the GCC represents more than 25 percent of global oil exports (Saudi Arabia stands at 17 percent). More than 25 percent of China’s oil imports come from Riyadh. And China, predictably, is the GCC’s top trading partner.

The Shanghai Petroleum and Natural Gas Exchange went into business in March 2018. Any oil producer, from anywhere, can sell in Shanghai in yuan today. This means that the balance of power in the oil markets is already shifting from the US dollar to the yuan.

The catch is that most oil producers prefer not to keep large stashes of yuan; after all, everyone is still used to the petrodollar. Cue to Beijing linking crude futures in Shanghai to converting yuan into gold. And all that without touching China’s massive gold reserves.

This simple process happens via gold exchanges set up in Shanghai and Hong Kong. And not by accident, it lies at the heart of a new currency to bypass the dollar being discussed by the EAEU.

Dumping the dollar already has a mechanism: making full use of the Shanghai Energy Exchange’s future oil contracts in yuan. That’s the preferred path for the end of the petrodollar.

US global power projection is fundamentally based on controlling the global currency. Economic control underlies the Pentagon’s ‘Full Spectrum Dominance’ doctrine. Yet now, even military projection is in shambles, with Russia maintaining an unreachable advance on hypersonic missiles and Russia-China-Iran able to deploy an array of carrier-killers.

The Hegemon – clinging to a toxic cocktail of neoliberalism, sanction dementia, and widespread threats – is bleeding from within. De-dollarization is an inevitable response to system collapse. In a Sun Tzu 2.0 environment, it is no wonder the Russia-China strategic partnership exhibits no intention of interrupting the enemy when he is so busy defeating himself.

https://www.unz.com/pescobar/de-dollarization-kicks-into-high-gear/