By Godfree Roberts – an early extract from his weekly Here Comes China newsletter and posted with permission
WILL RUSSIA DESTROY THE US DOLLAR?
Farewell to Inordinate Privilege
Earlier this week, Russia announced that countries on its Unfriendly Nations list must pay in roubles for its gas. Within hours, the rouble regained its pre-embargo value on international markets.
De facto, the rouble also established itself as a reserve currency in the EU, as is the petrodollar in the Middle East. Having renounced coal and nuclear power, Europe left itself with no alternative to Russian gas.
But wait, there’s more on the currency front: next week, Russia and China will offer frictionless access to the world’s largest market, via cheap, secure, trackable, instantaneous transactions that are free of government manipulation, currency fluctuations, embargoes, and sanctions.
Here’s the backstory: after helping America out of the GFC, PBOC Governor Zhou Xiaochuan observed, “The world needs an international reserve currency that is disconnected from individual nations and able to remain stable in the long run, removing the inherent deficiencies caused by using credit-based national currencies.”
Zhou proposed SDRs, Special Drawing Rights, a synthetic reserve currency dynamically revalued against a basket of trading currencies and commodities. Broad, deep, stable, and impossible to manipulate.
Nobelists Fred Bergsten, Robert Mundell, and Joseph Stieglitz approved: “The creation of a global currency would restore a needed coherence to the international monetary system, give the IMF a function that would help it to promote stability and be a catalyst for international harmony”.
Dr. Putin and Mr Xi wasted no time.
2012: Beijing and Moscow began valuing their currencies against an international currency/commodity basket.
2014: The IMF issued the first SDR loan
2016: The World Bank issued the first SDR bond
2017: Standard Chartered Bank issued the first commercial SDR notes.
2019: All central banks began stating currency reserves in SDRs
Mar. 14, 2022: “On April 1, China and the Eurasian Economic Union – Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan – will reveal an independent international monetary and financial system. It will be based on a new international currency, calculated from an index of national currencies of the participating countries and international commodity prices”.
SDRs are inspired by John Maynard Keynes’ invention of a synthetic currency that derives its value from a vast, global, publicly traded basket of currencies and commodities. Utterly resistant to manipulation it is as stable as the Pyramids.
SDRs pose an attractive alternative to the toxic US dollar for the EAEU, 143 BRI member states, the Shanghai Cooperation Organization (SCO), ASEAN, and the RCEP, none of which counts the United States as a member and all of which count Russia as a full or correspondent member.
Adding amusement to this development is the fact that the EAEU, BRI, SCO, ASEAN, and RCEP were already discussing a merger before the Ukraine operation.
I predict a currency mutiny.
Godfree Roberts wrote Why China Leads the World: Talent at the Top, Data in the Middle, Democracy at the Bottom, and publishes the newsletter, Here Comes China.
Dmitry Orlov has a good article on this on his new Boosty site. Perhaps he will allow Saker to repost it. I added this comment:
After 30 years of glue sniffing euphoria, the US is now crashing. And when it realizes it is cutting off its limbs to keep its jaundiced organs alive, it will have to make major, and costly, changes in living arrangements. Mass transit in lieu of suburban sprawl. No more bloated military. A return to local industry and farming. Far more labor intensive cooperatives that actually do things and make stuff. Regional cultural and quasi-sufficiency. The end to industrial entertainment and woke academia. A resurgence of a proletariat based religion of hard work and respect. A return to classical literature and art. Oh, how to pay for it all on NO budget?
“We have deep pockets,” say the SCO and the RCB. “May we interest you in a loan so you can link up to the BRI via the Bering Strait and Russian Alaska? Our polite little green (and yellow!) consultants will cheerfully assist in restructuring your economy for you. You can gladly pay us Tuesday for an infrastructure today. Can you grow bananas?”
Coming to a hegemon near you; the White Man as Burden.
Thanks for the quotes from Orlov’s article, good to have a laugh at the start of the day.
I am sure the SCO/RCB will provide excellent, personalized, customer service to all of those in need, including but not only, the decaying West.
The White man as burden?
Russians are a burden?
(I know allowing myself to be trolled means I lose, but… ;-)
There will be no BRI link via Alaska. I suggest you spend some time there to examine the terrain.
Ships are far more cost efficient, particularly if they move to a hybrid wind power model.
JonLX: Link please. I can’t find such a site.
Thank you JonLX,
I read your comment on Club Orlov this morning and copied it for a friend.
Word gets around.
“I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character. I have a dream today.” — Dr. Martin Luther King, Jr, “I Have A Dream” speech, The Lincoln Memorial , Washington DC.
Appreciate your post JonLX. Orlov is right, American would soon need to shape up and put up to earn their livings. It ain’t gonna be easy. They have, over the past 30-40 years, grown too dumb, too fat, and too encumbered by lawyer-engineered regulations that kill society efficiencies for the purpose of funneling money to the lawyers and other societal parasites. The climb out of their abyss is gonna be long, hard, and frustrating. They will be competing against a developing third world that has been doing this for a few decades now, and thus more adroit at developments of earning a living. Good luck, America.
The danger is, Americans would give it a trial, found the going too hard, and decide to use their nukes, thinking wiping out the world would make it easy to dominate it again. They are too dumb by now to realize the nuking would wipe out themselves too. But such is life. We’ll just have to hope them obese American won’t resort to such folly.
Not all Americans are obese.
Not all Americans are dumb effs.
Despite my lack of enthrallment with American society and my appalledness at American “culture,” I do believe there is a hell of a lot DIY ingenuity and initiative out there in the garages and basements and pickups of the USA.
Yeah Taffy there were garage/basement hacks who created ideas and industries in our nation, and I hope they are still around. My own financial well being is dependent on a prosperous America. But even though their legends still linger in our press musings and academic story telling, I haven’t seen much of their stirring for a while now. The disappearance of these geniuses takes a while to show up in social conversations and awareness. I’m afraid the geniuses of yester-years have learned to go into finance and legal swindles to sit on their butts and still screw the rest of us enough to support their high lives, instead of hacking in basements like rats to hope for breakthroughs. The hero of America today is one who makes big bucks without having to lift fingers.
I personally know eight highly talented Physics, math and Biology majors (half of them with PhD and even postdoc experience) who ended up being seduced into finance. Three of these i have occasion to meet now and then (they are millenials, BTW), and thier conversation has gotten really boring. Nothing on the professional front and what they do talk about are a hobby here and there, a child or two making their way through nursery school, and travel plans. They are stuck in metropolitan US where things were really tough during the Covid years.
They seem envious of my professional, rather eventful life (I am in high technology and science research) and grill me, who is definitely older than them. I encourage them to look for a ‘way out”, perhaps through that hobby of theirs, perhaps put all that money they earned into starting something different and innovative. They appear to be taking it in.
perhaps there is hope for at least some of them, if they can extract from the merry-go-round and the addiction to money=success mentality. Oh yes, forgot to mention – two of them are on anti-anxiety medicine, per their disclosure. The third is on something, though I’m not sure what. I tell them you can get a high from geopolitics and may be deep study of history, that is if they can get over that anxiety thingy.
“Our polite little green (and yellow!) consultants” has me rolling around on the floor.
“it will have to make major, and costly, changes in living arrangements”
The USA will collapse and splinter into warlordism.
Think “The Handmaid’s Tale”
“there’s more on the currency front: next week, Russia and China will offer frictionless access to the world’s largest market, via cheap, secure, trackable, instantaneous transactions that are free of government manipulation, currency fluctuations, embargoes, and sanctions.”
Wow. Next week. Head spinning yet has been in the works for some time.
“On April 1, China and the Eurasian Economic Union – Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan – will reveal an independent international monetary and financial system. It will be based on a new international currency, calculated from an index of national currencies of the participating countries and international commodity prices”.
Where does this quote originate?
Yeoww. Will commodities factor in to the new currency basket, precious metals in particular?
The link to the quote got stripped out in transmission:https://smoothiex12.blogspot.com/2022/03/this-is-important.html
Since I have followed SDR development since 2009, I put two and two together…
Many commenters are pointing out that SDRs are now administered by the IMF, which is a tool of globalist interests. I don’t think that is the intent of the system designed by Sergey Glazyev.
The article in which I first read about the new exchange system (Pepe Escobar?) stated that the basket of commodities would be referenced in Yuan. Countries that want to participate in the new system will use their own currency relative to its value in Yuan. The new system will serve as a clearing house for settling payments for goods, completely outside of SWIFT.
The trillion-Yuan question is, will the US tolerate this, or lash out in an irreversible way to prevent it? Such a system takes away their power.
No, the vampire of lies will not tolerate it. They will nuke the world first, I’m afraid……..
Answer: We can expect the US/UK to react in their usual WOKE fashion.
To support mid 20th century German political enthousiasts one has to be a mid 20th century German political enthousiast first. I think we are witnessing Der Untergang 21st century style
Edward – The “owners” aka tptb who are driving the deep state to do the evil they have been doing for so long do not give a flying fart about the US. In fact they have nothing but the utmost disdain for 99% of americans, 99% of the global population for that matter.
The “owners” can easily transfer their trillions into whatever the universal units of wealth may be, probably already have to a large extent. They can even take a big hit and still walk the planet as Gods amongst mere mortals.
What the “owners” don’t want is all of the beautiful places to be spoiled by fallout or useless eaters.
The people who will suffer most, those who will die off at an exponential rate do not have access to “The Button”, in fact they have zero recourse as they have all been brainwashed (mass psychosis and all…).
The US will not go down without a fight. How much damage the people in power will do before they get purged will depend on many factors. Right now we can see that the Pentagon is successfully holding back the warmongers, but it may not be able to do so in the future. The media/congress/academy will promote war until the very end to save their own asses, and the military folks will opose them for the same reason (they are the ones who die first) . These people are war criminals and they know it, so they will fight to hold power until the end.
The real question is how the masses will behave. If we see strong enough pressure from mass movements, it will force the US elites to look inwards and do something about it. Last time there was a genuine threat to the system, the elites where forced to make concessions through the New Deal. The good old “give away the rings to keep the fingers”.
The Military/Pentagon can always take matters into their own hands, if they are cohesively united against the current direction of travel then.they need to getvrid of Biden et al and start calling the shots for a while. Its been coming for some time and the ongoing woke culling of patriots from the US military could be the last straw.
When the agents of the controlled opposition offer you a solution for the problem the transnational finance has created. you’d better wake up.
What a good idea! Put the IMF in charge of the world currency! By the way, who own the IMF?
It will be easy to see whos interests are promoted by this new basket of currencies. Just looking at the ratio commodities/credit. Smaller than 1 will mean bankers.
“On April 1, China and the…”
Serait-ce un poisson d’avril?
Peut-être. On verra la semaine prochaine…
Deepl-translate from mod:
Maybe. We’ll see next week…
Can someone give me one single reason, why the IMF wouldn’t abuse the power to control all currencies in the world? I mean, here we are: Complaining about the globalists trying to enslave all of mankind, killing half of it, and turning the rest into literal mutants…. all while perhaps accidentally starting WW3 in the process. And then we turn around and entrust those demons with deciding the exchange-rate of all currencies in the world? And having the power to…. caugh…. freeze the SDRs of any nation in the world?
This all sounds eerily similiar to the crypto-situation: Yeah, crypto could liberate money – decentralized and private crypto that is. Crypto managed by a central government instead is the total opposite: Devil incarnate. Likewise, an index of currencies and goods sounds all great and wonderful, until you add the part where a bunch of global dictators decide the exchange-rate of everything – instead of free markets doing their supply and demand thing.
Am i missing something here? If yes, go ahead and educate me.
BOFH Who are these globalists you are talking about? I don´t mean their ethnicity!
I share your distrust. I am suspicious if anything characterized as “unique and global” and especially of anything that the IMF and WB heartily approve of and will be involved in.
The IMF is Washington’s tool for global domination in the financial sphere, nothing more, nothing less. IIMF “loans” to Ukraine are a perfect proof of who controls the IMF. If you think it’s only a consortium of bankers, loaning out money, here’s what they did. The IMF had 4 conditions for loaning money to any country:
1. The borrowing country could not have a civil war going on. The IMF didn’t want to loan to the losing side and not get its money back, and that money would fuel a deadly conflict.
2, The borrower had to provide the IMF with a plan for how it would pay back the loans. No plan, no loan.
3, The plan presented to the IMF had to be credible, not merely unrealistic scribbling. Unicorn plans gets nothing.
Since 2014, the IMF “loaned” billions of dollars to Kiev, where the money was promptly stolen by the =oligarchs.
All three of these IMF rules were violated and AFAIK, none of the IMF delegates filed a formal complaint. I put loaned in quotes because the IMF knew the money would never be paid back. The billions were intended to sponsor the Empire’s attack on Russia.
During the important years of 2011-2019, he IMF was headed by Christine Lagarde, a French lawyer who specialized in labor law, from the corporate side of course. Not a banker. In 2019, her replacement was a politician from Bulgaria.
Supposedly the IMF is a UN organization, so maybe that’s why the IMF is even being mentioned in the context of replacing the US dollar. But the UN is rotten to the core and also it is controlled by Washington – and has been for decades because only Washington would pay the UN’s expenses. The UN needs major renovation or outright replacement. The UN should start with moving out of New York City because the US has egregiously violated the Host Agreement by refusing visas to diplomats from Iran and Russia. The UN must be moved to a neutral country or, unthinkable as it may seem to some people, simply abandoned for a new organization. The more honest and useful UN organizations, such as the WHO, ITU, and UNESCO, could find a home in the new organization.
I said there were 4 conditions and only listed 3. Sorry. I think there was a fourth condition, but if so, I don’t remember it.
I see your sense of humor is working smoothly today. The WHO being a more honest and useful UN organization? After their appalling behavior with the Covid scam, being in the pocket of the Gates foundation & having a criminal as its leader surely you jest.
Cosimo: Yes the IMF did ‘give’ money to the Ukraine and it was promptly stolen. That leaves the people of the Ukraine responsible for the debt. That is how the IMF gets resources of the indebted country for pennies on the dollar.
WTF you talkin’ about? The WHO is honest and useful? Where have you been the past couple of years?
Worse even. Lagarde is an American-French element of these organizations. Nothing good can be expected of her.
The thing with Nobel prize winners is that they are part of the system by definition. I mean, they are chosen by a committee in Sweden. Also the so called Nobel prize in Economy was invented by a Swedish bank, with obvious intentions to use Nobel’s name to give clout to their ideas.
Regarding the role of the IMF in international finance, there is a simple explanation: western “economists”, and intelectuals as a whole, cannot think outside the narrow bounds of the system. So even when they see the problem, they can only think inside the current power structures to find solutions. By that perspective, it is not that the IMF in inherently evil; they just don’t know what they are doing, there are some corrupt people there (bad apples), etc. Same reasoning goes for other institutions like the Pentagon, WH, and so on. Basically, it’s the “if only the people in power knew what they are doing” reasoning.
As for the IMF playing a positive role in the international finance system, I’d say the chances of that happening are zero. It’s kinda like saying “the Azov battalion could help evacuate civilians out of Mariupol”; I mean, they COULD do that, but they won’t.
At this point I’m fairly certain that the durable solution will come through new institutions, created by new players, instead of reforming the old ones. It has become clear that western based international organizations cannot be trusted at all, even those that claim to be neutral (like sports federations). Until those new institutions are stablished in the international arena, we will be seeing a lot of chaos and drama.
What is apparently being offered on April 1 is not just a new currency but a new financial system – presumably a way to conduct international trade without worrying overmuch about the shifting values of the original currencies.
Presumably initial trading will be largely commodity based and as countries won’t need to settle debts in dollars they will replace dollar reserves with the new currency (if that is how it works). This will create a surplus of dollars which may well become devalued because of this.
Presumably this will lead to more inflation and possible action by the Red such as more rapid hiking of interest rates – can America afford, say, a 5% increase in interest rates on her colossal interest repayments?
Would war be cheaper?
Wonderful rundown! As a long time subscriber to Godfree’s excellent newsletter, I have been looking forward to the announcement on 1 April with great anticipation. Thank you Saker! While not particularly enamored with your Russian Orthodox Exceptionalism it gives me a different perspective–and Michael Hudson, Pepe Escobar, Godfree Roberts and Max Blumenthal are the best line-up of contributors on the web. Bravo for exceptional judgement.
Checking the market exchange rate history (https://www.xe.com/currencycharts/) shows:
RUB/EUR Feb 8 : Mar 24 86 : 108
RUB/USD Feb 8 : Mar 24 75 : 98
But the article proceeds to argue from the following statement:
“Earlier this week, Russia announced that countries on its Unfriendly Nations list must pay in roubles for its gas. Within hours, the rouble regained its pre-embargo value on international markets.”
The beginning statement therefore seems to be a gross exaggeration, which unfortunately casts doubt on the opinions which are argued in the piece.
We just got 110 RUB / CHF this afternoon, down from 120 a week ago. It was around 80 just before Christmas, so recovery will take a bit more time
The EU is buying about 700 million EUR of gas per day. They will shortly need to pay in RUB. The currency will go through the roof, in my humble opinion.
Moscow share prices are doing extremely well on the reopening of the market with many shares up 18 percent or more.
I think we need to hear more about Russia’s gold reserves. For the last two days there has been talk coming out of first, the US and now today the UK, about targeting Russia’s gold reserves.If what we’ve been told is true,that Russia’s gold reserves (or at least most of them) were safely tucked away inside Russia,what could they be talking about. The only way the West could be able to target Russia’s gold reserve,is if,on the contrary Russia’s gold reserve was instead somewhere where they could target it. If that is the case,then Russia has more than a little problem with bad economic management. And far more than some reform will be needed.A full out purge and restructuring would be called for.
They can’t touch them physically. They want to put sanctions on anyone, who buys Russian gold, which could scare many investors away. But I don’t belive Russia wants to sell gold to West anymore and there will be plenty of buyers in other countries, who don’t care about those sanctions or they will launder it through some middle man.
Also Russia can put some counter sanctions if needs be.
Good glad to hear that answer. I’d think a nice PR statement, would be to see Putin or some other top leader make a tour of those reserves in Moscow with a smile on their face,and give the V sign,lol.
Gold Production by Country
China 368 tons/year
Or they just sanction countries that buy anything from Russia with Gold. The US is already trying to put it through the Senate.
Sadly it will scare off many good traders with Russia methinks. However, with time , countries will launder money and lie to the US to still trade with Russia.
The wicked witch built a house over the stored Russian gold and then put it on the balance sheet at the State Dept.
Once Hillary was clued in about the coming leverage disaster, she burnt the paper files, wiped out the computer files, clean with a cloth I recall, and left the talk in place.
Now add some years of interest, and some how the problem was magically going to go away, along w/some recently missing people, and one can see where this is going, or maybe not, memory’s are short around here.
IMF rules say than no loan’s are given to states involved in armed conflict, and yet a 1 billion $ loan has just been announced to Ukraine. I wouldn’t bet on IMF being fair and non manipulative.
The graph says all we need to know. The free ride is obviously threatened. Long live meaningful work and human dignity and joyful interaction. Lets rally behind the oligarchs who ask for immunity and offer to give it all back to us. Oh wait we already tried that.
@ Godfree Roberts
I predict a currency mutiny.
Thank you for your concise and clear article.
The currency mutiny is already happening, however, we could be witnessing the onset of what could be called “The Dollar Wars Era,” the desperate West fighting to perpetuate the exploitative financial system they imposed on the planet after WWII. They are now defending their Eurostan protectorate by throwing a wrench (Ukraine) at the rapprochement Russia/Eurostan, while trying to keep the ME from not dumping the dollar.
The currency mutiny will not be a free ride.
Michael Hudson’s comment at Naked Capitalism sees a clean slate where dollar debts in the third world are null and void.
“Your explanation was wonderfully clear, Yves. I’ve circulated it to my UN colleagues after a morning meeting with the Near East and India for a meeting. They are seeing dedollarization as a means of de-indebting themselves, especially in view of the rising energy and food prices that will make payment of their foreign debt impossible.
The IMF is trying to give them SDRs to pay dollar bondholders, but the representatives I spoke with today look forward to a Eurasian-backed alternative set of institutions to the IMF and World Bank, starting with a kind of Clean Slate. That was their motive for inviting me to the meeting.
The amazing thing is that it is the US itself that has chosen to dedollarie the world — and perhaps with it, its dollarized debt burden for the Global South.”
It actually started in 1913, then another stem was taken in 1934, another step was taken during, 1944 Bretton woods, and little after WWII with the introduction of disposable consumerism and planned obsolescence, which greatly contributed to pollution, then another step in 1971 with the final abolition of the Gold Standars, then came the secret accord of 1973 establishing the Petrodollar, then with Clinton easing the banking laws, after that I was all Wall Street money, the epitome of Keynesian economics and domination of the economy, but also planted the seeds of its own demise which is what we are at.
Without the petrodollar and international reserve primacy, the US will not be able to create so much money to pay interests on its debts and pay other obligations, which will impact in the biggest scheme ever, the banking reserve, and without that all the liabilities will sooner than later have margin calls that can not be paid. For the first time the US dollar will have inflation and devaluation, since commodities will be alternately priced.
This is the need of the house of cards which is the US economy.
Mars is right. Go back to a Gram standard where all Nations issue banknotes based on units of precious metals. The Founding Fathers of the USA actually made precious metals the “only money”in their New Republic. Vladimir Putin’s Government is Now toying with this clear and effective Monetary Procedure ; brought on ….as a result of Provocations by Talmudic controlled Western Countries ; who are attempting to steal Russia’s resources.
Since we know that the West/US control the IMF and World Bank already. How can their involvement be a good thing.
SDR empowers the IMF and World bank instead of the US FED, transfering power from US elite to global banking oligarchy who indeed wanted to destroy the usd and were prevented to do it in the last 4+ year by Trump policies..
SDR is still mostly based on USD.
Anyway, everything going to plan for the Davos crowd.
National currencies have to be used, as used to be the case 80 years ago, need to cancel reserve currency.. this way national trade balance are forced to be at equilibrium.
The U.S. govt media complex is always accusing China of ‘destroying the international order’ by creating alternatives to the dollar. But the U.S. is the only country that has weaponized their currency to impose trade embargoes on unwilling countries.
Head of the INternational Energy Agency, tarted, that Putin’s demand of payment for gas in Rubles is a security threat.
Poland has stated that they are not willing to pay in Rubles
The rest except Moldova an Hungary, are considering it but they would still want to pay in Euros.
Well I say they have the need, Russia has the supply, Russia is the one that makes the decisions, that already said that they would abide to their contracts, but with some contracts the demand to pay in Rubles would not violate those contracts.
They have to pay and they have no choice.
I commented this move to my wife and friends a couple of weeks ago, I thought that Russia could play that card, they all told me I was crazy. So I am going to call them later and have this discussion with them again and ask them if they think that the EU will bend the knee. I believe they will have to bend the knee, by either negotiating end of some sanctions and return of Russias reserves, or pay in Rubles.
The countries that did not sanction Russia can pay in their own currencies, I hope this applies to everything else, which will help southern economies and damage Western economies, so it would be great seeing a loaf of bread selling for 2 dollars in the US and 10 cents in Mexico, as an example
No. It’s back to gold.
“Such absurdity: synthetic reserve currency dynamically revalued against a basket of trading currencies and commodities. Broad, deep, stable, and impossible to manipulate”
This is the utter opposite of what it claims to do. Such an abstract concept cannot possibly in any way back a currency.
Just define 1 unit of drawing right as a gram of pure 99.99 gold: end of. No one can manipulate this definition.
The underlying property has got to be finite so that it cannot be reproducible ad infinitum. It’s got to be unambiguous so no one can fiddle with definitions and shades of quality. This work has all been done by the classical liberals. BTW absolutely no BS cryptos.
I strongly disagree with the statement “impossible to manipulate”. If it is created by humans it will be manipulated by humans. It is only a question of the degree of difficulty, if it is too easy anyone could do it.
It is in the nature of many humans to want to live an easy life off of the labour of others.
Wouldn’t this IMF arrangement contradict some financing arm of nato policy.
I’m sure there would be two cats not sleeping w/each other somewhere in the world.
SDRs? You are aware I assume that was the idea IMF has been promoting for a long time. This begs the question who controls IMF? Neither China nor Russia.
The IMF always makes its loans to needy countries in US dollars.
The only way the borrowers can pay the interest is by earning dollars from their export trade.
The IMF loans are conditional on privatizing state assets and impoverishing the borrowers workforce.
Recommended reading “Confessions of an Economic Hit Man” by John Perkins
There is one question that has kept the USD on top. It is the question asked, to give one example, by drug lords who’ve accumulated obscene amounts of wealth. What currency to you store that wealth in? Do you for instance, buy Argentina or Turkish currency? I do not insult either nation, but both have been subject, possibly manipulated, into massive falls in value. So, if you want to take a bunch of bills and bury them somewhere for a rainy day, these would not be good choices.
The choice of drug lords and oil sheiks around the world has been the US $100 bill. They feel like they have some confidence that their money will still be valuable when that rainy day comes.
The day that question gets a different answer, the day that the people with obscene amounts of money decide that perhaps the $100 bill is not the safest place for their wealth ….. that is the day the dominance of the dollar ends.
On a related note, the term ‘petrodollar’ is often quite misused. It actually has a very specific meaning. After the oil price hikes and the Arab Oil Embargo of the early 1970’s, the USA had a problem. Now that they were having to send large amounts of dollars abroad for oil, their currency was becoming unbalanced. So, they made a deal. They made a deal with the Saudis and other oil sheiks for them to come spend those dollars back in America. They bought weapons. They bought American real estate. The bought American securities. This was the original meaning of the petrodollar. It refers to this oil money that had flown abroad returning to the USA. These were important arrangements for US power negotiated back by the likes of Kissinger.
It is this original definition of the ‘petrodollar’ that is important today, with the recent news that the Saudis will begin selling oil to the Chinese on the basis of Chinese currency and not dollars. This should have both the impact of decreasing the flow of ‘petrodollars’ back into the USA, thus weakening the balance of trade and the strength of the dollar. It also has the effect of signalling future intentions, in that the oil sheiks now seem to see a future where holding a big bunch of US $100 bills may not be the wisest thing for an oil sheik to do.
If the USD is losing the oil sheiks, then it is losing a key element of support which has made it the world’s reserve currency. And it will correspondingly increase the power of the drug lords in keeping the USD on top. If the Americans lose the support of the drug lords, then they could be in real trouble.
SDRs are a gimmick to keep the debt and USD party going.
To make the house of cards larger before it topples.
The fix for any currency in the old days to was set a bank reserve ration to limit the money multipiler effects.
But that was removed about 30yrs ago by Greenspan. And this is why there is a problem in the private banking system in the west. Govt CB money printing is another problem and just adds to that.
A 10% min reserve requirement for private banks can stablize the value of money.
But it stops the eco expansion.
trying to think this though:
If Russia will demand payment for gas and oil and coal (and maybe metals, etc) in Roubles, then it would seem that the buyers will have to establish Rouble accounts with Russian banks – so if the buyer pays Euros or Dollars for those Roubles, who will they pay – who has Roubles who will be able to use Dollars or Euros which would have to be in an account in a US or European bank ? or would the buyer bring gold to the Russian bank and receive payment in Roubles that are deposited to their bank account, from which payments to Gazprom would be made ? need help understanding this plan
For those who are wondering how Ukraine could have a Zionist problem when thier current president is Jewish, have they stopped to ask how the US could have a white (police) against blacks killings when their president (Obama) is a black man?
Weird and irrelevant comment in this forum.
SDRs are another centralization tool. The IMF was cruel in the 90s to the Majority world. What’s wrong with a multipolar currency with local diverse components. MR Xi likes Central control.
Can regular people store their money in the bank in SDRs and then withdraw in local currencies? Or is this only for governments and bankers?
The bancor was always a good idea, but in the post WW2 environment Keynes had no chance in Hell of getting it accepted.
It was the US dollar or it was nothing.
And now the bancor is going to replace the dollar, only it’ll be called the SDR.
Well, better late than never, but history is going to look back on these last 80 years and wonder what on Earth everyone was thinking when they pegged their future and their fortune to the benevolence (hah!) and wisdom (hah!) of Washington.