The US Dollar Collapse is Happening Now! A Post Dollar World is Coming!
It would be an understatement this year to say that we are living in an interesting time in the midst of the weakening influence of the U.S. dollar. But while sensational, non-American, or cynical-looking, attacks are inevitable. I think more appropriate expressions will end there.
“We live in an era of dishonesty.”
I would like to speak frankly about the Fed‘s pivot argument, the inflation argument, and the slow global decline in the U.S. dollar in the new normal, where the historic bullish rate of gold has not yet begun. These views are not based on biased politics but on honest economics; strangely enough, they should still be important.
Open Dishonesty Is the New Normal
I have recently researched a series of reports presenting empirically evident lies that are relevant today, from CPI inflation rates to the Cleveland Fed’s 1% real interest rate myth, from official unemployment to the now ridiculous definition of recession (revised version).
But the recent high-rise lies are directly from U.S. President Joe Biden, the most prominent figure. So, Biden staggered to the platform and quickly read to the world that U.S. inflation was zero in July.
But in fairness to a president whose cognitive capabilities are clearly (and sadly, indeed) declining, Biden will not be the first president to lie for life, red or blue.
A History of Fibbing
They remember Clinton’s promise that it would be good for the American working class to join China in the WTO. But soon after, millions of people were deprived of their jobs in Asia.
And we must not forget the small war in Iraq and the invisible weapons of mass destruction.
It should not be ignored that both Bush and Obama (Geithner, Bernanke, and Paulson, too) affirmed that the billions of dollars saved by TBTF Bank (quasi-nationalization) and the Zero to Zero Inflation Money Printing (Wall Street Socialism) are “victims of free market principles” necessary to “save the free market economy.”
In reality, however, we have not seen any free market price discovery since QE1. Therefore, Biden’s announcement that there was no inflation in July is only one of the clear and optically (i.e., politically) clever lies in the long history of lies. That means inflation may have been low in July, but Tietmeyer did not say that this does not mean inflation was “low.”
Fed Pivot: Setting the Stage (Narrative)
However, the decline in the CPI in July created a new headline myth to justify the Fed’s further monetary easing by the end of the year (i.e., midterm elections) or early 2023.
As you can see below, fiction writers, data collectors, and Washington, D.C.’s tongue-in-cheek policymakers have already collected official “data” to justify the Fed’s move toward more dovish banknote printing and, consequently, the currency’s decline.
In addition to the slowing Consumer Price Index in July, the U.S. government has checked a pre-pivot check box to ensure the Fed can return to printing paper money from scratch to save the labor market and not the working class. Specifically, DC strongly supports the following “data points” and “stories.”
- Slowing of inflation expectations.
- The decline in online prices.
- A decline in producer prices (PPI).
- Drop in the crude oil price (fall from high price).
Has inflation reached its peak? Is this evidence that inflation is driving down consumer power, and thus price demand, and creating deflation? Has the Fed almost completed its anti-inflation campaign? My short answer is “no,” and the long answer is “no” when it comes to market, currency, and economic conditions.
It’s Going To Get Worse (More Pain Ahead)
A clear indication of further pain ahead, in other words, the reason for the Fed to shift from temporary hawks to permanent pigeons, is the ongoing credit crunch in the U.S.
The credit and bond markets are the most important market and economic indicators. In early August, the Federal Reserve’s quarterly Loan Officer Survey released a frightening and thought-provoking piece of news that the credit market was tightening.
Even if D.C. wants to pretend it’s not been in a recession for the past 30 years, it’s important to know that the credit crunch has always been ahead of the recession. Of course, hawks might argue that during the 1970s, when inflation was high, the bank’s credit crunch did not stop the Volcker Fed’s hawkish policy of raising interest rates.
However, let me remind you again that the United States (debt to GDP ratio of 125%) in 2022 was different from the Volcker era, which was 30%. So I’ll say it again. Unless the Fed believes that it has been ordered by Davos to destroy America directly, the U.S. cannot afford to continue with hawkish policies (like Volcker) – I think this is a fair belief, but I am (yet) not ready to accept.
Despite Powell’s fear of becoming like Arthur F. Burns, who has fueled inflation, and despite his failure to try and be a tough guy at the Fed throughout 2018, this time again, I feel that the Fed is waiting for weak economic data to justify a pigeon-headed axis to expand Q.E. rather than contain inflation, for all the explanatory points and reasons above (such as a decline in U.S. tax revenues in July).
Because the Fed’s Only Job is to Keep Uncle Sam’s IOUs from Drowning
The only way to prevent the U.S. Treasury from going down (that is, to prevent the deadly rise in bond yields and interest rates) is for the Fed to print more money and purchase Uncle Sam’s unloved bonds. And this can only be achieved by increasing Q.E., not by decreasing it in the future.
Of course, the money that can be made with a simple click of a mouse is essentially inflation, which is fatal to the U.S. dollar’s purchasing power. That is why gold is inherently superior to all inconvertible paper currencies in use today, including the world’s central currency.
However, with regard to gold’s rise, in addition to the economy’s ability to suppress inflation (the U.S. dollar needs to fall and interest rates need to fall in order to fight against the dollar), there are other factors outside the United States that are encouraging gold’s rise.
Little Trouble in Big China
Have you noticed that a large number of funds have been withdrawn from China? The capital drain had reached the level seen in 2015 when the Yuan was forced underground by 2016. Does this mean that F.X. jockeys should start short-selling CNY?
I don’t think so. In fact, the Chinese Yuan is holding up despite the massive capital outflow. But how?
China Is Openly Mocking the United States Dollar and Back-Firing Putin Sanctions
Putin’s outright betrayal of the war, financial inaction, and politically arrogant Western sanctions represent the biggest game changer in the global monetary system since Nixon closed the gold window in 1971. Furthermore, the Chinese Yuan is strong despite a large amount of capital outflow because foreign exchange reserves (that is, national savings denominated in overseas assets) are actually increasing rather than decreasing.
What? Why? Where is the money coming from?
The answer comes from almost all countries except the dollar-led Western countries. In other words, countries such as China and Russia have been desperate to leave the dollar for the past ten years but have done so in the wake of recent Western moves to weaponize the U.S. dollar by freezing Russia’s foreign reserves.
The exaggeration of short-sighted sanctions by the West gives the East the perfect excuse for a financial and monetary counterattack, and they are fighting to win the heated currency wars.
No Dollars, Thank You
Specifically, countries that want to purchase Chinese imports (goods) must convert or settle the local currency to renminbi in advance, rather than the U.S. dollar that SWIFT and the world once ruled. In short, the U.S. dollar is no longer the toughest man in the room or the prettiest girl in the dance.
This is becoming more evident with the headlines of Indian companies exchanging U.S. dollars for Asian currencies, China and Saudi Arabia signing energy deals outside of the increasingly diminishing (warned) petrodollar, and the Russian Central Bank considering buying currency from their friends, such as Turkey, India, and China.
Suppose a commodity like oil (up 30% since 2018) leaves a place like China or Russia. In that case, it will be available for purchase in local currencies (India, Brazil, Turkey), which will be converted to CNY. The procedure adds a large amount of China’s F.X. reserves (especially when oil prices are rising), thereby ensuring that China’s currency remains strong despite a large amount of capital outflow.
From Mono-Currency to Multi-Currency
In other words, countries such as Russia and China are taking the initiative in the import settlement from a single-currency world to a multi-currency world, even though Europe and the United States are trying to strengthen monetary power through sanctions led by the U.S. dollar.
Russia, whose foreign reserves have been frozen to the West, can purchase friendly currencies such as China, India, and Turkey with its energy profits and ruble and rebuild foreign reserves other than the U.S. dollar. In this way, as I have repeatedly warned (in articles and interviews) since February 2022, Europe and the United States have defaulted on themselves and the world’s core currency.
The Old World is slowly but surely making an irreversible shift from a U.S. dollar-dominated monetary system to a multi-currency, multi-FX price model. And as winter sets in, countries such as Britain, Japan, Austria, and Germany, which have been blind to the United States, will find themselves heating up with oil and gas, which are available outside of the old U.S. dollar-led system, and cold and watery for supporting the wrong policy. Will countries like the UK, Austria, and Germany bend or stay steady as energy prices continue to weigh on Western countries, especially the E.U.?
In any case, the U.S. dollar will clearly lose over time and will not be trusted again as a neutral currency. But whether you agree or not, you may still be asking. What does it have to do with the money?
Gold Is the Key to Everything
As more countries look to the East (i.e., Russia) from the West (and the U.S. dollar) to meet their energy needs, how will they procure rubles and renminbi to purchase oil, gas, and other products? After all, with the new import model after the sanctions such as previously mentioned, Turkey cannot buy Russian oil in the lira, and it is necessary to settle the transaction in the ruble first.
So, what kind of currency will Turkey use again?
From Petro-Dollar to Petro-Gold
Always a good gold analyst, John Brimelow gave us very clear tips and answers. Turkish gold imports reach close to 70 tons, an increase of 44% from the previous year, easily reaching the level of 300 tons a year earlier. In other words, Turkey may be dumping the U.S. dollar and buying gold at a deliberately manipulated COMEX/LBMA price. And Turkey can sell that gold to the Russian central bank and exchange it for the “bargaining price” ruble needed to buy Putin’s oil.
Given that the underlying oil market is close to 15 times that of gold, one can imagine how further oil-gold transactions such as those previously mentioned will affect the price increase of rare assets such as gold.
See the Sea of Change
See how the U.S. dollar is gradually losing its luster. Let’s see why gold is gradually becoming brighter. Do you know that the US-led sanctions were the first political and financial blunder since Kamala Harris tried to locate Ukraine on the map?
Why was the price-fixing of gold by BIS/COMEX/OTC earlier this year the perfect (and man-made and legal fraud) timing needed for other countries to keep gold cheap to buy?
Questions of Rhetoric
Isn’t it because Saudi Arabia is more interested in gold than the U.S. dollar that it is currently refining gold in its own country? Perhaps this is also a reason for countries that are not very friendly to the U.S. (i.e., Nigeria and India) to launch bullion exchanges and start gold trading.
Perhaps the new role of gold is not the reason (from 502 tons to 56 tons) why BIS, the largest player in paper pricing of gold, has eliminated nearly 90% of gold swaps in a year. And perhaps the stubborn significance of gold goes further to explain why JP Morgan and City, the two largest gold price operators in the U.S. in futures exchanges, are grotesquely expanding their gold derivatives books (they own 90% of the gold of U.S. derivatives banks) at the same time that BIS is clearing the swap.
It’s simple. To keep the natural gold price neck a little longer to accumulate the same things even before the currency system they led to ruin finally collapses.
Gold’s Bull Market Has Not Even Begun: Honest Not Sensational
Given our dishonest times and the mechanization described above, it would not be sensational to remind conventional investors of what many gold investors already know. Gold is the most sincere and loyal when a dishonest and dishonest market breaks down. As Egon and I have warned for years, Hedge fund managers and other candid analysts are anticipating a big pain in the market, collectively and already.
The big guys are now short-covering U.S. stocks.
Whether it is revalued by oil or by an inconvertible paper currency that is increasingly worthless, gold can easily reach levels that current investors cannot imagine. After Nixon’s fiasco in 1971, gold soared 400% in just one year, from 1973 to 1974.
Don’t Watch the Hen House, watch The Foxes
TBTF Bank has no moral in me. I have researched for years about their public injustice. Since Larry Summers replaced Glass Steagall with a casino and a speculator for bank employees, what the big banks do is neither just nor fiduciary. Ironically, however, it is reasonable to say that even these banks will buy up more physical gold (at present repressed or unfair prices) as their world-building structures collapse with systemic crimes. And if JP Morgan and City are preparing, you need to prepare too.
After all, better a fox than a hen, no?
By summarizing this video article, we can see that there are several reasons for the continuous appreciation of gold prices and that this is not just simple market speculation. In addition, I believe the current gold buying spree by many large banks is just the beginning and that we have not yet seen the true potential of gold. In other words, the gold bull market has not even begun.
Just like gold, silver can act as a store of value. But it’s more than just a safe haven asset. Silver is widely used in the production of solar panels. It’s also a critical component in many vehicles’ electrical control units. The industrial demand — plus the hedging properties — makes silver a very interesting asset class for investors.
In addition, you can watch our Crypto videos to keep up on the high fundamental cryptocurrencies that provide real-world utility, like XRP which will play a pivotal role to resolve the dollar collapse and the global liquidity crisis of the current monetary system.
High fundamental cryptocurrencies with real-world utility are going to be the protagonist of the new digital era of the financial system that is about to rise because of the technology involved to create powerful gains in financial efficiency, equity, and inclusion.
So, if you are still on the sidelines, it may be time to reconsider your investment strategy.
US Dollar Collapse
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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.