Many respected economists and market analysts who favour the free markets approach concur that the world is heading into a new monetary order – what Zoltan Poszar of Credit Susse has called Bretton Woods III. Ignoring the bollocks being spouted by Klaus Schwab with his Great Reset and Joe (Dementiaman) Biden and his Build Back Better, we are heading towards a new economic reality that will see the collapse of the US$ as the default reserve currency, to be replaced not by any other fiat currency such as the Euro or the Renminbi, but by a system in which commodities are the primary denominator of value. Should this turn out to be the case we can expect an acceleration of the shift in geopolitical power from west to East.
“When this crisis (and war) is over, the U.S. dollar should be much weaker and, on the flipside, the renminbi much stronger, backed by a basket of commodities,” said Pozsar in his dispatch on March 7.For politicians and business leaders this will cause huge and complicated problems as the follies of their virtue signalling green agendas and net zero energy policies are exposed. For us ordinary punters it will mean a rough ride ahead:
- inflation will stay high, destroying the value of savings and pension funds.
- interest rates on our borrowings will be higher, rates on our savings will stay low
- Costs of food and consumer goods as well as energy products will be higher putting luxury goods beyond the reach of many people
- Unemployment may fall as manufacturing industry is repatriated.
- Virtue signalling policies such as the EU's paying farmers to let agricultural land return to nature (rewilding) will be abandoned as importing basic foods becomes too expensive
Due to the effects of rising commodity prices and the political instability resulting from the Russia-Ukraine war is starting to change our relationship with money from how we know it.
Currently the values of all major currencies are defined by nominal values in relation to the US$, agreed and regulated by institutions such as the Central Banks. In future the real values of the commodities must be a factor in determining values. Commenting on the Biden Administration's bid to freeze Russia out of world markets by expelling Russian banks from the SWIFT international payments system, Vyacheslav Volodin, the speaker of the lower house of the Russian parliament, as reported by the BBC this week, told the world: “If you want gas, find roubles.”
The Kremlin followed up with a bombshell that has hardly been mentioned by mainstream media:
The Kremlin also said Russia could start demanding payment in roubles for other commodities such as fertiliser, grain, metals and timber.
This means that Russia isn’t merely demanding rubles for gas and oil exports; it’s also going to demand rubles for commodities.
The ruble requirement begins today (1 April,) and will be rolled out across existing contracts over the next several weeks and months, according to the Russian finance ministry. Many European nations, notably Germany, depend on Russian gas to power their cities, nomes, offices and factories. The day that the gas tap is turned off is the day that Germany’s economy collapses and the nation is pluncged into chaos, suffering irreversible economic damage due to mass bankruptcies of German-based businesses.
European leaders have insisted they will refuse to pay for Russian energy exports with rubles. Such threats will be exposed as empty bluster the moment the lights go out and the machines stop working because the gas that fuels the power stations has stopped flowing. The exclusion of of Russia from financial systems means Russia is largely unable to use dollars or euros. So there’s no point in Russia trading gas for fiat currencies that it can’t use and doesn’t want. So long as the West’s sanctions remain in place, if Russia were to sell gas for dollars or euros, that would be the equivalent of giving away its natural resources for free.
It is worth noting that the rouble has already fullly recovered from its plunge in currency markets immediately following the imposition of economic sanctions by the West. While the corporate media was initially claiming Russia’s currency would collapse within days, as this blog predicted the opposite has happened. Russia’s currency is actually climbing steadily in value while the dollar, the euro and the yen are all losing value at a shocking rate.
So why should The Kremlin not simply order pipeline operators to turn off taps on the pipelines to Europe and sell to China, India, Pakistan, Bangla Desh, Indonesia, Viet Nam and Philippines (about half the world's population between them.)
It is already happening “Germany and Austria have taken the first steps towards gas rationing,” the BBC reported this week. Austria relies on Russia for 80% of its natural gas. Germany simply has to find Roubles.
And no country is going to give away energy for free. Especially not to a group of “unfriendly” nations that unleashed economic warfare against you in the first place.