by Bill Holter, JS Mineset:
SWIFT is the U.S. clearing system for payments, both internally and globally. To this point in time, the entire world has relied on SWIFT to settle the vast majority of trade and transfer payments. It was created, administered, and controlled by the U.S. since 1973 (same year as the “petrodollar” was launched) and stands for Society for Worldwide Interbank Financial Communication.
A few years back, Washington began making threats versus Russia that they would be sanctioned and cut off from SWIFT. We said at the time and still maintain to this day that using SWIFT as a threat against Russia (or any nation for that matter) was a grave error. We posited that threatening Russia with a cutoff from SWIFT would force them to create their own system which would ultimately attract other trade partners as users. It seems this is exactly what has happened, yet no one in Congress seems to know? I say this because they now discuss “the mother” of all sanctions against Russia.
As a response to the last several years of threatened and actual sanctions, we believe Russia has prepared for this moment in at least two ways, (and probably more). We know Russia has sold off ALL of their US Treasury holdings and replaced them with other sovereign debt and increased their gold holdings. It is also believed they have created their own settlements system. Have they incorporated blockchain?
Also, much recent chatter has arisen re China working on and testing their own digital yuan currency. I would love to know if this would include gold somehow backing on a ratio basis? Should China come forth with a digital yuan (especially with gold backing), what would that mean to dollar hegemony? As an aside, what would it mean to the existing crypto world?
As for crypto, how can anyone with a straight face call anything that drops in value (versus unbacked fiat) by 50% in just 60 days? A “store of value” they told us? We claimed and maintain that cryptos had an absolutely perfect accounting system of strictly limited (in most cases) supply of “nothings”. A speculation where many millionaires and billionaires were created? Yes! A currency that would be used to transact and a sound store of value? LOL!
So here we are, watching the US poke the Bear in their own backyard and threatening them wait for it TO IMPLODE THE US DOLLAR by our own actions! Does Russia invade the Ukraine? I don’t know but my opinion is they do not need to for several reasons. All they need to do is sit back and wait for the idiots in Washington to throw the limp wristed punch of shutting them off from SWIFT. They will then have absolute cover for releasing and offering their own settlements system to the world?
They also have a second punch since they are Europe’s largest supplier for energy. Will the Europeans respond to Russia demanding to be paid via their own settlements system by saying “no, we would rather use the dollar so we will freeze and close down our factories”? Fat chance! Would these events also push China forward with a crypto yuan? Can you envision any other timeframe more favorable?
To wrap this up, sadly I believe the idiots in Washington are now too far down the road to back off and leave Russia, Russia, Russia alone. It is my opinion, Washington has their hands on the guillotine pin. The only problem though, is that it is the dollar itself strapped into the gallows, and the blade will come down directly on the U.S. Treasury! Should Washington move forward, they will give cover to any nation or even corporation who might like an alternative to the dollar. Which means less demand no matter how you slice it. Can anyone explain to me how the Treasury will finance multiple Trillion borrowing needs with dollar demand sinking like the Titanic? Anyone who answers “it doesn’t matter, the Fed will be the buyer of last resort”, has not been paying attention. I could say this is for all the marbles, but unfortunately the world does not play for marbles
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