Zero Hedge – by Global Intel Hub
Currency Central Holdings Inc. — 4/21/2022 — Knoxville, TN — For the first time since 1971 the US has defaulted on it’s banking obligations and the Petro Dollar system marking ‘peak Dollar.’ While only a handful of public figures have a handle on the situation, we are concerned that the White House is spreading dangerous misinformation on how Currency Markets work so we’d like to explain key points on the nuts and bolts of the soft default and what it means for the future of global currency markets.
- Safe Haven Default – The US Fed seized $800 Bn + in Russian and affiliated assets. If you are an investor not from the United States, you are going to think twice about keeping your funds in ‘safe’ USA. There are tons of alternatives such as Singapore, Switzerland, Dubai, Cayman Islands, to name a few. To say it differently, the ‘flight to safety’ is no longer ‘buy Dollars’ – it doesn’t matter what is going to replace the USD, it’s important that it’s being replaced.
- Petro Dollar Default – By sanctioning the world’s largest oil producer, Russia demanded payments for Oil in Rubles, making the new global go to Currency for Oil – Rubles. In parallel, Russia pegged the Ruble to Gold, making the Ruble backed by Oil and Gold. Most BRICs either followed suit or agreed to trade Oil in Yuan or Rubles. The Biden administration’s blocking US Oil production was not helpful, nor was the signaling by US leaders they will fight inflation with more inflation. China agreed to settle Oil in Rubles or Yuan for it’s thirsty manufacturing base, setting a strong non-USD precedent.
- SWIFT shift to SPFS-CIPS – The Russian ban on SWIFT forced those banned to seek alternatives. Both Russia and China had SWIFT alternatives that they’ve been developing for many years such as the CIPS system [3] and Singapore based Nium [4].
- Shift to Yuan – Before the events surrounding the Russia-Ukraine conflict, China was perceived as a toxic house of cards. That has drastically changed with Billions flooding into the Yuan not only from Russia but from partners of Russia who will happily settle their transactions in Yuan, and see China as a less aggressive, more understanding Superpower (as China is on the receiving end of US Hegemony).
- Abandoned World Reserve Status – During crisis, the Fed supplies Dollars as needed via swap agreements and the US Government supplies aid through various NGOs and DC controlled entities like the IMF, World Bank, etc. The actions against Russia are unprecedented. While the US has played global military superpower, it has always kept funds of the enemy safe in US hands whether the enemy was Adolf Hitler or Saddam Hussein. In fact, the Federal Reserve Bank even melted Nazi gold and rebranded it – talk about white glove service. It kept the war going, not to mention the billions in funding provided by US bankers to fund the other side (the Nazis) often times directly to Hitler himself. [5]
- Hypersonics – The US Dollar is not ‘backed by nothing’ as many claim, it’s actually backed by bombs – or in other words, US Military Superiority. The Navy protects trade routes, Space Force protects communications, etc. Russia used a Hypersonic missile to take out a secret NATO base inside Ukraine [6]. The message sent to the West was obvious- Hypersonic missiles have no defense or warning, and because they are so fast you don’t even need to arm them (with nukes for example). While the US is not officially involved in the war (although many Americans have been seen fighting the Russians in Ukraine) this is a victory for the kinetic war by Russia. Using Hypersonic weapons Russia could take out the US Navy, military bases, in a relatively short time period. Of course, the US can respond by ‘making Moscow glass’ but that’s not the point. War is a chess game, and US Military Superiority has made the US Dollar reign supreme since the British handed the torch to the Americans generations ago. US Foreign Policy is 80% Hubris and 20% Technological Superiority – that Superiority that’s left is in Space. The one place the US has a massive advantage over both Russia and China is Space. Anyhow, the context here is the fate of the US Dollar world reserve currency.
- BRICS / OPEC seeking alternatives – Now that many are forced to convert to Ruble or Yuan to buy Oil, many are seeking alternative payment networks. This is not a one way street – Russia imposed capital controls and Russian nationals took about 30 days to setup companies in Kazakhstan, China, Hong Kong, Singapore, and other places circumventing the rules. This further as flooded alternative centers to capital (other than NY/London) and these places are literally flooded with new business.
- US Net Importer – Since 80% of goods are manufactured in China et al, US economic actors need to pay for the same materials in with their hyperinflated dollars. In other words, the value of the US Dollar decreasing in value can be seen at the pump and at the grocery store.
So having made all these points why is the US Dollar index up? Because all the currencies in the index are backed by the US Dollar, and the US Dollar is exporting hyperinflation. Let’s discuss a few economic scenarios. The US Dollar is being devalued – and this can be seen in the cost of raw commodity based products and services, i.e. food and energy (guns and butter). Metals markets are totally manipulated so don’t use a Gold argument to back your way out of this. The US Dollar was devalued by a straight 25% – 30% instantaneous move.
Imagine you are a Japanese manufacturer that depends on US widgets to make your goods (such as the majority of electronics, automobiles, computers, etc.). Now it costs you 30% more for the same goods. You need these goods otherwise you will not be able to have a finished product and a business. So you buy more US Dollars, which drives up the value of the USD/JPY pair. If you look at Currencies down against the USD they are mostly G8 trading partners. This is called in FX “Real Money Flows” meaning demand for US Dollars. This isn’t a flight to safety, this is scrambling to pay more for the same goods. There is no doubt this situation is complex which is why the elaboration here. The Macro economic backdrop cannot be understood simply through the view of Monetary Policy, although it remains the most important factor. In this current example, shortages can drive up prices, also driving up the USD.
Imagine you are a US based Delaware fund but your investors are in Russia. Now funds are locked, they cannot send money to USA. Now instead of buying US Dollars you are buying Bitcoin OR foreign currency, and you are not sending it to the United States, you are sending it to Singapore, Hong Kong, or China you certainly are not sending it to the US where Russians have been OFACd.
Perhaps this was the plan all along, you can see from a mile away what the “Solution” will be, a digital dollar or CBDC that we’ve been reading about for years, from the White House:
Explore a U.S. Central Bank Digital Currency (CBDC) by placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest. The Order directs the U.S. Government to assess the technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans’ interests. The Order also encourages the Federal Reserve to continue its research, development, and assessment efforts for a U.S. CBDC, including development of a plan for broader U.S. Government action in support of their work. This effort prioritizes U.S. participation in multi-country experimentation, and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values.
Here’s the kicker, they have mapped this out long ago[1]. It’s now obvious that Bitcoin was an experiment in monetary slavery labeled as liberal freedom. “Who needs the banks when you have Bitcoin” they said, a system built on SHA-256 which was patented by the NSA[2]. OK, RIGHT!
The rest is here: https://www.zerohedge.com/news/2022-04-25/us-dollar-defaults-petro-dollar-and-ru-banking-obligations