Fall Of The Petrodollar
This is massive, if it ends up happening:
Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales
One of the core staples of the past 40 years, and an anchor propping up the dollar’s reserve status, was a global financial system based on the petrodollar – this was a world in which oil producers would sell their product to the US (and the rest of the world) for dollars, which they would then recycle the proceeds in dollar-denominated assets and while investing in dollar-denominated markets, explicitly prop up the USD as the world reserve currency, and in the process backstop the standing of the US as the world’s undisputed financial superpower.
Those days are coming to an end.
One day after we reported that the “UK is asking Saudis for more oil even as MBS invites Xi Jinping to Riyadh to strengthen ties”, the WSJ is out with a blockbuster report, noting that “Saudi Arabia is in active talks with Beijing to price its some of its oil sales to China in yuan,” a move that could cripple not only the petrodollar’s dominance of the global petroleum market – something which Zoltan Pozsar predicted in his last note – and mark another shift by the world’s top crude exporter toward Asia, but also a move aimed squarely at the heart of the US financial system which has taken advantage of the dollar’s reserve status by printing as much dollars as needed to fund government spending for the past decade.
This could easily start a domino effect with other countries and exports that will remove the USD as the petrodollar and the reserve currency. If that happens, our “enjoyable” levels of 10% producer inflation (~8% consumer) will quickly turn hyper-inflationary.
It’s the single thing propping up our current spending and debt levels. If we lose that, it all starts crumbling.
Get ready to bring a wheelbarrow of cash to the grocery store to buy a single gallon of milk, circa early 1900s Germany style.
The supply chains are also not looking great. Between the new sanctions (both indirectly from the U.S. and directly from Russia), food protectionism popping up all around the globe (check out Argentina), and essentials like fertilizer and wheat being cut off, we’re looking at a rough road ahead once these all start to really settle in. Inflation is already at that unhealthy 10%, and that’s tracked a month behind.
I think most of us in the younger generations were hoping for a crash, so we could afford a house. It’s seeming increasingly likely that the exact opposite is going to happen: Hyperinflation to the point we can’t even afford a van to live out of.
I fail to see how this is not planned in some capacity. Covid, the economy, provoking Russia into the Ukraine war, a new federal centralized digital currency, and the rest of it. They must know what comes from these actions. They are doing it purposefully.
I’m still juggling between the possibilities: economic catastrophe, new (real) pandemic, or a NATO-Russia war. All have become possibilities within the past few months. All could even be enacted side-by-side, given our current global environment. That’d be an easy method for the population reduction they seek. Release an actually deadly plague so no one can protest, crash the economy so everyone starves at home alone or relies on them for survival, and nuke any holdout countries. Not a bad plan, if that is the endgame.
But my bet is still on the economic component first. Even if we ignore my endgame conspiracy, bad things are coming our way. A tidal wave is coming from these actions. The rest of the world is looking at the United States and doubting its strength and “worldwide financial policeman” position. All it takes is for them to walk away to get the ball rolling.
Now would be a good time to get yourself acquainted with TCAs if you are not yet:
Because if we lose the petrodollar, you’re going to need them.
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