Category Archives: Western Hegemony’s Collapse

Western Hegemony’s Collapse

Marjorie Taylor Greene, Congresswoman from Georgia, US is the Loser

The US dollar may cease to be a global currency as, even under heavy sanctions, Russia is showing the world that it can do without the US dollar and Washington’s friendship, Marjorie Taylor Greene, a Congresswoman representing Georgia, said on Sunday.

“Two years ago <…> we were living in times of world peace. Today <…> we are now on the verge of world war. And the innocent victims are each nation’s people paying taxes to those in power. The US proxy war with Russia, in Ukraine (a non-NATO nation), benefits China the most,” she wrote on her Twitter account. “It’s draining our military resources, driving inflation, hurting world trade, & Americans don’t support it.”

“It could also result in the dollar no longer being the world’s currency. Because of our own arrogance and “fight to save democracy” in non-NATO Ukraine, heavily sanctioned Russia is proving to the world that they don’t need the US dollar or friendship to trade and thrive,” she emphasized.

As West, Debt, & Stocks Implode; East, Gold, & Oil Explode

by Authored by Egon von Greyerz via,

“The risk of over-tightening by the European Central Bank is nothing less than catastrophic” says Prof Kenneth Rogoff .

At Davos he also said: “Italy is extremely vulnerable. But this could pop anywhere. Global debt has gone up massively since the pandemic: public debt, corporate debt, everything.”

Rogoff believes that it is a miracle that the world averted a financial crisis in 2022, but the odds of a major accident are shortening as the delayed effects of past tightening feed through.

As Rogoff said: “We were very fortunate that we didn’t have a global systemic event in 2022, and we can count our blessings for that, but rates are still going higher and the risk keeps rising.”

But lurking in the murkiness is also the global financial assets/liabilities which is almost $500 trillion including the shadow banking system at 46% of the total. The shadow banking sector includes pension funds, hedge funds and other financial institutions which are largely unregulated.

Shadow banking is not subject to the normal mark-to-market rules. Thus no one knows what the real position or losses are. This means that central banks are in the dark when it comes to evaluation of the real risks of the system.

Clearly, I am not the only one harping on about the catastrophic global debt/liability situation.

And no one knows the extent of total global derivatives. But if they have grown in line with debt and also with the shadow banking system, they could easily be in excess of $3 quadrillion.

Cultures don’t die overnight, but the US has been in decline since at least the Vietnam war in the 1960s. Interestingly, the US has not had a real Budget surplus since the early 1930s with a handful of years of exception.

But when you, like the US, live on borrowed time and borrowed money, it becomes increasingly difficult to keep up appearances. In 1971, the pressures on the US economy and currency became too great. Thus Nixon closed the Gold Window with the dollar having lost over 98% in real terms since then. This is of course a total catastrophe and a guarantee that the remaining 2% fall to ZERO will come in the near term future, whether it takes 5 or 10 years for the dollar to reach oblivion. Remember that the final 2% is 100% from today!

The US, EU and Japan have now reached the stage when no one wants their debt. So sovereign debt of these nations is no longer a question of “passing the parcel” but keeping the parcel. When every third party holder of these debts is a seller, who will buy?

These three countries will end up holding their own debt. Japan already holds over 50% of its debt. Before the Western Ponzi scheme comes to an end, these three nations will virtually hold 100% of their own debt. At that point, the bonds will be worthless and interest rates will have reached infinity. Not a pretty prospect!


The final phase of all empires always includes excessive deficits and debts, inflation, a collapsing currency, decadence and war. And the US qualifies perfectly in all those categories.

Ernest Hemingway stated it superbly:
The first panacea of a mismanaged nation is inflation of the currency; the second is war.
Both bring temporary prosperity;
both bring a permanent ruin.
But both are the refuge of political
and economic opportunists.

The US has failed in every war since the Vietnam war, including the Yugoslav Wars, Afghanistan, Iraq, Syria and Libya. The results have been massive casualties and destruction of the countries, often leading to economic misery, anarchy and terrorism.

The Ukrainian war is not between Ukraine and Russia but between the US and Russia as I discussed in a previous article (Link). The clear proof that there is no desire for peace from the US is that they are sending money and weapons to Ukraine in the $100s of billions and “encouraging” an increasingly suffering Europe to do the same. But they are not sending any peace negotiators to Russia in an attempt to end the war. This is very ominous.

The geopolitical situation is now on a knife edge with two major nuclear powers fighting about a relatively insignificant country. This is how major wars normally start.

Let us hope that the current conflict does not lead to a major nuclear war since that would be the end of the world. Thus not worth to speculate about the outcome of this high risk scenario.

But the economic war and the collapse of the US dominated financial system is not just inevitable but also catastrophic for the Western economies.


As the hegemony of the US is coming to an end, the dominance of the decadent West is moving quickly to the East and South. Commodity based countries like the enlarged BRICS will dominate for the next few decades and probably longer. Oil and gas will form the base of this shift but also many other commodities including gold which is now starting a new era.

It is likely that 2023 will be the first year of many when we will see a strong rise in gold just like 2000 – 2011 which saw a 7.5X gain.

The end of the Western debt based cycle and the rise of the Eastern and Southern commodity cycle is well illustrated in the graph below


The S&P Commodity Index relative to Stocks has recently made a 50 year low. Just to return to the mean, the index would need to go up 4X. But when long term cycles turn up from a historical low, they tend to trend higher and longer than anyone expects. So a move past the 1990 high of 9 is very likely. This would mean that commodities, and especially oil and gold, relative to stocks would move up more than 9X!

This 9X move would obviously involve a combination of falling stocks and rising commodity prices.

The expected move of the index confirms the shift from the West, based on an unsound and debt infested system, to the East & South, based on commodities.

Much of this move is based on the fossil fuels of the countries involved – to the chagrin of the climate movement zealots.

In today’s woke world, there is a tendency to believe that we can change all the laws of nature and science. This is the case both in the economy and climate. Bankers and governments are confident that they can create permanent prosperity by printing worthless pieces of paper believing that these represent real and lasting value and wealth.

Well surprise, surprise, these people will soon have the shock of a lifetime as all that printed money returns to its intrinsic value of ZERO.

A debt based economy eventually becomes a self-fulfilling prophecy.

The higher the debt, the more the debt needs to grow in a never ending vicious circle. In the end the debt cycle becomes a perpetual motion Ponzi scheme……. UNTIL IT ALL CRASHES!

The debt feeds on itself and the more that is issued, the more needs to be issued. As inflation rises, the escalating interest cost on the debt leads to more debt. Next is defaults, both private and foreign. Then the $2-3 quadrillion derivatives, a great part of which is in the shadow banking system, comes under pressure. This leads to massive further debt creation by the Fed and other central banks, desperately trying to save the system.

This will eventually lead to what von Mises called: “…. a final and total catastrophe of the currency system involved.”

But remember that we are here talking about the Western financial system. The economic sun in the East will rise strongly and eventually be the guiding light for the world economy.

The debt based US and West will to quote Hemingway decline “first gradually and then suddenly.” So due to the $2+ quadrillion size of the problem, the biggest part of the decline is unlikely to take more than 10 years and it could be a lot faster, especially at the end.

But the climate zealots

will have to wait to 2050 to learn that through their actions they didn’t manage to limit the increase in temperature to 1.5 degrees. But with a lot of luck, climate cycles might be on their side and make the weather much colder.

Personally I believe that cycles determine the climate and not humans.

The climate cycle graph below covering 11,000 years shows that there has been numerous periods with warmer temperatures than currently. At the peak of the Roman Empire 2000 years ago, Rome had a tropical climate.

Fossil fuels produce 83% of the world’s energy today. According to forecasts this percentage is unlikely to come down significantly in the next 50 years.

Partly due to the increased cost of producing energy, fossil fuel production will fall by 26% by 2048. Increases in nuclear and renewables will not compensate for this decline.

If the world stops using fossil fuels, the world economy would totally collapse. Sadly the climate activist movement does not seem to worry about such disastrous consequences.

So it seems fairly clear that for a very long time, the world will be dependent on fossil fuels in order for the economy and population not to collapse.

For the above reasons, the commodity based countries will soon dominate the world and that for a very long time.

The constellations of commodity rich nations are forming rapidly.

Firstly we have the BRICS countries which currently consist of Brazil, Russia, India, China and South Africa. Many countries are in the process of joining BRICS including Saudi Arabia, Iran, Algeria, Argentina and Turkey.

It is the enlarged BRICS aim to bypass the dollar and create their own trading currency.

Many talk about the Petroyuan replacing the Petrodollar but what would everyone do with the Chinese currency since it isn’t freely convertible. Better then to have a currency linked to several commodity countries like Special Drawing Rights. This would create more stability and usability. The Credit Suisse analyst Pozsar calls this Bretton Woods III.

There is also the EAEU or Eurasia Economic Union with Russia leading plus China, India, Iran, Turkey and UAE involved.

The SCO – the Shanghai Cooperation Organisation headquartered in China is also an important force. The SCO is a political, economic, international security and defence organisation. It includes many Eurasian nations like China, Russia, Uzbekistan, Kazakhstan etc.

All the economies involved in this important development are commodity based. For example, commodities are 30% of Russian GDP. Their target is to expand gold mining to 3% of GDP and become the biggest gold producer in the world.

Russia has the world’s largest commodity reserves at $75 trillion and produces 11 million barrels of oil per day. Russian friendly provinces produce another 14M totalling 25M. China produces 5m barrels and the Middle East Oil going through the Strait of Hormuz is 22M barrels. So in a conflict with the US, Russia, China and Iran could decide to close the Strait of Hormuz which means they would have control over 50% of global oil supply. As Goldman Sachs has stated, oil would then be in the $1000s.

If we take Russia, Iran and Venezuela, they control 40% of the global oil supply.

The point I am making is that these various constellations of commodity countries will be the dominant economic power of the future as the US and Europe decline.

So for Russia, gold and oil are two strategic commodities which will play an important role not just for Russia but for all of these Eastern/Southern countries.

And no one should believe that the US and European sanctions are working. Russia and Iran are selling oil and gas to China at a discount. China then exports this, including refined products, to Europe at premium.

So the sanctions are a farce which totally kills the European economy.

Interestingly, the relationship between yellow gold and black gold has been stable for decades as this chart shows:

GOLD / OIL RATIO 1950 – 2023


Gold was the best performing asset class in 2022 but the investment world didn’t notice since it is hanging on to the declining bubble assets of stocks, bonds and property.

Let’s look at gold’s performance in various currencies in 2022:

The chart shows gold up 15% against Swedish Kroner on the right and for example up 11.6% in pounds, 6% in Euros and virtually unchanged in US$.

Bearing in mind that most asset markets, including bonds, have fallen by 20-30%, this is an outstanding performance by gold.

But no one must believe that gold is going up. All gold does it to reflect the total mismanagement of most economies. The chart above should be turned upside down to reflect the loss of purchasing power of all paper money.

As has been the case since 1971, this trend of falling currencies will continue but not at the same steady pace.

With the debt infested Western economies collapsing, their currencies will implode one after the other.

So please firstly acquire as much physical gold as you can afford and then some more.

And when you own your gold, don’t measure the value in collapsing currencies. Just measure your gold in ounces, kilos or grammes.

Also please don’t keep it in the country where you live, especially if that country has a tendency to grab assets. I don’t need to tell you which countries you can’t trust. The problem is, there are not many you can trust.


Also if you store your gold with a gold custodian, ensure that only you can release it by having the Warehouse Receipt in your name. A custodian gold company disappeared last year with the major customer assets in spite of the gold being stored with a major vault company. The weakness was that the gold company could release the gold without the client’s approval. This is not an acceptable way to store your wealth preservation asset.

Finally remember that gold is not just your most important wealth preservation asset but can also be beautiful.


“They want to turn Russia into Muscovy.” Nikolay Patrushev

Аргументы и Факты

Machine translation

What actions of the West are Moscow preparing for and what policy can be countered? This was told by the Secretary of the Security Council of the Russian Federation Nikolai Patrushev .

Turbulent environment

Vitaly Tseplyaev, Nikolai Platonovich, how do you assess the situation in the world that has developed by the beginning of the coming year?

Nikolai Patrushev : The situation in the world is extremely complicated and has a turbulent character. Many countries of different regions are simultaneously in a military-political, economic, social and spiritual crisis. Let’s hope that this year there will be positive changes.

  • You once said that the leadership of Western countries does nothing to improve the situation not only in the world, but even in their own countries. Can you explain what you’re talking about?

Western politicians do not have the strength and opportunity to change life in their states for the better, since they have not been independent figures for a long time. Everyone has connections with big business, lobbyists, foundations. They don’t even hide these facts. There are very recent examples. As it turned out, dozens of deputies of the European Parliament were controlled by the structures of JS Miller. Soros, and the European Commission, at the behest of one of the world’s largest American pharmaceutical companies, has created a number of corruption schemes for the purchase of vaccines worth tens of billions of euros. Clearly, the real power in the West lies in the hands of resourced clans and transnational corporations.

  • Aren’t you referring to rockefellers and Rothschilds?

  • In fact, there are many more such corporations and clans. Thus, the total income of the 500 largest companies in the world, according to unofficial data, reached almost $ 38 trillion in 2021. The bulk of multinational companies are corporations headquartered in the United States. Their revenues brought about 16 trillion dollars with a net profit of 1.8 trillion.

The capital of a number of transnational companies exceeds the GDP of most of the world’s economies, and the funds created by them for further enrichment claim to be a supranational mechanism for managing humanity. The same Soros Foundation has become almost the main world center for planning and implementing “color revolutions.”

Two actors in one play

  • Do you want to say that even the US authorities do not pursue an independent policy?

In fact, the American state is only a shell for a conglomerate of huge corporations that rule the country and try to rule the world. For TNCs, even US presidents are just extras who can cover their mouths like Trump . All four assassinations of American leaders are linked to a corporate trail. It is no coincidence that a growing number of Americans claim that Republicans and Democrats are just two actors in the same play, which has nothing to do with democracy.

The American authorities, fused with big business, serve the interests of transnational corporations, including the military-industrial complex. The assertive foreign policy of the White House, the unbridled aggressiveness of NATO, the emergence of the AUCUS military bloc and others are also a consequence of corporate influence. The draft US budget for 2023 is the best proof of Washington’s plans to unleash new wars to the detriment of the well-being of its own citizens. Of the total planned federal government spending of $1.7 trillion, half is allocated to defense — more than $850 billion. Only for the continuation of hostilities in Ukraine and the prolongation of the conflict, it is planned to allocate $45 billion.

This is despite the fact that the United States itself and its henchmen are irrevocably sliding into a debt pit. For Americans, the national debt has reached more than thirty-one trillion dollars. England’s debt – 2.4 trillion pounds – was the highest since the Second World War and exceeded 101% of gross domestic product. The world record for the ratio of debt to GDP – more than 2.6 times – was set by Japan with a national debt of almost ten trillion dollars. But the countries that consider themselves the masters of the world are not going to be able to repay these debts.

Earlier, the West had prospered and achieved world domination through colonial conquests. This is how transnational companies behave today, preferring to increase their capital by pumping resources from other countries. At the same time, they use the system of dumbing down the masses to impose on the population of the planet the idea of ​​certain rules that they themselves invented and which do not comply with international law.

— So you really believe that when carrying out activities in various countries of the world, TNCs seriously affect local political and socio-economic processes?

  • Right. On the one hand, through foreign direct investment, they introduce new technologies and increase labor productivity. Only that the population cannot take advantage of these results, since companies always displace the local producer, becoming monopolists. By withdrawing the main volumes of profits from abroad, they deprive countries of the opportunity to increase their national welfare.

To solve this problem, national legal regulation is not enough. The current international legal regulation of the economic activities of TNCs is formed in the interests of the corporations themselves and with their direct participation. Its change in favor of the national interests of countries is torpedoed.

In the context of fundamental changes in the world, the goal of corporations is to preserve the system of global exploitation. At its head is the elite of businessmen who do not associate themselves with any state. Under it are the so-called developed countries of the world, as well as the “golden billion”. And then there is the rest of humanity, contemptuously referred to as the “third world.”

  • According to this logic, apparently, Russia is not provided with the most enviable place in this hierarchy.

  • In the West, there is no place for our country. Russia irritates a handful of world rulers by the fact that it has rich resources, a huge territory, intelligent and self-sufficient people who love their country, its traditions and history.

Transnational corporations are unnerved by Russia’s ideological and ideological divergence from countries under the control of Western capital. Corporations are aimed at enriching and developing the consumer society. Russia, on the other hand, defends a reasonable correlation between spiritual and moral values ​​and socio-economic development.

In this regard, Westerners seek to weaken our country, to dismember it, to destroy the Russian language and the Russian world. They have long worked out the technology of undermining their rivals from within and splitting them into small states. This was done before, when, for example, London at the end of the First World War collapsed empires and stamped dozens of countries out of them. That’s how they work today. A prime example is Yugoslavia. A state that had an independent voice in the international arena is divided into six.

What do the events in Ukraine mean?

  • At the end of December, the 100th anniversary of the formation of the USSR was celebrated. In your opinion, how did the collapse of the Union in 1991 affect the policy of the United States and its allies?

“He inspired them. In the space of the former Union, 15 new subjects of international law have emerged. Of course, none of them in terms of their level of influence can be compared with the USSR, with the exception of the Russian Federation, which, having retained its long-deserved international authority, is a permanent member of the UN Security Council, plays a crucial role in the world, defending national interests. Today, they still shout out loud that Russia should not remain united, it should be driven into the framework of Muscovy of the 15th century. To do this, they do not shy away from anything, including inventing a thoroughly false history of our country, shifting to it their responsibility for the oppression of other peoples, which Russia has never done.

The whole story with Ukraine was started in Washington in order to work out the technologies of demarcation and pitting a single people against each other. Millions of people are forbidden to speak their native language from birth. Russian language is forced to forget their origins. The West, for the sake of its ambitions, practically destroys the Ukrainian people, forcing the active generation to die on the battlefield and driving the rest of the population into poverty.

The events in Ukraine are not a clash between Moscow and Kiev, it is a military confrontation between NATO, and above all the United States and England, with Russia. Fearing direct contact, NATO instructors drive Ukrainian guys to certain death. With the help of a special military operation, Russia liberates its regions from occupation and must put an end to the bloody experiment of the West to destroy the fraternal Ukrainian people.

  • “But in the world, on the contrary, Russia is accused of seizing the territory of Ukraine, attacks on its infrastructure …

“We are not at war with Ukraine, because by definition we cannot have hatred for ordinary Ukrainians. Ukrainian traditions are close to the inhabitants of Russia, just as the heritage of the Russian people is inseparable from the culture of Ukrainians. Please note that in Crimea the Ukrainian language is preserved as one of the state languages. In many cities, Ukrainian cultural centers, ensembles of Ukrainian song and dance continue to operate. In the south of the Far East, given the large proportion of immigrants since the time of Stolypin, a significant number of residents consider their native culture as being that of the Ukrainian people.

And the sooner the citizens of Ukraine realize that the West is fighting against Russia with their hands, the more lives will be saved. Many have long realized this, but are afraid to declare it, fearing reprisals. It is not the West’s plan to save anyone’s life at the expense of its enrichment and other ambitions. At the same time, Americans, British and other Europeans often create the illusion that they are protecting civilization from barbarism.

  • Do you hint at the events in Afghanistan, where the United States declared a fight against terrorism, and then rather ingloriously left there?

  • Not only in Afghanistan, but also in other regions. They created terrorist organizations, such as al-Qaeda, the Taliban movement *, to achieve their goals, and they themselves then fight them. While arranging a demonstrative elimination of terrorist leaders, like Osama bin Laden, a hundred new ones were trained and armed.

The US presence in Afghanistan turned out not to be a fight against terrorism, but the creation of multimillion-dollar corruption schemes and a multiple increase in drug production. The sudden withdrawal of the Americans from this country, as it turned out, was largely due to focusing on Ukraine, where, according to their estimates, the preparation of the Kiev puppet regime for offensive anti-Russian actions was successful. By the way, this was confirmed by US Secretary of State Blinken, who said that if the US military had not left Afghanistan, Washington would not have been able to allocate so much money to Ukraine.In addition, part of the equipment removed from the Afghan land was transferred to Europe, mainly to Poland, allowing the Europeans to militarize the Kiev regime.

  • On February 24 last year, Russia called the goals of the SVO just the “demilitarization” and “denazification” of Ukraine. Are you still confident that these goals will be achieved?

“Neo-Nazi criminals who have been rampant in recent years in Ukraine will inevitably be punished. However, it is possible that the most odious will try to save their curators for use in other countries, including for organizing coups d’état and performing sabotage tasks.

Such a scheme was worked out during the defeat of Nazi Germany. After 1945, the Americans, the British and the West German authorities under their control reported on the denazification of their zone of occupation of Germany, while the Nazis rescued from punishment were used to create the armed forces of the Federal Republic of Germany, as well as an agent network of American and British intelligence, including for covert operations against the countries of the socialist camp.

The CIA, which until 1948 was called the Office of Strategic Services of the United States, actively used former employees of the Abwehr and the Reich Security Directorate of Hitler’s Reich to create new German special services.

In the postwar years, the Americans actively involved Nazi criminals in the development of new types of weapons, including weapons of mass destruction and their means of delivery. The same applies to the use by the Americans and Japanese war criminals who developed and used chemical and bacteriological weapons.

“The potential of mankind is far from being exhausted”

  • Let’s return to the topic of the influence of transnational corporations on the policies of different countries. You claim that it is almost limitless. And what methods do you think there are in the arsenal of TNCs?

  • These methods are the most cynic. One of them is experiments with dangerous pathogens and viruses in military biological laboratories under the supervision of the Pentagon. Unceremoniously engage in the moral and ethical decay of society. The West has mastered the zombification of people with the help of mass propaganda, and now seeks to use cognitive weapons, influencing each person pointwise with the help of information technologies and methods of neuropsychology. It imposes neoliberal and other values, some of which are inherently directly opposite to human nature.They act consciously and do not hide in their circle that the LGBT agenda is a tool for gradually reducing the number of “extra people” who do not fit into the framework of the notorious “golden billion”. Yesterday, GMOs were advertised, not caring about what the health consequences of such products will have, and today they urge women not to have children in order to combat climate change. Overseas science proposes to evaluate people by the amount of carbon they leave behind. They measure and count humanity in the same way that Nazi scientists once measured skulls in search of criteria for separating “higher” and “lower races”.

  • It’s a pretty grim picture. As if the end of humanity is just around the corner…

The potential of mankind is far from exhausted. There are structures that are designed to influence this situation in a positive way. These are the UN and the UN Security Council. Such associations as the SCO, BRICS, ASEAN and others are becoming increasingly popular. However, the West is not interested in the effectiveness of their work. The Anglo-Saxons are obsessively trying to push the world community to the idea that these institutions have generally outlived their usefulness, and it is necessary to live by their invented rules. Those who disagree with their hegemony are labeled “rogue states,” “terrorist countries,” or states that pose a threat to national security.At the same time, Western countries do not notice that they themselves are gradually remaining in the minority, since the world is already tired of the strategy of force and threats they use.

Power in people

— How is the Russian leadership going to build its strategy taking into account the above problems?

“Our country is on the path of creating a strong, modern, independent economy in order to achieve economic sovereignty. Russia has all the resources for this. We need a culture of their use, a careful and masterly attitude to our treasures – not only natural, but also intangible.Russian business should be nationally oriented. Private capital, as well as the authorities, should think about the long-term development of the country.

Russia’s financial independence is important, as well as technological sovereignty. We have plenty of our own Lomonosov and Kulibin. The problem is to notice them in time. It is necessary not only to develop science and education, but to revive the real cult of the scientist, engineer, worker. The younger generation should be inspired by the ideas of creative work for the benefit of our Motherland, and not sit in the offices of Western corporations.

The invincible strength of Russia lies in our hardworking people, whose advantage lies, among other things, in different views on life, in their multinationality and multi-confessionality. It is important to understand that we have a unique and distinctive culture, that Russia is not Europe, not Asia and certainly not an “anti-West”. This, by the way, is our fundamental difference. For a Russian person, hatred, by definition, cannot be a unifying principle. Only Westerners, who openly call us adversaries, are full of hatred. But they need to be reminded of their unsuccessful military operations in Vietnam, Afghanistan, and other countries. In the context of the emergence of new military threats, it is important for us to have such armed and special services so that Russia’s opponents do not even think that they can fight with us.

Ominous Military & Financial ‘Nuclear Threats’ Could Erupt In 2023

by Egon Von Greyerz via,

The world is today confronted with two nuclear threats of a proportion never previously seen in history.

These threats are facing us at a time when the world economy is about to turn and decline precipitously not just for years but probably decades.

The obvious nuclear threat is the war between the US and Russia which currently is playing out in Ukraine.

The other nuclear threat is the financial weapons of mass destruction in the form of debt and derivatives amounting to probably US$ 2.5 quadrillion.

If we are lucky, the geopolitical event can be avoided but I doubt that the explosion/implosion of the Western financial timebomb can be stopped.

More about these risks later in the article.

There is also a summary of my market views for 2023 and onwards at the end of the article.


With a business life of over 52 years in banking, commerce and investments, I am fortunate to still learn every day and learning is really the joy of life. But the more you learn, the more you realise how little you really know.

Being a constant and curious learner means that life is never dull.

As Einstein said:

The important thing is not to stop questioning.

Curiosity has its own reason for existing.”

There has been another important constancy in my life which is understanding and protecting RISK.

I learnt early on in my commercial life that it is critical to identify risk and endeavour to protect the downside. If you can achieve that, the upside normally takes care of itself.

Sometimes the risk is so clear that you want to stand on the barricades and shout. But sadly most investors are driven by greed and seldom see when markets become high risk.

The end of the 1980s was such an obvious period, especially in the property market. Stocks crashed in 1987 but if you are not leveraged, stock crashes normally don’t wipe you out. But in commercial property the leverage can kill a lot of investors and sadly did in the early 1990s.

The end of the 1990s was another period of very high risk in the tech sector. I was involved with a tech business in the UK and told the founder in late 1999 that we must sell the business for cash. This was the time when tech businesses were valued at 10x sales. Virtually none of them made a profit. So we managed to sell the business in 2000. We actually got shares as payment but were allowed to sell them immediately which we did. Thereafter the Nasdaq crashed by 80% and many businesses went bankrupt.

At those particular moments of extreme overvaluation, you do not have to be clever in order to get out and take profit. Super profits should always be realised when the valuation of businesses doesn’t make sense and the prospects don’t look good.


So let’s get back to the massive risks that are hanging over the world currently.

In my estimation this is not a war between Russia and Ukraine but between the US and Russia. Russia found it unacceptable that the Minsk agreement of 2014 was not kept to. Instead, the bombing of the Donbas area continued, allegedly encouraged by the US. As Ukraine intensified the bombing, Russia invaded in Feb 2022.

I won’t go into the details here of who is at fault etc. But what is clear is that the US Neocons have a major interest for this war to escalate. For them Ukraine is just a pawn and the real enemy is Russia. Why would the US otherwise lead the initiative to sanction Russia and send weapons and money to Ukraine but send no peace keepers to Russia?

Let us just remind ourselves that ordinary people never want war. The American people doesn’t want war, nor do the Russians or Ukrainians. It is without fail always the leaders who want war. And in most countries, even in the so called democratic USA, the leaders have total power when it comes to starting a war.

Most of Europe is heavily dependent on Russian oil and gas. Still Europe is shooting itself in the foot by agreeing to the sanctions initiated by the US. The consequences are disastrous for Europe and especially Germany which was the economic engine of Europe. Germany is now finished as an economic power. Time will prove this.

The global economic downturn started before the Ukrainian war butthe situation has now severely deteriorated with the European economy weakening rapidly. Still, Europe is digging its own grave by sending more weapons and more money to Ukraine much of which being reported to end up in the wrong hands.

The Ukrainian leader Zelensky is skilfully inciting the West to escalate the war in order to achieve total NATO involvement.

The risk of a major escalation of the war is considerable. Russia’s main aim is for the Minsk agreement to be honoured whilst the US Neocons want to weaken Russia in a direct conflict. Major wars are often triggered by a minor event or a false flag.

The Neocons know that a defeat for the US in this conflict would be the end of the US dollar, hegemony and economy. At the same time, Russia is determined not to lose the war, whatever it takes. This is the kind of background that has a high risk of ending badly.


Since there is not a single Statesman in the West, dark forces behind the scenes are pulling the strings. This makes the situation particularly dangerous.

The risk of a nuclear war in such a situation is incalculable but still very real.

There are 13,000 nuclear warheads in the world and less than a handful of these would wipe out most of the West and a dozen, a major part of the world.

Let’s hope that the West comes to its senses. If not, the consequences are unthinkable.


The other nuclear cloud which is financial will fortunately not end the world if it detonates but inflict a major global setback that could last many years, maybe decades.

I have in numerable articles and interviews outlined that the global debt expansion will end badly.

This can be illustrated in a number of pictures so let us look at two self explanatory graphs.

The first one shows how global debt has grown 75X from $4 trillion to $300T since Nixon closed the gold window in 1971.

The graph also shows that the world could reach debt levels of maybe $3 quadrillion by 2030. That sounds like a sensational figure but the explanation is simple. Derivatives were around $1.4 quadrillion over 10 years ago as reported by the Bank of International Settlement (BIS) in Basel. But with some hocus-pocus they reduced the figure to $600 trillion to make it look better cosmetically. The BIS decided just to take just one side of a contract as the outstanding risk. But we all know, it is the gross risk that counts. When a counterparty fails, gross risk remains gross. So as far as I am concerned, the old base figure was still $1.4Q.

Since then derivatives have grown exponentially. Major amounts of debt are now created in the derivatives market rather then in the cash market. Also, the shadow banking system of hedge funds, insurance companies and other financial business are also major issuers of derivatives. Many of these transactions are not in the BIS figures. Thus I believe it is realistic to assume that the derivatives market has grown at least in line with debt but probably a lot faster in the last 10+ years. So the gross figure is easily in excess of $2 quadrillion today.

When the debt crisis starts in earnest which could be today or in the next 2-3 years, major defaults in derivatives will become debt as central banks print money on an unprecedented scale in a futile attempt to save the financial system. This is how debt can grow to $3Q by 2030 as the graph illustrates.


The second graph shows that the US, the world’s biggest economy, is living on both borrowed time and money.

In 1970 total US debt was 1.5X GDP. Today is is 3.6X. This means that in order to achieve a nominal growth in GDP, debt had to grow 2.5X as fast as GDP.

The conclusion is simple. Without credit and printed money there would be no real GDP growth. So the growth of the US economy is an illusion manufactured by bankers and led by the private Federal Reserve Bank. As the graph above shows, GDP can only grow if debt grows at an exponential rate.

The gap between debt and GDP growth is clearly unsustainable. Still with hysterical money printing in the next few years, in an attempt to save the US financial system, the gap is likely to widen even further before it is eroded.

There is only one way for the gap to narrow which is an implosion of the debt through default, both sovereign and private. Such an implosion will also lead to all assets inflated by the debt – including bonds, stocks and property – also imploding.

Temporarily the US has achieved this illusory wealth but sadly the time is now coming when the Piper must be paid.


The days of the dollar as reserve currency are counted. A currency that has lost 98% in the last 50 years hardly deserves the status of a reserve currency. A combination of military might, petrodollar payments and history has kept the dollar far too strong for much too long. Since there is no immediate alternative, it is possible that the dollar temporarily will remain strong for a while as the Ukrainian conflict continues. The economies of other currencies (Euro, Pound, Yen) are clearly too weak currently to be realistic reserve currency contenders.

The days of the Petrodollar are also counted.

Major moves are now taking place between the world’s biggest energy producers (excluding the US) which will gradually end the Petrodollar system.


But firstly let’s understand that in spite of the climate zealots, there will be no serious alternative to fossil fuels for many decades. Fossil fuels account for 83% of global energy.

Global growth can only be achieved with energy. Since renewables today only account for 6% and are growing very slowly, there will be no serious alternative to fossil fuels for many decades.

In spite of that, Western governments in Europe and the US have not only stopped investing in fossil fuels, but also closed down pipe lines, coal mines and nuclear power plants. This is of course sheer political and economic lunacy and a very rapid method to achieve a collapse of the world economy. Add to that the Russian sanctions and we have a global recipe for disaster.

Without fossil fuels, the world economy will collapse. In spite of that, political pressure has slowed down fossil fuel production substantially. As the graph shows, fossil fuel production is likely to decline by 26% by 2048. Increases in nuclear and, hydro and renewables will not compensate for that fall. The effect will be a fall in global GDP and trade. But more about the energy side in another article.

Few people understand the importance of global trade. Rome conquered many countries from Europe to Asia and Africa. But during the Roman Empire, the various economies prospered due to free trade. The Romans were clearly superior thinkers compared to current Western leaders.


The GCC countries (Gulf Corporation Council) consist of Saudi Arabia, UAE plus a number of Gulf countries have 40% of the oil reserves in the world.

Another 40% of oil reserves belong to Russia, Iran and Venezuela all selling oil to China at a discount currently.

In addition there are the BRICS countries (Brazil, Russia, India, China and South Africa. Saudi Arabia also want to join the BRICS which represents 41% of the global population and 26% of global GDP.

Finally there is the SCO, the Shanghai Cooperation Organisation. This is a Eurasian political, economic and security organisation headquartered in China. It covers 60% of the area of Eurasia and over 30% of global GDP.

All of these organisations and countries (BRICS, GCC, SCO) are gradually going to gain global importance as the US, and Europe decline. They will cooperate both politically, commercially and financially. As energy and oil is a common denominator for these countries, they will most likely operate with the Petroyuan as their common currency for trading.

With such a powerful constellation, minor hobbyist groups like Schwab’s WEF will dwarf in significance and finally disappear as the WEF members including the political leaders lose their power and the billionaires their wealth.

Dmitry Medvedev’s Predictions? or Wishful Thinking?

Predictions of Dmitry Medvedev given today (translated from his Telegram channel)

What could happen in 2023:

1. Increase in oil prices to $ 150 per barrel and gas prices to $ 5,000 per 1,000 cubic meters.

2. The return of the UK to the European Union.

3. The collapse of the European Union after the return of the UK and the abolition of the euro as the currency of the former EU.

4. The seizure by Poland and Hungary of the western regions of the former Ukraine.

5. The creation of the Fourth Reich on the basis of Germany and the satellites that joined it (Poland, the Baltic countries, the Czech Republic, Slovakia, Romania, the Kiev Republic, etc. marginals).

6. The war between France and the Fourth Reich. The partition of Europe, including the new partition of Poland.

7. Separation of Northern Ireland from the Kingdom of Great Britain and Northern Ireland and accession to the Republic of Ireland.

8. The Civil War in the USA, the separation of California and Texas into independent states. Creation of the union State of Texas and Mexico. The subsequent victory of Elon Musk during the US presidential election in some of the states assigned to the Republicans after the Civil War.

9. Transfer of all major stock exchanges and financial activity from the USA and Europe to Asia.

10. The collapse of the Bretton Woods financial system, including the collapse of the IMF and the World Bank. Abandoning the euro and the dollar as world reserve currencies. The return of the gold standard. Transition to the active use of digital fiat currencies

De-Dollarization Accelerates

De-dollarization and the New Economic Order

The Biden administration’s idea of transforming the dollar and the global payment system into weapons has caused many countries and investors to actively diversify their assets away from the dollar system.

As Bloomberg reports, countries such as Bangladesh, Kazakhstan, and Laos are in talks with China to increase their use of the yuan, while Beijing and Moscow are developing joint mechanisms for mutual settlement without using the dollar, and India is promoting its rupee as a regional currency by starting to provide a bilateral payment mechanism with the United Arab Emirates.

Another reason for the flight from the dollar is its potential strengthening in the coming years due to a change in the course of the Federal Reserve’s monetary policy. Corporations around the world are selling an unprecedented amount of their debt in local currencies, fearing a further strengthening of the dollar.

As Bloomberg columnist Michel Jamrisco writes, there are increasing voices saying that the dollar is being used to “intimidate small countries.” Southeast Asian countries are therefore using this reason to trade more in local currencies, moving away from the dollar.

‘Too Little, Too Late’: US Not ‘Flexible Enough’ to Compete With China in Africa

“I’m not sure the US is flexible enough to play the kind of game the Chinese are playing. […] I think that the Chinese have been much more creative and shown much more foresight in what they want to do in Africa. And I don’t think western powers are going to be able to catch up with them,” says Dr. Frederick Golooba-Mutebi, Ugandan independent researcher and political scientist with a special interest in political economics.”

by Petr Baryshnikov via Sputnik

The 2022 US–Africa Leaders Summit, which took place from 13 to 15 December in Washington DC, was the second such event in history. It has been widely seen as part of an American attempt to counter growing Chinese influence in Africa. Sputnik asked various experts to assess Washington’s chances of success.

America’s intensified efforts to compete with China in cooperating with Africa face several obstacles, with the Chinese development model being more attractive to the developing nations than the US model, Dr Ezzat Saad, director of the Egyptian Council for Foreign Affairs, said in an interview with Sputnik.

“It is remarkable that China does not seek to impose its development model or governance system on other countries, but through a flexible Chinese policy that is compatible with the changing conditions […] in Africa, and is based on a development pattern that meets the needs of the continent away from competition or any ideological considerations, in contrast to the American approach in this regard,” he underlines.

Saad also notes that Washington treats Africa “as a bloc without states with their own interests and concerns”, which “undoubtedly reflects the strength of the relationship between Washington and Africa”.
The American strategy on the continent, which is characterized by a high level of politicization of relations, is connected to the US global political interests, says Ovigwe Eguegu, a Nigerian policy adviser at consultancy Development Reimagined, specializing in geopolitics – with particular reference to Africa in the changing global order.

“I think the US, of course, would continue to increase its pressure campaign on China and try to recruit African countries to take part in western-sponsored UN resolutions and proposals also in the United Nations, the Human Rights Commission, to try to use the UN system to exert pressure on China. And that is likely to increase both. There’s a concern that African countries are not going to play along,” he notes.

There are all sorts of fields of competition among foreign powers in Africa. One of the most important is investment, as the continent is still “in dire need” of funding, mainly to develop infrastructure and human capital, says Nicholas Dweh Nimley, a writer and research scholar on China-Africa Cooperation who is also chief editor of Liberia’s NEWCOM Television. According to him, if the US was serious about wanting to compete with the East Asian giant, it could provide low-interest loans to Africa or write off infrastructural loans as China does – but it is uncertain whether such measures would be approved by Congress, “because it is the US taxpayers’ money”.
For his part, Saad believes that the announcements made at the Washington summit – such as plans to invest at least $55Bln in Africa over the next three years, to allocate $2.5Bln for food aid and to lend up to $21Bln through the International Monetary Fund to low and middle-income countries – are too paltry to eclipse Chinese influence.

The bottom line is that the aforementioned western initiatives are ‘too little, too late’, even according to some western experts, and that inflation and domestic policies in major western countries will limit the funding that governments will provide, and the private sector in these countries will be very reluctant to invest in an environment of instability,” Saad said.

China, in contrast, sees insecurity in Africa as a consequence of insufficient sustainable development, believing that economic and technical assistance as well as investments in infrastructure projects are necessary to achieve “stability, security, social peace and good governance in the countries of the continent”, he underlines.
China is Africa’s main direct backer, with its investment roughly double that of the US.

What Putin Has to Say

Videos not played on Apple’s devices due to its anti-Adobe maniacal policy.

The resources of Western countries are not on the verge of exhaustion, Ukraine receives mainly Soviet weapons, we knocked them of by the hundreds, burned it out, this technique is close to exhaustion – Putin

◾️ No one wants unification of the Russian people, except for us ourselves. And we will do it. 

◾️Russia shows much better economic performance than many G20 countries; its unemployment rate is below the pre-pandemic period.

◾️Our youth demonstrate a desire to keep the country moving forward, they have a high level of education and training.

◾️United States has long been meddling in the post-Soviet space, including in Ukraine. Even in Soviet times, they prepared the ground [for disorder].

◾️Our adversary has always tried to divide us and lead us astray from one another. 

◾️We endured it all and hoped for peace – but later we find out that we were simply ‘led by the nose.’

◾️[Nord Stream 2] is an act of international terrorism – individuals without the support of authorities could not have done this on their own. 

◾️The fact that now they [West] are trying to impose an energy price cap is an atavism of colonialism.

◾️The United States achieved its prosperity firstly from the slave trade, then the First World War; they used to rob their way through, but the world has changed – they can’t do it now.



Xi, the Dollar Slayer

via Gilbert Doctorow

Russian television is talking up a storm about Xi’s visit to Saudi Arabia and the enormously significant agreement to denominate Chinese purchases of oil in Yuan. In this regard, Russian commentators are running well ahead of the more cautious description of ‘agreements under discussion’ and ‘partial payments in Yuan’ that we find in yesterday’s Global Times, an English language semi-official Chinese newspaper.

However, there is every reason to believe that the Russians know more than the Chinese or Saudis are willing to say publicly. After all, there are now news leaks to the effect that the Chinese have for months been sending many planeloads of military gear to Russia each week in support of its Ukraine campaign, in violation of their supposed neutrality on the issue. That by itself is subject to a news blackout that Washington, for obvious reasons, does not violate. To do so would accelerate the economic decoupling with China in a way that would leave all U.S. retail shelves bare in a very few months. Replacement of the Chinese global factory in supply chains is still several years away.

Let us recall that China is the world’s biggest petroleum importer and trade in their currency instead of the dollar is the landmark event that dooms the U.S. dollar as the world’s reserve currency. Creation of the Petroyuan will, in a very few years, end the U.S. Treasury’s free ride on the global bond market. Interest rates in the States on government bonds will rise from their present phony levels to match those of others in the industrialized world, with the consequence that U.S. taxpayers will see the advent of ‘pay as you go’ financing of America’s wars abroad. With some luck, if we make it through the present fraught confrontation with Russia over Ukraine, Peace on Earth may become a year-long theme song and not just a tune for one or two days at the end of each year.

And whom do we have to thank for this oncoming development that is plain as the wart on Uncle Sam’s face? It is Vladimir Putin and his David stand versus the US-NATO Goliath now proceeding on the territory of Ukraine.

It is patently obvious that the change of direction in the Middle East against the United States and towards the rising world power, China, as well as towards its close ally Russia, was prompted precisely by the U.S. sanctions on Russia, by the freezing of 350 billion dollars of Russian assets on deposit in the West. These exceptional and unprecedented punishments could just as easily be applied to Riyadh at any time for a multitude of reasons. And, unlike Russia, the Saudis could not possibly resist an economic and financial assault from the West.

So, I say, thank you, thank you again to Vladimir Vladimirovich for setting the world well on its way to peaceful multipolarity and balance of powers.

©Gilbert Doctorow, 2022

Time for the US to Fold Up Its Dollar Empire

by Alasdair MacLeod via Goldmoney,

In this article I examine the current state of the fight for hegemonic control between America on the one side, and Russia and China on the other. It is being fought on two fronts. Ukraine, the one in plain sight, is about to endure a winter without power and adequate food potentially leading to a humanitarian crisis.

The other front is financial with America facing a coordinated attack by Russia and China on its dollar hegemony. The Russians are planning a replacement trade settlement currency, which if it succeeds, could unleash a flood of foreign-owned dollars onto the foreign exchanges.
We have no way of knowing how advanced this plan is, but the indications point perhaps to a gold-based digital currency. Moscow establishing a new gold exchange, Asian central banks accumulating additional gold reserves, and Saudi Arabia seeking non-dollar payments for oil sales are all circumstantial evidence.
As well as these plans, there has been an underlying shift away from a long-term everything financial bubble, with the prospect of higher interest rate levels in time. The reasons for foreign ownership of fiat dollars are diminishing, and a successful new Asian trade currency will only add to the dollar’s woes.
Could this pressure compel America de-escalate Ukraine and sanctions against Russia? The argument to do so has become compelling. It is also a way to lower energy prices, giving central banks needed room for interest rate manoeuvre. 

Russia is making the most of winter

The evidence that Russia is intent on breaking the will of the Ukrainian people is mounting. As the snow begins to settle, Russia is knocking out the power generation necessary to keep people warm and alive. It is a modern variation on the medieval siege. But instead of surrounding a city or castle and starving the residents into submission, by making conditions impossible they expect the Ukrainians to leave.
Nearly eighty per cent of that unfortunate country’s population is Ukrainian, as opposed to Russian. But that is based on officially recognised national boundaries and is not adjusted for the regions Russia gained in the East, including Crimea, in 2014 and subsequently. That leaves a potential refugee problem of 34 million Ukrainians fleeing impossible energy-starved living conditions with scarce food as the cruel winter grinds on.

It takes two sides to make a proxy war. You wouldn’t believe it from the western media, but Putin has been careful to not escalate the situation into an official war and drawing NATO into direct confrontation. Instead, he is using the Ukrainian constitution which protects ethnic Ukrainians, but not minorities including Russian speakers. Effectively, they are denied human rights and gives Putin the excuse to rescue them.
This legal ethnicity in Ukraine’s constitution is unusual today, a feature shared with Nazi Germany. It allows the Russian propaganda machine to accuse the Ukrainian regime of being a Nazi state. Russia’s “special operations” were to rescue ethnic Russians in accordance with international law and explains why they have offered them Russian passports and safe passage from the Donbas and Kherson. Following acts such as the car bomb in Moscow which killed Darya Dugina, the daughter of a prominent Putin ally, and the bombing of the Kerch bridge Putin has accused Ukraine of terrorist acts for which Russia seeks retribution. Again, anti-terrorist activity is a device to avoid a declaration of war while justifying further action.
As the winter progresses, 34 million Ukrainians will therefore face the choice of becoming refuges or dying of cold and starvation. Now that the snow has arrived, the Russians have started targeting Ukraine’s energy supplies. The timing is no accident and the EU’s leaders can now envisage the likely consequences. But in relying on NATO for their ultimate protection, the Brussels establishment does not see Nato’s policy changes as its responsibility and so by going along with American’s leadership they have neglected their own interests.
But the Americans now appear to understand the looming danger of winter with no power. Doubtless, this is what led William Burns, the CIA’s director to meet his opposite Russian intelligence chief in Ankara two weeks ago. The official story was that Burns was there to warn the Russians not to resort to nuclear weapons and to raise the issue of US prisoners.[i] But there is little doubt that this back-channel meeting was to explore compromises before America finds itself a party to the cruel sacrifice of the Ukrainian population in a proxy war.

Negotiations will not be a slam dunk

In the great game of geopolitical strategy, bringing the Americans to the negotiating table can be chalked up as a win for the Russians. But it is not just about a proxy war on Ukrainian soil. Both Russia and America have overriding objectives. The Russians want to secure their western borders, which means American military withdrawal from all border nations at the least — Lavrov has mentioned 300 miles being the missile range. The US will undoubtedly resist these demands, because to give up effectively on its post-war role as the protector of Europe through NATO would be an open admission of defeat on the world stage. It would mean the end of US global hegemony, which the Americans are desperately clinging on to. Furthermore, it is a defeat that would enhance Russia’s power not just in the Western European arena, but through its partnership with China over the entire Eurasian continent.
From the US’s point of view, negotiations with Russia will probably turn out to be an exercise in damage limitation — like the withdrawal from Afghanistan. She needs to get to the table before the situation deteriorates much further. And other than the Ukraine situation they have three pressing problems to consider:

  • There is little doubt that the EU’s troubles will escalate this winter, with energy shortages, exorbitant food prices, and rocketing production cost likely to be the most severe test the EU has ever had to deal with. It comes at a time when the euro system faces instability which could take down major banks and expose the euro system itself as insolvent. Systemic risk would then almost certainly translate into an existential threat to the US banking system.
  • The US is fighting not one but two new hegemons in Russia and China which have teamed up to form a new Asian-based world order with commodity and raw material suppliers worldwide. Purely on a population basis, a rapidly industrialising Asia with its associated interests in the Shanghai Cooperation Organisation, the Eurasian Economic Union, BRICS, the whole of Africa and large swathes of South America outnumber the North Americans, NATO members, Japan, South Korea, and some less certain US allies by at least six to one.
  • The core of this Chinese-Russian partnership is determined to dispose of the dollar for trade settlement as far as possible. As one of the two parties behind the creation of the petrodollar, the Saudis are realigning themselves with the Asian trade bloc. Further moves in this direction are sure to undermine the dollar’s hegemony, the principal source of America’s power over other nations.

The EU dimension

You can tell that dissention is now evident in the EU, with the EU accusing the Americans of profiteering from the Ukraine war. This was from Politicoearlier this week:
The fact is, if you look at it soberly, the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons,” one senior official told POLITICO.[ii]
The article goes on:
“The explosive comments — backed in public and private by officials, diplomats, and ministers elsewhere — follow mounting anger in Europe over American subsidies that threaten to wreck European industry. The Kremlin is likely to welcome the poisoning of the atmosphere among Western allies. We are really at a historic juncture,’ the senior EU official said, arguing that the double hit of trade disruption from U.S. subsidies and high energy prices risks turning public opinion against both the war effort and the transatlantic alliance. ‘America needs to realize that public opinion is shifting in many EU countries.’”
Realistically, America can only keep its principal EU allies on side if it addresses these concerns. Attributed almost entirely to sanctions against Russia at America’s behest and to Putin’s reactions to them, rising prices are creating political pressures on the ground likely to force politicians to seek an early end to sanctions. In this respect, time is on Russia’s side.

But it is not just in the EU that these pressures have arisen. The new global trend of rising prices is affecting the EU more than most, the European Central Bank having held its deposit rates in negative territory for a considerable period of time. Like other central bankers, ECB officials failed to plan for an exit route from interest rate suppression and are more badly wrong-footed than most central banks. It was a policy which encouraged commercial banks into risky territory.
Compressed lending margins forced major commercial banks to maintain profits by leveraging their balance sheets to record levels. The dead hand of negative rates, amounting to a tax on reserves held within the euro system was a burden on banks’ performance. While the increase in rates has initially been a profit bonanza for the banks, they are now exposed to losses from declining asset values and non-performing loans. And with the ECB’s deposit rate still only 1.5% when official price inflation is running at over 10%, far higher interest rates are inevitable. Unless somehow price inflation can be brought down significantly, the consequences will be to create huge losses for the banks from financial assets both on-balance sheet and in the form of collateral — losses that will wipe out shareholders’ capital.
The inflation problem is now manifest in an energy crisis arising from sanctions against Russia. To prevent the entire euro system being destabilised, the obvious short-term solution is to treaty with Russia. The removal of this source of rising prices would in turn reduce the outlook for euro interest rates, stabilising the entire euro system. We can be sure that the ECB and its network of national central banks will be pointing this out to their politicians.
Indeed, an ending of the sanctions would give stock markets and bond prices an almighty boost, at a time of growing concerns over a global recession. Let there be no doubt: the west’s policies against Russia are nothing short of suicidal. And politicians in Brussels would be blind not to see it.

The conflict between the US and the two Asian hegemons is escalating

From Russia’s point of view, America’s precipitative withdrawal from Afghanistan and the replacement of an unpredictable President Trump with an aging Biden, known to the Russians through his background in US foreign affairs, confirmed that America’s global influence was failing. For Russia, with Britain out of the EU it was a good time to escalate tensions between America and Western Europe to side-line America from Europe.
Putin has shown high level skills as a political operator — he had to have them in order to successfully navigate his way through the mess left by Yeltsin to a position of ultimate power. Before escalating the Ukraine situation, we can be certain he anticipated both American-led sanctions and calculated his response. That the Americans have tentatively signalled that they are now prepared to negotiate confirms the success of Putin’s Ukraine strategy. Now, with the onset of winter he can afford to wait. And the longer he waits, the greater the squeeze on Ukraine and the EU.
America is fighting this power game on two fronts: Russia and China. She cannot be too aggressive against China because the US is still mightily dependent on its economy. The US is resorting to selective technology bans and not much else. Having exported manufacturing supply chains to China and Southeast Asia, large US corporations cannot afford to see their supply chains undermined by aggressive foreign policies. Already, intentionally or not China is putting the squeeze on US corporates with its covid lockdown policy.
We can never be entirely sure of Chinese intensions, particularly with the enigmatic President Xi. With protests at lockdowns, western media portrays Xi’s administration as reverting almost to Maoist policies, a reversal of China’s recent march into capitalism. The treatment of Uyghurs offends us. But reform of covid policies was known to be on its way, and on Tuesday the announcement was made by China’s National Health Commission, giving new guidance to local administrations, which should ease lockdowns. 
The underlying problem for China’s government is that its economy is suffering a debt hangover from decades of overinvestment in domestic construction, secured by an exceptionally high savings rate. If the economy was left to its own devices, according to classical theory a debt crisis would destroy malinvestments and reallocate capital to more productive use. But with the large commercial banks under state control the policy will be more likely to ride through the transition of capital reallocation, whatever the cost.
The effect of a credit crunch is to heighten the urgency for state directed investment into other areas, particularly integration with other Asian nations. While we must not forget that there are significant political and cultural differences between China and Russia, American hegemony and trade policies have only served to tighten the bonds between them, so cross-border investment is an obvious priority.
The immediate economic consequences are damaging for China, with an economy which has become ex-growth. While this is a negative factor for the whole region, it could hasten pan-Asian integration to limit economic damage, and to take nations such as India, the Africans and now the entire Middle East further away from US hegemonic control. American allies in Southeast Asia will also be re-examining their foreign policies.
Looking through the immediate prospects for a global recession, we can see that the old world of stagnating economies is being separated from a new world of industrialisation. Independent developing nations are being drawn into the progressive camp, leaving a rump of failing nations living in the past.
So far, a confirmation of the end of US hegemony has been seen in the change of Saudi Arabia’s trade policy, whereby it has realigned itself to Russia and China, confirming its intention to join the BRICS organisation. With other Arab states following the Saudi lead, this confirms that the Gulf states see their future being bound up with the Russian and Chinese partnership. This is likely to be followed by nations in South-East Asia, which at the moment are sitting on the fence. But Indonesia’s recent hosting of the G20 meeting showed that the hosts appeared to be more worried about upsetting the Russians and Chinese than the US-led western alliance.
Member states of the European Union are beginning to face the same dilemma. They have gone along blindly with NATO policies without questioning them. The failure of NATO’s wars in the Middle East and Afghanistan, and the consequences of the overthrow of Libya’s Ghaddafi have all led to Europe’s refugee problems. Now, the economic sacrifice of NATO alignment is plain to see. EU leaders are muttering darkly about how the Americans are profiting from Ukraine while Europe is paying the price. 

The dollar’s hegemony is under threat as well

We know from official announcements that the Russian Chinese partnership, specifically through their membership of the Eurasian Economic Union, is planning to cobble together a new trade settlement currency. Due to currency sanctions against Russia, a sense of urgency has been imparted to the project, with other nations in Asia realising that retaining western currencies in their central bank reserves carries risk of sanctions. These risks are not merely restricted to the immobilisation of reserves in western currencies, but also restrict trade. The consequences of sanctions policy have been to force Asian governments to rethink about trade security as well.
At this stage, all we can do is to draw together some threads to determine the likely form of the new trade settlement currency Sergei Glazyev, the senior Russian official tasked with the project has proposed. An official statement dated 16 June from the committee which he chairs included the following statement:
“Sergei Glazyev informed about presenting in the near future the concept for forming the common EAEU exchange market, which, in particular, would involve the unification of exchanges’ information systems and the nomination of prices in national currencies. “The agenda includes the transition to a new stable settlement currency based on a basket of national currencies and exchange-traded products, as well as the creation of our own stable pricing system. Such principles should be applied in work not only within the EAEU but also throughout the SCO,” the EEC Minister concluded.”[iii]
The objective is for the dollar to be replaced as the settlement medium of intra-national trade. And the idea is that this new trade settlement currency will be open to be joined by other nations. If this project is successful, then the dollar will lose its status as the reserve currency for participating nations. 
As described above, the project is impractical, appearing to be a political statement designed to gain early support for the project. Elsewhere, we see proposals to set up a new Moscow gold exchange, purportedly to replace access to the London bullion market now denied to Russia and its refiners. But again, we see that the moving light is the same Sergei Galzyev, this time telling us that the demand comes from Russia’s bullion industry.
If it is to work, Glazyev’s original proposal to Eurasian states cannot proceed. The inclusion of national currencies in some sort of daily fixing does n0t guarantee stability, and every time another SCO member decides to join a whole rebalancing exercise would have to take place. The same considerations apply to “exchange traded products”, which from other statements we can take to refer to commodities traded between members of the scheme.
From being an inherently defensive move against US dollar hegemony, subsequent confirmation of Saudi intentions to switch payments from dollars to unspecified Asian currencies changes priorities. From convincing a coterie of Eurasian states, Glazyev’s prize is to persuade the Saudis and other gulf energy suppliers as well to accept the new trade settlement medium. Only a gold-based currency fits the bill. With their Bedouin roots in physical coin, a gold-based trade settlement currency acceptable to the Saudis would have the added advantage of dealing a significant blow against the dollar. 
The more one considers the situation, one can only conclude that gold is the logical basis for such as scheme, and Glazyev’s involvement in the new Moscow gold exchange suggests he has reached a similar conclusion. If that’s the case, then it will be necessary to back a gold fixing schemein such a way that participants can confidently retain balances in the new currency, even though it will almost certainly be digital in form.
Assuming that the scheme progresses towards fruition with gold representing commodity-based transactions generally, the requirement for retaining dollar balances will fall away. The impact on the dollar has to be our next topic.

Foreign dollar balances are simply enormous

As illustrated by the chart above, foreign ownership of financial assets including bank deposits totals nearly $30 trillion, down over $4 trillion since last December. Some of this is due to fluctuations in portfolio valuations, but clearly the foreign appetite for holding dollars is waning. If the Russia/China Asian bloc comes up with a viable trade settlement currency, both official ownership and private sector ownership of dollars will be less required, and ownership by foreigners will diminish further. 
Dollars will be sold for other currencies, to purchase bullion, or to build stocks of durable commodities. The global desire to sell dollars for other major fiat currencies was knocked on the head by currency sanctions against Russia. And we can be sure that the message about holding yen, euros, or sterling is widely received in all Asian nations. 
Therefore, US-led currency sanctions against Russia will probably backfire badly. With the dollar being sold for bullion and commodities, the value of dollars relative to bullion and commodities will obviously decline. It will be a trend readily understood by foreign holders, likely to drive the dollar down more rapidly than might be expected. 
It may be that the process has already started. So far this year, the dollar has gained against other major currencies due to the Fed having led other central banks into higher interest rates in an attempt to contain price inflation. Other central banks are now responding belatedly with their revised interest rate policies, and consequently the rising trend in the dollar’s trade weighted index has broken down from its previous uptrend. The chart below illustrates the dollar’s move so far.

Compounding the dollar’s problems are market suspicions that the Fed will be forced into a policy pivot as evidence of a recession mounts. While softening its line slightly the Fed still denies it, presumably for fear of encouraging yet higher consumer prices. Markets are betting that it is only a matter of time before the Fed is forced to call a halt to interest rate rises and reintroduce quantitative easing. The yield on the 10-year US Treasury note has fallen from 4.4% to 3.63%, while the CPI ‘sincrease slowed to 7.7% in October. 
Sanction-induced commodity and energy price rises have obscured a wider trend emerging from the end of the forty years of the financialisation of major western economies — the end of a prolonged everything bubble. Intractable government deficits are driving the debasement of currencies relative to the values of commodities. A new financial cold war between the hegemons is undermining the logic of supply chains across multiple jurisdictions. Just-in-time inventory management has become riskier. And while supply chain difficulties have lessened recently, the trade outlook has deteriorated, supply chain reform is on the cards, and commercial bank credit is long overdue its 10-year cyclical downturn. 

Managing foreign dollar liquidation

Assuming that foreigners act as outright sellers on a net basis rather than merely hedging existing positions, the buyers will be either the Fed in the case of official institutions selling, or commercial banks. 
When the Fed buys dollars, it reduces the liability side of its balance sheet, or redeploys repatriated dollars by buying assets. And since we are considering net selling by foreigners, those assets will be dollar-denominated assets in the domestic US economy. Whether the Fed reduces its balance sheet or buys domestic assets is a matter for economic and monetary policy.
Commercial banks will be acting principally for domestic US buyers, in which case there is no reduction in their aggregate deposit liabilities because the ownership of deposits merely changes. However, if they are not acting for domestic buyers but for themselves and deposits are being withdrawn, then they must reduce their balance sheet assets to match. They can do this by selling financial assets if they have them on their balance sheet, or by calling in loans. However, we know from US Treasury TIC figures that commercial banks have limited foreign currency loan exposure (i.e. balance sheet assets —in June, it was $687bn[iv]) and with other currencies having been weak they are unlikely to have unhedged on-balance sheet foreign currency financial asset liabilities in any quantity. Therefore, the bulk of private sector involvement is off-balance sheet and therefore the effect on outstanding commercial bank credit will be limited.
It would therefore appear to be mainly a problem for the Fed, and the impact on the dollar of foreign selling will only be lessened through the expansion of the Fed’s balance sheet. The chart below gives a clue of what the relevant impacts are likely to be.

We have ascertained that commercial banks will not be buying dollars from foreigners in sufficient amounts to affect their balance sheets materially. Instead, if foreigners decide the world is moving away from the dollar, the Fed’s balance sheet currently standing at $8.6 trillion will be exposed to a contracting foreign dollar mountain of up to $30 trillion. There is a leverage factor in this which could be substantial.
A further problem for the monetary authorities is that they increasingly expect a recession, even though it appears to be slow in arriving. A recession is a contraction in commercial bank credit, against which the Fed would expect to compensate by the combination of an expansion of its balance sheet and the government increasing its budget deficit. In other words, after fifty-one years of the dollar being totally fiat, and the dollar seeing demand on the basis that it is the only reserve currency, the ending of that period at a time when the US economy is entering a recession is the worst combination of events possible.
This is probably the most compelling reason for the US Government to seek to de-escalate tensions over Ukraine and dismantle sanctions against Russia. It would or should have been on the CIA’s William Burns’s mind when he met his opposite Russian number in Ankara a fortnight ago.
[i] See
[ii] See
[iii] See
[iv] Line 1 minus line 2 at