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The Petrodollar’s Swan Song And The Rise Of The New Gold Standard

by on September 28, 2022

(Left: Putin recently, attacking US money printing and the free stuff they were buying everywhere, at the expense of the poorest countries, with their freshly printed paper).

Far from being a sign of ‘strength’, the current rise of the Dollar is wreaking havoc not just in emerging markets, but in the biggest economies of the World. Even worse: it’s all based on a terrible bluff. The Fed’s maniacal interest rate hikes are tearing apart not just the international economy, but America itself, and will soon have to be abandoned as the next mega shock is just months away.
The American Century is over, and there will be no new one.

For HenryMakow.com, by Anthony Migchels

The Euro has been worth more than the Dollar for 20 years, but is now standing at a mere $0,97. The Pound has not been as low since 1985. The Yen not since 1998. The Yuan will be forced into devaluation soon.

It’s already a major crisis, and it’s all going to end very badly, not long from now.

The utter cluelessness of the commentators about the true damage these rate hikes are doing is astounding. “Oh, what is 3% higher rates, when you have 8% inflation? We need at least 10% interest rates!” This is a nice example by Peter Schiff spouting this ignorant nonsense.

People clamor for a new Volcker to ‘fight inflation’. Volcker raised rates to an astounding 19,39% in April 1980, to kill the inflation of the seventies, and resurrect the Dollar.

But do you know what the difference is between 1980 and 2022?

It’s $90 Trillion.

That’s the total debt the US is now carrying around. The National Debt is now $32 Trillion, north of 130% of GDP. In 1980 it was $914 billion, with a GDP of almost $3 Trillion.

It should be completely obvious to anybody with a basic grasp of economics and monetary policy that the effect of rate hikes is a function of the size of the underlying debt. The larger the debt, the larger the effect of a 1% or any rate hike will be. But clearly it isn’t, as it’s completely ignored by mostly all talking heads out there. While the debt drives EVERYTHING.

Why do people think the Stock Exchange AND the Bond Market had the worst first six months on record this year, after the Fed had raised rates only 1,25%? Because we need 10% rates? No, when total debt is $90 Trillion, even a 1,25% rate hike already takes out more than a Trillion out of the economy in interest payments.

Recently, the Fed pumped up rates with another 0,75%, and its comments threatened more steep hikes in the months ahead. The Fed funds rate now is 3,25%.

And we’ve been here before: in 2018, the Fed, far more cautiously, raised its funds rate to 2,5%.
It immediately led to a crash in money growth (M2), leading to the Repo Crisis of September 2019, which in turn led to the Mega Bailout in the week of March 18th 2020, and us getting locked up to prevent a revolt.

The Fed causing deflationary shocks.

And here is M2 now:

The Fed causing more deflationary shocks.

Gosh, I wonder what the result will be now?! I’m sure it will be all very different this time. Not.

Remember: the Repo Crisis involved the mass bankruptcy of the biggest banks on both sides of the Atlantic. So it was not ‘just another bust’, it was an almost terminal one. One that is coming back soon. The only question is how soon. Could be months. Could be a little longer. But with the current hikes, and more coming, it’s looking like rather sooner than later.

Government debt service will quickly become unpayable.

As you can see, the Government is now already paying $600 billion per year in interest as a result of the hikes. And the only way is up. At this rate, soon they will be paying a trillion. Which is the entire deficit. And 25% of its total budget, the Government rakes in $4 Trillion per year. No Government has ever survived losing 25% of its budget to interest payments, historically.

The Dollar is destroying the biggest economies in the World
The problems are manifold: in the first place, there is a severe shortage of Dollar in Asia. The bottom line really is, that the American economy is simply not big enough anymore to provide all the world with sufficient money without inflation at home. In 1945, the US economy produced half of World production excl. the Soviet block. It’s now about 23%, if we calculate very generously. In real terms, in terms of actual production instead of all the financial nonsense that is counted as ‘GDP’, it’s really much less.

This is deflating especially the Chinese economy, which is now suffering a massive real estate collapse, to a large extent because of this. The only question is, really, how long Beijing will continue to accept this, and the answer is: not long.

Equally bad is that economies are importing a lot of inflation because their units are declining vis a vis the Dollar. Japan is trying to keep its own interest rates low, but the Yen has imploded as a result. As a consequence, the Japanese felt forced to start propping up the Yen, last week, by selling dollars, and most notably: US treasuries. This immediately led to a further spike of yields on the US treasuries market. Even worse: it sets a very dangerous precedent. If Japan can do it, so can everybody else. And it’s really the very last thing the Petrodollar can use in its final days.

China and Japan are the World’s largest holders of treasuries, and they have both liquidated about 10% of their holdings this year. Yellen was in Japan this year, likely to threaten them to stop. But while US threats are becoming more hysterical by the day, they count for less and less.

The BRICS
Earlier this year, just after the sanctions started against Russia, Moscow soft pegged the Ruble against Gold. And while this did not really last, it was a big shot across the bow. Recently, Moscow has said it could open a Gold Exchange of their own, to rival the COMEX in NYC and London’s LBMA.

The true threat to the Petrodollar this entails, is that it would involve price discovery for precious metals, independent of the West. And without Gold futures to suppress its price. It would mean exploding the Fed’s longstanding game of Gold suppression, exposing not only the true price of precious metals, but especially the weakness of the Dollar and associated currencies (Euro, Pound, Yen).

Not only that: the BRICS nations are planning a kind of reserve currency of their own. In parallel with not so much to the Dollar, but the IMF. Gold will play an important role in that basket of currencies. It will also radically speed up de-dollarization. Already China, India, Russia are using less and less Dollar for trade between them, while this trade is exploding.

Interestingly, in Shanghai Gold is currently traded at a $43 premium compared to prices in NYC. Which is not only sending lots of Gold from the West to the East, it’s also indicating real stresses in the physical vs. paper markets.

COMEX, the LBMA, and Silver

For always we have known that there would come a day, that the faux prices for Gold and Silver, suppressed with futures, would at some point get exposed by the COMEX not being able to deliver physical metals at said prices.

And over the last year or so, COMEX has been bleeding physical Silver at an astounding rate. Have a look at the above graph: it really speaks for itself. The silver stackers are besides themselves, at the moment, as pay day seems to be coming for them. For years they’ve been stacking, knowing it would all blow up at some point. Similar graphs are available for the LBMA.

Conclusion
In reality, the Petrodollar was already executed in March 2020, when they printed $6 Trillion, $4 Trillion of which went to the Big Banks which were all bankrupt. Here’s Uncle Vlad tearing into ‘the irresponsible monetary policies of the West’, and the disastrous consequences it has had for World Markets.

But Geopolitics has its slow rhythm, and these trends take time to come to their conclusion.

Soon, a major deflationary shock will land on Wall Street, and either there will be a last round of money printing (which will lead to unacceptable asset bubbles and rising prices even worse than we had the last two years), or they will let it go, and bring in their ‘Cyber Attacks’, which they have been signaling for years now, to sell the bail ins (slaughtering defaulting banks and taking deposits) that are unavoidable in the times ahead.

The BRICS nations will distance itself from the Dollar, and will reintroduce Gold as their main monetary base, meaning the New Gold Standard will come from the East. It will lead to the deflation of the debt bubble in the West.

Do not be fooled by the current meteoric rise of the dying Dollar.

A Supernova ends up as a small white dwarf, and so will the once mighty Greenback.

Related:
The Fed Is Pulling The Plug On The Debt Bubble. ‘Cyber Attacks’, Followed By The Greatest Depression Are Coming
The Dying Dollar And The Rise Of A New Currency Order (ten years old! And very relevant now, its predictions are coming true).
The BRICS Bank: Next Stop On The Road To World Currency

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11 Comments
  1. CK_ permalink

    The underlying cause of the financial collapse and the Great Reset is likely Peak Oil. I rejected Peak Oil because of fracking and the abiogenic theory but I’ve changed my mind after doing more research. TPTB are depopulating us with the clot shots and are bringing back Feudalism by doing a controlled demolition of the current system.

    This 2006 video explains that higher energy costs will stall the economy and cause investments to decline, tanking the economy, which depends on continuous loans (debts). It also predicts a return to Feudalism after Peak Oil because capitalism requires continuous growth.
    https://documentaryheaven.com/oil-smoke-and-mirrors/
    https://peakoil.com/generalideas/seven-myths-used-to-debunk-peak-oil-debunked

    Finally, here’s an excellent comment (not mine) about Peak Oil and the global economy:
    “The biggest, darkest conspiracy of all is the one that gets dismissed by even the vast majority of the conspiracy theory community, due to the community largely being controlled by TPTB. That being the conspiracy to suppress knowledge of Peak Oil/Limits to Growth. To suppress knowledge of ecological reality.

    Civilization hiding the fact that it is built to collapse catastrophically is *the* mother of all conspiracies, and the closer to collapse it comes the louder get the avoidance tactics that seek to delay the inevitable. The plandemic and Russian war being the two main globally-coordinated fake crises postpeak oil that serve to both initiate and fine-tune demand destruction ahead of the supply collapse of remaining affordable energy to the marginal global consumer.

    If you can see peak oil then you can see the necessity to head for the hills and start busting your ass because you and your family’s lives depend on it. And what’s more, honoring our species depends on it. Peak Oil is the most maligned (non-) conspiracy theory of all time. So much so that it’s been turned into the inverse of what it is, by the conspiracy theory community. The conspiracy to cover up the geological reality of peak oil has been inverted by people like Alex Jones into a ‘malthusian’ conspiracy by the elites to have a fake justification to kill everyone off. And that’s just plain stupid. Carrying out depop agendas bring extreme risk to elites. You don’t do it for no reason. You don’t even countenance doing it. They’re doing it out of necessity no different from the aging hobby farmer downsizing the herd out of necessity.

    As with most things, it’s the ignorant strawman fallacy that gets lobbed at Peak Oil Theory in order to maintain the denialism that finds it’s root in fear. Peak Oil scares people because the industrial dynamics of catabolic collapse surely leads to Senecan Cliff. There’s no reason-based room for doubt.

    The strawman ignorantly says, “they’ve been talking about peak oil forever and it never happened, and they’re still talking about it!” The strawman refuses to go inside peak oil just as the germ theorist refuses to go into the terrain. There are numerous classes of oil production as well as numerous geographical and economic sectors of the oil industry. This, there are various peaks of production that must be distinguished from each other, and the natural order in which the peaks occur.

    Here is the most basic peak oil pattern of historic production peaks and the *causal* fallout from them.

    1970- the US hit peak conventional crude production. About 2 years later it went off gold altogether and by surrounding the middle east with it’s military it forced the world onto the petrodollar system which is the dollar backed by oil instead of gold. (Gold is an agrarian standard of value unsuited for the scale of mature industrialism.)

    1989- Soviet Union total oil liquids production peaked (all-time high). About 2 years later the USSR collapsed.

    1999- Global peak cheap oil occurred. This was the all-time low of the real, inflation-adjusted cost (not the nominal cost) of retail petroleum products. About 2 years later 9/11 happened, which catalyzed the oil theft wars of the next two decades AKA the ‘war on terror.’

    2004/5- global peak conventional oil happened. This was the peak that the godfather M King Hubbard was referring to when in the 50s he predicted global peak oil in the year 2000. About two years later Bear Stearns happened, then Lehman Brothers, and global organic economic growth ended forever, and ever since we’ve been riding on nested financial bubbles, the suspension of mark-to-market accounting in the shale industry that enabled that bubble, bailouts, and quantitative easings.

    2018/2019- the world hit global total oil liquids production, which is all conventional crudes plus the unconventional shale and tar-sands plays. About 1.5years later they front-ran the uncontrolled collapse caused by this final peak — THE peak in Peak Oil — with the plandemic.”

    See the last 3 comments (by “reante”) in this link for the rest:
    https://viroliegy.com/2022/06/08/breaking-down-viroliegy-with-billy-watson/

  2. I am impressed by the research in this article. The end of the dollar is nigh but we all knew that. Pepe Escobar mentioned Sergey Glazyev’s plan to invite the Global South to worldwide Debt Cancellation by joining BRICS. He wants everyone who owes money denominated in dollars, pounds, the euro and the yen to refuse to pay either the principle or the interest.

    A Word of Advice. When, not if, this collapse comes, Americans will want to be living in a state with Republican control of the governorship, both houses of the state legislature, the judiciary and the police. There is a federal plan to arrest 8 million Americans when the dollar dies. Maybe even more than that by now as that number is from 20 years ago.

    A Republican governor can say No to federal government mass arrests without trial in his state.

  3. CK_ permalink

    Another great but disturbing article.

    Tucker Carlson “predicts” a cyberattack in retaliation for Nord Stream:
    https://www.foxnews.com/opinion/tucker-carlson-what-happened-nord-stream-pipeline

    “If we actually blow up the Nord Stream pipelines, why wouldn’t Russia sever undersea internet cables?

    What would happen if they did that? What would happen if banks in London couldn’t communicate with banks in New York? Just that one piece of it, leaving aside its potential effects on our power grid, but let’s just say the banks couldn’t communicate with each other for one day. What would the economic effect of that be? We would cascade downward into your house. We can have an actual collapse. We could wind up very quickly in third world conditions. Those are the stakes. Have the people behind this, the geniuses like Toria Nuland, considered the effects? Maybe they have. Maybe that was the point.”

  4. Reblogged this on Calculus of Decay and commented:
    Great stuff …have been looking forward to this next entry…

    Excellent work continues!

    Everyone, please have a read!

  5. btw .. there are no economists.. the pretenders don’t comprehend the ‘fed’… the gvt debt.. T bonds… gvt BORROWING… DEFICIT SPENDING…….. l

  6. there are no real currencies.. yes of course a dollar or so in a vending machine will buy you a coke.. all currencies are a sham .. the USD is scrip… printed by bankstards… not fiat at all.. pretend money printed by the banksters who own the CBD central bank dynasty.. rockies & rothies.. morgies et al…

    how do i know ??? look at the national debt in USA alone… it’s tans of TRILLIONS !!!! from absurd BORROWING… by USG..

    i submit USG is bent.. blackmailed and bribed.. to go along with the CBD lending gvt bogus scrip money as debt on the people…

    $31 bleeping TRILLIONS.. TRILLIONS of public debt..

    did you bleeping vote for that ????????????????????……!!!

    this excrement is global……

  7. maup permalink

    Wel interessant dat Rusland uit de BIS bank is gezet : https://english.alarabiya.net/business/banking-and-finance/2022/03/10/Bank-for-International-Settlements-suspends-Bank-of-Russia-

    Mijn vraag is wie zijn de aandeelhouders van de R.centrale bank ?
    en wie zijn de poppetjes in Rusland voor de Globalisering ?

    • Dezelfde als hier. Het is gewoon een prachtig toneelstukje.

      Oost tegen West. Het Westen gaat de komende jaren de vernieling in gereden met de Grootste Depressie, en dan komt de Oorlog.

      • maup permalink

        Ja ik zie het grotere spel ook , wat ik echter probeer, is het in te vullen
        wie zijn de globalisten in R.land , wie sturen dat land echt aan?
        Wat ik zover kon vinden is zwaar verouderd :

        https://isgp-studies.com/intro#russia

        groet
        maup

        • Rusland ?
          De Lubavitch natuurlijk.

          Het “Vrije” Westen ?
          De Chabad. ( “Redemption through Sin” )

          Met hun bijbehorende SCHIJNconflict, immers, beide Koshere Clans putten hun totààl geflipte “ideologie” uit The Intrinsically SICK Talmud.

          Of niet dan, Anthony ?

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