Death By a Thousand Cuts — US Credibility and Dollar
We have Russia, which is waving the aggressor flag at us with impunity. While the annexation of Crimea was a foregone conclusion in my mind, I was fearful of it being only the first step in the resurgence of the old Soviet-era power grab.
It now seems that my worst fears are coming true. As predicted, Russia is manifesting chaos within Ukraine before it takes it over under the guise of rescuing the Russian minority/majority populace. The sanctions by the United States and European Union seem to have no consequence. The warnings by NATO also seem to have no effect so far.
Will there be all out war? Will Russia take over Ukraine? Will Moldova or Belarus be next? While I do not know the answers, what I do know is that this is not boding well for the United States as a super power who appears helpless to stem the tide.
Next we have the constant battle (below the surface though) with China. I have mentioned to you several times that China wants to knock off the U.S. dollar as the reserve currency mantle. It has signed dozens of bilateral agreements with small and large countries to trade with them in local currency. So many trades China conducts that are priced in U.S. dollars worldwide are now being transacted in non-U.S. dollar terms. For example copper, coal, zinc and other commodities that are quoted in U.S. dollars worldwide are being traded in Australian dollars or renminbi when China buys from Australia.
The ultimate threat to the U.S. dollar is now at our doorstep. It is now rumored that China is negotiating a similar bilateral trade agreement with Saudi Arabia. When that agreement is signed (mind you I am saying not IF but WHEN), we can start counting on the end of the dollar, as oil will start getting priced in renminbi by the largest buyer and seller of crude oil.
So what is the root cause of the United States being ineffective in exerting its influence?
In my view, the result of ignoring the rising tidal wave of debt is the primary cause of this degradation of U.S. reputation around the world. The madness of printing unlimited money and debasing our own currency has begun to take its toll. While the world watched anxiously for the signs of inflation to appear, the manifestation of this wanton debt increase has appeared in geopolitical terms at the onset. We may see economic turmoil still, but the first casualty of the increase in debt has started already.
It is only a matter of time before we see the shockwaves ripple through the financial markets. We will see the U.S. stock markets decline. We are already seeing the S&P 500, Nasdaq and NYSE all in the red for the year. We have also seen gold rise a little bit here. This is only the beginning.
I am certain that the most lucrative trade of the year will be short U.S. stocks and commodities (gold, silver, platinum and palladium).
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