Putin’s 9 May speech in Red Square came and went, without any new theatre opening up. This may indicate a change in strategy to limit the kinetic war to Donbas but he’s made it quite clear that, in his world view, the culpable protagonist, is NATO /USA. By moving away from military rhetoric his speech, along with threats to take “retaliatory steps, both of a military-technical and other nature” against NATO-bound Finland, shifts the focus in the conflict to the financial, economic and cyber security fields.
If the West is at the end of a 50-year debt-financing bubble, the global financial system, largely of American design, is very vulnerable. That is why an interview on 26 April 26 in Rossiyskava Gazeta by one of Putin’s top strategists — the man who in 1999 replaced him as head of the FSB, Nikolai Patrushev — adds new heat to the boiling pot. Patrushev, who is Secretary to the Russian Federation’s Security Council, the inner sanctum chaired by Putin and which includes Lavrov, Medvedev and Mishustin, announced a fresh challenge to the US–dominated global financial system.
Nikolai Patrushev Source; Spisok-Putina.Org
The Kremlin determines the West’s weakest financial spot to be its debt bubble. In its eyes it is a West burdened by decades of debt excesses, now facing runaway inflation, supply chain disruption, and faltering consumer confidence.
It sees the West’s Central Banks, led by the Fed and Bank of England, trying to perform a miracle U-turn — jacking up interest rates in a time of war without triggering recessions.
This is Russia’s opportunity, as the Kremlin sees it, to lead a coalition of economic regions that strike a blow to USA pre-eminence and births a new currency system.
Patrushev outlined Russia’s plans to head a multi-currency system pegged to gold and commodities and, he couldn’t have been clearer: “For any national financial system to be made sovereign its means of payment must have intrinsic value and price stability, without being pegged to the Dollar. Now experts are working on a project proposed by the scientific community to create a two-circuit monetary and financial system. In particular, it is proposed to determine the value of the Ruble, which should be backed by both gold and a group of goods that are currency values, and to put the Ruble exchange rate in line with the real purchasing power parity”.
Patrushev’s interview was first reported in the West by Ronan Manly, a precious metals analyst and writer with Singapore-based, BullionStar.
Since Nixon’s break from the gold standard, the US has built power from an endless demand for Dollars to finance trade and to attract inexpensive capital flows into US Treasuries, giving it a unique competitive advantage, one that US proponents see as open-ended, immutable, and an American birth right.
But in announcing plans to head a global multi-currency system, starting in the Eurasian region and extending, through intensive co-operation to half the planet, Patrushev sees things very differently:
we are clearly aware that the West allows other countries to be its partner only when it is profitable for it
“The West has unilaterally appropriated an intellectual monopoly on the optimal structure of society and has been using it for decades… We are not opposed to a market economy and participation in global production chains, but we are clearly aware that the West allows other countries to be its partner only when it is profitable for it. Therefore, the most important condition for ensuring Russia’s economic security is to rely on the country’s internal potential, a structural adjustment of the national economy on a modern technological basis”.
Though largely ignored in the West, Russia has pegged the Ruble to gold in trades between its Central Bank and its banking system — setting a floor at 5000 Rubles per gram.
Though largely ignored in the West, Russia has pegged the Ruble to gold in trades between its Central Bank and its banking system — setting a floor at 5000 Rubles per gram.
This twins the Ruble with gold, which is traded in US Dollars, while simultaneously Russia demanded Rubles for gas from opponents to its war in Ukraine.
Based on Patrushev’s comments, which I believe are aimed squarely at commodity-exporting nations, the next likely step is to entice payments for Russian gas in gold, in an attempt to change the nature of international energy markets away from trading in Dollars.
If successful, this could trigger a flow of gold into Russian reserves bolstering its currency-peg plans. This has the potential to damage the highly-leveraged paper gold markets and to start a contagion.
Russia’s plans would ultimately require the removal of its exchange controls, which have pushed the Ruble to a two-year high against the Dollar. It would also require a post-war international agreement for commodity-backed currencies involving all participants including China, India, Iran, Latin America and Africa, if it were ever to be successful. In doing so Russia would face the double-edged sword Nixon faced when gold was demanded as payment for national debt instead of Dollars, due to sagging confidence in the US currency after it had borne the cost of the Vietnam War.
Those who blindly follow the doctrine of US pre-eminence scoff at plans to restructure the global financial system, having heard it all before.
What’s different this time, is the scale of debt being carried by the US and many Western economies while Central Banks, unnerved by breakaway inflation, raise borrowing rates in a desperate attempt to counteract inflation.
What’s different this time, is the scale of debt being carried by the US and many Western economies while Central Banks, unnerved by breakaway inflation, raise borrowing rates in a desperate attempt to counteract inflation.
If the tightening cycle, now entered into by the Fed, hobbles the US economy this year, a flip flop by the Fed, back to easing once again to avoid recession, would hobble the Fed itself.
The truth is that, it is all finely poised. The advanced sign of an end game would be nose-bleed-inducing falls in risk assets across the board: property, equities and bonds.
System fragility isn’t just a theory. In such a scenario the weakest parts of the global debt bubble would be first to detonate under the strain of rising rates. So watch out for the future of Leveraged Loans.
System fragility isn’t just a theory. In such a scenario the weakest parts of the global debt bubble would be first to detonate under the strain of rising rates. So watch out for the future of Leveraged Loans.
Estimated at over $5 trillion these are loans often to low-grade corporates at higher interest rates, used to finance share buybacks, management buy-outs and mergers and acquisitions; and 80%, according to the IMF, of them within advanced economies.
About a quarter of the riskiest leveraged loans are packaged together and sold as Collateralised Loan Obligations (CLOs) to banks, insurance companies and pension funds looking for higher income, even if at higher risk.
If all that sounds familiar, it should do.
The risk posed after 50 years of this cycle hasn’t gone unnoticed by Central Banks. Plan B for any loss of control by Central Banks is being fast-tracked and championed by the Bank for International Settlements (BIS).
Nearly half the world’s central banks are now experimenting with these digital currencies.
These are new currencies called, Central Bank Digital Currencies (CBDCs). Fully supported by the IMF and the world’s biggest asset manager, Blackrock, nearly half the world’s central banks are now experimenting with these digital currencies.
Three are already live in Nigeria and in the Caribbean including the Bahamas, and China has released a digital Yuan in several cities as a live test.
The BIS is conducting a study of cross-border digital payments on a multi-digital currency platform for Central Banks in Australia, South Africa, Malaysia and Singapore.
Meanwhile work is ongoing at the ECB and the Fed to reduce the friction for cross-border digital currency transactions.
These currency prototypes will start at Central Bank transaction level and then probably work their way down to consumers – once the wiring has been worked out.
But don’t take my word for it, here is what Larry Fink the CEO of Blackrock, which advises Central Banks, recently had to say:
“A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption”.
“The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. As a result, a large-scale reorientation of supply chains will inherently be inflationary…
The war will prompt countries to re-evaluate their currency dependencies. Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate…
A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption”.
These currencies will be unlike any currency you’ve ever dreamt about. Eventually these may be issued directly by Central Banks to you but, unlike the Euro, they will come with strings attached in their codes on how, where and when they can be used as a medium of money.
There will be no middlemen like retail banks and credit card companies and, without safeguards, Central Banks will have full oversight and control on the use to which the currency is put.
Tax evasion and moving the proceeds of crime will be much harder, but government taxes and fines will become susceptible to being taken at will.
Conversely stimulus money and social protection payments will be transferred direct into your digital wallet, bypassing intermediaries including Government agencies — leading to losses of roles across the public sector in administration and in the vetting of benefits.
Integration into Social Credit Scoring systems looks like the potential final destination, the nirvana for authoritarians and globalists alike.
Left unchallenged by laws on data privacy and civil rights, these changes to the way stimulus and benefits are paid could open up the nightmare of their being tracked, supervised and controlled by Big Government and Central Banks, giving these institutions the freedom to fine, freeze or tax your money, censuring you for alleged misbehaviour, including for over-spending of carbon credits, for example.
Left unchallenged by laws on data privacy and civil rights, these changes to the way stimulus and benefits are paid could open up the nightmare of their being tracked, supervised and controlled by Big Government and Central Banks, giving these institutions the freedom to fine, freeze or tax your money, censuring you for alleged misbehaviour, including for over-spending of carbon credits, for example.
Augustin Carstens
This isn’t theorising. Here is what the BIS General Manager and former Governor of the Bank of Mexico, Agustin Carstens, had to say at an IMF summit two years ago:
“We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control over the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that”.
Technically, digital currencies can form the bedrock of a centralised Social Credit system.
If you want to check out what that might mean, take a look at China.
The Chinese labour under surveillance from 200 million cameras and are tagged and regulated by social scores for what is deemed good and bad behaviour.
No surprise that China is most advanced in its digital yuan which allows it to effect complete control over its population.
These Central Bank currencies are not to be confused with private crypto currencies. Crypto currencies are in open systems which are the diametric opposite of Central Bank Digital Currencies — and not subject to terms of use and surveillance.
It is simply stating fact that the current debt-based fiat currency system faces a challenge, both within — from Central Bank Digital Currencies — and without — from private crypto and now from a Russian move into gold and commodity-pegged currencies.
Money itself is a weapon and currencies are a new warfront.
