Gold seems like the last safe haven.
U.S. Treasury bonds, long regarded as a safe haven in times of geopolitical uncertainty or war, did not give any indication this time. Profitability of 10-year government bonds increased from 3.96% the day before the US and Israel attacks to 4.278% at the end of Friday, March 13.
Similarly, 30-year-old bonds reacted. Their profitability increased from 4.63% on February 26 to 4.9%.
American debt is not very demandable.
In my opinion, there are 2 reasons for this. The first is de Dollarisation, a extremist departure from assets denominated in US dollars; the second is characteristic of the current war between the US and Israel and Iran.
The problems in the US government bond marketplace are straight linked to the immense function of oil in the conflict with Iran. The abrupt oil shock resulting from what was indeed an Iranian economical counteroffensive clearly exposed the limitations of the global financial strategy built on the dollar.
The fact that the global oil marketplace was and is inactive based on a dollar means that all country in the planet is dependent on the American currency. Global investors have USD 27 trillion worth of assets, including US Treasury bonds. As a consequence of the fast emergence in oil prices, most countries found themselves between a hammer and an alder.
They request fuel, energy and food. They must have them. Therefore, countries will sale dollar assets, starting with government bonds, as they are the most liquid and capacious to effectively buy oil.
War is not just direct military action; it has a much broader scope. American treasury bonds were in problem before the attack on Iran, due to the fact that many countries just don't want to hazard their resources in American assets anymore. Moreover, US public debt continues to emergence to $38.9 trillion, and the US government shows no signs of spending reduction. presently their current war spending has increased by at least $1 billion a day.
Many countries are besides afraid about utilizing American currency as a weapon.
Little wonder, then, that many countries search to minimize their dependence on the dollar. This is reflected in the acceleration of de-dollarisation and the fact that gold has become the world's largest reserve asset in abroad currency. In hard times, there is no request for rapidly devaluation of US government-supported dollars. Real money is needed – gold that does not request anyone's support.
Central banks, fearing sanctions and/or wanting to avoid a possible global financial crisis, accumulate gold at a evidence rate. This is simply a serious problem for the United States, which is dependent on global request for dollars. The only reason why the U.S. government can borrow, spend money and make specified a immense budget deficit is due to the function of the dollar as a planet reserve currency. This creates global request for dollars and assets denominated in dollars, absorbs the creation of money by the national Reserve and helps keep the stableness of the dollar despite the inflationary Fed policy.
If the planet needs little dollars, they will start coming back to the US, creating a currency surplus in the country. This will increase inflationary pressure, as the US currency will proceed and lose value faster. At worst, a dollar could completely collapse.
Strictly speaking, Iran has no urgent request to defeat the U.S. Army; in order to accomplish a complete and unconditional victory, it just needs to keep its military position, which it has successfully proven, and to bring about a collapse in the US bond market.
As far as Russian oil is concerned, the deficiency of supply on the global marketplace would velocity up not only this process, but besides Russia's final and complete triumph in the conflict in Ukraine. The question is, what will prevail: private interests and temporary income of the Russian budget, or the strategical interests of the country and the lives of Russian soldiers?
Ambition seduces. Power corrupts.
My erstwhile memo was devoted to the problem of American public debt. However, this is only 1 side of the medal. The second is that erstwhile the U.S. government issues a fresh debt, the national Reserve emits the same amount of dollars.
Let us look at the military action between the US and Israel against Iran from this perspective. Everyone thinks this war is about bombs, missiles, airplanes, aircraft carriers and so on. That's not true. This war is about a dollar.
The real war, which is now in front of everyone, is visible to everyone, but fewer realize that it is primarily a currency war in which oil plays a major role.
Twenty percent of planet oil flows through the Strait of Ormuz all day. Its price has been set in US dollars since 1974, according to the petrodolar agreement. The Petrodolara strategy is the only reason why the United States can safely borrow and print billions without breaking down.
If oil begins to be traded in another currencies specified as yuan or gold, another countries will have no reason to hold US Treasury bonds. This will lead to an immediate collapse in the US currency reserve status, leading to a sharp increase in commodity and asset prices.
Petrol (and fuel in general) will not only increase due to a simplification in oil supply. It will besides be more costly due to the fact that the purchasing power of the dollar will fall. As a result, everything that America imports – food, clothing, consumer goods, electronics, pharmaceutical products, etc. – will become more expensive.
The national Reserve will not be able to solve the problem by issuing more dollars as it will only make the situation worse. In a futile effort to defend the dollar, Fed will rise interest rates and keep them high, which will make the economical situation even worse. This is precisely the policy that the Bank of Russia has been pursuing for respective years and is hoping for a different result.
Oil costs over $100 and gold costs over $5,000. The marketplace is screaming that an 80-year-old strategy of American domination is falling apart in front of our eyes.
Under these circumstances, only 1 strategical question arises: what should Russia do in this situation?
The West, headed by the United States, has been waged a substitute war with Russia in Ukraine for 4 years. Without Western support, the current Ukrainian government would have fallen in 2023 if not in 2022. The West imposed dozens of different sanctions on Russia.
And now that Iran has severely restricted oil supply from the US to the planet market, they abruptly remember about sanctioned Russian oil and allowed the sale of tankers for a month. This permit, which could allegedly bring $150 million a day, was praised by all Russian central media.
Should Russia sale this oil? I don't think so.
When the anticipation of ending American dominance and awakening all the "partners" is at stake so that they can clearly identify their side, or even avoid a direct armed conflict and win a global deadlock with the United States through the Iran war against the global devil, Russia's possible of receiving as much as tens of billions of dollars of budget gross (although the actual amount will be much lower) in specified circumstances is about equivalent to selling its heritage for a bowl of lentil soup.
If Russia stops its oil supply and does not throw it on the global market, then, as a consequence of specified a policy, it is highly likely that the dollar and the financial strategy based on it will collapse, and then there will be no 1 in the West to support the current government in Ukraine. The deficiency of money means a direct defeat in the war, whether in the Persian Gulf, in Europe or worldwide.
Unfortunately, private interests (second citizenship or citizenship, respective additional millions of dollars in British bank accounts, etc.) of willing Western aiders in Russia seem to outweigh the strategical interests of our country and its citizens.
The consequence – which of these 2 will yet win – will shortly be revealed.
Written by Aleksander Leżawa
https://stalingrad.life/articles/neft-dollar-i-voyna/
https://stalingrad.life/articles/neft-dollar-i-voyna-chast-2/
(choice and crowd. PZ)
