I agree about the delayed banking crisis. If bank portfolios are still losing value, how could there *not* eventually be a crisis? I get the sense that it’s been postponed *only* because “government stepped in with bandaids and hugs for crying bankers over their skinned knees” (I laughed out loud at that phrasing - thanks!).
Oh there's no doubt that it's been postponed because of the government intervention. Hell, the government BRAGGED about the intervention!
But at the end of the day the Fed is still attempting right-size the money supply by introducing countervailing market disequilbria. That can only end with something breaking...like the banking system (again).
Oh, sweetie......it's over. The entire system is only an illusion in America now, kept afloat only by the perception of the public that dollars are the mainstream tools of exchange.
The cabal is now trying to steer everyone into a favorable perception towards their digital global currency, which they're trying desperately to create the infrastructure for and roll out all at the same time before the BRICs memo announcing Operation Sandman can no longer be suppressed by fakestream legacy media in the U.S.
While the future of the dollar--or any of the fiat currencies--is inherently problematic, the potential for BRICS to introduce a new currency to displace any of the existing fiat currencies is approximately nil for at least the next 10 years.
It took the EU 20 years to progress from the initiation of the Exchange Rate Mechanism to the introduction of the euro, and that was with member economies that were far healthier than those of Brazil, Russia, or China currently. I highly doubt BRICS will succeed in birthing a new currency within the next few months or even years. The economic disparities within the BRICS collection of countries alone is going to make that project slow going.
Which means folks will just have to struggle and carry on using dollars as best they can.
I would agree with your assessment, if we were prior to 2020. Unfortunately, things shifted across the board and I believe we are operating on a whole new playing field. 2030 is the deadline.
I think you'll find that things have shifted into high gear and are happening a lot faster than in previous cycles.
There is lots of interesting legislation and political groundwork that have been occurring, across multiple sectors, over the last 5 years that should have taken decades to pass.
The world is on a new timetable, and whoever's it is, they want the major shifts done by 2030 and the dust to be completely settled by 2050.
Thing is, somethings don't comply with timetables, and currency and economic treaties are on that list.
The EU's Treaty of Lisbon is a good object lesson in this. Stitched together by the Eurocrats, it was pretty much rejected by the voters in every EU nation where it was put to a referendum--so the Eurocrats had to go back to the drawing board to get their latest round of creeping authoritarianism pushed through.
For BRICS to implement a new currency all the BRICS countries have to adopt it in some form or fashion, or it is meaningless. That means China has to give up at least some control over the yuan, and that means giving up some control over its current account--something China has steadfastly refused to do.
China's the largest economy in the BRICS group of nations. If they don't give up currency control BRICS does not implement a new currency. It won't have the international credibility to be worth a plug nickel.
BUT
If China gives up their tight capital controls they risk massive capital flight from China. That's what has happened every other time Beijing has relaxed their capital controls, and its why Beijing has always been hostile to cryptocurrency. If yuan/remninbi are converted into crypto there's no way to keep those assets bottled up behind the Great Firewall of China.
That's just the first big hurdle.
Then the currency has to displace the dollar. To do that requires unwinding some $12 Trillion in dollar denominated financial assets worldwide. This is not something that can be done quickly--when asset positions unwind rapidly you get an Enron debacle at the corporate level or a Great Financial Crisis at the international banking level.
Then there's the tricky problem of what happens to global commerce once the dollar is dethroned. One thing that will absolutely happen is the US will not be able to afford keeping its 12 aircraft carrier groups patrolling the international sea lanes. Those same sea lanes are what the BRICS countries must have safe and secure for their economic integration to proceed. There are two countries with the ability to secure international sea lanes on anything but a regional basis and neither of them are in BRICS.
China in particular needs oil flowing from the Persian Gulf across the Indian Ocean (past India's brown water navy...the same India that has periodic border skirmishes with China in the Himalayas). Cut off the flow of oil to China and China's economy collapses outright within a year. They can't import enough oil via Russia's eastern pipelines and Asiatic ports--Russia doesn't have that much oil flow going east and won't before 2030.
And that's not even considering the economic stresses being felt by Russia and China at the moment, or the terminal demographic decline that is now an acknowledged reality in both countries. Factor those in and the outlook for BRICS darkens considerably.
This is the thing people get exactly backwards about the dollar hegemony: the dollar is the dominant international currency BECAUSE the US is the country with the largest economy and the largest military power projection capacity. Dollar hegemony is a consequence of US global power, not a source of it.
Can the US be toppled from the top economic perch by 2030? Yes. Can any other country or group of countries move into the spot thus vacated by the US? Not by 2030.
Which is the thing to always remember about all those who eagerly anticipate "de-dollarization": With the state of the global economy as it is today, the alternative to dollar hegemony is not a "petroyuan" or a new BRICS currency or anything of the sort. The alternative is a ruptured global economy where all the current patterns of global trade break down, and all the countries that haven't escaped the middle income trap have to return to life without global trade--without global food shipments, without global energy shipments, without global technology shipments. The alternative to dollar hegemony as things stand today is economic anarchy.
The forces that drive economics beat legislation and politics every time. It's what beat the British Empire and the Soviet Union. It's what will beat the CCP. It's what will tear apart the EU. Eventually it's what will doom the United States.
There's a lot to comment on there and I do thank you for taking the time to be thorough, especially to a novice in finance matters. You are my go to person when my financial system spider sense is tingling🙏🤗
Re likelyhood of BRICS though, how would what you've outlined be impacted with a literal change of guard in the Suez Canal? The conflict in Sudan between the two brawling governments has escalated rapidly and spilt over into Egypt etc. If that is no longer a region of infighting countries and becomes more aligned with China and Russia as Saudi Arabia is signalling, then I would expect that would change things at an international banking level, quite a bit. Control of trade routes and all that. But that is above my pay grade 😉🤷♀️
"if that is no longer a region of infighting countries...."
What we have to recognize is that the Middle East, as well as a substantial portion of the African continent, is not so much a region of infighting countries as it is a region of infighting tribes--and the tribal geographies do not always align with national boundaries. Tribal allegiances do much to inform the nature of the forces clashing in Syria, for example, and in Iraq. Afghanistan is a cacophony of different tribes, with the Taliban being an expression of the dominant Pashtuns.
The Bin Laden family of 9/11 infamy hails from the region of the Arab Peninsula delineated as Yemen, and are in fact ethnically Yemeni--and most if not all of the 9/11 hijackers were from that portion of Saudi Arabia that abuts Yemen, intriguingly in the same region where the Houthis are waging their insurgency.
And one should never forget that the country we call Saudi Arabia was formed by conquest barely a century ago. As monarchies go, the House of Saud is of extremely recent vintage, as is the monarchy of Jordan. And all of these countries had their borders literally defined in a conference room in the Versailles Palace after the defeat and breakup of the Ottoman Empire during WW1.
Countries such as Somalia and Ethiopia are still fractured and fragmented along ethnic and tribal lines.
Somalia, if you recall, for a time was making great impact on the world as a region of pirates hijacking freighters and tankers. Banks don't stop that sort of thing, navies do--and navies are not something the BRICS countries have in abundance.
West Africa has similar issues at certain parts of the coast.
These are not things that a group of diplomats sitting in an airconditioned hotel in Dubai can wish away with the stroke of a pen.
I'm just glad to have a mortgage free home now that I'm retired. And reasonable tax rates (if any tax could be called reasonable) at last count (but they did go up almost 30%).
I agree about the delayed banking crisis. If bank portfolios are still losing value, how could there *not* eventually be a crisis? I get the sense that it’s been postponed *only* because “government stepped in with bandaids and hugs for crying bankers over their skinned knees” (I laughed out loud at that phrasing - thanks!).
Oh there's no doubt that it's been postponed because of the government intervention. Hell, the government BRAGGED about the intervention!
But at the end of the day the Fed is still attempting right-size the money supply by introducing countervailing market disequilbria. That can only end with something breaking...like the banking system (again).
Oh, sweetie......it's over. The entire system is only an illusion in America now, kept afloat only by the perception of the public that dollars are the mainstream tools of exchange.
The cabal is now trying to steer everyone into a favorable perception towards their digital global currency, which they're trying desperately to create the infrastructure for and roll out all at the same time before the BRICs memo announcing Operation Sandman can no longer be suppressed by fakestream legacy media in the U.S.
Wait for it. It's coming.
While the future of the dollar--or any of the fiat currencies--is inherently problematic, the potential for BRICS to introduce a new currency to displace any of the existing fiat currencies is approximately nil for at least the next 10 years.
It took the EU 20 years to progress from the initiation of the Exchange Rate Mechanism to the introduction of the euro, and that was with member economies that were far healthier than those of Brazil, Russia, or China currently. I highly doubt BRICS will succeed in birthing a new currency within the next few months or even years. The economic disparities within the BRICS collection of countries alone is going to make that project slow going.
Which means folks will just have to struggle and carry on using dollars as best they can.
I would agree with your assessment, if we were prior to 2020. Unfortunately, things shifted across the board and I believe we are operating on a whole new playing field. 2030 is the deadline.
I think you'll find that things have shifted into high gear and are happening a lot faster than in previous cycles.
There is lots of interesting legislation and political groundwork that have been occurring, across multiple sectors, over the last 5 years that should have taken decades to pass.
The world is on a new timetable, and whoever's it is, they want the major shifts done by 2030 and the dust to be completely settled by 2050.
BTJMO.🤗
Thing is, somethings don't comply with timetables, and currency and economic treaties are on that list.
The EU's Treaty of Lisbon is a good object lesson in this. Stitched together by the Eurocrats, it was pretty much rejected by the voters in every EU nation where it was put to a referendum--so the Eurocrats had to go back to the drawing board to get their latest round of creeping authoritarianism pushed through.
For BRICS to implement a new currency all the BRICS countries have to adopt it in some form or fashion, or it is meaningless. That means China has to give up at least some control over the yuan, and that means giving up some control over its current account--something China has steadfastly refused to do.
China's the largest economy in the BRICS group of nations. If they don't give up currency control BRICS does not implement a new currency. It won't have the international credibility to be worth a plug nickel.
BUT
If China gives up their tight capital controls they risk massive capital flight from China. That's what has happened every other time Beijing has relaxed their capital controls, and its why Beijing has always been hostile to cryptocurrency. If yuan/remninbi are converted into crypto there's no way to keep those assets bottled up behind the Great Firewall of China.
That's just the first big hurdle.
Then the currency has to displace the dollar. To do that requires unwinding some $12 Trillion in dollar denominated financial assets worldwide. This is not something that can be done quickly--when asset positions unwind rapidly you get an Enron debacle at the corporate level or a Great Financial Crisis at the international banking level.
Then there's the tricky problem of what happens to global commerce once the dollar is dethroned. One thing that will absolutely happen is the US will not be able to afford keeping its 12 aircraft carrier groups patrolling the international sea lanes. Those same sea lanes are what the BRICS countries must have safe and secure for their economic integration to proceed. There are two countries with the ability to secure international sea lanes on anything but a regional basis and neither of them are in BRICS.
China in particular needs oil flowing from the Persian Gulf across the Indian Ocean (past India's brown water navy...the same India that has periodic border skirmishes with China in the Himalayas). Cut off the flow of oil to China and China's economy collapses outright within a year. They can't import enough oil via Russia's eastern pipelines and Asiatic ports--Russia doesn't have that much oil flow going east and won't before 2030.
And that's not even considering the economic stresses being felt by Russia and China at the moment, or the terminal demographic decline that is now an acknowledged reality in both countries. Factor those in and the outlook for BRICS darkens considerably.
This is the thing people get exactly backwards about the dollar hegemony: the dollar is the dominant international currency BECAUSE the US is the country with the largest economy and the largest military power projection capacity. Dollar hegemony is a consequence of US global power, not a source of it.
Can the US be toppled from the top economic perch by 2030? Yes. Can any other country or group of countries move into the spot thus vacated by the US? Not by 2030.
Which is the thing to always remember about all those who eagerly anticipate "de-dollarization": With the state of the global economy as it is today, the alternative to dollar hegemony is not a "petroyuan" or a new BRICS currency or anything of the sort. The alternative is a ruptured global economy where all the current patterns of global trade break down, and all the countries that haven't escaped the middle income trap have to return to life without global trade--without global food shipments, without global energy shipments, without global technology shipments. The alternative to dollar hegemony as things stand today is economic anarchy.
The forces that drive economics beat legislation and politics every time. It's what beat the British Empire and the Soviet Union. It's what will beat the CCP. It's what will tear apart the EU. Eventually it's what will doom the United States.
There's a lot to comment on there and I do thank you for taking the time to be thorough, especially to a novice in finance matters. You are my go to person when my financial system spider sense is tingling🙏🤗
Re likelyhood of BRICS though, how would what you've outlined be impacted with a literal change of guard in the Suez Canal? The conflict in Sudan between the two brawling governments has escalated rapidly and spilt over into Egypt etc. If that is no longer a region of infighting countries and becomes more aligned with China and Russia as Saudi Arabia is signalling, then I would expect that would change things at an international banking level, quite a bit. Control of trade routes and all that. But that is above my pay grade 😉🤷♀️
"if that is no longer a region of infighting countries...."
What we have to recognize is that the Middle East, as well as a substantial portion of the African continent, is not so much a region of infighting countries as it is a region of infighting tribes--and the tribal geographies do not always align with national boundaries. Tribal allegiances do much to inform the nature of the forces clashing in Syria, for example, and in Iraq. Afghanistan is a cacophony of different tribes, with the Taliban being an expression of the dominant Pashtuns.
The Bin Laden family of 9/11 infamy hails from the region of the Arab Peninsula delineated as Yemen, and are in fact ethnically Yemeni--and most if not all of the 9/11 hijackers were from that portion of Saudi Arabia that abuts Yemen, intriguingly in the same region where the Houthis are waging their insurgency.
And one should never forget that the country we call Saudi Arabia was formed by conquest barely a century ago. As monarchies go, the House of Saud is of extremely recent vintage, as is the monarchy of Jordan. And all of these countries had their borders literally defined in a conference room in the Versailles Palace after the defeat and breakup of the Ottoman Empire during WW1.
Countries such as Somalia and Ethiopia are still fractured and fragmented along ethnic and tribal lines.
Somalia, if you recall, for a time was making great impact on the world as a region of pirates hijacking freighters and tankers. Banks don't stop that sort of thing, navies do--and navies are not something the BRICS countries have in abundance.
West Africa has similar issues at certain parts of the coast.
These are not things that a group of diplomats sitting in an airconditioned hotel in Dubai can wish away with the stroke of a pen.
Great article. BRAVO
I'm just glad to have a mortgage free home now that I'm retired. And reasonable tax rates (if any tax could be called reasonable) at last count (but they did go up almost 30%).