I can’t believe my timing! I wrote my piece “Two Separate Topics” yesterday and finished it by saying “they don’t need us, we need them” and that I would elaborate on it. Lo and behold, Zero Hedge posted an article, Russia Holds “De-Dollarization Meeting”: China, Iran Willing To Drop USD From Bilateral Trade. Russia announced publicly late yesterday that they plan to “de dollarize” their trade! Yes I know who cares because Russia is an economic basket case that has a very small slice of global trade right? Wrong!
Next Tuesday, Vladimir Putin will meet with Chinese President Xi Jinping, I believe that the odds are quite high that an energy deal will be announced where Russia will supply China with oil and gas and that infrastructure (pipelines) will also be built to the express exclusion of the dollar. Please understand that this is not a deal where a few million barrels of oil are sent and then get settled for, no, this will be a very long term partnership which is why the infrastructure will be built.
My intent was to explain that China has imported 1,000’s of tons of gold over the last several years and that they (even though their system is very highly leveraged just as ours) have prepared themselves for what is coming. “What is coming” is that China will have just as many massive defaults as the U.S. will …but with a “small difference.” I believe that China will mark gold up to an arbitrary number of let’s say $10,000 per ounce which will do a number of things. First, this will make China’s holdings worth much much more which can and will be used as collateral to steady their debt markets. This collateral will serve to re liquefy the banks AND back their currency should they wish to (I believe they do).
Another added “benefit” is that this will expose the fact that the West no longer has any gold. The dollar will go into a spiral because not just “one lunatic” like Saddam Hussein is proposing to no longer use dollars. No, we are talking about 2 major oil producers and our largest trading partner who may just be the largest economy in the world having eclipsed us. Another little tidbit is that these 3 taken together were for years the absolute arch enemy of the U.S. and now they are forming a unified triad where Russia and Iran can say, “Hey, you told us not to use dollars anymore, we’re just doing what you’ve told us to do.” Talk about forming “policy” without looking 5 seconds into the future, our sanctions would be the definition of this.
So we sanction Russia, tell them that they are “shut out” of the SWIFT clearing system, freeze some assets and cannot use dollars, Russia has responded with trump card after trump card. Examples would be them telling us, “OK, fine, we will no longer launch your satellites for you.” I did not even realize that this was the case; we no longer have the ability to launch our own satellites and must rely on Russia to get them up and into orbit. What’s up with this? They also have told us that the space station is now “off limits,” JFK must be rolling around in his grave thinking “so much for winning the space race.”
This announcement of “de dollarization” is huge news and I believe a precursor to further tightening of the screws on the U.S. Iran being a part of this I can understand but China? China holds some $3+ trillion of dollar assets, why are they willing to impair these assets? The answer of course is that they already realized that these assets were impaired long term and headed for the quadriplegic category anyways, they have also bled out and hedged dollars in advance preparation. Another VERY interesting piece of news this morning is that Saudi Arabia has invited the Iranian foreign minister to Riyadh for talks Saudi foreign minister says has invited Iran’s Zarif to visit, really? I thought that Saudi Arabia wanted Iran bombed off the face of the Earth? I thought that Iran was a direct OPEC competitor that had totally different views based on religion?
So why would Saudi Arabia want to begin talks with their arch enemy? Simple, because mommy and daddy told them to. China and Russia have aligned and obviously taken Iran along under their wing. If Saudi Arabia wants to be in this family… then they must “make nice” or they are on their own. People, please put this, and all of the timing together. Russia has announced this “triad” of “de dollarators” for a lack of a better term. China and Russia have the highest level talks scheduled for May 20th and we know what is being discussed and most probably announced. We also know that Saudi Arabia has been none too pleased with the U.S. for quite some time and now plan to have talks with Iran. I see this as Saudi Arabia choosing sides. “Choosing sides” as in abandoning the losing side!
You see, the only reason that the dollar has survived this long is because of the artificial demand created by and sustained by the Saudis only accepting dollars for their oil. They are not foolish; they surely know that were they to accept any other currency for their oil, the dollar would be collapsed within two weeks or maybe in as many hours. They may have contemplated this in the past but always feared “GI Joe” paying them a visit …until now. They surely know that they sit in a position where they can either go down with the U.S. and their dollars OR they can switch sides and be a part of the winning team. Please understand that this is not like an athlete moving from one abysmal team to an elite team, no, this is like an athlete moving to a team whose checks will clear for the next season from one that very well may be defunct.
As for the title of this piece, it is very true. “They” don’t need us and each deal and alliance that gets signed and announced is further proof. “We” absolutely need them. Where would the U.S. be had China not sopped up over $3 trillion worth of dollars? Would the very strange “Belgium buyer” have needed to step up years earlier? Think about it, if you and I know that the “Belgium buyer” has to be some sort of Fed or ECB proxy, do you think that the Chinese, Russians and Saudis are so dense that they don’t “get it?” No, they know, we know, you know, everyone knows. This is not even a 2+2 equation; it is much simpler than that. This is a 1+1 equation (Russia and China) that is so simple and is “growing” with each new deal and each new announcement of new team members.
The only ones who still don’t get it for the large part are the American people. Once Saudi Arabia announces that they will accept other currencies for oil (or God forbid that they will no longer accept dollars), the American people will finally get it. They will “get it” right in the pocketbook which apparently is the only way to get American attention. I would give great odds that within 2 weeks of any Saudi “change of teams” that the dollar will become an international pariah. I also think it highly likely that the “rest of the plan” will come into effect which will be large orders of gold and silver which will not (because they cannot be) be filled. My guess is that $20-$25 billion “dollars” are all that are needed to blow the entire Western financial system to pieces should they be presented for metal. The number is more than likely far less than this …but $25 billion won’t even buy an international ham sandwich in today’s world.
May 20th is the date folks. Any numbers of announcements after that date can and I believe will finally devastate the U.S. dollar.