- Nine years and counting: Slow march to de-dollarization
- The end of sanctions? (Not what you think)
- Jim Rickards on “the greatest threat to the dollar”
- AI hoax prompts a market fumble
- Slow march to a CBDC (E-Verify)… Strange bedfellows sponsor AM radio-saving bill… A “gratuitous” haiku… And more!
Nine years after we started writing about “de-dollarization,” you can’t get away from headlines about it now…
If you’re not yet up to speed, de-dollarization is “a movement of foreign countries and trading partners to move away from using U.S. dollars as a means of payment for exports and imports,” says Paradigm Press macroeconomics authority Jim Rickards.
“Taken further and given enough time the de-dollarization movement could spread from payment currencies to affect the role of reserve currencies.”
The de-dollarization movement shifted into high gear after Russia invaded Ukraine 15 months ago… and Washington froze the dollar-based assets of Russia’s central bank.
But it was a long time coming — with earlier rounds of sanctions against Russia, as well as Washington’s other whipping boys like Iran, North Korea, Syria and Venezuela.
“The overuse of sanctions by the U.S. has caused other countries to wonder what would happen to their trade and surpluses if the U.S. decided to target them,” says Jim.
“One way to hedge this geopolitical exposure is to diversify national reserves into gold, which cannot be seized or frozen. The payment currency problem is being addressed with new commodity-backed currencies being developed by BRICS+ (Brazil, Russia, India, China, South Africa, and others) that will be unveiled this August.”
For the most part, the blinkered Beltway class is still oblivious to de-dollarization.
One exception is Sen. Marco Rubio (R-Florida) — who went semi-viral a few weeks ago after a Fox News interview. He was reacting to word of a deal in which China and Brazil would trade using the yuan and the real — not the dollar.
“We won’t [be able] to talk about sanctions in five years,” he said, “because there’ll be so many countries transacting in currencies other than the dollar that we won’t have the ability to sanction them.”
A few days ago, Little Marco elaborated on that thought in a column published in the London Telegraph.
Perhaps not surprisingly, given the zeitgeist in D.C. these days, he said it’s all the fault of China’s government. “The Chinese Communist Party is the driving force behind this change,” he said. “Moreover, as China’s economy continues to grow, more nations will enter Beijing’s orbit and this emerging system. When that happens, alternatives to the dollar will attain greater viability.”
Back to Jim Rickards: “I agree with Rubio that China is the leader of the global effort to destroy the dollar. But I disagree that China is the dollar’s main problem.
“The problem comes from the U.S. Treasury and the White House itself.
“The greatest threat to the dollar comes from uncontrolled spending, massive budget deficits, profligate money printing, reckless sanctions and other policy actions that make the dollar an unattractive asset for foreign investors to hold.”
But those problems have been many years in the making, and they were created by presidents and congressmembers from both major parties. It’s much easier for them to blame foreign devils than to clean up their own mess.
“It’s important to watch what China is doing in the international currency markets,” Jim says. “It’s more important to put some limits on spending, deficits and money printing in Washington. If we support the dollar instead of taking it for granted, foreign investors will do their part by holding dollar assets.
“The concern is that policymakers won’t get the message in time. In that case, the only hedge is gold.”
[Ed. note: For an extremely limited time, we’re making an exceptional offer on one of Jim Rickards’ high-end trading services. Its documented track record includes gains of 128% in 28 days… 183% in 11 days… and 203% in 26 days.
Please review this short message from our VP of publishing Doug Hill. The offer comes off the table at midnight tonight.]
Today marks what’s probably a first — a market-moving hoax generated by AI.
“A purportedly AI-generated photo of a fake explosion at the Pentagon spread rapidly on social media on Monday,” says the New York Post, “prompting mass confusion among users and a brief sell-off in the U.S. stock market.”
Among the outlets that circulated the photo was Russia’s English-language news channel RT and the ****-stirring alt financial site Zero Hedge.
There’ve been market-moving hoaxes before, just not with the AI factor: In April 2013, hackers got hold of The Associated Press’ Twitter account and said there’d been an explosion at the White House. The Dow took a 140-point spill.
Today it was more like a 275-point spill — granted, from a much higher level — but everything has stabilized again. At last check the Dow is down slightly from Friday’s close at 33,371 while the Nasdaq is up nearly a half percent at 12,714 — a nine-month high.
The S&P 500 is once again hovering around 4,200. As we said more than once last week, experts in the Paradigm stable who seldom agree on anything agree that if the S&P can break out above 4,200… a sustained rally will be underway.
➢ Among the big movers is Micron — down nearly 3% after the Chinese government banned Chinese firms from buying Micron chips on the grounds that they’re a national-security risk. That’s the first such move made by Beijing — and probably not the last. (Washington did the same with China’s Huawei a few months ago.)
Precious metals are stuck in the mud, gold at $1,973 and silver at $23.67. Crude is up 42 cents to $71.97.
No economic numbers to speak of today: The most important one this week comes on Friday — when the Commerce Department issues the Federal Reserve’s favorite measure of inflation, ahead of the Fed’s next policy-setting announcement on June 14.
Go figure: The Republican Party is opening the door to a central bank digital currency… in the name of “border security.”
Earlier this month, the House passed the Secure the Border Act — a sprawling immigration enforcement bill that does much more than target illegal immigrants.
That’s because it mandates employers to use the electronic E-Verify system to verify employees’ citizenship status.
“Imagine giving Biden the ultimate on/off switch for EMPLOYMENT called E-Verify,” tweeted Rep. Thomas Massie (R-Kentucky.) “I will NOT vote to require EVERY American to get Biden’s permission if they want to work.” (Massie was one of only two Republicans to vote against the bill.
It gets worse, because the bill includes two pilot projects linking biometric information to E-Verify… and the legislation won’t specify whether that information is fingerprints, iris scans or a DNA swab.
The good news is this legislative obscenity doesn’t stand a chance in the Senate. The bad news is that the party that allegedly stands for small government has no qualms about enabling an all-seeing surveillance state.
In the two months since we first broached the subject, it appears the removal of AM radio from new vehicle models is becoming “a thing.”
As we mentioned at the time, the motors on electric vehicles tend to generate nasty buzzing noises and signal fading on AM radio frequencies. Several manufacturers have dropped AM radios from their EVs — and Ford plans to drop AM from all its vehicles.
The Washington Post had a long story on the topic a few days ago, focused on the local content and public service of an AM station in Bryan, Texas — just on the other side of College Station.
Now the Axios site reports that “a bipartisan group of lawmakers wants to make it illegal for carmakers to eliminate AM radio from their cars, arguing public safety is at risk.”
At issue is the fact that the Federal Emergency Management Agency has dumped a fair amount of money and resources into about 75 radio stations nationwide — most of them on AM — to ensure they can stay on the air and convey emergency information in a widespread grid-down situation.
“When the cellphone runs out, the internet gets cut off or the television doesn’t work because of no electricity or power to your house, you can still turn on your AM radio,” says Rep. Josh Gottheimer (D-New Jersey), who’s sponsoring the legislation in the House.
Yes, the bulk of the AM stations with the biggest listenership run conservative talk formats, but politics is making strange bedfellows here: The lead sponsors in the Senate are Ed Markey (D-Massachusetts) and Ted Cruz (R-Texas).
Our previous coverage of this offbeat story can be found here — including how these “primary entry point” radio stations are outfitted for a true SHTF scenario… how to locate your nearest PEP station… and a buyer’s guide for a decent portable AM radio to keep at home if you live in a remote area.
To the mailbag and a baffling submission…
“Once again, gratuitously disparaging.
It confirms my impression that the
the newsletter is of little worth.”
Um… was this a failed attempt at haiku?
In any event, reading between the lines, we’re guessing the reader took exception to Friday’s edition — which featured an unflattering picture of Ukraine’s president Zelenskyy and adjectives mocking the appearances of British prime ministers both current and former.
Or was it that we likened the debt-ceiling farce stateside to a banana republic?
God forbid we engage in a little bit of irreverence targeting people who seek to exercise political power, right? Much better that we take our cue from every other media outlet in existence and fawn over their sage leadership.
There was a lot of substance in Friday’s issue about the inevitable blowback against the West’s economic warfare measures. (Today, too, for that matter.) We try to inject a bit of levity as a sort of coping mechanism — lest we plunge into despair at how two (or three, or four?) generations of politicians, central bankers and business titans have frittered away our collective prosperity.
Additional relevant background, if you care: Zelenskyy was elected in 2019 on a platform of negotiating a settlement of Ukraine’s differences with Russia once and for all — including a grant of more self-rule to the Russian-speaking population in Ukraine’s east.
But he never followed through. Was he being pressured by Western leaders? Was he afraid of the hard-liners in his own country, some of them actual sieg-heiling neo-Nazis?
We don’t know. What we do know is that about six weeks into the war, British Prime Minister Boris Johnson — another object of our mockery on Friday — was dispatched to Kyiv to tell Zelenskyy to cut off peace talks with Moscow.
Those talks had made considerable progress according to an article in Foreign Affairs published last summer — but Johnson made it clear that even if Zelenskyy was ready to cut a deal, his Western backers were not.
If there’s anyone worthy of “gratuitous disparagement,” it’s this bunch.
Best regards,
Dave Gonigam
The 5 Min. Forecast
