This could cause insane hyperinflation. A key part of American hegemony is that we print dollars to bribe every country on the planet. This doesn't have any real effects because they all bury the it in a hole in the hope that it will retain it's value better than their own currency.
There are now strong incentives for people with large amounts of Russian trade to start dumping dollars, and once one country does everyone else has to follow suit to avoid getting screwed. This also means people will start calling in US debt. One way around this for the US is to simply delete those digital dollars and not pay any of the debt. There is nothing any country could do about that other than invade to physically take resources as compensation, and good luck with that.
Doesn’t work like that if they don’t have the gold reserves to back it up. And now they have 85% all goods and services cut off the international market. Which is what money is supposed represent.
You do that when your economy is strong economically, not when it’s about to collapse. Gold peg means nothing if you don’t have the gold reserves & couldn’t exchange it even if you did.
Except, if Europe wants to keep the heat on next winter, guess what they can't do? They can't pay for Russian energy in anything but rubles or gold.
Putin locked in gold at a price below global market value, about $1600/ounce. Why is that important? Because to buy Russian energy you're either going to buy rubles for exchange driving demand thus increasing the value of the ruble or your going to pay more gold for a barrel of Russian crude or NG which essentially increases the value Russian energy. And since some people are going to pay for Russian energy with gold there's going to be two additional effects. 1) Russian energy is going to cost Europe more in gold since Russia considers an ounce to be valued less than international markets giving Russia access to cheap gold. 2) It's going to drive up the price of international gold since demand for it will increase.
Europe can't not buy Russian energy in the mid-term until European countries restructure their energy acquisition, 5 - 10 years.
we had inflation during nixon because of spending on vietnam war and other worthless govt spending, so nixon stopped the bretton woods gold convertibility as other countries wanted their gold back which we didn't have. This won't cause inflation in russia unless they spend too much.
I was talking about dollar inflation as a result of foreign reserve dumping. This is a far worse situation than 1971. The way to avoid it is to nuke the dollar empire(cancel all foreign dollars and debts) for the sake of the domestic economy, which would also require a push towards autarkic reindustrialization. It would be painful, but better than the option of collapsing both the empire and the domestic economy.
it doesn't matter how much gold there is it's all relative, it's just better than fiat based on nothing. You can use dollars to buy gold but the dollars are really IOUs that nations could use to get their gold back from where it was stored, that's what convertibility means here
It is not relative if it’s un-exchangeable. Then it’s no better than fiat. All it does is extend credit based on faith that is not backed up by real material. You’re just exchanging trust in one thing for another.
This could cause insane hyperinflation. A key part of American hegemony is that we print dollars to bribe every country on the planet. This doesn't have any real effects because they all bury the it in a hole in the hope that it will retain it's value better than their own currency.
There are now strong incentives for people with large amounts of Russian trade to start dumping dollars, and once one country does everyone else has to follow suit to avoid getting screwed. This also means people will start calling in US debt. One way around this for the US is to simply delete those digital dollars and not pay any of the debt. There is nothing any country could do about that other than invade to physically take resources as compensation, and good luck with that.
This is good analysis.
One factor I'd like to add, for collective consideration:
Petrodollars maintain value primarily because they are used to buy oil, and the west crushes alternatives.
When Russian Golden Rubles start being used to buy/trade oil, That's when shit will hit the fan-- or we will see an actual WW3.
The ruble isn’t worth the electricity that keeps their computers on right now.
Yep. Hence trying to make it a medium for buying gold, the same way the dollar is a medium for buying oil.
It's desperation on Russia's part.
Doesn’t work like that if they don’t have the gold reserves to back it up. And now they have 85% all goods and services cut off the international market. Which is what money is supposed represent.
Lol.. Ruble has recovered to 10 rubles of its previous trading tunnel.
You rube go look at the forex.
Wow maybe that’s why they’re creating a gold peg?
You do that when your economy is strong economically, not when it’s about to collapse. Gold peg means nothing if you don’t have the gold reserves & couldn’t exchange it even if you did.
Except, if Europe wants to keep the heat on next winter, guess what they can't do? They can't pay for Russian energy in anything but rubles or gold.
Putin locked in gold at a price below global market value, about $1600/ounce. Why is that important? Because to buy Russian energy you're either going to buy rubles for exchange driving demand thus increasing the value of the ruble or your going to pay more gold for a barrel of Russian crude or NG which essentially increases the value Russian energy. And since some people are going to pay for Russian energy with gold there's going to be two additional effects. 1) Russian energy is going to cost Europe more in gold since Russia considers an ounce to be valued less than international markets giving Russia access to cheap gold. 2) It's going to drive up the price of international gold since demand for it will increase.
Europe can't not buy Russian energy in the mid-term until European countries restructure their energy acquisition, 5 - 10 years.
we had inflation during nixon because of spending on vietnam war and other worthless govt spending, so nixon stopped the bretton woods gold convertibility as other countries wanted their gold back which we didn't have. This won't cause inflation in russia unless they spend too much.
I was talking about dollar inflation as a result of foreign reserve dumping. This is a far worse situation than 1971. The way to avoid it is to nuke the dollar empire(cancel all foreign dollars and debts) for the sake of the domestic economy, which would also require a push towards autarkic reindustrialization. It would be painful, but better than the option of collapsing both the empire and the domestic economy.
There was no convertibility to gold since the 1870s. And there simply isn’t enough gold in the world to conduct global trade in any meaningful scale.
it doesn't matter how much gold there is it's all relative, it's just better than fiat based on nothing. You can use dollars to buy gold but the dollars are really IOUs that nations could use to get their gold back from where it was stored, that's what convertibility means here
It is not relative if it’s un-exchangeable. Then it’s no better than fiat. All it does is extend credit based on faith that is not backed up by real material. You’re just exchanging trust in one thing for another.
Russia has been trying everything they can to undermine the US Dollar. If they are serious about TGS it just may work this time.