The End of the Petrodollar and What It Means for You

The End of the Petrodollar and What It Means for You

by Nick Giambruno, contributer, International Man Communique

The End of the Petrodollar and What It Means for You

 

Oil for Gold (and Bitcoin)…

The US government reaps an unfathomable amount of power from its racket of printing fake money out of thin air and forcing it on the world. The petrodollar system is a big reason it has gotten away with this scam for so long.

Here’s how it works…

Oil is by far the largest and most strategic commodity market. For the last 50 years, virtually anyone who wanted to import oil needed US dollars to pay for it.

Every country needs oil. And if foreign countries need US dollars to buy oil, they have a compelling reason to hold large dollar reserves.

This creates a huge artificial market for US dollars and forces foreigners to soak up many of the new currency units the Fed creates. Naturally, this gives a tremendous boost to the value of the dollar.

The system has helped create a deeper, more liquid market for the dollar and US Treasuries. It also allows the US government to keep interest rates artificially low, thereby financing enormous deficits it otherwise would be unable to.

In short, the petrodollar system is the bedrock of the US financial system. That's why the US government protects it so fiercely. It needs the system to survive. World leaders who have challenged the petrodollar have ended up dead…

Take Saddam Hussein and Muammar Gaddafi, for example. Each led a large oil-producing country—Iraq, and Libya, respectively. And both tried to sell their oil for something other than US dollars before US military interventions led to their deaths.

Of course, there were other reasons the US toppled Saddam and Gaddafi. But protecting the petrodollar was a serious consideration, at the very least. When countries like Iraq and Libya challenge the petrodollar system, it's one thing. The US military can dispatch them with ease.

However, it’s a whole other dynamic when Russia and China undermine the petrodollar system… which is happening in a big way right now.

Russia and China are the only countries with sophisticated enough nuclear arsenals to go toe-to-toe with the US up to the top of the military escalation ladder. However, the US military can’t attack Russia and China with impunity because they can match each move up to all-out nuclear war—the very top of the military escalation ladder.

For this reason, the US is deterred from entering into a direct military conflict with Russia and China—even though they are about to strike a fatal blow to the petrodollar system. The top Russian energy official recently made it explicit. He said Russia would accept gold or Bitcoin in return for its oil.

"If they want to buy, let them pay either in hard currency—and this is gold for us… you can also trade Bitcoins."

Here’s the bottom line. The petrodollar system’s demise appears to be imminent. It has enormous geopolitical and financial consequences that most investors don’t understand.

The Real Reason for China and Russia’s Massive Gold Stash

It’s no secret that China and Russia have been stashing away as much gold as they can for many years. China is the world’s largest producer and buyer of gold. Russia is number two.

Today it's clear why China and Russia have had an insatiable demand for gold. They've been waiting for the right moment to pull the rug from beneath the petrodollar system. And now is that moment…

After it invaded Ukraine, the US government kicked Russia out of the dollar system and seized hundreds of billions in dollar reserves of the Russian central bank.

Washington has threatened to do the same to China for years. These threats helped ensure that China cracked down on North Korea, didn't invade Taiwan, and did other things the US wanted.

These threats against China may be a bluff, but if the US government carried them out—as it recently did against Russia—it would be like dropping a financial nuclear bomb on Beijing. Without access to dollars, China would struggle to import oil and engage in international trade. As a result, its economy would come to a grinding halt, an intolerable threat to the Chinese government.

China would rather not depend on an adversary like this. This is one of the main reasons it created an alternative to the petrodollar system. This system will allow anyone in the world to trade oil for gold. It will bypass the US dollar, financial system, and sanctions.

 

 

Here’s how it works…

After years of preparation, the Shanghai International Energy Exchange (INE) launched a crude oil futures contract denominated in Chinese yuan in 2017. Since then, any oil producer can sell its oil for something besides US dollars… in this case, the Chinese yuan.

There's one big issue, though. Most oil producers don't want to accumulate a large reserve of yuan, and China knows this.

That’s why China has explicitly linked the crude futures contract with the ability to convert yuan into physical gold—without touching China’s official reserves—through gold exchanges in Shanghai (the world’s largest physical gold market) and Hong Kong.

PetroChina and Sinopec, two Chinese oil companies, provide liquidity to the yuan crude futures by being big buyers. So, if any oil producer wants to sell their oil in yuan (and gold indirectly), there will always be a bid.

After years of growth and working out the kinks, the INE yuan oil future contract is now ready for prime time. It comes at the perfect moment. Russia is the world’s largest energy producer. China is the world’s largest energy importer, and Russia is Beijing’s largest oil supplier.

Now that the US has banned Russia from the dollar system, there is an urgent need for a credible system capable of handling hundreds of billions worth of oil sales outside of the US dollar and financial system. The Shanghai International Energy Exchange is that system.

Other countries on Washington's naughty list are enthusiastically signing up. For example, Iran—another major oil producer—accepts yuan as payment. So do Venezuela, Nigeria, and others.

Even Saudi Arabia—the linchpin of the petrodollar system—is flirting in the open with China about selling its oil in yuan. One way or another—and probably soon—the Chinese will find a way to compel the Saudis to accept the yuan.

China is already the world's largest oil importer. Moreover, the amount of oil it imports continues to grow as it fuels an economy of over 1.4 billion people (more than 4x larger than the US).

The sheer size of the Chinese market makes it impossible for Saudi Arabia—and other oil exporters—to ignore China’s demands to pay in yuan indefinitely. The Shanghai International Energy Exchange further sweetens the deal for oil exporters.

Think about it… An oil-producing country has two choices:

Option #1 – The Petrodollar

The dismal financial situation of the US guarantees the dollar will lose significant purchasing power. Plus, there's enormous political risk. Oil producers are exposed to the whims of the US government, which can confiscate their money whenever it wants, as it recently did to Russia.

Option #2 – Shanghai International Energy Exchange

Here, an oil producer can participate in the world’s largest market and try to capture more market share. It can also easily convert and repatriate its proceeds into physical gold, an international form of money with no political risk.

From the perspective of an oil producer, the choice is a no-brainer. Even though most people have not realized it yet, it marks the end of the petrodollar system and a new monetary era.

A lot of oil money—hundreds of billions of dollars and perhaps trillions—that would typically flow through banks in New York in US dollars into US Treasuries will instead flow through Shanghai into yuan and gold. We could also see countries using Bitcoin to pay for oil, as the top Russian energy official recently suggested.

What Happens Next

Ron Paul knows more about the international monetary system than almost anyone alive. He once gave a speech called "The End of Dollar Hegemony," where he pointed out the one thing that would precipitate the US dollar’s collapse.

Here is the relevant part:

"The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better."

The bottom line is that China, Russia, and other countries will ditch the dollar and use yuan, gold, and potentially Bitcoin to trade oil. It will be the end of the petrodollar system, and it is imminent.

For over 50 years, the petrodollar system has allowed the US government and many Americans to live way beyond their means. The US takes this unique position for granted. But it will soon disappear. There will be a lot of extra dollars floating around suddenly looking for a home now that they are not needed to purchase oil.

As a result, expect inflation to skyrocket and a financial earthquake of historic proportions… One that could alter that direction of the US forever and mark the biggest economic event of our lifetimes.

The sad truth is, most people have no idea how bad things could get, let alone how to prepare…

 


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Tim Moseley

Cryptos Drop

Cryptos Drop As Markets Digest Interest Rate Hike And Forward Guidance

By RTTNews Staff Writer | Published: 3/18/2022 10:29 AM ET

Crypto markets remained subdued early on Friday as investors weighed the impact of the interest rate hikes announced by the Federal Reserve and Bank of England.

Both the central banks raised the rates by quarter percentage each, and on expected lines. However, the Fed's dovish action and a simultaneous hawkish stance has spooked investor sentiment as markets grapple with the prospect of six more rate hikes during the current fiscal. Lack of progress in the Russia-Ukraine ceasefire talks too dampened investor sentiment.

Markets also assessed the Dollar's rebound after correction in the previous sessions. The Dollar Index is currently at 98.54, having gained substantially from the level of 97.96 on Thursday.

Crypto market capitalization dropped close to a percent to $1.82 trillion. Bitcoin's dominance dipped to 42.3 percent while Ethereum powered to 18.5 percent.

Bitcoin is trading at $40,536.24, down 1.05 percent in the past 24 hours. Search data on Google Trends shows that 'Bitcoin' searches dropped to a six-month low reading of 30 in February, compared to 100 in mid-May, providing insights on behavioral dynamics in the context of a turbulent period in the lead cryptocurrency's history.

Ethereum is trading at $2,806.06, down marginally by 0.17 percent amidst huge expectations regarding the arrival of Ethereum 2.0. Meanwhile, Ethereum Co-founder Joe Lubin has reiterated his expectation that the next era of Ethereum would come within the next 6 months.

All the top 10 cryptocurrencies except 7th ranked Terra (LUNA) have been able to post gains on a weekly basis. Terra is down more than 5 percent on an overnight basis and 13 percent on a weekly basis.

As per data published by stakingrewards.com which tracks 261 yield-bearing assets, staked value of Terra (Luna) is at $26.45 billion, below the $33.02 billion attributed to top-ranked Solana (SOL) and the $26.62 billion on account of Ethereum 2.0. Terra's staked value has dropped from $31.7 billion on March 11 whereas Solana (SOL) bettered its previous level of $32.1 billion and Ethereum 2.0 improved from $25.1 billion.

Apecoin (APE), the new token of the popular NFT project Bored Ape Yacht Club has jumped to the 33rd ranking among all cryptocurrencies and 14th rank among all crypto tokens after prices surged around 100 percent in the past 24 hours. The cumulative gains on the token that was launched on March 17 exceed 1300 percent.

With a circulating supply of 0.28 billion and market capitalization of $4.11 billion, the ERC-20 token which is used within the Bored Ape NFT ecosystem is now ranked as the most valuable cryptocurrency in the Entertainment category. Based on market capitalization, it is also now ranked the second most valuable cryptocurrency in the Collectibles & NFT, Metaverse, Content Creation, Gaming, DAO and Governance categories.

In legal news, Coinbase Global Inc, Coinbase Inc, and Brian Armstrong, the CEO of Coinbase Global have been named defendants in a class action lawsuit that claims that the Nasdaq-listed exchange acted in the capacity of a brokerage for securities without sharing the required risks involved in trading as many as 79 different tokens. According to the Plaintiffs, Coinbase is liable as a brokerage firm and an "actual seller" when exchange takes place, crediting and debiting the parties involved in the transaction in its accounts, rather than facilitating direct exchange between those parties. The plaintiffs are being represented by Connecticut law firm Silver Golub & Teitell.

The previous occasion when the Fed raised interest rates was on 20 December 2018, when after increasing the Fed Funds Rate to 2.50 percent, the Fed promised to stop raising rates. At that time, Bitcoin was trading around $3250 and commanded a market capitalization of $57 billion.

On March 3, 2020, when the Fed Funds rate was reduced by 0.50 percent to 1.25 percent on account of the coronavirus pandemic, Bitcoin had risen to $8,560 while the market cap soared to around $156 billion. When on April 29, 2020, the Fed Funds rate were lowered further to 0.25 percent, Bitcoin had fallen to near $7670 and market cap to $140 billion.

On March 15, 2022, a day before the Fed hiked rates to 0.50 percent, Bitcoin was trading above $39,000, commanding a market cap of $747 billion.

Between March 2020 and March 2022, the Fed's Balance Sheet increased from $4.31 trillion to $8.91 trillion. FOMC's January press release stated that it expected to commence reducing the size of the Federal Reserve's balance sheet after the process of increasing the target range for the federal funds rate had begun. The latest word on this is that the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.

The quantitative easing carried out to increase money supply and stimulate economic growth would have found its way to varied asset classes. The Balance Sheet reduction aims to reverse the effect of the liquidity easing, given the profound impact it has had on inflation.

Tracking the Fed's Balance Sheet reduction program could give a sense of how liquidity and asset valuations would pan out in the day's to come. All asset classes would invariably have to take cognizance of this repositioning. Cryptocurrencies are no exception.

For comments and feedback contact: editorial@rttnews.com

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Article written by an RTT News Staff Writer, and posted on the RTT News.com website.

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Tim Moseley

Cryptos Brush Aside Rate Hike Fears

Cryptos Brush Aside Rate Hike Fears

By RTTNews Staff Writer | Published: 3/16/2022 10:01 AM ET

Cryptocurrencies rallied ahead of the interest rate review announcement by the Federal Reserve due on Wednesday. Market capitalization surged to $1.78 trillion from $1.72 trillion on Tuesday.

Bitcoin is trading at $40,376.25, having gained more than 4 percent in the past 24 hours. BTC has traded between $38,567.64 and $41,465.45 in the past 24 hours.

Ethereum surged by more than 5 percent in the past 24 hours and is currently trading at $2,674.48. The 24-hour trading range has been between $2,526.47 and $2,722.95.

Ethereum's rally assumes significance amidst reports that the Ethereum "Merge" has successfully taken place on the Kiln Testnet. The merging of the Beacon Chain with Kiln has happened on March 15. Ethereum's energy consumption is expected to drop significantly post the transition to the proof of stake consensus mechanism.

23rd ranked Chainlink (Link) which gained 6.50 percent and 25h ranked Uniswap (UNI) which rallied 5.25 percent are the top gainers among the top 25 cryptocurrencies ranked according to overall market capitalization.

Uniswap, the top ranked crypto token in the Decentralized Exchanges category has however lost close to 5 percent on a weekly basis.

7th ranked Terra (LUNA) shed 1.82 percent despite the broad-based rally and is the most prominent loser in the top 25 category. This follows a series of Twitter exchanges which eventually led to Terra's CEO placing a $1 million bet on the price of the coin in a year's time.

38th ranked metaverse crypto The Sandbox (SAND) has surged more than 8 percent in the past 24 hours amidst the announcement that global financial services provider HSBC would acquire a plot of land in The Sandbox metaverse. The virtual land would be developed to engage and connect with sports, esports and gaming enthusiasts. With the partnership, HSBC is also seeking to create innovative brand experiences that are educational, inclusive and accessible for its new and existing customers. The SAND token, which is the second most valuable metaverse token is presently trading at $2.92.

In regulatory developments, reports from Argentina indicate that the country is set to include cryptocurrency firms in the proposed anti-money laundering regulations. Earlier the U.K.'s Financial Conduct Authority (FCA) too had mooted a similar move.

The DeFi space witnessed two separate instances of exploits. DeFi protocols Agave and Hundred Finance have reportedly been exploited for $11 million. In another instance, $3 million has apparently evaporated from DeFi space as Deus Finance suffered a malware hack.

Financial markets worldwide are bracing for the Fed's policy review with a strong rally. Stock market indices across the globe surged and crypto prices appeared more or less dovetailed with movements in major stock markets. The pre-emptive relief rally appears to be founded on the strong reading that the current political and economic scenario would not justify a larger hike by the Fed even if the inflationary situation demands it.

For comments and feedback contact: editorial@rttnews.com

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Article written by an RTT News Staff Writer, and posted on the RTT News.com website.

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Tim Moseley

Shanghai Crypto Pyramid Scheme

Shanghai Crypto Pyramid Scheme With Over 60,000 Victims Busted

By Adrian Klent – March 16, 2022

Key Takeaways

  • Law enforcement agencies in Shanghai have infiltrated a crypto pyramid scheme.
  • The scheme involved over 60,000 victims and 100 million yuan.
  • Chinese authorities have been increasing their oversight of the illegal industry.

Despite ousting the crypto industry from its borders, China has continued to uncover criminal operations related to crypto. A joint law enforcement operation in Shanghai has led to the crackdown of the city’s first crypto pyramid-scheme case.

10 arrested in connection with 100 million yuan crypto scam

The local news outlet, The Paper, reports that the bust was the result of more than six months of investigations carried out by the Economic Investigation Team of the Shanghai Public Security Bureau, together with the Yungpu Public Security Branch.

So far, about 10 persons have been arrested in connection with the dubious scheme which was set up in June 2020. Authorities also claim more than 100 million yuan is involved.

The scammers marketed the scheme to be a “unicorn in the global application field” and “the world’s fastest public chain”, the authorities stated. However, investigations revealed that the elaborately set up company was only running multi-level marketing (MLM) scam, promising participants massive returns for signing up, buying tokens, and referring new participants.

No blockchain or token existed as the scheme was only run through a server, rewarding old signups with funds and new sign-ups.

This has not been the only crypto-related pyramid scheme that Chinese authorities have exposed of late. Last month, Ripple Pay Union, another MLM scam was clamped down. The criminal network claimed to have ties with the American fintech company, Ripple, and its XRP token.

Asides from pyramid schemes, China has also recorded an alarming amount of crypto being used for money laundering and gambling. The crypto that was most commonly involved was found to be USDT according to an analysis by a blockchain forensics firm.

China’s crypto scammers have also involved victims from neighboring countries. Business Standard recounts that victims in Singapore lost over $139 million to Chinese fraudsters last year.

China broadening its crypto crackdown net

China officially declared holding, trading, mining cryptocurrencies illegal last year. Since then it has been going after lawbreakers and putting new regulations in place to ensure there are no loopholes for the crypto industry.

Last week, China’s Supreme People’s Procuratorate disclosed that it prosecuted 1,262 people for laundering crimes involving crypto. The offenders included crypto exchange executives and online lending platforms.

DISCLAIMER: None Of The Information You Read On ZyCrypto Should Be Regarded As Investment Advice. Cryptocurrencies Are Highly Volatile, Conduct Your Own Research Before Making Any Investment Decisions.

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The original article written by Adrian Klent and posted on ZyCrypto.com.

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BTC BYTE MINER software – working and Paying 2 Options for you

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BLOCKCHAIN – Still Set To Be The Most Disruptive Technology Since The Internet

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BLOCKCHAIN – Still Set To Be The Most Disruptive Technology Since The Internet

Blockchain technology is celebrating ten years and in spite of the current turmoil, it still stands that it has the potential to become the most disruptive technology since the internet, transforming the way governments and businesses operate and interconnect. But are we close to the tipping point of mass adoption?

Why is it this technology has not yet completely transformed our world, considering the numerous initiatives that are underway? The devil is not in the technological details, but rather in the word just mentioned – transformation. Without a holistic transformational approach to the technology, it will stay promising, not fulfilling its full potential.

Deloitte’s 2018 Blockchain Report suggests that the technology is getting closer to an outright breakthrough. The survey polled a sample of more than 1,000 senior executives in seven countries at companies with $500 million or more in annual revenue. 74% see a compelling business case and 34% have already started to integrate blockchain technology in their organization.

However, despite the respondents’ interest in blockchain’s capabilities, nearly 39% of the global sample said they believed blockchain was “overhyped”. In the United States, this number was even higher: 44% of the respondents view blockchain as overhyped, up from 34% in a 2016 survey by Deloitte.

In terms of technology, blockchain has already proven its value and there are production examples and consortia in almost every industry that are either live or have the mission statement to do so.

We now know that the technology works, and the yet to be released potential is clear: to fully reinvent how businesses and governments manage their transfer of value, be that personal information, currency or goods. Blockchain solutions can take both time and costs out of almost any process, enabling near real-time operations with a high degree of accuracy and control. However, it will require a fundamental transformation in all parts of the value chain to establish new processes, commercial agreements, and controls throughout the ecosystems. Hence, legacy and decentralization are not very well-matched.

So what is needed to make the transformation and move from tech hype to mass adoption? We see three necessary actions:

1. Be clear on the return of investment – regardless of if it comes in fiat currency, tokens, new business or efficiency in governmental processes. A fundamental step for transformation is to move forward from a technological focus, towards a business value-led multi-disciplinary approach. This requires a mindset shift for senior leaders who are used to driving efficiencies and make technology investments for their own organizations. Thinking in terms of consortia, platforms and ecosystems is a new horizon and will take some time to mature.

2. Make regulators regulate – the current lack of regulatory clarity or standards related to e.g. KYC processes, ICOs, and digital identity is holding back potential change.

3. Bring diversity to the table – skills within business, regulation, transformation, subject matter expertise, R&D, project management and more are needed from all genders and walks of life. A fundamental step for transformation is to move forward from a technological focus that mainly attracts a tech-savvy, and often like-minded, group and let people with diverse backgrounds apply their experience and competencies in the next step towards broader adoption. Because there’s one thing we know for sure from these ten years of blockchain: decentralization works.

Viktor Tjäder-Larsson

Philip Dunard Reuter

Ester Sundström

Deloitte:

Deloitte is one of the world’s biggest professional services firms, serving four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries

Article by Toshitimes

 

Tim Moseley

The Artist that came out of the Winter