Bitcoin & Geopolitics – Week 4

Bitcoin & Geopolitics - Week 4

What is at stake in Ukraine is the exorbitant privilege of the dollar. Defeat will lead to the disintegration of the US Empire.

Ukraine, a new cemetery of Empire?

The world has been unipolar since the fall of the Berlin Wall, when the United States emerged as an unrivaled superpower. Then came globalization and the victory of the dollar.

Three decades later, the world has changed dramatically and the war in Ukraine seems to be the death knell for this unchallenged hegemony. Or the exact opposite of the expected effect, which is to isolate and destroy Russia.

“Russia is isolated, Russia is isolated”, repeated in the chorus of the newspapers that receive the doxa media heard directly from the Élysée. In fact, United Nations votes show that 75% of the world does not follow the West. In other words, the operation does not work to demonize Russia.

We are facing a split in the G20 with the G7 camp on one side and the BRICS supported by non-aligned people on the other, which is only possible with a reform of the international monetary system.

Deodorizing signs are growing as the imbalance in the US trade balance widens. The United States has run a cumulative trade deficit of more than 15,000 billion dollars since 1975. Colossal…

The 2022 deficit was a record with a hole of 650 billion. That’s as big as Poland’s GDP…

Nations are tired of funding Americans for free while watching the value of their dollar reserves melt like snow in the sun due to runaway inflation in the United States.

Who is flowing the dollar?

Although the yuan made only 19% of the trade settlements between China and Russia in 2021, we now have more than 50%.

The Chinese yuan is the most traded foreign currency on the Moscow Stock Exchange. The share of daily dollar amounts has fallen from 80% to 40% over the past year. Conversely, the yuan’s share rose from less than 1% to 45%.

India buys many Russian commodities in rupees as well as UAE dirhams.

China went even further to ask GCC countries to make full use of the Shanghai Petroleum and Natural Gas Exchange so that he can buy his oil and gas in yuan.

Saudi Finance Minister Mohammed Al-Jadaan said a few weeks later in Davos that there is none “no problem discussing how we settle our trade agreements, whether in dollars, euros or Saudis”.

This statement is indicative of the dollar since OPEC has accepted the dollar exclusively since 1975. Know that oil is the lifeblood of any industrialized economy. Simply put, it is the most traded bulk commodity by sea.

And with the expansion of BRICS beyond Brazil, Russia, India, South Africa and China, the de-dollarization of trade flows is expected to increase further. Brazil and Argentina have just joined forces “reduce dependence on the US dollar”.

Credit Suisse

The trend towards deodorants has not escaped Zoltan Pozsar, a pundit at Credit Suisse. The latter said in the FT that the “Threat of the great power conflict exorbitant dollar privilege” :

“The trade balance surpluses of China, Russia and Saudi Arabia are at record levels. But these surpluses are, for the most part, no more recycled than US government debt which offers negative real returns due to inflation. »

Instead, Credit Suisse sees an increase in demand for gold in China. Russia, which saw its trade surplus reach 86% in 2022 ($227 billion), won’t invest a kopeck in US debt either.

Saudi Arabia is investing in mining companies specializing in the extraction of the metals needed for the energy transition. Not to mention the “funding geopolitical investments such as the new Silk Roads and helping allies and neighbors in need, such as Turkey, Egypt or Pakistan”, says Zoltan Pozsar.

In short, trading less dollar-denominated will reduce the amount invested in US Treasuries. In this case, “one could question the excessive privilege of the dollar as an international reserve currency”.

Stated even more clearly, the dollar exchange rate will fall until the US trade balance returns to equilibrium. The Americans will have to tighten their belts.

A ceiling on dollar-backed debt

The debt of the United States has just reached 31,400 billion dollars, that is to say the symbolic legal limit that has already been raised 78 times since 1960…

“The US Debt is Growing Regardless of the Government in Charge »

But who invests in US debt? Except for the Fed, the US debt is kept roughly equal between domestic and foreign investors. Of which China holds 870 billion dollars, down from 1300 billion in 2013.

China no longer invests in US debt. What could be more normal when you know that the FED has bought 6,000 billion dollars of US debt since 2008. This is so much money created ex nihilo that it dilutes the value of the dollars held by the rest of the world.

The gargantuan debt of the United States scares you. Bloomberg reported on Monday sharp criticism from Zambia as the Chinese Embassy criticized the United States for its “catastrophic debt problem”.

Imagine that interest on the US debt alone currently costs more than $700 billion per year. That’s as much as the US Defense budget. Knowing that the government does not pay interest on the 6,000 billion bought by the FED.

What if the United States rolls over all its debt with a prime rate of 4.50% instead of 0.25% as has been the case since 2008? It is very simple, then the interest payment will be more than 2000 billion dollars per year. So much money that obviously has to be borrowed in a mad rush.

This is why nations are losing interest in dollars backed by Ponzian debt that has gone exponentially. The world is actively looking for a solution to replace the dollar by refusing to see it before their eyes.

Bitcoin is poised to become the next international reserve currency. It is debt free, uncensored, limited to 21 million units, and stateless. It is time for the world to face the facts. Bitcoin !

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Nicolas Teterel avatar
Nicolas Teterel

Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.

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