As quickly as it came March 25th, it was then quashed just a few weeks later.
I had done extensive writing on this, and did two YouTube shows on this. The plan was….
“For Russia to give 5,000 rubles for a gram of gold”.
This above sentence then became much trickier than it sounds. At first glance, it appears to be a gold standard. Quickly, people pointed out “That doesn’t mean Russia will SELL you 1 g of gold for 5,000 rubles”. At which, I then constructed this diagram with how I felt this was going. Understanding this diagram is important for the rest of this discussion.
What I felt was an arb with the gold/ruble/dollar others then saw as a “floor” for gold. At the time, it was like $1700. So, why would ANYONE sell a gram of gold to Russia for 5,000 rubles? It then had to do with cheap oil, and arbing the oil and gold. So, the BIG picture was IF oil was priced in g of gold, you would have potentially seen a $2300-$3200 gold price quickly.
However, what this did, in effect, was strengthen the ruble a hell of a lot more quickly than THEY even imagined. Within a week or so, you could find the RUB/USD trades at 71-78, depending on the tool you were looking at. What THEN happened was the price of the ruble was TOO HIGH, meaning you could then potentially buy gold from someone in Russia at 5,000 rubles, then turn around and sell the gold in USD for profit. What??
Yeah, things evolved quickly, and I wanted to let the dust settle a bit. Where us gold bugs DID see a potential for the gold backing, you then also saw Alisdair Macleod come out and report that Russia indeed had 12,000 tons of gold, and not the 2,000 or so reported. IF true (big caveat here as I have not see this number reported anywhere else) that could effectively have the Ruble backed 1:1 with gold.
Even if NOT true, this still has the potential today to have a gold peg at somewhere like 20%. And, many have postulated, that IF a gold backing comes back, it wouldn’t be 1:1 with currency, but perhaps a 10-20% backing. This is consistent with Russia having 2,000 tons of gold.
While many have just seen tanks and rockets, from the get go many of us have been looking at this as a war against the USD. Dollar bulls are incessantly pompous about the value of it going up – but they fail to really grasp the bigger picture about how all of the trash currencies out there are falling against REAL things. For example the DXY is what…
When you look at the biggest two here, they account for about 71% of the value of this. Let’s look at what’s then going on with the RUB/USD
Then, recently, they suspended this program. Saying they can then have “negotiated” prices. What was essentially happening was the RUB was becoming too valuable, too quickly.
Many of you see Putin as a monster. It is a one-dimensional view of a world leader. What I just see with the RUB/USD above was a method in which he could fight for his country to stabilize the currency, quickly – BUT if he had wanted to, he could have let this thing run and completely ruin western banks and with it, blow up the gold/silver on the COMEX/LBMA in weeks. He chose a way to defend against the sanctions without taking the entire western financial sectors down. Meaning – he did a proportional response to the SWIFT actions – it appears – and did not go full gold backing which surely could have leveled most banks in the western world in a week.
Let that all sink in before we proceed.
It has been clear to many of us for a very long time that Russia/China/India have had a lot of interest in gold. I wrote back late last year about how central banks had been buying gold up in droves. It was also noted in many of my articles how Russia, for years, has been working on de-dollarizing and had no treasuries of note.
To me, this appeared to be a financial war being waged. Russia was not bending the knee and buying treasuries, and they had been sanctioned for the Crimea invasion in 2014. It has been clear for many years that my country has been using “The reserve currency” and SWIFT to control/manage global finance. The saying is, “he who has the gold makes the rules”. And with this, has been many years of US policy trying to de-legitimize gold – to make the USD and treasuries the new form of gold. Problem is, the East, who has owned gold for thousands of years, knew better.
When I started my master’s in cybersecurity, you learn a lot about cyberwarfare. One item discussed in this is MAD, or mutually assured destruction. When you see warfare happen, it may be a series of escalations or de-escalations leading to a point that is all out warfare for survival. But the overarching concept was that in cyberwarfare, there are MAD items in there – so often you may see conflicts with a series of reciprocal endeavors. Meaning – if Russia had someone hack some businesses, a reciprocal attack would NOT be bombing them. Perhaps sanctions are levied, or the like.
This leads us to financial warfare. To ME, my ANALYSIS is showing that Putin wants to win, yes – but in his future, Russia has a seat at the table and the commodities they sell will be fairly priced, and they do not want to bend the knee to the US or any form of WEF Klaus Schwab stuff. You can disagree with Putin and hate him – but yet see why he is fighting that globalist structure. If Putin was evil, 100%, he would have cut gas off 100% at the beginning of this conflict to the West. Instead, he offered to keep selling, and they can pay in Rubles or gold.
This made Western powers incensed. HOW DARE HE!! As a casual observer here, I just don’t see the big deal. If you are Poland, you would simply open an account with a Russian bank that is not being sanctioned (there are a few), then the money you would buy gas for in Euros, you give to them, and then they convert the Euros to RUB and you get the gas. There’s no price change. The problem is, you placed sanctions on Russia, and they found a way to defeat your sanctions. Had you not thought this out???
To me, it appears as if the move right now up in the USD looks to be a weaker Euro – perhaps the Euro is being sold for ruble? I saw this and agreed, and wanted to give credit.
There might be something to this…
In the above, is the EUR/RUB and the red circle is when the 5000RUB/g took effect. Note that this fell from a higher number than the RUB/USD and while the RUB/USD leveled out, you can see a steady and continued dive.
To me, this, along with the recent stock market troubles, point to the higher USD. Then consider the Yen, who pledges near zero interest rates AS the US is raising rates. This led to a 20 year low against the USD, but you also have Japan most likely having to buy Russian gas and oil.
With the JPY/RUB, you have almost an identical chart to the EUR/RUB. In the cases of the Yen and Euro, you can see their prices against the Ruble are far lower than before the war started.
So the “attack on the dollar”? It seemed to push Yen/Euro down, which has boosted the USD against these weaker currencies. But you see the ruble hit pre-war numbers, and STOP there. Why? Because Putin is not looking to KILL the dollar. All he had to do was peg the ruble to the dollar. And – that may be his eventual kill shot. But he doesn’t need to do that – yet. Does he want to piss off 330m Americans with many guns and weapons? No. He did a proportional response.
But looking forward, what is ahead? If he voluntarily left SWIFT, it might have been looked at as an act of aggression towards the US. In this case, they were booted – and with the US seizing foreign reserves, THAT move may have just pushed a lot of people on the fence in the camp of getting the hell out of SWIFT and the USD and treasuries.
The move ahead
While the dollar has moved higher lately, you only need to look at things that could come down the road to see where it is going. In a crash-like scenario of 2020, you could obviously see the dollar going higher. I am in the Michael Oliver arm wrestling camp, and feel there will be sustained moves down over a broader time frame. To recap, we are from a 0% to a .25% Fed funds rate (give or take a few points) and the markets have completely shit the bed. Obviously, they are accounting for future hikes.
But I ask you this…why are they tightening? They stopped the buy backs, and this led to rates popping higher. IF we have inflation some mark at 17%, why they hell are you giving someone your money for 2.7% yield to guarantee 14% loss per year? The ONLY reason you do that is….
- the government makes you – these are big banks, pension funds – and used to be the Saudis, Chinese, etc. Your 60/40 funds with home financial advisors will be tested.
- You BELIEVE they will control inflation in the next few months and you will make money for 9 years.
In the above situations, I believe banks are getting spanked. Pension funds will go insolvent at some point, but I had seen someone postulate that bail outs might then force them to buy these bonds at lower rates. My buddy’s financial advisor finally sold him out of bonds. The Saudis reduced their treasuries from $180B to $100B and are seeking Chinese friendship and have discussed buying in Yuan. The Chinese are most certainly going to reduce their treasuries. This leaves Japan as being a bag holder. Why wouldn’t the Japanese then start selling?
What if inflation cannot be stomped out? They are doing their best to create demand destruction – and even talked about “the reverse wealth effect”. Their idea to stop inflation, essentially, I believe, may be to CREATE a deflationary event to curb stomp it. Like forcing rates higher and higher UNTIL they break it. I wrote an article about this in January where I pondered what if their goal IS to break the economy? Many of you out there are waiting for a Powell Pivot Part Deux. Remember, in 2018, he had Trump yelling at him daily to lower rates, and this time around he has Biden’s team directing him to stomp inflation. One must consider the markets are in for considerable pain ahead. But does this mean more selling sends the DXY higher?
Death by a thousand paper cuts
IF Russia wanted to force a kill shot to us, they would have pegged the ruble to gold. It’s still possible.
This is from RT, but understand the message may be a warning shot more than a plan of execution.
So, even entertaining this idea then may have the effect of KEEPING the ruble strong against the USD.
But if you look at my initial chart above, it’s how I see it playing out. Russia’s commodities CAN make them extremely powerful IF it is their currency. With a close linking of gold, oil, gas, and the ruble, you can see how this can be extremely powerful.
I am not predicting the DXY to 10 tomorrow. But to me, there is a clear path ahead.
- The US continues to tighten which strengthens it against the EUR and JPY AS these countries are selling to buy rubles. So the DXY going higher is sort of a mirage in this respect as it is falling against commodities – represented now by the RUB. While the DXY may remain high against shit currencies, the REALITY is our purchasing power of buying things will continue to diminish at an alarming rate. Meaning – we may see a higher DXY, but commodities prices may outpace that, providing lower spending power. The DXY “strength” is a mirage.
- IF the RUB has a commodities backing, with perhaps gold/gas/oil, etc – this strengthens it against all currencies, and what might be interesting is NOT to watch the DXY, but the USD/RUB.
- I’d watch for nations to continue to sell out to treasuries – forcing these rates higher. Saudis, Chinese, Japanese – can force bond rates much higher. How is that cost of capital going to affect the 38% of S&P companies that were zombie companies?
- While the RUB cannot REPLACE the USD, I do not think that is the goal. I believe the goal is to WEAKEN the USD and with this, FORCE us to cut back defense spending and all other types of spending – especially on foreign aid/NATO. If we cannot create trillion dollar deficits every year, then we may not be able to fund the military as much as we do now. WEAKENING the dollar creates a strategic objective then of lessening their impact with NATO, and perhaps sees an implosion of NATO. They can defeat NATO without firing a single shot at them, as we defeated the USSR with financial warfare.
- Russia could reserve the right, AT ANY TIME, to back the RUB to gold. Or oil. I believe many financial analysts are not understanding the significance, as this is a polar opposite of the MMT type of economies some of our brightest are pretending to understand. It seems a move to SOUND MONEY may be in store for many BRICS economies. You cannot PRINT iron.
- Commodities may have a tumultuous time ahead, but my belief is we are about to see a decade long commodities explosion – and all of the USD printed over the last 2 years will bid up all of those scarce resources to very high levels.
In the ST, we may see the DXY go up like milkshake theory predicts – but we could also see how this Russia/SWIFT/RUB thing affects commodities prices FAR higher. Meaning, inflation can rage on indefinitely which may pull up gold/silver with a sling shot move up to “catch up”. While most analysts see the DXY dying which brings gold higher, not many see both DXY and gold going higher together, but that is not incongruent. I am of the camp that the paper currencies will die, but many might have seen other paper shit dying before the USD, which pushes the DXY up RELATIVELY to other currencies WHILE the USD is dying against commodities.
Let that last sentence resonate. And, if we think the ruble may end up as a commodities-backed paper currency, you could potentially see that strength against the dollar go far higher.
Russia does not need to crush us. We already did that to ourselves with debt. Russia simply needs us to be weaker so they are not threatened by NATO at their borders AND they can have the strength to tell the IMF/WEF and all globalists to “go to hell”.
Lastly, if you think about all hot wars – what happens afterwards? You have cities to rebuild from the ground up. It costs a lot of money to “nation build”. To me, Putin wants strong customers for his commodities. If the US goes into a 20 year depression, there goes a lot of consumers for raw materials for finished goods. If you look at what might be happening with the currency war, it appears to me he wants Western powers weaker, but not disabled. To me, it’s a rational response to the sanctions, which my money is he bet on, and planned this move for.
We put him in check with the sanctions. When he made a move, he put us in check back. We can simply move our piece to safety and play for a draw, or we can escalate and trade pieces until both have only kings on the board and it is a draw anyway.
Make no mistake. Everyone sees tanks. I see a currency war that started in 2014 and is coming to a conclusion soon. As Europe may now be forced to open accounts with gazprombank, they will accept euros and sell them for the ruble. If they do not do this, it is a matter of time before Europe goes into a decade long depression.
This is what this war boils down to.
Moving ahead, with the mention of gold/ruble/oil – it is now out there in the ethos. Gold, a once forgotten relic, was mentioned by a head of state as CURRENCY to BUY ENERGY. Anyone who misses this message and wants to hold on to MMT, may go down with the ship.
My bet continues to be on gold/silver.
If you look at this chart from 2009 to 2012, we would get routine 7-15% pull backs. Only at the end did we get a 20% pull back, then a bounce, then a 15% pull back.
Here’s where we are now. At an 8% pull back.
So, could the Russians peg the ruble to gold? Perhaps. RT seems to float that out there. It could happen, and talk of this can continue to strengthen the ruble even more.
Doubt gold at your peril, despite Western banks trying to gaslight you into thinking it doesn’t exist, is a “relic”, or held for “tradition.
So – while the “peg” doesn’t exist anymore in the format suggested above, it doesn’t mean long term it cannot come back. Think of a day where the ruble is at 50 to USD and perhaps at that point they do a 3000 RUB to g of gold (just an idea, I didn’t do the math). What would happen then? Could that be a year from now when we are in a deep recession, and this is a kill shot? Who knows. But I think this currency war is far from over. It doesn’t mean the DXY cannot continue to rise – but ask yourself why it is rising? Flight to the dollar OR weaker currencies in the basket as they are sold for RUB?
April 28, 2022 at 7:04 pm
Very good article Nathan – well thought through!
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