According to a report released by the U.S. Congressional Budget Office on October 7, it is expected that the U.S. federal debt interest payments will triple from nearly $400 billion in fiscal 2022 to $1.2 trillion in 2023, and worse than that, the Federal Reserve is raising interest rates quickly, desperately trying to control inflation, but this will cause various problems.
erects a US Treasury clock on West 43 Street in New York City, USA, updating the total U.S. debt data in real time. On October 9, on a monitor like an aircraft dashboard, it reminded past pedestrians that the total federal debt deficit had exceeded the $31 trillion mark, accounting for 125.49%, which is 9.2 times higher than when Reagan delivered his resignation speech in 1989. Although the Federal Reserve has adopted a radical process of currency tightening, it is still increasing by 900 billion in national debt every hour. The clock increases the number of U.S. borrowings in seconds.
As we all know, at present, most of the US dollar is issued based on the expansion scale of US bond , which is the US bond standard. The logic behind this is well known. After the US dollar broke up with gold, it supported the usage of the US dollar and its global currency dominance through the perfect closed loop of "oil-US dollar-US bond". Therefore, the oil dollar artificially created an additional demand for the US dollar in the global market, so this further explains that the oil dollar is the core foundation of the US dollar, but the situation has changed a lot now.
htmlOn October 8, senior economists of the Federal Reserve wrote again on the New York Fed website, pointing out that although the US dollar still occupies an absolute dominance, this is not unchangeable, warning that "the US dollar will not be able to maintain the monetary power for a long time." This may not be a coincidence, because the latest de-dollarization trend is worth paying attention to.
At the same time, this is nothing new to those who study currency history. As shown in the figure below, there were six major reserve currency periods since 1450, with the earliest global reserves dominated by Portugal until 1530, Spain became stronger, and for most of the 17th and 18th centuries, the Dutch and the French issued currencies dominated world trade, but the emergence of British Empire made the pound a reserve currency.
Until 1918, the United States was economically superior to the United Kingdom. Since then, the US dollar replaced the pound, and since 2008, more than 75% of global transactions have been completed in US dollars. At the same time, the US dollar also accounts for more than 60% of the issuance of foreign debt and 59% of the global central bank's international reserve . Therefore, this is now new to the possibility of the Federal Reserve economists' public recognition of the " dollar crisis ".
In this regard, Peter Schiff, a Wall Street prophet and a staunch supporter of the Austrian economics school, said that in the environment where the US parties have reached a consensus that the US economy will decline, this will be the beginning of this dollar contraction.
Immediately after Goldman Sachs analysts warned that "the dollar may lose its global reserve currency status", Ruchir Sharma, chairman of the Rockefeller Institute in the United States, also analyzed that "the post-dollar world is coming?" and pointed out that the dollar status is on the verge of a sharp decline.
Peter Schiff further pointed out that "the petrodollar-based dollar structure has already had problems, and it issuing money indiscriminately, and predicts that the United States will encounter a worse financial crisis than in 2008, because the soaring U.S. federal lending and spending have turned the dollar into a monopoly currency supported by the large-scale Ponzi scheme ."
According to the explanation of former Bank of England governor Carney , the dominance of the US dollar has brought problems to decision makers outside the United States, which will force the world to think about the role of the US dollar in international settlement. He believes that the best way to reduce the US dollar is to replace the US dollar with a globally accepted digital currency to facilitate transactions in the global market.
Immediately afterwards, the Iranian central bank stated that it plans to incorporate more currencies into the new foreign exchange settlement system, allowing merchants who have import business transactions with Iran to make currency pairing settlement payments with their corresponding countries, and completely disable the US dollar in commodity transactions with some countries. At the same time, the integration of Russia's SPFS and Iran's electronic financial information platform Sepam has also made new progress.
At present, the Iranian authorities have officially replaced the original foreign exchange position of the US dollar with RMB (see the figure below for details), and have ranked RMB, euro and UAE Dirham as the country's three major foreign exchange currencies. According to the latest data from the Iran Financial Tribune, as of August, Iran's share of RMB asset reserves in foreign reserves has reached 20%, and plans to launch digital currencies.
At the same time, Iran also proposed to introduce a new unified currency in emerging economies to provide a problem of parallel settlement of US dollars. And just in early July, the central bank of Cuba also confirmed that Cuba had asked foreign businessmen not to bring the US dollar to the country because they would no longer accept the US dollar.
Immediately afterwards, Saxo Bank report stated that at present, global crude oil participants, including the Asian market, are already very happy to trade settlement in the form of RMB, which not only helps to obtain some oil pricing rights from major international benchmarks, but also can promote the use of RMB in global trade.
For example, it is reported that during the continuous shipment of Iranian oil to Asian markets, most settlements are conducted in RMB or euros, which shows that the RMB has played a role in oil trading currency in Iran's oil economy and trade.
Iranian oil tanker in the Strait of Hormuz
As we have seen, at present, China, India, Indonesian , UAE, Venezuela , Iran and many European countries have taken certain realistic steps to bypass or give up the settlement of US dollar oil. At the same time, the trading volume of RMB-denominated crude oil futures has been strong for more than four years on the listing, and the pricing function has been shown in the Asian market. Chinese customers have even started to partially use RMB to settle oil when they trade crude oil with some countries.
According to data provided to BWC Chinese website a week ago by the Shanghai Futures Exchange, as of July 2022, the number of overseas customers in the Shanghai Futures Exchange increased by 25.12% year-on-year, with an average daily transaction volume and position volume of 75 registered overseas intermediary institutions. The Shanghai Futures Exchange, including crude oil futures, low-sulfur fuel oil futures and crude oil options, has maintained a relatively high level of cumulative trading volume and position volume. In particular, crude oil futures are actively in line with international standards and have established good interactions with many exchanges in North America, EU , and Asia-Pacific.
At the same time, the latest data provided by World Gold Association and IMF are also verifying the above logic. As shown in the figure below, in recent years, as the global central bank's U.S. bond holdings have declined, the global central bank's gold reserve soared to a historical high, using to hedge the risk of U.S. bond exposure.
So, from this perspective, in fact, when the US dollar leaves the gold standard , this incident itself shows that the value of the US dollar is slowly losing. Although it has been re-used with the help of petroleum dollars, it has been continuously diluted by the Fed's multiple rounds of quantitative easing and the US federal debt deficit of up to 31 trillion US dollars.
Because global central banks have realized that the US dollar has a shelf life, the financial team of BWC Chinese website noticed that this voice mainly appears in Europe and emerging countries. For example, in recent years, the sound of restoring the gold standard has been heard one after another.
New progress is that according to the views of Wall Street senior currency expert Ilijiz Baimulato, the world will inevitably use national digital currencies or digital currencies backed by gold to replace or weaken the US dollar. For example, the Russian Central Bank is planning to establish a new Asian monetary system, which is planned to combine with gold to build a multi-currency system anchored by gold or digital gold currency, away from the influence of the US dollar, and this new currency will be specifically used for cross-border payments. But things didn't end here, and the United States finally proposed to retreat to the gold standard.
Alex Mooney
U.S. West Virginia State Representative Alex Mooney again boldly submitted a new bill to the House of Representatives on October 6, showing that it is trying to return the dollar monetary system to the gold standard. Mooney is also submitting a plan to immediately review the U.S. gold reserves (H R3526) mentioned:
Because the lack of transparency of the US federal authorities and the huge level of federal debt and interest expenditures triggered a continuous inflation nightmare, weakening the outside world's confidence in the country's gold reserves and the US dollar. Mooney proposed a solution in the bill to control the Federal Reserve's money supply and return its decision to the US market, in other words, it is to return to the gold standard.
Please note the picture below. What happened to U.S. Treasury bonds since Nixon ended the gold standard. As most U.S. debt appears after leaving the gold standard, this is just more evidence that the US dollar has over-inflated.
In this regard, Lawrence Larry, professor of economics at George Mason University, said that the significance of the proposal initiated by Mooney is worthy of the market's attention. The United States has enough gold to restore the gold standard, and the gold standard can continue to play a role in today's global economy. Immediately afterwards, another legislator representative in the state introduced a sound currency bill on this basis and canceled all taxes on gold, indicating that at the US dollar base, the initiative to use gold to break the mechanism for issuing US dollar bonds is fermenting.
Coincidentally, the Malaysian Central Bank has also proposed to the United States that pan-Asian gold supports currency, because gold is more stable than the US dollar, and at this critical moment, something that surprised the market and new changes have happened.
Just after the Federal Reserve economists warned that "the decline of the dollar is an inevitable historical process", the Bank of Japan and the Ministry of Finance are also working with four major Japanese banking institutions to study and arrange a globally dominated international network similar to SWIFT that can be used for digital currency payments, and can bypass the US dollar in economic and trade fields such as oil with many countries around the world, including Iran. Obviously, Japan, as an ally of the US economy, has also begun to seek to bypass the oil dollar and sell US bonds heavily, which obviously surprised the market and investors. The news shows that Japan has resumed purchasing oil from Russia, and at the same time, Japan is also the main buyer of Iran's oil.
and even, the EU plans to launch a euro-denominated crude oil futures contract in 2023, and will, based on studying the digital euro, let the euro be the default currency for energy contracts with third countries, officially shine the sword against the US dollar to maintain the status of the euro and hedge against the energy crisis of the . In fact, Europeans' distrust of the US dollar has been seen since in recent years, including Germany, Italy, France, Poland , Hungary and other countries have begun to transport gold from the United States or the United Kingdom back to China in advance.
As the latest data reported by the IMF shows, the global major reserve share of the US dollar has been in a slow but irreversible decline, because the US dollar, as the credit currency, is a Ponzi scheme built on the huge US debt house of cards. Although, at present, the dollar index continues to refresh its 20-year high, however, debt has always been a shadow on the US dollar, but it has not happened now. (End)
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