2022-03-29

Ignore Western Ideas of Money in Asia

Zh: Rabobank: Don't RUB Me The Wrong Way
Meanwhile, Russia is pressing ahead with plans to insist on a switch EU payment for its gas to RUB by Thursday. It has underlined it won’t export it for free, while the EU says it won’t pay in RUB. That is as binary a trade as you can get, and the potential outcomes should be obvious. The FX market seems to think so anyway, with EUR/RUB strengthening from 165 at its low to 105 at time of writing. But are we really going to see Russia “win” like that given the huge geopolitical and geoeconomic implications?

The much-vaunted Russia-India RUB-INR trade flaunted as the previous catalyst for “the end of the dollar!” is, according to the Indian press, looking far more mundane. The Business Standard reports India and Russia may keep RUB out of the proposed INR-RUB trade, given its high post-sanctions volatility: payments for the rising level of commodity trade that is indeed happening are likely to be settled in INR *pegged to the dollar*, and deposited in an Indian bank account. Under the proposed trade mechanism, when India imports goods from Russia, INR equivalent to the dollar value will be deposited in an Indian bank account. When India exports goods to Russia, Indian exporters can be paid from the same account in INR. You know who used a similar arrangement to work around sanctions? Nazi Germany. I’m sorry, I mean “Nasty Germany”.

The key points are that:

1. commodities will continue to be PRICED in DOLLARS, as we saw with the purported Saudi CNY oil sale;

2. Russia, for now, is still accumulating new USD and EUR reserves via its energy trade surpluses; and

3. nobody wants to touch RUB. Not even India, an emerging ‘neutral’ heavyweight in what article after article now say is a bifurcating world economy.

...If countries want to hold fewer USD reserves because of geopolitics and economies halting exports of the vital commodities USD are supposed to allow others to freely purchase, then that is not negative for the US dollar. Quite the opposite! It is negative for global trade. That may be in USD, and so there is less physical demand for them, but Eurodollar debts still have to be paid back, with rising interest, IN DOLLARS - and when there are less USD reserves, and flows, to do so with. That backdrop is arguably positive for the US dollar for now – unless, and I repeat, you are trading an avalanche of Eurodollar defaults.

Where we are seeing global FX reserve diversification, it is 75% driven by shifts into the likes of Canadian, Aussie, or Singapore dollars for example, all of which are still under the emerging Western/Anglosphere geopolitical umbrella. (Canada finally just opted for the F-35 as its fighter jet of choice, underlining that fact.) Such a development opens up some opportunities: Australia might be able to shift to invoicing more regional trade in AUD in ASEAN over time, for example.

However, we are not yet seeing the much-touted global switch to holding reserves in “commodity-backed” currencies of the future like CNY or RUB. That will require a game-changing economic policy shift or geopolitical event first. The first is seen as theoretically possible if politically unlikely, and the latter as perhaps strategically inevitable, but not necessarily to the dollar’s detriment: being nasty again, one could have made the same trade in the 1930s – and see how that worked out.

Westerners upset with Western central banks and Western governments created a false image of Russia, but especially China, as a heroic opponent. If you limit your expectations then yes, to some extent Russia and China are opponents of the globalists. They could slow or hobble the Baizuo by causing them unrecoverable political losses.

Yet there is no positive agenda that follows. There is no desire of the part of China or Russia to free Western peoples' from their own destruction at the hands of the Baizuo. They want to ensure that destruction remains in the West and isn't spread to Russia and China. They seek quarantive, not conquest. They could care less if the dollar collapses or not, as long as their economies are damaged by Western monetary policy. All the better if the dollar survives and the Baizuo can remain in power, selling off their nation and destroying it from within.

China is winning right now. Plenty of nations have become too aggressive too early, and maybe China will follow that path. If they stay on course and avoid war though, the Baizuo will complete the destruction of America as a global power by the 2030s.

In conclusion, nothing is going to change until change is forced via total economic collapse or total war. And what will follow? If I was the CCP, I'd think the U.S. has a pretty good setup! How about we keep the global financial system, but restart it with the yuan at the center? China takes "the exorbidant privelege" for itself? If China emerges victorious from a WWIII, I'd wager the new system would be far close to that than something desired by powerless Westerners hoping the near tyrant loses to the far tyrant.

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