Life,  Wealth

Is the Petrodollar System Facing its Demise? Gold and Digital Currencies Emerge as Alternatives

On West 43rd Street in New York City, the United States, there is a U.S. Treasury Clock, which updates the total U.S. federal debt data in real time. On December 8, a display like an airplane dashboard reminded passers-by that the total federal debt deficit is approaching. At the $33.9 trillion mark, the clock increments the amount America owes by the second, which, if a pedestrian pauses there for a few minutes, is an increase of hundreds of thousands of dollars.

Therefore, according to the data model calculated by Morgan Stanley on December 6, under the current high interest rate level, if the U.S. Treasury Department needs to pay all interest payments to all creditors, in the next few weeks, the U.S. Treasury Department will It may be necessary to issue up to $1.7 trillion in new national debt to balance its spending and repay related debt payments. It is clear that this will plant hidden dangers for the continued turmoil of the U.S. dollar, U.S. debt and the U.S. banking industry, which is still in the Federal Reserve to raise interest rates. circumstances will become clearer.

However, Nouriel Roubini, an Iranian-American economist who successfully predicted the U.S. subprime mortgage crisis, and Dalio, the founder of Bridgewater Associates, successively said in interviews with the media that “the soaring debt in the United States is having a negative impact on the U.S. dollar and U.S. debt. To produce systemic damaging effects, no matter how much the U.S. Treasury sells U.S. debt and what monetary policies the Federal Reserve adopts, it is unlikely to solve the current problems faced by the U.S. dollar and U.S. debt in a substantive way.” But the worst-case scenario doesn’t end there.

Dalio, the founder of Bridgewater Associates, warned in a report published on December 2 that no matter how the U.S. Treasury sells U.S. debt and what monetary policy the Federal Reserve adopts, it is unlikely to substantively solve the current problems faced by the U.S. dollar and U.S. debt. problem, because the “big problems of U.S. debt and inflation” will eventually lead to a “catastrophic financial collapse” of the U.S. dollar, which will harm the U.S. economy. digital currency field.

According to the explanation in the latest report published by senior Wall Street prophet Peter Schiff on December 8, in the context of the restructuring of the global financial order, oil-producing countries that are restricted by US dollars in transaction settlement can innovate the foreign exchange system and create a A digital reserve currency anchored to gold can be accepted and supported by central banks around the world as one of the alternatives to reduce or bypass the role of the US dollar.

We have noticed that the chief banker of the Central Bank of Iran has stated last week that he will follow the development trend of global digital currencies and plans to give priority to the use of digital currencies in the settlement of cross-border transactions of commodities. He plans to issue a digital reserve currency anchored to gold as a way to achieve cross-border cross-border transactions. A payment method for transactions to bypass the U.S. dollar.

Immediately afterwards, according to a report by the Russian news website Vedomosti on December 8, Iran is discussing with Russia the development of a new gold-backed digital currency. The gold-backed digital currency will allow Iran to lock in the international gold exchange rate instead of legal currency. Yar, and the digital currency will also allow other countries to exchange with each other without external participation in transactions to bypass the U.S. financial monitoring system and become a feasible solution after the Iranian central bank was disconnected from the international settlement system. plan.

At the same time, new news shows that it is reported that Russia, Iran and India have begun to explore the possibility of using gold to trade oil. As early as November last year, the African country Ghana, which is rich in gold, officially began to use gold to trade oil. Gold is used to settle oil, excluding the U.S. dollar. Currently, ten banks in Iran have joined the digital rial project and issued a series of regulations to commercial banks, paving the way for the issuance of digital gold currency.

As part of this strategy, Iran’s central bank launched a new currency exchange center in April and allowed for the first time to directly trade gold with foreign currencies, including yuan and euros. The latest data from Iran’s customs showed that Iran’s gold imports were accelerating in the past three months. Subsequently, the Central Bank of Iran stated in a statement that promoting Iran to obtain more gold is the most important goal of the establishment of the center.

Not only that, as a key step in de-dollarization, the Iranian foreign exchange website stated in a statement that considering that Iran has replaced the U.S. dollar’s ​​foreign exchange position with RMB, and the pricing power function and market trading share of RMB crude oil futures continue to expand, Against this background, coupled with the leading advantages of the digital renminbi, the share of Iran’s oil transactions that choose to settle in renminbi will become larger and larger.

According to Iranian Oil Minister Jawad Oji on December 7, the country’s crude oil exports have reached their highest level since 2018, and they are working hard to deliver more oil to the Chinese market. Data shows that since this year, Iranian crude oil has Crude oil shipments to the Chinese market have continued to grow, and these spikes in oil export figures are attributed to new changes in the way Iran’s oil industry exports and settles payments.

According to statistics released by two other global energy shipping data companies, Vortexa and Kepler, in the 24 months as of December 1, at least more than 30 million tons of Iranian oil have arrived in China, and the price is higher than the international oil price. The price was lower and it is expected to continue to expand oil exports to China in the coming months.

Immediately afterwards, The McGill International, the world’s leading research institution, in its updated report, suggested that oil-producing countries such as Iran, Saudi Arabia, Iraq, and the United Arab Emirates can exchange some oil revenue for gold reserves, just like global central banks dumping U.S. debt in exchange for gold. , to support the prospect of establishing a global digital reserve currency system anchored to gold.

The above-mentioned new news in the global oil and gold markets, U.S. Treasury bonds, digital currencies, and petrocurrency fields seems to indicate that the petrodollar system based on the closed loop of “oil-dollar-U.S. debt” has dominated for half a century. Problems have already arisen, and combined with the fact that Europe and Japan, which hold the largest number of overseas dollars, are also facing a showdown in the fields of oil trading, U.S. debt and digital currencies, which are explicitly or implicitly helping to follow de-dollarization, then this will have a negative impact on the petrodollar and U.S. debt systems. It may officially sound the death knell of the petrodollar system, and this explains part of the reason why China is following the global central bank in accelerating its gold holdings in the field of international reserve assets. The latest data is reflecting this trend.

According to the latest data released by the World Gold Council on December 2, China has imported a total of 1,145 tons of gold in 2023 as of September this year, marking the strongest annual performance since 2015.

Then, according to a report released by Swiss Customs on December 8, Switzerland exported a total of 152 tons of gold in October, of which 89 tons were shipped to China, compared with 12 tons in the same period last year and 56 tons in September. This also made the top 10 gold exports this year. In March, Switzerland also shipped 562 tons of gold to China, an increase of 43% over last year. In addition to the strong demand for gold in the Chinese market, the latest data released by the People’s Bank of China also showed that China increased its holdings in the first 11 months of this year. Approximately 215 tonnes of gold reserves, as noted in the association’s Gold Demand Trends report, reflect China’s strong gold demand.

This shows that only from statistics released by the World Gold Council, Swiss Customs and the Central Bank of China, since January this year, at least 1,922 tons of gold have been shipped to China from the three major international gold markets of the United States, the United Kingdom, and Switzerland. At the same time, The Federal Reserve and the U.S. Treasury Department, which are currently caught in the U.S. credit crunch crisis and the expected U.S. economic recession, do not dare to refuse or prevent countries from returning their own gold in order to maintain the credit of U.S. debt and the U.S. dollar, nor do they dare to show up This will become even more clear as the U.S. economy faces the risk environment of a “Minsky moment”.

In this regard, Nouriel Roubini further explained in an interview with the media on December 7, “The soaring debt risk in the United States will become a nuclear bomb that detonates the U.S. financial debt market and ignites the credit crisis of the U.S. dollar. The impact of the U.S. currency will eventually make the world lose confidence in the U.S.’s ability to repay its huge debt, and damage the U.S.’s financial prestige and the U.S. dollar’s status as the global reserve currency, but the resulting crisis will be even more terrifying.

Because the reason why Americans can buy cost-effective goods all over the world and live a life of luxury through printed green paper of US dollars is precisely based on the status of the US dollar as the world’s major reserve currency. If the U.S. dollar becomes another currency, then the Ponzi scheme maintained by the U.S. based on U.S. dollar hegemony will inevitably begin to collapse at an accelerated pace.

Especially at this time, U.S. debt creditors around the world have begun accelerating liquidation and selling, which will undoubtedly shake the fundamental logic of U.S. economic growth, dilute the monetary dividend of the U.S. dollar, and weaken the U.S. dollar’s ability to export inflation and collect seigniorage, giving arrears The debt-addicted U.S. economy has planted a debt time bomb.

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