Here’s the Massive Difference Between a Theoretical Russian Gold Put and an Actual Russian Gold Put

This is an interesting article concerning gold and especially the time it will take for a gold peg to be implemented. (I agree with the explanation but not with the timing as a financial crash would/will accelerate the process.)

Here’s the Massive Difference Between a Theoretical Russian Gold Put and an Actual Russian Gold Put

 

I originally published this article here on 6 April 2022, but since conditions have drastically changed since then, I’ve provided the brief update below. To read all my articles when first published, please sign up here.

9 April 2022 UPDATE: What a difference 23-hours make. Though the Bank of Russia announced that they had intended to keep the peg of 5,000 rubles to 1g of gold for the next three months, on 7 April, 2022, one day after I published this article, they released a statement that they will now buy gold at market prices due to a “significant change in market conditions”. No doubt, one reason for this decision to end this peg prematurely was the massive discount in Russia to purchase gold versus futures and spot prices granted by the fixed price of 5000 rubles to 1g of gold. Another significant contributing factor to the Bank of Russia’s decision was the manifestation of my explanation written on 6 April that “the ruble would only have to strengthen, against the USD, by another 3.42% to bring the gold price in Russia up to parity with the USD equivalent price”. 

Over the last 24-hours, the ruble has risen by more than this percentage against the USD, which would have raised the USD equivalent price of gold in Russia, if the peg were maintained, to a premium above current global future/spot gold prices. This development also modifies my "gold prices likely to remain dampened in the immediate term" comment below, as the unpegging of the rising ruble to gold allows global spot prices to rise without creating ridiculous discounts in the gold ruble price in Russia. Although the Bank of Russia was somewhat cryptic in its reference to a vague “significant change in market conditions”, there is no doubt in my mind that my aforementioned explanations were the conditions that caused them to dissolve a peg that they had originally planned to maintain for three months . Despite this, all the points I make below, to a large degree, still remain true. Below is the entirety of the article I published on 6 April, 2022.

There has been a lot of buzz in the gold community surrounded Russia’s decision to price gold in rubles regarding the creation of a “Russian gold put”, a floor in gold prices, similar to the Greenspan and Bernanke puts placing a floor beneath US stock markets. However, I don’t think the manifestation of a Russian gold put in the immediate to intermediate term is realistic.

Why? To begin, China launched a Yuan-denominated gold contract in Shanghai six years ago in April 2016. Back then, even Bloomberg Intelligence participated in the propaganda hype of this development by penning an article stating that gold prices could rise to $64,000 an ounce if China decided to even partially back the yuan with gold. Of course, after a series of articles in mass financial media touted the “Shanghai gold put”, gold ended the year much lower than its price at the time of the SGE launched the Yuan-based gold contract. Furthermore, after the yuan denominated gold contracts started trading on the SGE, gold  took another four years just to  challenge the 2011 highs of $2,000 per troy ounce after falling to about $1,100 at the end of 2016. In hindsight, to justify their narrative of a “Shanghai gold put”, some claimed the launch of yuan-denominated gold contracts placed a floor of $1,000 in the price of gold. However, clients of my former consulting/research firm knew that I stated gold prices would never sink below $1,000 again once it breached this mark at the end of 2009, six years before the Shanghai Gold Exchange launched its Yuan-denominated gold contracts. So again, the narrative of the Shanghai gold put creating a floor of $1,000 dollars was a false one.

If the launch of yuan-denominated gold contracts available for global trading did not create a floor for gold (as I believe the rise in gold prices over time created a natural $1,000 floor as a consequence of Central Bankers destroying the purchasing powers of fiat currencies around the world), then expectations of ruble-denominated gold sales achieving a feat that yuan-denominated gold contracts could not (in a short period of time) is improbable. Yuan-denominated gold trading should have far stronger influence over global gold prices than ruble-denominated gold trading, as China possesses the second largest GDP in the world while Russia comes in at number eleven, but yet yuan denominated gold trading could not even keep gold prices over a paltry $2,000 per ounce. In addition, because of the sanctions against NATO nations/allies buying Russian gold, the amount of global Russian gold exports will be curtailed, though certainly non-NATO allies may make up for the decline in NATO nation buying. Furthermore, though Russians certainly understand the utility of gold as a means to store and preserve purchasing power over decades of time due to the wild historical volatility in ruble purchasing power, I still would not judge Russian’s love for gold over that of the Chinese.

 

Misinformation Surrounds the Russian Gold Narrative

A lot of misinformation is being peddled all over the world about Russia’s decision to peg 1 gram of gold to a price of 5,000 rubles. While it is correct to claim that this decision helped the ruble to rapidly regain its purchasing power after imposed economic sanctions caused it to crash, as of 5 April, gold in Russia at the above peg is still trading at a massive $64 discount per troy ounce to its 5 April CME front month gold futures contract of $1,930. In other words, it is far cheaper now to buy physical gold in Moscow than to buy a CME gold futures contract and stand for delivery. And the ruble would only have to strengthen, against the USD, by another 3.42% to bring the gold price in Russia up to parity with the USD equivalent price. Thus, after all the NATO economic sanctions imposed on Russia, the attempt to collapse the ruble has completely failed.

 

For those that still believe BTC is a more sound form of money than is gold, there is a reason the Russian government/banking complex decided to peg the ruble to gold and not BTC. Further, all BTC hodlers should be grateful that Russia decided to peg the ruble to a fixed gold weight instead of a fixed BTC amount, because had they fixed the ruble to BTC, you can bet that bankers would have expedited new regulatory laws and forced BTC below $10,000 over the next few months.

Now, on to the misinformation. I’ve seen quite a few articles that reference the peg of 5,000 rubles to a gram of gold as a return to the gold standard. Stating that a peg of a fiat currency price to a weight of gold is a gold standard displays a complete lack of understanding of a true gold standard. A true gold standard can never peg the weight of gold to a fiat currency price for the same reason that cryptocurrencies priced in fiat currencies can never “save the world”.

Secondly, in 2019, 2020 and 2021, Russia exported roughly $5.7B, $18.5B and $18.7B worth of gold. In 2020 and 2021, at their respective annual average gold prices of $1,770 and $1,799, Russia’s exported gold tonnage amounted to roughly 325 tonnes in each of those years. This is an amount that will not only be easily absorbed by China, India and Russia’s Central Banks, but also more importantly, an amount now unavailable to back gold derivative markets in New York and London. For example, China only imported about 354 tonnes of Swiss gold last year, well under their 600 tonne average of Swiss gold imports from 2012-2019 (combined numbers of Hong Kong and China). If Russia doesn’t decide to keep their domestic gold production completely in-house, which is also a possible outcome of sanctions against Russian gold, China alone could easily absorb Russian gold exports banned by NATO nations if it decides to return to gold import tonnages of previous years. And if a drastic drop of Russian gold to Western nations becomes a permanent, instead of just a temporary situation, in future years, then indeed, the NY and London gold derivative markets may be exposed as “Emperors that have no clothes”.

Furthermore, in 2020, most of Russia’s exported gold ended up in the UK and in turn, was forwarded to Switzerland where it was refined and then exported to the US. The US, by a large margin, was the largest importer of Swiss gold, importing  $32B that year (click the following link to view Swiss gold imports by nation from 2012 to 2021). Thus, by following the money, it appears that the US, by sanctioning Russian gold that eventually ended up in US vaults in previous years, is cutting off its nose to spite its face. For those wondering how much gold is $32B, at the 2020 average gold price of $1,770 per troy ounce, $32B amounted to roughly 18M AuOzs, or roughly the amount that currently sits in COMEX vaults backing gold futures trading as of 4 April 2022.

Thus, beware of analysts that don’t even understand the definition of a gold standard that issue warnings that Russia’s peg of its ruble to gold will become a game changer in global gold pricing mechanisms, because their understanding of the banker perception management game, as is their understanding of a gold standard, is likely severely distorted (to view the very significant returns we just delivered to skwealthacademy patrons this past month using our understanding of how perception differs from reality in the investment world, click here).

 

Gold’s Price Likely to Remain Dampened, Not Elevated, in the Immediate Term

As the situation stands now, Russia’s decision to peg 5,000 rubles to 1 gram of gold has likely sealed gold’s immediate price fate at sub-$1,900 in direct contradiction to the opinion of many analysts that predict the Russian gold put will imminently push gold above the $2,000 mark for the third time this year. And should this prediction of mine, published first on my news site on 5 April 2022 (while gold was trading at $1,930) and then on my substack platform the next day, come true, such a development should buttress the argument for the need to entirely scrap the unethical, immoral system of global gold pricing that exists right for a free and fair pricing system actually based upon global physical supply and demand determinants.

 

Is a Russian Gold Put Possible At All?

Of course the development of a Putin or Russian gold put is possible, but the likelihood is that it will take years, not months, to develop. Gold soaring above $2,000 again will not be due to the Russian gold put when it happens but it will simply be just another step in gold’s naturally higher price progression. Long term, as other nations not on the NATO friendly list realize that gold should be the number one asset held by their Central Banks, then the Russian gold put will slowly come into play. Furthermore, as other non-NATO nations (in which more than half the world’s population live, see the map below) gain an understanding of how Russia’s massive gold reserves saved the ruble from purchasing power devastation after a coordinated attack by NATO nations’ imposed economic sanctions, then many of these nations will also ratchet up their sovereign physical gold purchases.

But such a process will take time as other non NATO nations have observed the NATO killing of Libya’s Muammar Gaddafi after he proposed creating a pan-African gold and silver currency to compete with Western fiat currencies and Goldman Sachs;s funding and support of a corrupt Malaysian PM  Najib Razak, in which Goldman Sachs bankers helped raise billions of dollars for Malaysia’s sovereign 1MDB fund through a shady deal that led to billions raised in a bond offering embezzled by Razak.  It was Razak’s illegitimate rise to power in Malaysia, funded directly by a shady Goldman Sachs bond offering, that delayed the return of popular former Malaysian PM Mahathir Mohamad to the Prime Minister office. This multi-year delay was critical in effectively killing Mahathir’s  proposed plan of a common gold-backed currency for all SE Asian nations (if you are not familiar with the above story, I highly encourage you to learn about it at the above link because you will learn how important it is to remain abreast of such situations to invest wisely when banker meddling is significantly altering asset prices).

Thus, for the Russian gold put to spread to other non-NATO nations, the leaders of these other nations will likely need to receive some assurances from Russia of military protection against illegal assassinations and coups ousting them from power before they agree to join any Russia-Africa-Asia-South America gold alliance that could genuinely place a floor underneath the price of gold as gold prices continue to rise against collapsing fiat currencies. This will likely develop as a result of sanctions against Russian gold imports, but the development of this alliance is far more complex than is being presented by most outlets today, and thus the Russian gold put is something that, in my opinion, will not materialize in months, but take years to build. Many geopolitical alliances will have to be formed and strengthened for a real Russian gold put to materialize. Certainly it may develop, and it likely will develop over time, but as Gaddafi’s and Mahathir’s failures to implement an African and Asian gold put illustrated, doing so is not without consequences of sparking military and/or economic wars against such “offending” nations so such alliances necessary to form a regional “gold put” are not ones that will be formed quickly and easily.

Since economic sanctions against any nation that joins a Russian gold put alliance, enforced by NATO nations, are likely, resource and energy agreements between Russia and other nations most likely must be consummated to assure other nations that would join a gold put initiative that their energy and commodity (including food) needs can and will be met in spite of such punitive sanctions.

Shocking Estimates Show Ukraine's Crop Harvest Could Be Halved

 The real crisis are usually not the ones on the news frontpages but the ones brewing slowly in the background. The harvest in Ukraine may be a problem for some countries such as Egypt? but it is hiding a much larger one in the background: the price explosion of fertilizers. 

In many countries, farmers will not be able to afford fertilizers in 2022 reducing drastically their productivity and crops. There are many sectors where a 10% decline is a problem but not a catastrophe. Food is not one of them. (We are, it is said, nine meals away from anarchy.) Adding to the war in Ukraine (energy) and the implosion of our financial bubbles (credit), we are heading towards an epic second half of 2022: Buckle up!  

Shocking Estimates Show Ukraine's Crop Harvest Could Be Halved 

Ukraine is one of the world's top exporters of corn, sunflower oil, and wheat. Disruptions stemming from Russia's invasion of Ukraine have stoked fears the war-torn country could experience a 50% decline in crop output this year, according to Bloomberg. 

Forecast data from ag expert UkrAgroConsult show Ukraine's corn output could be as low as 19 million tons, about half of last year's 41 million tons. 

UkrAgroConsult's pessimistic outlook follows huge production uncertainties as farmers experience shortages of diesel and fertilizer and bombed-out infrastructure. 

The outlooks of two other ag firms aren't as gloomy. Black Sea research firm SovEcon expects Ukraine's 2022 corn harvest to be 27.7 million tons, and Barva Invest's outlook is 29.5 million tons. Both a far below 2021 totals. 

Maxigrain analyst Elena Neroba warned if farmers don't have diesel, they "can't plant huge hectares." 

"Some farmers still don't have access to seeds and fertilizers. Even if they already paid for them, the delivery supply chain doesn't work as well as it should," Neroba said. 

Regardless of how much the conflict impacts output, global food prices have never risen so fast and have never been so high in anticipation of food shortages worldwide. 

In March, global food prices jumped a stunning 12.64% MoM - almost double the previous record monthly surge...

Prices have exceeded levels only seen during the inflation riots of 2010/11, known as Arab Spring. 

Breaking down export numbers, Ukraine produced 49.6% of global sunflower oil, 15.3% of global maize, 12.6% of global barley, and about 10% of global wheat. 

Rather than planting, some Ukrainian farmers are stealing Russian tanks and selling them to the government. 

We've already pointed out that food inflation riots are underway and may continue to spread throughout emerging market economies. 

The bad news is that the world's hunger problem isn't going away and may only worsen. The anticipation of Ukraine's crops evaporating from the global food supply will exacerbate the incoming food crisis. Food supplies may plunge next year as harvests will result in lower production, which may force food prices even higher. 

The world could be on the cusp of a multi-year food crisis. It's never been a better time to start growing your own garden.

The Commodity-Currency Revolution Begins...

 Real commodities against FIAT Money, let see how it goes!

No wonder the West is going mad. It will get worse soon!

Authored by Alasdair Macleod via GoldMoney.com,

We will look back at current events and realise that they marked the change from a dollar-based global economy underwritten by financial assets to commodity-backed currencies. We face a change from collateral being purely financial in nature to becoming commodity based. It is collateral that underwrites the whole financial system.

The ending of the financially based system is being hastened by geopolitical developments. The West is desperately trying to sanction Russia into economic submission, but is only succeeding in driving up energy, commodity, and food prices against itself. Central banks will have no option but to inflate their currencies to pay for it all. Russia is linking the rouble to commodity prices through a moving gold peg instead, and China has already demonstrated an understanding of the West’s inflationary game by having stockpiled commodities and essential grains for the last two years and allowed her currency to rise against the dollar.

China and Russia are not going down the path of the West’s inflating currencies. Instead, they are moving towards a sounder money strategy with the prospect of stable interest rates and prices while the West accelerates in the opposite direction.

The Credit Suisse analyst, Zoltan Pozsar, calls it Bretton Woods III. This article looks at how it is likely to play out, concluding that the dollar and Western currencies, not the rouble, will have the greatest difficulty dealing with the end of fifty years of economic financialisation.

Pure finance is being replaced with commodity finance

It hasn’t hit the main-stream media yet, which is still reporting yesterday’s battle. But in March, the US Administration passed a death sentence on its own hegemony in a last desperate throw of the dollar dice. Not only did it misread the Russian situation with respect to its economy, but America mistakenly believed in its own power by sanctioning Russia and Putin’s oligarchs.

It may have achieved a partial blockade on Russia’s export volumes, but compensation has come from higher unit prices, benefiting Russia, and costing the Western alliance.

The consequence is a final battle in the financial war which has been brewing for decades. You do not sanction the world’s most important source of energy exports and the marginal supplier of a wide range of commodities and raw materials, including grains and fertilisers, without damaging everyone but the intended target. Worse still, the intended target has in China an extremely powerful friend, with which Russia is a partner in the world’s largest economic bloc — the Shanghai Cooperation Organisation — commanding a developing market of over 40% of the world’s population. That is the future, not the past: the past is Western wokery, punitive taxation, economies dominated by the state and its bureaucracy, anti-capitalistic socialism, and magic money trees to help pay for it all.

Despite this enormous hole in the sanctions net, the West has given itself no political option but to attempt to tighten sanctions even more. But Russia’s response is devastating for the western financial system. In two simple announcements, tying the rouble to gold for domestic credit institutions and insisting that payments for energy will only be accepted in roubles, it is calling an end to the fiat dollar era that has ruled the world from the suspension of Bretton Woods in 1971 to today.

Just over five decades ago, the dollar took over the role for itself as the global reserve asset from gold. After the seventies, which was a decade of currency, interest rate, and financial asset volatility, we all settled down into a world of increasing financialisation. London’s big bang in the early 1980s paved the way for regulated derivatives and the 1990s saw the rise of hedge funds and dotcoms. That was followed by an explosion in over-the-counter unregulated derivatives into the hundreds of trillions and securitisations which hit the speed-bump of the Lehman failure. Since then, the expansion of global credit for purely financial activities has been remarkable creating a financial asset bubble to rival anything seen in the history of financial excesses. And together with statistical suppression of the effect on consumer prices the switch of economic resources from Main Street to Wall Street has hidden the inflationary evidence of credit expansion from the public’s gaze.

All that is coming to an end with a new commoditisation — what respected flows analyst Zoltan Pozsar at Credit Suisse calls Bretton Woods III. In his enumeration the first was suspended by President Nixon in 1971, and the second ran from then until now when the dollar has ruled indisputably. That brings us to Bretton Woods III.

Russia’s insistence that importers of its energy pay in roubles and not in dollars or euros is a significant development, a direct challenge to the dollar’s role. There are no options for Russia’s “unfriendlies”, Russia’s description for the alliance united against it. The EU, which is the largest importer of Russian natural gas, either bites the bullet or scrambles for insufficient alternatives. The option is to buy natural gas and oil at reasonable rouble prices or drive prices up in euros and still not get enough to keep their economies going and the citizens warm and mobile. Either way, it seems Russia wins, and one way the EU loses.

As to Pozsar’s belief that we are on the verge of Bretton Woods III, one can see the logic of his argument. The highly inflated financial bubble marks the end of an era, fifty years in the making. Negative interest rates in the EU and Japan are not just an anomaly, but the last throw of the dice for the yen and the euro. The ECB and the Bank of Japan have bond portfolios which have wiped out their equity, and then some. All Western central banks which have indulged in QE have the same problem. Contrastingly, the Russian central bank and the Peoples Bank of China have not conducted any QE and have clean balance sheets. Rising interest rates in Western currencies are made more certain and their height even greater by Russia’s aggressive response to Western sanctions. It hastens the bankruptcy of the entire Western banking system and by bursting the highly inflated financial bubble will leave little more than hollowed-out economies.

Putin has taken as his model the 1973 Nixon/Kissinger agreement with the Saudis to only accept US dollars in payment for oil, and to use its dominant role in OPEC to force other members to follow suit. As the World’s largest energy exporter Russia now says she will only accept roubles, repeating for the rouble the petrodollar strategy. And even Saudi Arabia is now bending with the wind and accepting China’s renminbi for its oil, calling symbolic time on the Nixon/Kissinger petrodollar agreement.

The West, by which we mean America, the EU, Britain, Japan, South Korea, and a few others have set themselves up to be the fall guys. That statement barely describes the strategic stupidity — an Ignoble Award is closer to the truth. By phasing out fossil fuels before they could be replaced entirely with green energy sources, an enormous shortfall in energy supplies has arisen. With an almost religious zeal, Germany has been cutting out nuclear generation. And even as recently as last month it still ruled out extending the lifespan of its nuclear facilities. The entire G7 membership were not only unprepared for Russia turning the tables on its members, but so far, they have yet to come up with an adequate response.

Russia has effectively commoditised its currency, particularly for energy, gold, and food. It is following China down a similar path. In doing so it has undermined the dollar’s hegemony, perhaps fatally. As the driving force behind currency values, commodities will be the collateral replacing financial assets. It is interesting to observe the strength in the Mexican peso against the dollar (up 9.7% since November 2021) and the Brazilian real (up 21% over a year) And even the South African rand has risen by 11% in the last five months. That these flaky currencies are rising tells us that resource backing for currencies has its attractions beyond the rouble and renminbi.

But having turned their backs on gold, the Americans and their Western epigones lack an adequate response. If anything, they are likely to continue the fight for dollar hegemony rather than accept reality. And the more America struggles to assert its authority, the greater the likelihood of a split in the Western partnership. Europe needs Russian energy desperately, and America does not. Europe cannot afford to support American policy unconditionally.

That, of course, is Russia’s bet.

Russia’s point of view

For the second time in eight years, Russia has seen its currency undermined by Western action over Ukraine. Having experienced it in 2014, this time the Russian central bank was better prepared. It had diversified out of dollars adding official gold reserves. The commercial banking system was overhauled, and the Governor of the RCB, Elvira Nabiullina, by following classical monetary policies instead of the Keynesianism of her Western contempories, has contained the fall-out from the war in Ukraine. As Figure 1 shows, the rouble halved against the dollar in a knee-jerk reaction before recovering to pre-war levels.

The link to commodities is gold, and the RCB announced that until end-June it stands ready to buy gold from Russian banks at 5,000 roubles per gramme. The stated purpose was to allow banks to lend against mine production, given that Russian-sourced gold is included in the sanctions. But the move has encouraged speculation that the rouble is going on a quasi- gold standard; never mind that a gold standard works the other way round with users of the currency able to exchange it for gold.

Besides being with silver the international legal definition of money (the rest being currency and credit), gold is a good proxy for commodities, as shown in Figure 2 below. Priced in goldgrams, crude oil today is 30% below where it was in the 1950, long before Nixon suspended the Bretton Woods Agreement. Meanwhile, measured in depreciating fiat currencies the price has soared and been extremely volatile along the way.

It is a similar story for other commodity prices, whereby maximum stability is to be found in prices measured in goldgrams. Taking up Pozsar’s point about currencies being increasingly linked to commodities in Bretton Woods III, it appears that Russia intends to use gold as proxy for commodities to stabilise the rouble. Instead of a fixed gold exchange rate, the RCB has wisely left itself the option to periodically revise the price it will pay for gold after 1 July.

Table 1 shows how the RCB’s current fixed rouble gold exchange rate translates into US dollars.

While non-Russian credit institutions do not have access to the facility, it appears that there is nothing to stop a Russian bank buying gold in another centre, such as Dubai, to sell to the Russian central bank for roubles. All that is needed is for the dollar/rouble rate to be favourable for the arbitrage and the ability to settle in a non-sanctioned currency, such as renminbi, or to have access to Eurodollars which it can exchange for Euroroubles (see below) from a bank outside the “unfriendlies” jurisdictions.

The dollar/rouble rate can now easily be controlled by the RCB, because how demand for roubles in short supply is handled becomes a matter of policy. Gazprom’s payment arm (Gazprombank) is currently excused the West’s sanctions and EU gas and oil payments will be channelled through it.

Broadly, there are four ways in which a Western consumer can acquire roubles:

• By buying roubles on the foreign exchanges.

• By depositing euros, dollars, or sterling with Gazprombank and have them do the conversion as agents.

• By Gazprombank increasing its balance sheet to provide credit, but collateral which is not sanctioned would be required.

• By foreign banks creating rouble credits which can be paid to Gazprombank against delivery of energy supplies.

The last of these four is certainly possible, because that is the basis of Eurodollars, which circulate outside New York’s monetary system and have become central to international liquidity. To understand the creation of Eurodollars, and therefore the possibility of a developing Eurorouble market we must delve into the world of credit creation.

There are two ways in which foreigners can hold dollar balances. The way commonly understood is through the correspondent banking system. Your bank, say in Europe, will run deposit accounts with their correspondent banks in New York (JPMorgan, Citi etc.). So, if you make a deposit in dollars, the credit to your account will reconcile with the change in your bank’s correspondent account in New York.

Now let us assume that you approach your European bank for a dollar loan. If the loan is agreed, it appears as a dollar asset on your bank’s balance sheet, which through double-entry bookkeeping is matched by a dollar liability in favour of you, the borrower. It cannot be otherwise and is the basis of all bank credit creation. But note that in the creation of these balances the American banking system is not involved in any way, which is how and why Eurodollars circulate, being fungible with but separate in origin from dollars in the US.

By the same method, we could see the birth and rapid expansion of a Eurorouble market. All that’s required is for a bank to create a loan in roubles, matched under double-entry bookkeeping with a deposit which can be used for payments. It doesn’t matter which currency the bank runs its balance sheet in, only that it has balance sheet space, access to rouble liquidity and is a credible counterparty.

This suggests that Eurozone and Japanese banks can only have limited participation because they are already very highly leveraged. The banks best able to run Eurorouble balances are the Americans and Chinese because they have more conservative asset to equity ratios. Furthermore, the large Chinese banks are majority state-owned, and already have business and currency interests with Russia giving them a head start with respect to rouble liquidity.

We have noticed that the large American banks are not shy of dealing with the Chinese despite the politics, so presumably would like the opportunity to participate in Euroroubles. But only this week, the US Government prohibited them from paying holders of Russia’s sovereign debt more than $600 million. So, we should assume the US banks cannot participate which leaves the field open to the Chinese mega-banks. And any attempt to increase sanctions on Russia, perhaps by adding Gazprombank to the sanctioned list, achieves nothing, definitely cuts out American banks from the action, and enhances the financial integration between Russia and China. The gulf between commodity-backed currencies and yesteryear’s financial fiat simply widens.

For now, further sanctions are a matter for speculation. But Gazprombank with the assistance of the Russian central bank will have a key role in providing the international market for roubles with wholesale liquidity, at least until the market acquires depth in liquidity. In return, Gazprombank can act as a recycler of dollars and euros gained through trade surpluses without them entering the official reserves. Dollars, euros yen and sterling are the unfriendlies’ currencies, so the only retentions are likely to be renminbi and gold.

In this manner we might expect roubles, gold and commodities to tend to rise in tandem. We can see the process by which, as Zoltan Pozsar put it, Bretton Woods III, a global currency regime based on commodities, can take over from Bretton Woods II, which has been characterised by the financialisation of currencies. And it’s not just Russia and her roubles. It’s a direction of travel shared by China.

The economic effects of a strong currency backed by commodities defy monetary and economic beliefs prevalent in the West. But the consequences that flow from a stronger currency are desirable: falling interest rates, wealth remaining in the private sector and an escape route from the inevitable failure of Western currencies and their capital markets. The arguments in favour of decoupling from the dollar-dominated monetary system have suddenly become compelling.

The consequences for the West

Most Western commentary is gung-ho for further sanctions against Russia. Relatively few independent commentators have pointed out that by sanctioning Russia and freezing her foreign exchange reserves, America is destroying her own hegemony. The benefits of gold reserves have also been pointedly made to those that have them. Furthermore, central banks leaving their gold reserves vaulted at Western central banks exposes them to sanctions, should a nation fall foul of America. Doubtless, the issue is being discussed around the world and some requests for repatriation of bullion are bound to follow.

There is also the problem of gold leases and swaps, vital for providing liquidity in bullion markets, but leads to false counting of reserves. This is because under the IMF’s accounting procedures, leased and swapped gold balances are recorded as if they were still under a central bank’s ownership and control, despite bullion being transferred to another party in unallocated accounts.

No one knows the extent of swaps and leases, but it is likely to be significant, given the evidence of gold price interventions over the last fifty years. Countries which have been happy to earn fees and interest to cover storage costs and turn gold bullion storage into a profitable activity (measured in fiat) are at the margin now likely to not renew swap and lease agreements and demand reallocation of bullion into earmarked accounts, which would drain liquidity from bullion markets. A rising gold price will then be bound to ensue.

Ever since the suspension of Bretton Woods in 1971, the US Government has tried to suppress gold relative to the dollar, encouraging the growth of gold derivatives to absorb demand. That gold has moved from $35 to $1920 today demonstrates the futility of these policies. But emotionally at least, the US establishment is still virulently anti-gold.

As Figure 2 above clearly shows, the link between commodity prices and gold has endured through it all. It is this factor that completely escapes popular analysis with every commodity analyst assuming in their calculations a constant objective value for the dollar and other currencies, with price subjectivity confined to the commodity alone. The use of charts and other methods of forecasting commodity prices assume as an iron rule that price changes in transactions come only from fluctuations in commodity values.

The truth behind prices measured in unbacked currencies is demonstrated by the cost of oil priced in gold having declined about 30% since the 1960s. That is reasonable given new extraction technologies and is consistent with prices tending to ease over time under a gold standard. It is only in fiat currencies that prices have soared. Clearly, gold is considerably more objective for transaction purposes than fiat currencies, which are definitely not.

Therefore, if, as the chart in the tweet below suggests, the dollar price of oil doubles from here, it will only be because at the margin people prefer oil to dollars — not because they want oil beyond their immediate needs, but because they want dollars less.

China recognised these dynamics following the Fed’s monetary policies of March 2020, when it reduced its funds rate to the zero bound and instituted QE at $120bn every month. The signal concerning the dollar’s future debasement was clear, and China began to stockpile oil, commodities, and food — just to get rid of dollars. This contributed to the rise in dollar commodity prices, which commenced from that moment, despite falling demand due to covid and supply chain problems. The effect of dollar debasement is reflected in Figure 3, which is of a popular commodity tracking ETF.

A better understanding would be to regard the increase in the value of this commodity basket not as a near doubling since March 2020, but as a near halving of the dollar’s purchasing power with respect to it.

Furthermore, the Chinese have been prescient enough to accumulate stocks of grains. The result is that 20% of the world’s population has access to 70% of the word’s maize stocks, 60% of rice, 50% of wheat and 35% of soybeans. The other 80% of the world’s population will almost certainly face acute shortages this year as exports of grain and fertiliser from Ukraine/Russia effectively cease.

China’s actions show that she has to a degree already tied her currency to commodities, recognising the dollar would lose purchasing power. And this is partially reflected in the yuan’s exchange rate against the US dollar, which since May 2020 has gained over 11%.

Implications for the dollar, euro and yen

In this article the close relationship between gold, oil, and wider commodities has been shown. It appears that Russia has found a way of tying her currency not to the dollar, but to commodities through gold, and that China has effectively been doing the same thing for two years without the gold link. The logic is to escape the consequences of currency and credit expansion for the dollar and other Western currencies as their purchasing power is undermined. And the use of a gold peg is an interesting development in this context.

We should bear in mind that according to the US Treasury TIC system foreigners own $33.24 trillion of financial securities and short-term assets including bank deposits. That is in addition to a few trillion, perhaps, in Eurodollars not recorded in the TIC statistics. These funds are only there in such quantities because of the financialisation of Western currencies, a situation we now expect to end. A change in the world’s currency order towards Pozsar’s Bretton Woods III can be expected to a substantial impact on these funds.

To prevent foreign selling of the $6.97 trillion of short-term securities and cash, interest rates would have to be raised not just to tackle rising consumer prices (a Keynesian misunderstanding about the economic role of interest rates, disproved by Gibson’s paradox) but to protect the currency on the foreign exchanges, particularly relative to the rouble and the yuan. Unfortunately, sufficiently high interest rates to encourage short-term money and deposits to stay would destabilise the values of the foreign owned $26.27 trillion in long-term securities — bonds and equities.

As the manager of US dollar interest rates, the dilemma for the Fed is made more acute by sanctions against Russia exposing the weakness of the dollar’s position. The fall in its purchasing power is magnified by soaring dollar prices for commodities, and the rise in consumer prices will be greater and sooner as a result. It is becoming possible to argue convincingly that interest rates for one-year dollar deposits should soon be in double figures, rather than the three per cent or so argued by monetary policy hawks. Whatever the numbers turn out to be, the consequences are bound to be catastrophic for financial assets and for the future of financially oriented currencies where financial assets are the principal form of collateral.

It appears that Bretton Woods II is indeed over. That being the case, America will find it virtually impossible to retain the international capital flows which have allowed it to finance the twin deficits — the budget and trade gaps. And as securities’ values fall with rising interest rates, unless the US Government takes a very sharp knife to its spending at a time of stagnating or falling economic activity, the Fed will have to step up with enhanced QE.

The excuse that QE stimulates the economy will have been worn out and exposed for what it is: the debasement of the currency as a means of hidden taxation. And the foreign capital that manages to escape from a dollar crisis is likely to seek a home elsewhere. But the other two major currencies in the dollar’s camp, the euro and yen, start from an even worse position. These are shown in Figure 4. With their purchasing power visibly collapsing the ECB and the Bank of Japan still have negative interest rates, seemingly trapped under the zero bound. Policy makers find themselves torn between the Scylla of consumer price inflation and the Charybdis of declining economic activity. A further problem is that these central banks have become substantial investors in government and other bonds (the BOJ even has equity ETFs on board) and rising bond yields are playing havoc with their balance sheets, wiping out their equity requiring a systemic recapitalisation.

Not only are the ECB and BOJ technically bankrupt without massive capital injections, but their commercial banking networks are hugely overleveraged with their global systemically important banks — their G-SIBs — having assets relative to equity averaging over twenty times. And unlike the Brazilian real, the Mexican peso and even the South African rand, the yen and the euro are sliding against the dollar.

The response from the BOJ is one of desperately hanging on to current policies. It is rigging the market by capping the yield on the 10-year JGB at 0.25%, which is where it is now.

These currency developments are indicative of great upheavals and an approaching crisis. Financial bubbles are undoubtedly about to burst sinking fiat financial values and all that sail with them. Government bonds will be yesterday’s story because neither China nor Russia, whose currencies can be expected to survive the transition from financial to commodity orientation, run large budget deficits. That, indeed, will be part of their strength.

The financial war, so long predicted and described in my essays for Goldmoney, appears to be reaching its climax. At the end it has boiled down to who understands money and currencies best. Led by America, the West has ignored the legal definition of money, substituting fiat dollars for it instead. Monetary policy lost its anchor in realism, drifting on a sea of crackpot inflationary beliefs instead.

But Russia and China have not made the same mistake. China played along with the Keynesian game while it suited them. Consequently, while Russia may be struggling militarily, unless a miracle occurs the West seems bound to lose the financial war and we are, indeed, transiting into Pozsar’s Bretton Woods III.

Sit back and watch Europe commit suicide

 Europe is accustomed to "suicide": Spain in the 17C, almost everybody in 1914 and again 25 years later. But what we should be worried about is the extreme belligerence of the Western alliance and the risk of a new World War as step by step, we are moving toward it. Europe has second rate leaders who mess up almost everything they touch: Immigration, energy, ecology, health... Difficult to imagine they will manage "conflict" better...

Guest Post by Pepe Escobar

The stunning spectacle of the EU committing slow motion hara-kiri is something for the ages. Like a cheap Kurosawa remake the movie is actually about the Empire of Lies-detonated demolition of the EU, complete with subsequent rerouting of some key Russian commodities exports to the US at the expense of the Europeans.

It helps to have a 5^th columnist actress strategically placed, in this case astonishingly incompetent European Commission head Ursula von der Lugen, with a brand new vociferous announcement of an extra sanctions package: Russian ships banned from EU ports; road transportation companies from Russia and Belarus prohibited from entering the EU; no more coal imports (over 4.4 billion euros a year).

That translates in practice into the Empire of Lies shaking down its wealthiest – Western – clients/puppets. Russia of course is too powerful militarily. The Empire badly needs some of its key exports – especially minerals. Mission Accomplished in this case amounts to nudging the EU into imposing more and more sanctions and willfully collapsing their national economies, allowing the US to scoop everything up.

Cue to the coming catastrophic economic consequences felt by Europeans in their daily life (but not by the wealthiest 5%): inflation devouring salaries and savings; next winter energy bills packing a mean punch; products disappearing from supermarkets; holiday bookings almost frozen; Le Petit Roi Macron in France – maybe up to a nasty electoral surprise – announcing “food stamps like in WWII are possible”.

We have Germany facing the returning ghost of Weimar hyperinflation; BlackRock President Rob Kapito saying, in Texas, “for the first time, this generation is going to go into a store and not be able to get what they want”; farmers in Africa not able to afford fertilizer at all this year, reducing agricultural production by an amount capable of feeding 100 million people.

Zoltan Poszar, former NY Fed and US Treasury guru, current Credit Suisse grand vizir, has been on a streak, stressing how commodity reserves – and here Russia is unrivaled – will be an essential feature of what he calls Bretton Woods III (yet, in fact, what’s being designed by Russia, China, Iran and the Eurasia Economic Union is a post-Bretton Woods).

Poszar remarks that wars, historically, are won by those who have more food and energy supplies, in the past to power horses and soldiers, today to feed soldiers and fuel tanks and fighter jets.

China, incidentally, has amassed large stocks of virtually everything.

Poszar notes how our current Bretton Woods II system has a deflationary impulse (globalization, open trade, just-in-time supply chains) while Bretton Woods III will provide an inflationary impulse (de-globalization, autarky, hoarding of raw materials) of supply chains and extra military spending to be able to protect what will remain of seaborne trade.

The implications are of course overwhelming. What’s implicit, ominously, is that this state of affairs may even lead to WWIII.

Rublegas or American LNG?

The Valdai Club has conducted an essential expert discussion on what we at The Cradle have defined as Rublegas – the real geoeconomic game-changer at the heart of the post-petrodollar era. Alexander Losev, a member of the Russian Council for Foreign and Defense Policy, offered the contours of the Big Picture. But it was up to Alexey Gromov, Chief Energy Director of the Institute of Energy and Finance, to come up with crucial nitty gritty details.

Russia so far was selling gas to Europe to the amount of 155 billion cubic meters a year. The EU rhetorically promises to get rid of it by 2027, and reduce supply by the end of 2022 by 100 billion cubic meters. Gromov asked “how”, and remarked, “any expert has no answer. Most of Russia’s natural gas is shipped over pipelines. This cannot simply be replaced by LNG.”

The risible European answer has been “start saving”, as in “prepare to be worse off. Reduce the temperature in households”. Gromov noted how, in Russia, “22 to 25 degrees in winter is the norm. Europe is promoting 16 degrees as ‘healthy’, and wearing sweaters at night.”

The EU won’t be able to get the gas it needs from Norway or Algeria (which is privileging domestic consumption). Azerbaijan would be able to provide at best 10 billion cubic meters a year, but “that will take 2 or 3 years” to happen.

Gromov stressed how “there’s no surplus in the market today for US and Qatar LNG.” And how prices for Asian customers are always higher. The bottom line is that “by end of 2022, Europe won’t be able to significantly reduce” what is buys from Russia: “they might cut by 50 billion cubic meters, maximum.” And prices in the spot market will be higher – at least $1,300 per cubic meter.

An important development is that “Russia changed the logistical supply chains to Asia already”. That applies for gas and oil as well:

“You can impose sanctions if there’s a surplus in the market. Now there’s a shortage of at least 1.5 million barrels of oil a day. We’ll be sending our supplies to Asia – with a discount.” As it stands, Asia is already paying a premium, from 3 to 5 dollars more per barrel of oil.

On oil shipments, Gromov also commented on the key issue of insurance: “Insurance premiums are higher. Before Ukraine, it was all based on the FOB system. Now buyers are saying ‘we don’t want to take the risk of taking your cargo to our ports’. So they are applying the CIF system, where the seller has to insure and transport the cargo. That of course impacts revenues.”

An absolutely key issue for Russia is how to make the transition to China as its key gas customer. It’s all about Power of Siberia 2 – which will reach full capacity only in 2024. And first the interconnector through Mongolia must be built – “we need 3 years to build this pipeline” – so everything will be in place only around 2025.

On the Yamal pipeline, “most of the gas goes to Asia. If the Europeans don’t buy anymore we can redirect.” And then there’s the Arctic LNG 2 – which is larger than Yamal: “the first phase should be finished soon, it’s 80% ready.” An extra problem may be posed by the Russian “Unfriendlies” in Asia: Japan and South Korea. LNG infrastructure produced in Russia still depends on foreign technologies.

That’s what leads Gromov to note that, “the model of mobilization- based economy is not so good.” But that’s what Russia needs to deal with at least in the short to medium term.

The positives are that the new paradigm will allow “more cooperation within the BRICS”; the expansion of the International North South Transportation Corridor (INSTC); and more interaction and integration with “Pakistan, India, Afghanistan and Iran”.

Only in terms of Iran and Russia, swaps in the Caspian are already in the works, as Iran produces more than it needs, and is set to increase cooperation with Russia in the framework of the strenghtened strategic partnership.

Hypersonic geoeconomics

It was up to Chinese energy expert Fu Chengyu to offer a concise explanation of why the EU drive of replacing Russian gas with American LNG is, well, a pipe dream. Essentially the US offer is “too limited and too costly”.

Fu Chengyu showed how a lengthy, tricky process depends on four contracts: between the gas developer and the LNG company; between the LNG company and the buyer company; between the LNG buyer and the cargo company (which builds vessels); and between the buyer and the end user.

“Each contract”, he pointed out, “takes a long time to finish. Without all these signed contracts no party will invest – be it investment on infrastructure or gas field development.” So actual delivery of American LNG to Europe assumes all these interconnected resources are available – and moving like clockwork.

Fu Chengyu’s verdict is stark: this EU obsession on ditching Russian gas will provoke “an impact on global economic growth, and recession. They are pushing their own people – and the world. In the energy sector, we will all be harmed.”

It was quite enlightening to juxtapose the coming geoeconomic turbulence – the EU obsession in bypassing Russian gas and the onset of Rublegas – with the real reasons behind Operation Z in Ukraine, completely obscured by Western media psyops.

So I submitted a few questions to a US Deep State old pro, now retired, and quite familiar with the inner workings of the old OSS, the CIA precursor, all the way to the neocon dementia.

His answers were quite sobering. He started by pointing out, “the whole Ukraine issue is over hypersonic missiles that can reach Moscow in less than four minutes. The US wants them there, in Poland, Romania, Baltic States, Sweden, Finland. This is in direct violation of the agreements in 1991 that NATO will not expand in Eastern Europe. The US does not have hypersonic missiles now but should – in a year or two. This is an existential threat to Russia. So they had to go into the Ukraine to stop this.  Next will be Poland and Romania where launchers have been built in Romania and are being built in Poland.”

From a completely different geopolitical perspective, what’s really telling is that his analysis happens to dovetail with Zoltan Poszar’s geoeconomics: “The US and NATO are totally belligerent. This presents a real danger to Russia. The idea that nuclear war is unthinkable is a myth. If you look at the firebombing of Tokyo against Hiroshima and Nagasaki, more people died in Tokyo than Hiroshima and Nagasaki. These cities were rebuilt. The radiation goes away and life can restart. The difference between firebombing and nuclear bombing is only efficiency. NATO provocations are so extreme Russia had to place their nuclear missiles on standby alert. This is a gravely serious matter. But the US ignored it.”

An End to Progress

 More than anything, if there is one religion left in the West, it is "progress" and the untold benefits attached. But then, what about the Chinese "progress" of Social credit? Is a population controlled by drones and video cameras really better off? Have we reached the limits, not of the Industrial Revolution but of the ideas sustaining the Enlightenment? And if that is the case, what comes next? Were George Orwell and Aldous Huxley uncannily prescient? 

By Jeff Thomas via International Man

“Progress may have been all right once, but it has gone on too long.”

I’ve always been fond of that quote. Back when Ogden Nash wrote it, it was quite clever. Today, the quote is a bit less entertaining, as we are living in a period when, more and more, world leaders seem to be headed in the wrong direction – away from progress. As the Great Unravelling plays out, people are coming to the conclusion that the directions taken by their leaders are, in Doug Casey’s well-chosen words, not only the wrong thing to do, but the exact opposite of the right thing to do.

The first category in which this seems to be true is economics. Most world leaders are quite committed to the idea that Keynesian economics will provide all the answers to solve any economic problem. However, the further each country goes down the Keynesian road, the clearer it becomes that Keynesian theory simply does not work. In fact, many countries that have followed it are on the brink of economic collapse, yet they are charging forward all the more determinedly with solutions that are based upon the very theories that caused the problems.

The second category is economic legislation. In most First World countries, particularly the US, legislators are making it ever-more difficult for businesspeople to function, as a result of the passage of ever-more complex and stricter regulations. The free market is, at this point, far from free, and there is a substantial flow of business away from First World countries as a result. Contrary to the claims of many politicians, most businesspeople are not following this exodus out of greed, but out of a need for survival.

The third category is social legislation. First World countries, at one time, took pride in referring to themselves as “the Free World,” in contrast to the communist and socialist Second World. Not so, today. Whilst many former Second World countries are beginning to open up, First World countries, generally speaking, are passing increasingly draconian legislation, converting once-free countries into virtual police states.

When the above trend began, few people took much notice, but, in recent years, the changes that have taken place are becoming, increasingly, both more numerous and more frequent. At present, the frequency and severity of governmental developments have begun to resemble a runaway train.

As mentioned in the introductory paragraph, more and more people are becoming convinced as to the reality of all of the above – that we are reaching an “End of Progress.” There does, however, seem to be a division in who they feel is responsible. Three theories follow.

The Evil Party

• The party I support makes mistakes, but they mean well.
• The alternate party is inherently evil and must be removed from power.
• The future depends upon whether our party takes control as a result of the next election.

People who see the control of their country in this light tend to live from election to election, each time hoping that their chosen party will take control of all branches of their government (such as occurred in the US between 2008 and 2010). On occasions when their party does succeed in doing so, they rarely seem to lose faith in this belief, even when their party fails to “right all the wrongs” as they promised they would if they gained complete control.

The Inept Legislators

• Both our primary political parties have become thoroughly corrupt.
• It no longer matters which party we vote for. They both act in opposition to our best interests.
• Legislators appear to be so inept that they truly don’t understand that they are bringing about the ruination of the country.
• All (or most) legislators have sold out to corporate interests, which have become their puppeteers.

The followers of this theory tend to believe that the situation will not improve substantially, no matter who is elected.

The Elite

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• A group exists, made up primarily of bankers, whose goal it is to one day rule the world.
• The Elites control the central banks of the First World, and, therefore, control the governments, as legislators need loans from the banks to pay for the ever-increasing cost of government. (Tax dollars, at this point, could not come close to covering that debt.)
• The Elites are not buffoons. They know exactly what they are doing, and they have a very clear long-term plan.
• The Elite plan is for a neo-serfdom; the elimination of the middle class, with the Elite as a very small, very wealthy class who will dominate nearly every facet of the lives of the proletariat.

A dominant perception of the identity of the Elite begins in 19th century Europe, with Mayer Rothschild, whose five sons are credited with developing a concerted plan for economic and political domination of the world. Their descendants are believed to have conquered America in the early 20th century, when they and others created the US Federal Reserve. Since that time, the power of the Elite has slowly increased both politically and economically, whilst the Elite themselves remain well in the background.

From the beginning, a Rothschild tenet was to avoid the limelight, whilst pulling the strings behind the screen. With each generation, this concept has been more apparent, and, today, the family names that have been associated with the seizure of control tend not to appear in the media. The names of Rothschild, Rockefeller, Morgan and the rest have either become less visible or more closely associated with philanthropy in the public awareness.

Theories differ as to whether the Elite plan a communist, socialist, fascist or other type of state, but they agree that the goal is a statist system, with a minimum of personal freedom for the proletariat.

There appears to be a bit of a divide between those who support each of the above theories. Each group appears to give a nod to the others, whilst firmly focusing on their own theory as being correct. This is interesting, as the three theories are by no means mutually exclusive. Certainly, the idea that the Elite are the puppeteers of the Inept Legislators is a good fit.

If the first theory is the accurate one, it would seem that the present pattern of decline would be due to a battle between good and evil, in which the socioeconomic structure is an unfortunate casualty of the battle itself. If the battle would only end (with the good guys as the winners), substantial progress would hopefully begin again.

If the second theory is the accurate one, a similar battle exists, but it is between two more-or-less equally-incompetent parties, neither of which seems to be able to sort things out. And again, the socioeconomic structure is an unfortunate casualty. (This theory promises less hope than the first.)

If the third theory is correct (whether or not it is coupled with the second theory), we have a very different reality. In the Elite theory, whilst there may be a battle between the political parties, it would matter little to the puppeteers as to which party is victorious. In fact, it would serve their interest if the battle were never-ending.

Just as in the latter days of the Roman Empire, the public, if they are to continue to be controlled, need a distraction – something to focus on rather than to focus on the real game. To an Elite, the political struggle is not so different from either the gladiators of the first century or the football matches of the twenty-first century. Both politics and sports are tried-and-true distractions from the otherwise central issue of the maximisation of social and political rule.

Under the Elite theory, the almost-consistently negative developments that are occurring in First World countries would by no means be an unfortunate casualty; in fact, they would be occurring by design. For a New World Order to exist, based upon statist principles, with the vast majority of humanity as a class of serfs, an End of Progress is not only an acceptable by-product, it is a principle objective.

So, is this, then, merely an academic discussion, a curiosity for the brain to muse over? Not at all. Regardless of our own personal perception of what is causing the present condition, the objective for us all should be to be as open as possible to all interpretations, as the closer we understand the situation, the more likely we are to create an ability to step away from the fray and avoid becoming a casualty of it.

How Coercion Compromised the Vaccine

 The vaccine had nothing to do with vaccination and everything to do with coercion whence the lies, untruths, trickery and propaganda...

Via Brownstone Institute

The fight over the Covid vaccines has become an epic struggle. It’s not just about who should get the shot and how many shots. The fight ever more centers on issues of effectiveness and safety of the product itself.

One group is convinced they are very dangerous for many people. The other side says that the people who say this are crazy, ideologically motivated, and spreading misinformation. Truth is, they say, these vaccines saved a million lives, are perfectly safe, and everyone should accept them, by force if necessary, including a booster and a fourth dose.

You can click all over the Internet on issues of vaccine safety and find articles in both directions. There are claims and counterclaims, assertions and fact checks, fact checks on the fact checks, and all of this continues without end. Because causal inference is so extremely difficult, people believe what they want based on political biases.

Meanwhile, the data blizzard is intensifying by the day. Some of it is very alarming. Genevieve Briand of Johns Hopkins University has documented a huge and unusual rise in young and middle-age adult deaths in 2021. The causes are elusive but the trend is undeniable. Many observers immediately blame the vaccine but there are other potential explanations: collateral public health damage from lockdowns in the form of drugs, alcohol, despair, degraded immune systems, fewer doctors appointments and general ill-health. Or some combination.

Then there’s the VAERs database, which allows doctors and members of the public to file reports of potential vaccine related adverse events. We’ve never seen reports this high. The trouble is that this database is not science as such: it’s evidence of how the Internet has democratized data collection. This is the first pandemic in which nearly everyone has the tools and power to access the reporting system. And many people are angry about being muscled into taking the vaccine.

This surely builds in a bias. Serious vaccine adverse reactions could get lost among vast numbers of unrelated health outcomes. At the same time, a study of reports from 2007-2010 concluded that this system vastly underreported injuries. We are left with the possibility that the system both overreports and underreports.

Then we have the anecdotes. We all have them. We know people who had no bad effects and those who complain of all sorts of ailments, short and long term, which they trace to the vaccine.

A few weeks ago, there was a court-ordered discovery of vaccine trial documents from Pfizer. They became a Rorschach test of prior belief. In the end, they did not help that much, and the genuine specialists who tried to sift through the data were shouted down by both sides.

What is true? I would like to know. We all would. We know about the increased risk of myocarditis after taking the Pfizer and Moderna vaccines, especially among young men. At the same time, writes Vinay Prasad, “the FDA has no reliable data to know for sure that boosting healthy young men provides a health benefit. It is possible to be net harmful.”

Sorting it all out will take years of sifting through data. We should prepare ourselves for whatever the data eventually tell us. There are genuine specialists who exist in this area but most of them are close ties to CDC and/or FDA, who already have a dog in this fight, leaving us with an awkward situation: we don’t know whom to trust. So the polarization continues without end.

Martin Kulldorff and Jay Bhattacharya rightly observe that vaccine fanaticism has bred vaccine skepticism. It also works in reverse. Why has all this become so difficult? It’s the coercion. It’s the overriding of human agency. The institutions that imposed these mandates already had a huge credibility problem from a year-long fiasco of crazed impositions: closures, masks, capacity limits, sanitization mania, plexiglass, forced separation, travel restrictions, and so on. None of this worked and all of it muscled people against their wills.

Then just as these started to go away came the vaccine mandates, from the same gang that had previously caused such wreckage, and for a product produced by a heavily subsidized industry and politically connected industry that is indemnified against liability for vaccine harms.

The public had by now figured out – no thanks to public-health authorities – that the risk of Covid to healthy kids and working-age adults was extremely low. The incidents of severity fell very clearly on the aged and infirm. Data has shown this since early 2020. It was not a mystery. And yet we didn’t hear public officials explaining this. They still haven’t. This is because they had imposed society-wide solutions for a problem that affected mostly a single age-cohort of the population.

Hence, trust was already gone by the time the vaccine mandates came along. Just like lockdowns overrode traditional public wisdom of focused protection, so too did universal mandates override an intelligent deployment of vaccines (by choice) only for those who wanted or needed them.

Now we had another problem. It seemed like a continuation of bad science and bad politics. Then the political divisions became more intense, simply because in the United States it was one political party that had imposed the mandates against the objections of the other political party. Complying or defying became a political symbol, which is pretty much the worst possible situation for public health.

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It should not surprise anyone that the element of force here caused people to become skeptical. Meanwhile, officials at the White House were driven by the single-minded goal of maximizing vaccinations throughout the whole population regardless of need or desire. They assumed that once people got the shot, they could be counted in the compliant category, forgetting the bitterness that remains in people’s hearts and souls once having complied with an edict that impinges so intimately on our bodily integrity.

In normal times, with any medicine you take, you are careful to know about possible side effects. You hear about them in every pharmaceutical advertisement. Your doctor tells you about them, including the incidents and the possibility. Then you make a decision. Is the problem you seek to solve greater than the risk you bear in triggering adverse effects you do not want? And clearly many people take that risk. Sometimes they regret it later. But it was, in the end, their own choice.

The Food and Drug Administration seeks to certify drugs as “safe and effective” but those categories are never completely fulfilled. Nothing is wholly and completely both. And people know that. Drugs and vaccines are imperfect and doctors and patients finally must rely on good judgments based on the available data. This had become a settled practice in American pharmaceutical distribution.

All of that was shattered with the vaccine mandates. They immediately divided workplaces and families. We heard tales from the top that amounted to separating society into clean and unclean. People were encouraged to look down upon and avoid the refuseniks even if they had natural immunity after a Covid recovery, which is stronger than vaccine induced immunity. Families argued. Congregations and musical groups were wrecked. Careers were trashed. Parents were divided from children and siblings from each other.

Daily, Brownstone Institute receives emails from people pleading for medical contacts to grant exemptions. We receive long letters from estranged couples with children who believe that their ex-spouse is either killing children with vaccines or Covid exposure. Our inbox is flooded daily with stories of people about to lose their jobs for non-compliance. The stories are truly heartbreaking and the prospect of bringing peace to these people’s lives has been bleak, simply because authorities have been so shockingly inflexible.

Meanwhile, the reports and fears of vaccine adverse events have only grown. When people are forced into something, there is a tendency to blame that thing, rightly or wrongly, on all subsequent bad outcomes. It’s the same as when you are sick and you take a medicine and then you get well: you credit the pill, correctly or incorrectly. So too with post-compulsion adverse events.

It became social, cultural, and political chaos. Cities were segregated, students bullied, professors threatened, corporate employees muscled, and even nurses (with natural immunity) fired from their jobs. Doctors were through various means pressed into political duty. Many experienced and reputable physicians were threatened, punished, and even fired for going against the narrative by granting vaccine exemptions or publicly questioning mitigation measures.

The media didn’t help, especially with the summer of 2021 campaign to claim that this was a “pandemic of the unvaccinated,” a political line that was untrue, and common knowledge once even public health authorities realized that the vaccination could stop neither infection nor spread.

And it was impossible not to remember that many of the same people who were demonizing the unvaccinated were the same people who in 2020 were denouncing the vaccine itself on grounds that its development was pushed into production by the Trump administration!

By the summer of 2021, science became completely disconnected from policy, if there ever was a relationship to begin with. For example, all data indicate that the effects of the vaccine in protecting people against infection wanes unusually quickly, while protection against severe outcomes lasts longer. To be “fully vaccinated” is on a timer, and thus came the campaign for boosters, and, with it, another round of compulsion and public anger on all sides.

The reality of waning efficacy undermined the “negative externality” argument for vaccine mandates. At some point after vaccination, your vaccine does not protect me or anyone if you still get infected and spread the disease.

To add further insult to injury, the standards of approval of the boosters by the FDA have slipped so much that not even warnings from the agency’s top experts could change the outcome. It seems simply astonishing that drug safety issues in the contexts of mandates would have become so driven by political considerations.

For example, it was impossible not to notice how regulators and messaging privileged mRNA vaccines over traditional ones such as J&J (which was withdrawn at one point) and AstraZeneca (never even approved in the US). Why? There is every reason to be suspicious.

Then you have the problem of the conflicts of interest. The FDA’s own website says: “About 54 percent, or $3.3 billion, of FDA’s budget is provided by federal budget authorization. The remaining 46 percent, or $2.8 billion, is paid for by industry user fees.” Are we supposed to believe that this has no influence at all? Would regulators be slow to implicate the companies that fund them?

There will be years of conflicts and arguments over all of this. And it is of no help at all that elites have imposed only one permissible line while Big Tech has censored dissent. That adds further anger and distrust. Why should we believe a forced opinion any more than we should comply with a forced medicine?

Are there conditions under which any vaccine mandates are justified? If a vaccine has the confidence of the public, the answer is probably no. People generally get them in the interest of their own health, provided there is trust.

The vaccine for this virus should never have been mandated. Having done so, public health has done itself deep harm. One wonders if the reputation of vaccines in general can recover.

Free choice is the foundation of trust. Overriding that with a politically motivated regime of compulsion, backed by the threat to destroy lives, can never result in good outcomes for either individuals or society.

State Department Memo In Early 2020 Assessed That Lab leak Was Most Likely Origin Of COVID-19

 Is there anyone who still believes there are any news left in the "News"?

 The good thing is that for those who really want to know, it is still possible to dig out the truth among an endless cacophony of half-truths, lies and propaganda...

Authored by Jeff Carlson and Hans Mahncke via The Epoch Times,

A newly released memo from the U.S. State Department reveals that government officials knew early on that the COVID pandemic likely originated at a lab in Wuhan, China.

That memo, dated April 2020, states that out of five possible origins for COVID, a lab leak was by far the most likely. The memo also suggests that alternative theories had been introduced to prevent a lab leak from being investigated. The memo, which focuses almost entirely on the likelihood of a lab leak, contains a large amount of information that wasn’t known publicly at the time it was written.

Although a lab leak is now widely accepted as a likely origin for the virus, when the memo was written, a concerted effort was underway to discredit that possibility. It also raises the question of what senior State Department leadership—including then-Secretary of State Mike Pompeo—knew and why the information was withheld from the public.

According to the newly released memo, the State Department knew as of April 2020 that the central issue surrounded an obsession with collecting and testing a massive amount of virus-carrying bats on the part of the Wuhan Institute of Virology and China’s Wuhan-located Center for Disease Control and Prevention (CDC).

The State Department noted that lab testing of the earliest-known patient at the Wuhan Central Hospital in December 2019 determined that the virus was a “Bat SARS-like Coronavirus.” At the time this patient was tested, the Chinese Communist Party (CCP) hadn’t disclosed that there was any problem at all.

When they finally acknowledged an outbreak, they initially blamed it on pneumonia. It was only at the end of January that the CCP finally started admitting that COVID-19 was caused by a new virus that was transmitted between humans.

By that time, the virus had already been seeded across the globe and any chance at suppression had been lost. It was during this same period that the director of the National Institute of Allergy and Infectious Diseases, Dr. Anthony Fauci, was made aware of the virus’s likely origin, having been told by a group of scientists whom he was funding that there was a high probability that the virus was engineered.

Although it’s been known since June 2021 that Fauci and the NIH covered up his knowledge of the virus’s origin, the State Department’s early insight into these matters wasn’t fully known until late March 2022, when the transparency group U.S. Right to Know obtained the April 2020 memo.

Two Labs

The memo, titled “An Analysis of Circumstantial Evidence for Wuhan Labs as the Source of the Coronavirus,” comprises five pages and is written in military BLUF style, meaning “bottom line up front.”

The memo begins by stating that one of two Wuhan labs is the likely source of the COVID outbreak. The two labs identified by the state department are the Wuhan CDC’s lab located in downtown Wuhan and the Wuhan Institute of Virology, where Shi Zhengli was known to have conducted dangerous gain-of-function experiments on bat viruses.

The State Department’s focus on the Wuhan CDC lab as a possible source is particularly significant as that facility is located only a few hundred feet from the Huanan Seafood Market where an already infected customer may have caused a superspreader event in December 2019.

Notably, the World Health Organization’s lead investigator of the virus’s origin, Peter Ben Embarek, privately told a Danish TV crew that he suspected that the Wuhan CDC lab was the origin of the pandemic. Embarek, who promoted a natural origin for the virus in his public report, privately noted that the CDC lab had mysteriously moved to its new downtown location in early December and that such a move may have increased the chances of a lab leak or accidental spillage.

The other lab identified by the State Department as the likely source of the pandemic is the Wuhan Institute of Virology, which has been the main focus of attention over the past two years.

The State Department memo noted that the Wuhan Institute, by far the most logical place to investigate the virus origin, had been completely sealed off from outside inquiry by the CCP. The memo also noted that a gag order regarding both Wuhan labs had been issued on Jan 1, 2020, and a major general from the People’s Liberation Army had assumed control over the Wuhan Institute of Virology since early January of 2020.

The State Department memo emphatically stated that “All other proposed theories are likely to be a decoy to prevent inquiry to Wuhan CDC and Wuhan Institute of Virology.”

It bears repeating that the memo was written in April 2020.

That’s because the State Department’s decoy argument mirrors the actions taken by Fauci and then-National Institutes of Health (NIH) head Dr. Francis Collins who–at the same time this memo was written–were actively suppressing and censoring any public discussion of the lab leak scenario. When Fox News ran a story in April 2020 suggesting that the virus came out of a Wuhan lab, Collins immediately contacted Fauci to explore ways the two men could “put down this very destructive conspiracy.”

Collins had previously told Fauci and his group of scientists that “science and international harmony” could be harmed if the lab leak theory took hold. Collins’s directive led Fauci’s group to publish two papers that categorically dismissed the lab leak theory, one in the medical journal the Lancet and the other in the scientific journal Nature. Those two papers would become the cornerstone of combined efforts from Fauci’s scientists, the media, Big Tech, and the U.S. government to suppress any discussion of a lab leak, while simultaneously promoting the natural origin theory.

The State Department memo also lists many facts that the public has only come to know in piecemeal fashion over the course of the past two years. We’ve previously covered many of these details on our show, including that the Wuhan CDC had a resident “Batman”—Tian Junhua—who bragged about personally having collected more than 10,000 virus-carrying bats as lab samples from Chinese caves.

Tian also was widely known for his recklessness and carelessness during his collection process.

Regarding the Wuhan Institute of Virology, the State Department memo noted that the director of the lab, Shi Zhengli, had conducted gain-of-function engineering of bat viruses to make them more easily transmittable to humans. As we now know, the defining feature of the COVID-19 virus, its furin cleavage site, is what makes the virus particularly transmissible in humans. While no furin cleavage site has ever been observed in naturally occurring SARS coronaviruses, Shi was part of a 2018 research proposal that aimed to insert exactly such a feature into coronaviruses.

The State Department’s memo also highlights the poor safety standards at the Wuhan Institute, a fact that could easily lead to an unintentional leak of the deadly virus to the outside population. Interestingly, the memo also questions the disappearance of lab worker Huang Yanling, whose bio, profile, and picture were scrubbed from the institute’s website shortly after the outbreak. To this day, Huang’s whereabouts and well-being remain unknown.

Lastly, the memo takes a detailed look at a Chinese medical professional whose online name is Wu Xiaohua. Wu claimed that Shi Zhengli was playing God by creating coronaviruses with the specific aim of making them more transmissible in humans. Wu also claimed that Shi used intermediate animals in her lab and that her lab’s management of deadly viruses was appallingly poor and negligent.

The State Department memo found Wu’s claims to be credible and that assessment holds up well, given the information that has been made public in the intervening two years. We now know Shi had an active plan to insert furin cleavage sites into bat viruses, we know that she used humanized mice to test how her virus creations would affect humans, and we know that her lab was repeatedly cited for its poor safety record.

The most striking takeaway from the memo is that it focuses almost entirely on the lab leak scenario, reflecting that the State Department was almost certain in April 2020 that the virus had originated in a lab. What remains entirely unclear is why neither the State Department nor Secretary Pompeo released this information as soon as they had it.

Had the memo been made public nearly two years ago when it was written, the course of events would have been very different. Knowing that the virus came out of a lab would have refocused public attention and the search for remedies could have been more focused.

There also would have been more concerted efforts to prevent future leaks. Rather than misdirecting the public toward a natural origin, Fauci and the NIH would have been exposed for their role in funding the work at the Wuhan Institute.

Most importantly, the Chinese Communist Party would have been subjected to greater international pressure for its role in suppressing any advance information regarding the outbreak. The memo might also have had an impact on the 2020 presidential election, as voters tended to see Donald Trump as far more capable than Joe Biden in taking on the CCP.

While we don’t know with certainty why the memo was concealed, the only person who had a constitutional role in deciding if suppression of a lab leak should be the policy of the U.S. government was President Trump. Although it’s possible that Trump decided it would be better to conceal the facts, it’s far more likely that, like all of us, the president was kept in the dark

Bretton Woods III? China Begins Buying Russian Coal And Oil In Yuan

 Is Ukraine more important than Serbia was in 1914? A World War may or may not be coming, but on the financial front the war has already started. I will be relentless with little room for diplomacy... 

Bretton Woods III? China Begins Buying Russian Coal And Oil In Yuan 

The old economic order, in which the dollar's centrality to global trade remains king, is beginning to fade. The latest example of the dollar's demise comes as China purchases coal and oil from Russia in yuan due to Western sanctions isolating Russian banks from the SWIFT payment system. 

Chinese commodity firms purchased Russian coal in local currency in March, and the first shipments are expected to arrive in China this month, according to Bloomberg, citing Chinese consultancy Fenwei Energy Information Service Co. Traders said this coal shipment paid in yuan would be the first since the U.S. and Europe unleashed harsh sanctions severing some top Russian banks from SWIFT. 

Traders are also reporting Russian crude bought in yuan. The first Eastern Siberia Pacific Ocean grade crude shipment will arrive at Chinese refiners in May. 

Russia and China trading yuan for commodities is just one example of a new emerging economic order.

Premium subs should recall former N.Y. Fed repo guru and current Credit Suisse strategist Zoltan Pozsar's stunning note last week that said the consequences of the Ukraine war are ushering in "the birth of the Bretton Woods III - a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the west."

Fast forwarding to the punchline, Poszar wrote that if the framework he has laid out previously (and again, in his latest note) is the right framework to think about how to trade interest rates in coming years, inflation will be higher; the level of rates will be higher too; demand for commodity reserves will be higher, which will naturally replace demand for FX reserves (Treasuries and other G7 claims); Meanwhile, demand for dollars will be lower too as more trade will be done in other currencies; and as a result of this, the perennially negative cross-currency basis (the dollar premium) will naturally fade away and potentially become a positive cross-currency basis.

Translation: the dollar is on its way out as the world's undisputed reserve currency, a consequences of events that put in motion when Putin invaded Ukraine (with the implicit blessing of China and India) and when the West decided to expel Russia from the entire western financial system.

It is this chain of events that Pozsar calls Bretton Woods III and the reports of China's purchases of oil and coal in yuan (not dollars) suggesting the path to that new world order is accelerating faster that many hoped (as the surge in the Ruble may also suggest).

Pozsar spoke with Bloomberg's Joe Weisenthal and Tracy Alloway this week and recited his Bretton Woods III thesis, suggesting: 

"Instead of a Volcker moment, we got a Putin moment and we basically have war and out of this war, something will also emerge.

"Out of this, I think this 'Bretton Woods III' that I started to kind of develop and run with, is a world where we are, again, going to go back to commodity-backed money — where gold, once again, is going to play a big role. And not just gold, but I think all forms of commodities," Pozsar said.

To the Credit Suisse strategist's point, the global financial system's plumbing is being reworked, and the dollar's dominance in global trade is being challenged.

As Pepe Escobar recently noted, Iran has shown how to do it.

Persian Gulf traders confirmed to The Cradle that Iran is selling no less than 3 million barrels of oil a day even now, with no signed JCPOA (Joint Comprehensive Plan of Action agreement, currently under negotiation in Vienna). Oil is relabeled, smuggled, and transferred from tankers in the dead of night.

All the blather about “crashing Russian markets,” ending foreign investment, destroying the ruble, a “full trade embargo,” expelling Russia from “the community of nations,” and so forth –that’s for the zombified galleries. Iran has been dealing with the same thing for four decades, and survived.

Moscow is also considering a rupee-ruble payment system for Indian oil traders, while Saudi Arabia could start pricing some of its brent in yuan for Chinese traders.

“The oil market, and by extension the entire global commodities market, is the insurance policy of the status of the dollar as reserve currency,” said economist Gal Luft, co-director of the Washington-based Institute for the Analysis of Global Security who co-wrote a book about de-dollarization.

“If that block is taken out of the wall, the wall will begin to collapse.”

A drop in the demand for dollars would be bad news for a US government that depends on dollar demand to fund its out-of-control spending. As Michael Maharrey recently wrote, imagine a world in which the Chinese didn’t need dollars.

China ranks as the biggest foreign holder of US debt. If it continues to divest itself of dollars, who will pick up the slack? The Federal Reserve has been buying Treasuries hand over fist for the last two years, keeping its big fat thumb on the bond market. But it’s tapering purchases and supposedly planning on shrinking its balance sheet. If global demand for Treasuries drop precipitously — and it would in a world without the petrodollar — the US government would either have to drastically cut spending or the Fed would have to continue printing money to monetize the debt.

Even if this is nothing but talk, it underscores the fact that the dollar is on shaky ground. US policymakers would be wise to consider future dollar weaponization carefully.