Perhaps Russia’s most aggressive weapon in its war on dollars is gold. The first line of defense is to acquire physical gold, which cannot be frozen out of the international payments system or hacked.
With gold, you can always pay another country just by putting the gold on an airplane and shipping it to the counterparty. This is the 21st-century equivalent of how J.P. Morgan settled payments in gold by ship or railroad in the early 20th century.
March 4, 2022
You Can’t Hack Gold
[This also has relevance to cancel culture.
I recall an article from the 70’s that detailed how gold payments were made between nations pre WWII (and maybe beyond). A number of banks in New York City maintained underground vaults with many stacks of drawers containing small gold bars (1 ounce, 10 ounce, 100 ounce- I can’t correctly recall). Various governments and companies maintained accounts valued in ounces of gold ( the daily exchange rate and govenment price on gold factored in.) As payments were made from one account to another, clerks changed the cards on the drawers, reflecting how many ounces in the drawer were owned by which account. Tedious, but physical transfer was not needed.
So, a high-trust system. Sounds not very well suited for our recent interesting times.
You are witnessing the demise of the PetroDollar.
For decades, all international oil/gas sales were done in dollars. If Chile wanted to buy from Mexico they needed dollars to do the deal. Because of this, demand for dollars has remained artificially high all that time… meaning we were effectively exporting inflation by proxy.
By trying to cut Russia out of the SWIFT system (something they have been panning for) and trade with other (like China and India) on an alternate / parallel system denominated in some other currency or item of value, international demand for dollars will lesson, then crash, meaning all that dollar printing will turn into domestic inflation. At that time, US exports will potentially boom as their relative price falls, and imports will become much more expensive. Suddenly all that “off-shoring to save costs” will look really stupid.
The US will, of course, try to bully countries into using only the SWIFT system, but that’ll be really hard with our largest trading partner (China, 1.4B people) using the parallel system, as well as one of our most solid foreign allies (India, 1.3B people) and a major oil/gas/grain/fertilizer/raw materials exporter (Russia).
The one upside is there may be enough strangeness that a large number of illegal immigrants will self-deport before the manufacturing jobs come back, so they will go to actual heritage Americans.
You can’t hack gold. Which is exactly why FDR banned it’s private ownership and Tricky Dick Nixon uncoupled the US Dollar from it. Divorcing the dollar from gold made the insane inflationary practices of the Federal Reserve ( at the behest of the Fed Gov) possible. And all things that cannot continue will not. Eventually the US Dollars tenure as world benchmark currency has to end. And thanks to the massive magical creation of dollars that has happened in the past couple of years we are seeing the end of the Dollar looming right in front of us. The House of Saud is signaling they are likely to end the use of dollars as the medium of exchange for oil and move to the Yuan/Renminbi. That move will be the death knell for the US Dollar since it will cease being the worlds benchmark currency and become mere toilet paper…..just like the Venezuelan Bolivar. The end of the Dollar’s tenure as king of the hill will cause a LOT of very rich and powerful people to no longer be rich and powerful. That is MORE than enough motivation to start a war…..a BIG war. Which is what we are seeing right now.