Could World War III be around the corner? It very well could be. Why? Look no further than the U.S. Dollar.
- Is the U.S. arming Ukraine simply to piss off Putin? No.
- Is the U.S. arming Ukraine as a result of lobbying efforts by Government contractors such as Lockheed Martin (LMT) and Northrop Grumman (NOC)? No doubt those companies benefit from military conflict, but I’m not sure the U.S. would risk a global hot war simply to generate revenue for the defense contractors.
- Could the Petrodollar have something to do with why the U.S. is fighting a proxy war with Russia and why the U.S. is risking a larger military conflict? Yes. It is the only reason I can think of.
The U.S. weaponized the Dollar early in the Russia / Ukraine conflict. We applied sanctions on Russia, including kicking Russia off of the global SWIFT payments network. In doing so we pushed Russia into China’s arms. Further, other countries took note of our weaponizing the Dollar.
For months there has been steady chatter concerning Russia, China, India and other countries settling cross border payments for certain goods – namely oil – using China’s RMB rather than the U.S. Dollar. It so happens that China has been building up its gold reserves. Some commodities analysts suggest that China’s gold reserves are many multiples higher than the self-reported 2 thousand tons figure. A digital RMB backed by gold certainly would be a convenient alternative to the U.S. Dollar.
I don’t expect the RMB to replace the USD as the global reserve currency overnight. However, I certainly can imagine limited trade flows between Russia, China, parts of Europe, India and OPEC settling in RMB rather than Dollars. Little by little the RMB would chip away at the Dollar’s reserve status. The Dollar losing even a small portion of global trade flow would greatly spook currency markets and further devalue the already watered-down Dollar.
It appears the U.S. executed the September 2022 destruction of the Nord Stream pipeline in order to curtail Russia’s export revenue while weakening the economic ties between Russia and Germany and in the process propping up the Dollar.
If one were to game theory this out, the removal of Putin and subsequent installation of “friendly” Russian leadership would ensure support of the Petrodollar. The U.S. Dollar would live to see another day and the U.S. could continue to print Dollars at will given the USD would retain reserve currency status.
The problem is that life would get messy for those living in Eastern Europe, Central Europe, Western Europe, Asia (to a degree) and here in the United States. Hot wars are messy. Blood is shed. Lives are lost. It would be far better to arrive at a diplomatic solution versus kicking off World War III.
How soon may World War III arrive? To answer that question, how soon could the U.S. put hypersonic missiles in Ukraine?
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