The shockwaves are still being felt by the incredible Western sanctions that have rendered the $ 630 billion of reserves accumulated by the Russian central bank virtually unusable. Can the current dollar-centric global financial system last if money can be summarily written off?
Arthur Hayes, a former emerging market trader and co-founder of the BitMEX trading platform, argues that central banks will choose to load gold, storable grains like wheat or storable commodities like oil and copper instead of dollars. “In essence, the fiat currencies of countries with the largest surplus will implicitly increase their support in gold or commodities,” he writes, saying gold could rise over $ 10,000 an ounce.
Luke Gromen, editor of Forest For The Trees and longtime dollar bear, said the change had happened even before the sanctions. In a podcast with Grant Williams, Gromen said that over the past eight years, global central banks have bought about $ 260 billion worth of gold, compared to the Treasury’s $ 60 billion. “So there has been this very slow, but steady and recently accelerating move away from this dollar system that broke in 2005, through 2008 into this system that looks a lot like what was proposed by [John Maynard] Keynes 80 years ago, ”he says.
The dollar-centric system has some drawbacks for the US “The problem with this is the US version of this deal that we are printing dollars for oil like we have been doing since ’73, and that’s the downside of the deal, that’s you You had to manage the deficits to supply the dollars to the world, “he said.” Which means you have to relocate all production. You have to send all production jobs overseas. You have to manage a lot of government-level deficits. all these things that are really very useful for GDP growth and for the economy in the short and medium term. And in the long run they bankrupt you. “
Gromen, like Hayes, expects more accumulation of gold. “So every central bank in the world is now evaluating this thinking, okay, we don’t have to be in a position where this can happen to us. Because who knows what could happen in the future and what could make us consider a bad actor. So presumably they will try to accumulate a lot more gold, “he said.
(It should be noted that gold has its own risks for foreign central banks. In the case of Russia in particular, the central bank will not be able to sell directly to any Western entity, and bipartisan legislation introduced in the US Senate would impose secondary sanctions on any American entity that knowingly transacts or transports gold from Russia.)
Gromen predicts the end of the 40-year bull market in bonds. And he sees the potential for reindustrialisation. “When you see Ohio getting an Intel INTC
fab and the CEO of Intel saying, “We will make Ohio one of the largest Intel manufacturing regions in the world.” What? Ohio was ground zero of people who have taken it in shorts since 1973 to present this deal. Another semi-manufactured in Arizona, another semi-manufactured in Texas, ”says Gromen. “It’s not even the first inning of this reindustrialization of America, but reindustrialization was never going to happen until you changed this dollar system and removed treasury bonds as a primary reserve asset, replacing it with a neutral one. And here we are. We are in two weeks. It’s incredibly exciting ”.
The economic calendar moves forward with data on jobless claims, the start of housing, the Philly Fed manufacturing index and industrial production. There is also an expected rate hike by the Bank of England, one day after the Federal Reserve made a quarter point hike and posted 11 increases in two years.
There were no major developments in the Russia-Ukraine situation until Thursday morning. Ukrainian President Volodymyr Zelenskyy spoke to the German parliament and criticized his support for the now suspended Nord Stream 2 gas pipeline project.
Williams-Sonoma WSM home furnishings retailer
earned 9% in after-hour trading, exceeding earnings expectations, raising dividend and approving a $ 1.5 billion share buyback.
Berkshire Hathaway BRK
continued to increase its stake in Occidental Petroleum OXY,
according to a filing late Wednesday.
US Stock Future ES00
they were weaker after the 4.4% surge for the S&P 500 SPX
in the last two days. CL crude oil futures
they swung higher.
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Irish Jews are receiving a double dose of holiday fun on Thursday with both St. Patrick’s Day and Purim observances.
Workers rebuilding Notre Dame Cathedral in Paris have uncovered previously unknown tombs.
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