More Prominent Countries Abandoning the US Dollar and Ignore U.S. Plea To Boost Oil Production

TGP contributor Larry Johnson recently joined Craig Simpson, who does a podcast from Arizona, on the political and economic fallout in the West from its feckless attempt to kill the Russian economy and end the presidency of Vladimir Putin.

Larry wrote previously about the end of Pax Americana, but it bears repeating — the major consequence of Russia’s Special Military Operation in Ukraine is the deconstruction of the international world order created and dominated by the United States in the wake of World War II. Elijah Magnier agrees:

Elijah J. Magnier told Sputnik that humanity was facing the dawn of “a new world” due to the US proxy conflict in Ukraine, which has sparked an economic crisis and civic disorder in the West.

“Things are changing” and Saudi Arabia is “looking at what’s happening,” Magnier said, “looking at the Americans much weaker than before, a distance from the Middle East.”

The US lacks “the same dominance as they used to have,” with oil-producing countries like Saudi Arabia and Iran now accepting payment in other currencies than the US dollar — like the Chinese Yuan and the Russian ruble.

The supremacy of the U.S. dollar as THE currency of international trade, especially in the oil markets, is over. Fox Business is reported today that China and Brazil agreed to abandon the dollar in mutual trade and will use their national currencies for mutual settlements. This deal lets them conduct trade and financial transactions directly (i.e., exchanging yuan for reals and vice versa) without the need to convert their currencies into U.S. dollars.

Simplicius is written an essential article on substack, The Truth About Russia’s Economic Power: Is It Really as Small and Weak as the West Claims? (Spoiler alert, it is not), and discusses how U.S. dollar dominance has enabled it to exert significant control over the economies of other nations:

A country that operates on a Trade Deficit (which is most countries in the world, including the U.S.) simply imports more items than it exports. It is a country that relies on importing goods from other countries to survive. The reason this is important is that, since the global financial system operates on the U.S. Dollar basis by ‘Dollar Hegemony’—i.e. the Dollar is the reserve currency of the world—this means that when a country IMPORTS items, it is pricing them usually in Dollars, since most trade, particularly of the most valuable commodities like Oil are done in Dollars. So this means that the price of a country’s native currency to Dollar conversion is essential.

What the world is now witnessing is an economic battle between the United States, which is a Trade Deficit country, and Russia, which enjoys a Trade Surplus. Simiplicius explains:

But, what if your country is a TRADE SURPLUS country, a rarer breed of highly self-sufficient economies—a list comprising only the most advanced first-world nations such as Germany, Japan, China, etc.? Russia is in fact amongst this distinguished list. It has one of the largest trade surpluses in the world, while the U.S. is the world’s biggest Trade Deficit country, by far.

So, how does a Trade Surplus country work? It is when a country Exports more than it Imports. In summary: the price conversion of the Dollar to the country’s currency is irrelevant because if you are generating everything your country needs within your own borders (self-sustainability), you are naturally pricing those items you yourself create in your own currency. So, what does it matter if the Russian Ruble goes from 30 Rubles to 1 Dollar, to 1000 Rubles to 1 Dollar? If you’re Russian and you’re not importing anything that’s priced in the Dollar, and you’re buying things within your own country priced in Rubles only, then it makes zero difference what the Ruble trades against the Dollar. Inside the borders of your own country, a Ruble is a Ruble, its price conversion to the Dollar is inconsequential.

Previously, the United States could rely on Saudi Arabia to counter OPEC decisions to limit oil production. That is no longer the case:

Saudi Arabia and other major oil producers on Sunday announced surprise cuts totaling up to 1.15 million barrels per day from May until the end of the year, a move that could raise prices worldwide.

Higher oil prices would help fill Russian President Vladimir Putin’s coffers as his country wages war on Ukraine and force Americans and others to pay even more at the pump amid worldwide inflation.

It was also likely to further strain ties with the United States, which has called on Saudi Arabia and other allies to increase production as it tries to bring prices down and squeeze Russia’s finances.

The production cuts alone could push U.S. gasoline prices up by roughly 26 cents per gallon, in addition to the usual increase that comes when refineries change the gasoline blend during the summer driving season, said Kevin Book, managing director of Clearview Energy Partners LLC. The Energy Department calculates the seasonal increase at an average of 32 cents per gallon, Book said.

So with an average U.S. price now at roughly $3.50 per gallon of regular, according to AAA, that could mean gasoline is over $4 per gallon during the summer.

And the bad news for Washington and the dollar keeps on coming:

The Association of Southeast Asian Nations is considering dropping the US dollar, euro, yen and the British pound to foster financial settlements via national currencies, ASEAN Finance Ministers and Central Bank Governors said at a recent meeting in Indonesia.

If such a measure is adopted, the ASEAN cross-border digital payment system will be further expanded. It will also allow member countries to use local currencies for trade, according to a briefing report.

For the last 75 years, the United States has been the economic colossus dominating and deciding what international rules must be obeyed. That era is over, but most folks in Washington and London do not realize it yet.

via theroaringamerican

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