Dollar Dismantling by BRICS (Russia, China, et al)

 Dollar Dismantling…


8/05/14 – It does not take a rocket scientist to see where the fate of the US Dollar is heading… or who is pushing hardest to get it there.  A recurring chorus of protagonists – or are they antagonists – are doing everything possible to accelerate the momentum in the global push away from the US Dollar (as the reserve currency).

When it is an isolated, third-world country – or second-rate power – they are quickly silenced or marginalized… Saddam Hussein repeatedly demanded payment for oil in Euros in late-2000… an attempt to drive a wedge between the US and the rest of the world.  We know where that got him.

Then there are those powers that are a little better connected and have a developing nuclear capability that cannot be silenced as easily…

Iran – before & during the reign of Mahmoud Ahmadinejad – vocalized the same desire and built Iran’s own Oil Bourse for the trade of oil in Euro, Yen & Iran’s Rial.  Its first official trade took place on Feb. 17, 2008, even though previous reports of Euro transactions had surfaced.  Those included a March 2007 New York Times article that reported China had paid for Iranian Crude in Euros in late-2006.

Finally, there is the ‘third column’ – those nations that are more powerful than most others, posing the greatest threat to US hegemony.  And, when they team up together – and proclaim the same objective – the US pays close attention.

Jekyll Island Redux

2010 ushered in a dramatic shift when Russia & China agreed to allow their currencies trade against each other, thereby facilitating bilateral trade – in currencies other than the US Dollar – between these two world powers.  No longer would each nation have to buy Dollars before purchasing goods from the other.

In another intriguing application of cycles, this event came 100 years after a precursor event…

In late-November 1910, two powerful US politicians (Sen. Nelson Aldridge & US Treasury Sec’y A. Piatt Andrew) – along with five leading financiers – met at Jekyll Island (off the coast of Georgia) and paved the way for a dramatic shift in the course for the US Dollar.

They laid out the plan for the Federal Reserve, which would ultimately wrestle control (or have that control meekly handed over) of the US currency away from Congress… as stipulated in the US Constitution.  That then paved the way for 100 years of steady inflation in the US… and the steady degradation & deterioration of the US Dollar.

Exactly 100 years later, in late-November 2010, two powerful global politicians (President Medvedev of Russia & Premier Wen Jiabao of China) met outside of Moscow and paved the way for a ‘global reserve’ that would ultimately replace the US Federal Reserve and the global Dollar reserve (status).

[Note: Both of these major currency shifts were precipitated by major financial crises, panics & collapses.  In October 1907, a failed attempt at cornering a stock – of United Copper – led to the Panic of 1907 and a 50+% drop in the stock market in less then two years.

100 years later, in Oct. 2007, the stock market peaked and again ushered in a bear market with the DJIA & other major Indices losing over 50% in less than two years.  The global repercussions of that crash – and the ensuing monetary policy – played a pivotal role in the development of the New Development Bank.  Coincidence?  Or Cycles??]

Rather than five individual financiers (as in 1910), the 2010 agreement was ultimately backed by five nationalfinanciers (the BRICS nations).  At the same time, there were repeated rumors of other nations signing on to the same idea and pushing for a basket of currencies as the global reserve.  They were building a powerful fortress around the US Dollar (to rein it in), BRIC by BRIC.

In January 2012, the ‘I’ in BRIC (India) held talks in Tehran to figure out an alternative method for paying for Iranian Crude, the result of US sanctions against Iran.  As in the case of China (the ‘C’ in BRIC), India is a major importer of Iranian crude.

Two months later, in March 2012, Iran announced that the Iranian Oil Bourse would no longer trade in US Dollars, opting instead to trade in Euros, Rupee, Yen & Yuan… or a basket of various currencies.

Momentum continued to build into July 2014, when the BRICS initiated the formation of the New Development Bank – a quasi-World Bank that was first agreed to on March 27, 2013.

This new global entity will attempt to offset the influence of the IMF & World Bank, and increase the influence of China & Russia in world economic affairs.  It has an initial funding of $50 billion that should quickly grow to $100 billion – with equal contributions from Brazil, Russia, India, China & South Africa.   The Bank is based in Shanghai, China.

P.I.T. (Period of Inflationary Testing)

1973–1976 – when first Saudi Arabia and eventually all of OPEC – agreed to price oil in Dollars (and when the Dollar was ultimately de-linked from Gold via the Jamaica Accord) – ushered in an inflationary bonanza for the US Dollar (as the result of its reserve currency status).  From that point forward, America was able to print Dollars with reckless abandon and frequently inflate its way out of debt… at least to a certain degree.

Of course, as has been the case for millennia, this was also clearly – particularly in retrospect – the onset of a ubiquitous, 40-year period of testing.  Although I don’t want to belabor this point, since it has been discussed so frequently, it is important to review it:

A 40-Year Cycle has been – for almost all of recorded human history – a decisive period of time that ushers in MAJOR changes.  It is a period of preparation or ’testing’ prior to those changes and is repeatedly documented in the ancient history of the Middle East, as detailed in the Bible and other ancient writings.

In many cases, it is also a final opportunity to turn away (’repent’) from destructive actions – whether they be moral, social, financial… or all of the above.  Unfortunately, in the majority of those cases recounted, little or no changes were enacted.  Instead, the affected (or ’infected’) society accelerated headfirst into a date with destiny.

2013–2016 is the culmination of that 40-Year Cycle for America.  Just as 100 years prior – in 1913 – and just as 40 years prior, in 1973, 2013 ushered in this decisive period with the agreement to create the BRICS Development Bank(now, the NDB).  That fortuitous decision in 2013 came 40 years after the first stage of Dollar hegemony (1973) – exactly when it was anticipated & projected – and tolled the bell for its ultimate demise.

Just as the move towards Dollar reserve status took a few years to reach fruition, the move toward replacing the Dollar as the world’s reserve currency is also likely to take a few years… at least until 2016 or 2017… and possibly until2021.

2015 is the culmination of a 30-Year period/cycle from the 1985 Plaza Accord that triggered a massive, multi-decade decline in the US Dollar… Could 2015 usher in a new Dollar decline… when the realization of this impending shift takes hold??

…Is the Dollar seeing the proverbial ‘handwriting on the wall’?  Has it been weighed… and found wanting??

…Since 2010, we have been discussing these developments and the steady move toward overthrowing the US Dollar as the ‘kingpin’ of global finance.  It is easy to see why these other nations want to supplant the Dollar and the power & influence that come with being the world’s reserve currency.

Russia & China have steadily built this coalition and steadily undermined the US Dollar and have been content to gradually whittle away the foundation of America’s wealth & prestige.  However, when that decisive ’BRIC’ is yanked out from under the US Dollar (2016?), this shift will accelerate – suddenly and dramatically!

2014 – most synergistic in 4Q 2014 – is not only when so many Stock Index cycles and timing indicators converge, it is also the completion/transition of multiple social/economic/financial cycles.  A stock market peak in4Q 2014 would complete a 40-year inflationary advance in Stock Indices (and many other markets) – originating from the 4Q 1974 bottom.

As discussed in the preceding pages, this is FAR MORE than just a market discussion or a market cycle. It is the culmination of a unique fractal of related 40-Year Cycles that deal with peculiar societal ‘experiments’ – spanning the entire history of America.

The latest ‘experiment’ involves supporting the US Dollar/Federal Reserve Note – and by default, everything priced in those Dollars – with nothing but debt and the world’s need to use Dollars to buy everything else.  While there is good reason to argue that the US earned that privilege, there is equally good reason to argue that the US has grossly abused that privilege.  Our 40-Year ‘Period of Testing’ is reaching fruition and other powerful nations are vying to knock us off the top of the proverbial (economic) mountain.

After 40 years of relative global blindness, somebody is yelling ‘the Emperor has no clothes’… and the rest of the global population is squinting their eyes and starting to recognize the obvious.

It may be that the BRICS are successful and ultimately overtake the West as the global financial leader. Or, it may be that the West sees the handwriting on the wall and takes the very difficult & painful steps toward curbing this inflation and backing the Dollar with something more than just debt.  If that were the case, it would corroborate analysis for a major inflationary peak and transition in 2014–2016.