For the first time in our lives, U.S. hegemony is truly on the brink…
Gold, oil, and silver have recently surged in value as China, and its growing list of allies, disrupt the world order.
The U.S. dollar and Americans’ standard of living may become the ultimate victims if the BRICS successfully launch their own global currency — which they’ve indicated they will.
Unintentionally foreshadowing what may be a new reality for the world order, Zbigniew Brzezinski’s classic paper, The Grand Chessboard, which posits he who controls Eurasia controls the world, will send a chill down your spine. Brzezinski wrote that,
“Cultural decay, political division, and financial inflation conspired to make Rome vulnerable even to the barbarians…”
Take out Rome and insert America…
The 45th President was just indicted, political division is at an all-time high amongst fellow Americans, pop culture and the mainstream media is crasser than ever, drug abuse recently hit record levels, politics has become a religion, and, well, we all know the inflation story.
Brzezinski outlines ‘Four Domains of Power’ a nation or empire must possess to rule unchallenged: militarily, economically, technologically, and culturally.
The U.S. remains the clear favourite from a military and technological standpoint. However, with inflation continuing to run rampant, growth stagnating, the U.S. remaining a service sector economy, its fertility rate declining, trillions in unfunded liabilities, and millions of baby boomers retiring every year, its economy is poised to roll over in the next decade.
From an economic standpoint, the U.S. economy remains, rather comfortably, the largest. Still, it has only registered two years in the past 23 years (excluding the rebound of 2021) above 3% GDP growth and appears destined for prolonged anemic growth. Moreover, the BRICS economies (24% of global GDP) now exceed that of America (23% of global GDP).
The pandemic only accelerated this trend and may have triggered a dramatic change unseen since post-WWII, when the Bretton Woods Agreement and System formed, positioning the Dollar at the center of world trade.
Note: The above highlights PPP GDP which is gross domestic product converted to international dollars using purchasing power parity rates.
The U.S. represented more than 40% of the world’s economy shortly after WWII, but the rise of many countries continues to erode its position.
So what does the U.S. export now? In short, oil and liquified natural gas…
Three of the top four largest exporting industries in the U.S. are:
(#1) Oil Drilling & Gas Extraction, worth $222.8 billion
(#2) Petroleum Refining, worth $158 billion
(#4) Natural Gas Liquid Processing, worth $75.9 billion
These three industries are worth more than the rest of the top 10 exporting industries combined. The U.S. also exports dollars for goods. A currency crisis could ensue if major US trading partners no longer desire to trade their hard-produced goods for dollars.
Golden Age of Hollywood and Americana is Dead
The ‘cool factor’ of Hollywood and the Americanization of countries worldwide has faded in a post-pandemic world (it started after the Great Recession). The degenerate nature of many Hollywood-produced films these days has turned many countries away from American entertainment. With the growing deglobalization forces and geopolitical rifts at play today, nations are looking within for their own heroes, celebrities and entertainment.
So, while the U.S. holds onto two of the four critical components to being a superpower, its economic and cultural clout is fading.
Back to the chessboard…
Written over 20 years ago, in 1997, Brzezinski highlights one warning in the Grand Chessboard that the U.S. should have seen coming:
“Potentially, the most dangerous scenario would be a grand coalition of China, Russia, and perhaps Iran, an ‘antihegemonic’ coalition united not by ideology but by complementary grievances.”
Everyone should download this free geopolitical analysis masterpiece as he lays out the rise and fall of great empires; from the Romans and Chinese empires to the Mongols, the Spanish, the French, the British, and finally, the Americans.
The ‘Grand Coalition’
The grand coalition hands China control of Eurasia.
Overlooked by many, China brokering a peace deal between Saudi Arabia and Iran just a few weeks ago is one of the most significant geopolitical events of our lifetime.
Think back to 2019, when drone attacks claimed by Yemen’s Houthi rebels, which Iran backs, hit two key oil installations inside Saudi Arabia. These facilities process the majority of the country’s crude output. But, when the Saudis complained about it to America, little was done.
The Saudis have realized who butters their bread…
Who is the biggest buyer of Saudi oil? China.
Where was the peace deal brokered? Beijing.
In just three years, China was able to subdue the Saudis’ gravest enemy.
Peter Baker from the New York Times wrote in Chinese-Brokered Deal Upends Mideast Diplomacy and Challenges U.S. that,
“Amy Hawthorne, deputy director for research at the Project on Middle East Democracy, a nonprofit group in Washington. “Yes, the United States could not have brokered such a deal right now with Iran specifically, since we have no relations. But in a larger sense, China’s prestigious accomplishment vaults it into a new league diplomatically and outshines anything the U.S. has been able to achieve in the region since Biden came to office.”
If you look at the economic facts, Iran, Iraq, and the Saudis need China.
In ‘Iran’s Increasing Reliance on China’, written by the United States Institute of Peace, the deepening relationship between China and Iran is presented:
“For the 10th consecutive year, China was Iran’s largest trade partner. Iran’s trade with China reached almost $16 billion in 2022, up seven percent from 2021. China’s crude oil imports from Iran reportedly set a new record in December 2022.”
Keeping that in mind, was it any surprise China was able to broker this deal?
China has always subscribed to the rule that money talks.
And Asia’s largest power player has now dramatically strengthened its ties with four (Saudi Arabia, Iran, Iraq, and Russia) of the world’s top 6 largest oil reserve nations:
- Venezuela 17.5%
- Saudi Arabia 17.2%
- Canada 9.7%
- Iran 9.1%
- Iraq 8.4%
- Russia 6.2%
source: World Population Review
The U.S., the world’s largest oil producer today, has only 4% of global reserves, according to worldpopulationreview.com.
China Increases Trade with Iraq
Bilateral relations and trade between China and Iraq have expanded dramatically in recent years.
According to Sercan Caliskan’s ‘China’s Expanding Influence in Iraq’,
“In 2022, China imported a significant amount of crude oil from Iraq, totaling 55.49 tonnes. This represented a substantial increase of 47.49 percent in Iraq’s oil exports to China, resulting in $39.04 billion in revenue.”
In other words, China has the Middle East power players aligned with it, not America, and has a critical geographic region from which to wield influence.
OPEC surprised the world last weekend with a 1 million barrel per day production cut. The Saudis cut the most at 500,000 barrels per day, with Iraq cutting by 211,000 barrels per day. Much of the influence the U.S. had over Saudi Arabia is gone as China and Russia flex on the global stage.
Soon enough, Americans will be paying more for gasoline once again. Let’s not forget America still hasn’t refilled its Strategic Petroleum Reserve, which Biden drastically depleted last year to deal with skyrocketing fuel prices.
Trump Weighs in on Looming Currency Crisis
Sadly, the U.S. likely has more enemies than friends, and the global monetary system it built after World War II is breaking down in real-time. In a stunning statement, and on the day of his historic indictment, former president Donald Trump stated,
“Our currency is crashing and will soon no longer be the world’s standard, which will be our greatest defeat frankly in 200 years, there will be no defeat like that. That will take us away from being even a great power.”
Although Trump didn’t do anything to stop America’s out-of-control deficit spending (he racked up trillions in debt), he’s likely right. And history supports his statement…
You see, dating back to the 1400s, the average duration a currency has been the world’s reserve currency is roughly 95 years. Portugal, Spain, Netherlands, France, and England all had their shot at reserve currency status before the U.S. And all were dethroned within 100 years on average. The U.S. dollar started to dethrone the pound shortly after WWI, around 1921, slightly more than 100 years ago. (Some will argue the dollar didn’t overtake the pound sterling until Bretton Woods, but we respectfully disagree. The dethroning commenced long before that.)
Yuan to Challenge US Dollar
China has wanted the Yuan to challenge the U.S. dollar for years. And until recently, it seemed unlikely. However, with the United States failing to get its fiscal house in order and dealing with massive internal political division and inflation issues at home, the world is losing faith in the Dollar and American supremacy.
In February, the Congressional Budget Office published its Budget and Economic Outlook from 2023 to 2033. Unfortunately, its findings are disconcerting…
“In CBO’s projections, the federal deficit totals $1.4 trillion in 2023 and averages $2.0 trillion per year from 2024 to 2033. Real GDP growth comes to a halt in 2023 and then rebounds, averaging 2.4 percent from 2024 to 2027.”
The Problem is Likely Irreversible
The U.S. national debt already stands at $31.66 trillion. The Federal Reserve’s balance sheet sits at around $8.7 trillion. Although the Dollar won’t be dethroned this year, or potentially even this decade, it WILL eventually be dethroned without a dramatic (and perhaps impossible) reversal in fiscal and monetary policy.
For decades, the world has facilitated America’s bloat by buying U.S. Treasury Bonds. And the U.S. has become dependent on these buyers; however, with inflation still elevated in the U.S. and its global influence declining, countries are less willing to buy bonds and finance America.
Internally, the problem for the U.S. is that GDP growth remains anemic, and too much tax revenue goes towards its many and expanding social programs. So, inflation is the only way to keep the party going. But we all know they can only play this game for so long… history has proven this time and again.
Furthermore, with the largest exports from the U.S. being oil and natural gas, two things Eurasia does not need much more of, thanks to the Saudis, Iran, Iraq, and Russia, much of the world may be done financing America’s spendthrift ways.
The takeaway from all this geopolitical drama? The U.S. Dollar could be on the verge of a currency crisis, and we appear set to enter an epic commodity bull market in the years to come.
All the best with your investments,
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