Putin continues his fight against the dollar, at an opportune moment.
The "economic war" that the Russian president has launched against the United States is accelerating.
His ambition is clear: to overthrow the U.S. dollar hegemony.
The Russian central bank now has more gold than dollars. Russia continues its massive purchases of gold, and avoids transactions in dollars with its trading partners.
Russian official holdings of USTs v. gold, 2008-2018.— Luke Gromen (@LukeGromen) February 21, 2022
Interesting divergence. pic.twitter.com/juB1uSHEqH
Putin is supported by China. The two great allies are increasing their trade in gold, and gradually selling their American bonds, to weaken the dollar.
Russia reveals record high stockpiles of gold and Swiss gold exports to China is at multi-year high.— Gold Telegraph ⚡ (@GoldTelegraph_) January 28, 2022
Gold flowing east.
De-dollarization is accelerating, including in emerging countries. The latter are seeing the means to exchange in another currency, which was hardly the case in previous decades.
But what can the United States do?
As inflation increases (currently at 7.5%, the highest level in 40 years), the dollar is losing its value. The only way the Americans can act is to raise interest rates and stop injecting liquidity, as soon as possible.
"At the current rate, the dollar is losing more than 1% of its value every 30 days. If inflation increases, this loss accelerates.
But, if the FED decides to act, the U.S. economy collapses."
Au rythme actuel, le dollar perd plus de 1% de sa valeur tous les 30 jours. Si l'inflation augmente, cette perte s'accélère.— Julien C (@julienchler) February 11, 2022
Mais, si la FED décide d'agir, l'économie américaine s'effondre.
After having injected trillions of dollars to save the markets, and after having elaborated a $1.9 trillion stimulus plan, the level of inflation is increasing.
Add to that the economic recovery, the strong demand, etc... Is a rate hike possible?
A hike sufficient to reduce the level of inflation would probably risk creating a surge in US debt (public + private) and a drop in the markets.
Putin seems to be taking advantage of this impasse in which the Fed is. He is creating tension in the energy and oil markets because this action has an inflationary effect across the Atlantic, which obviously weakens the dollar.
In short, as inflation rises, the Fed's dilemma is getting closer:
1/ Let inflation rise, at the cost of a continued loss in the value of the dollar and a decline in the purchasing power of American households.
2/ Act and create a financial and economic crisis in the country?
Original source: @julienchler
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