Thursday, April 6, 2023

Explain it Like I'm Five - Vox Popoli

 E.O Wilson had Richard Dawkins to explain his work to the masses. Apparently I have Skarn of the Razorforce to talk to the Bears, as he explains what the Tree of Woe and I have been pointing out about how the decline of the US military and NATO’s failure in Ukraine means the end of the USD-based Clown World economic system.

Can someone please explain to me like I am five as the real cause and effect of the recent TOW on VP? I can’t follow. It doesn’t make sense to a point where I can’t even ask a question.

Currencies have to be backed by something for them to be accepted. For the majority of history it has been precious metals. The US was on a gold standard but defaulted in 1933. WW2 gave the US the chance to become the global currency of choice due to holding the rest of the world’s gold. Thus Bretton woods agreement in 1944. However, the US continued to spend more than it earned, using credit to cover the difference. The rest of the world started asking for gold instead of dollars, coming to a head in 1971, when Nixon closed the gold window (ie no more exchanging foreigner held dollars for gold). To replace this, an agreement with the Saudis was reached to only allow the exchange of OPEC and Saudi oil in US Dollars, restoring the foreign demand for US dollars. The consequence was the US had to prevent oil from being traded in any other currency than USD.

However, between the constant USD printing and debt, making dollars less valuable to hold, the weaponization of the currency exchange and holdings system, and weakness of US is now allowing countries to bypass the USD, it’s all over but the tears, unless the US wins decisively in Ukraine and elsewhere, which doesn’t seem likely.

Thanks so much. it is the last part that I can’t follow, How is the weaponization of the currency allowing countries to bypass the USD?

The weaponization makes USD less valuable because foreign reserves held by countries can now be seized if the US doesn’t like your country’s policies. Such reserves are usually held in country of origin or close, aka Yen in Japan, to facilitate transactions. Or the SWIFT banking system. So stealing Russia’s USD and Euro reserves makes the carrot less attractive due to sovereign risk, at the same time the stick (US military interventions, sanctions, etc) is also weakening.

That’s a useful and reasonable summary that successfully gets the point across in a manner that most people should be able to understand despite the media’s best efforts to keep them in the dark. In support of these conclusions about the consequences of the US failure in Ukraine, it might be useful to read this recent observation by the Ayatollah Khamenei of Iran.

The US is no longer the power it once was, and has failed to rally the Arab world against Iran and curtail its nuclear program, Iranian Supreme Leader Ayatollah Ali Khamenei said in a speech to senior officials on Tuesday.

“Facts show that America was weaker under Obama’s administration than Bush’s administration. The US was weaker under Trump’s administration than the way it was under Obama’s administration. The US is weaker under [Joe Biden’s] administration than it was under Trump’s administration,” Khamenei proclaimed, according to Iran’s Tasnim news agency.

Khamenei noted that the US has failed to rally its Middle Eastern allies against Iran, declaring that “what has happened is the opposite.”

The Ayatollah went on to note the rise of several “anti-American” governments in Latin America, the declining importance of the dollar in global trade, the political chaos in Israel, and the diplomatic consequences of the EU “taking the brunt of the war” in Ukraine on Washington’s behalf as examples of the US’ waning influence.

By the way, the original Bear should be respected for doing the smart thing, and asking for a detailed explanation to help him understand the matter at hand rather than nodding, smiling, and pretending that he understood when he didn’t. Never forget that the difference between understanding a concept and having heard of its existence is greater than the difference between knowing about it and not knowing about it.

UPDATE: Nassim Nicholas Taleb isn’t too worried about the dollar’s status as the reserve currency… yet.

You will only start worrying about the dollar status as a reserve currency when you see long lines outside the Brazilian, Russian, Iranian, and Chinese consulates full of young professionals seeking immigration visas.

Of course, by then it will be too late. And there are already signs of smaller corporations establishing themselves in Russia and China, in particular, in preparation for the Great Bifurcation.