The Global Effort to Attack the Dollar Gathers Momentum.
If Cinderella’s slipper was such a perfect fit… why did it fall off when she was running up those stairs?
That’s the thing about fairy tales: We all buy into them because we’ve been trained to wait for the payoff, without paying attention to the details.
But the details, when you stop and consider them, raise their own set of questions…
Like: How could that slipper fall off if it was really her perfect fit? And since it did fall off, how come it fit so perfectly later on when the prince used it to identify Cinderella?
Maybe that Cinderella story is actually built on a faulty premise. All BS and bunkum. Maybe those glass slippers didn’t actually fit. Maybe they were so uncomfortable she kicked them off. Maybe Cindy stole ‘em and spun a yarn just to crash the ball. I mean, if the “perfect fit” is a lie, then why believe the rest of that fairy tale?
Which makes me wonder about some other fairy tales… like one that has people believing the U.S. dollar is a perfect fit for the world economy.
Lot of BS and bunkum in that tale too, particularly when you stop and question the details…
Like: Why should Brazil and China have to use U.S. dollars to trade soybeans and TVs when the greenback has no other meaningful purpose in those economies?
Why should India buy copper from South Africa in dollars?
The fairy tale writers want us to believe it’s because South Africa has no use for Indian rupees and that Brazil has no use for Chinese yuan. That all countries need U.S. dollars instead of rupees and rand and yuan because they can spend dollars all over the world.
Yet think about that for a moment and it smells a bit like that lie about Cinderella’s perfectly ill-fitting slipper.
Of course, Brazil has use for the Chinese yuan and vice-versa. They trade with each other every day!
South Africa last year bought the equivalent of $3.5 billion worth of mineral fuels, oils, and distillation products from India—not to mention $1.6 billion in vehicles and nearly $600 million in pharmaceuticals.
Why should India and South Africa face the added cost of converting rupees and rand back and forth between dollars just to make a trade between themselves that has precisely nothing to do with the U.S. or the dollar?
Believing they need the dollar as their go-between is myopic.
Which is why recent developments are so alarming for people whose wealth is predominantly held in dollars…
As I’ve noted in numerous dispatches over the last many months, Brazil, Russia, India, China, and South Africa—the so-called BRICS nations—have been busy dumping their dependence on the dollar and increasingly trading amongst themselves in their own currencies. And they’ve been busy convincing other nations to join the party.
Well, that effort just paid off in a big way.
Last week, six nations agreed to officially join the BRICS: Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates. I’ve been trying to gin up a fabulous acronym, but best I can do is BRICS+6.
At first blush, that collection of newcomers might be a yawner. Iran? Egypt? Ethiopia?
Argentina??? That basket case of an economy is a hiccup away from another currency and debt crisis every day of the year.
Alas, what’s happening here is that non-Western countries are building a wall of BRICS to keep the dollar out. Indeed, while six new countries have joined the alliance, another 17 applicants are already in the cue.
This is not insignificant.
The BRICS+6 represents a population of 3.7 billion people, 46% of the global population. If the International Monetary Fund is right, they represent nearly 30% of the overall world economy—slightly ahead of the G7 Western nations that pretty much run the show at the moment.
Add in those other 17 applicants, and the BRICS+23 would represent more than a third of the global economy.
And on top of that, an additional 17 countries have expressed interest in joining but have not yet filed a formal application. That includes the likes of Algeria, Nigeria, and Venezuela… which, again, probably sounds like a giant “so what?”
The “so what” is that along with Russia, China, Brazil, Saudi Arabia, the UAE, and Iran, the addition of Algeria, Nigeria, Venezuela—and all the other oil-producing countries looking to join the club—means a fully expanded BRICS would control 55% of daily global oil production.
Now, imagine those countries decide to start trading lots of their oil on the new Shanghai International Energy Exchange, where oil is priced in yuan, not dollars, which has been the sole currency in which oil has traded since 1974. Clearly, they will do that. To think they wouldn’t is more idiotic than believing Cinderella’s slipper was really hers.
Demand for dollars to buy oil would naturally shrivel.
And that has big—and bad—ripple effects up and down Main Street America.
Decreasing global demand for dollars means the value of the dollar grinds lower against world currencies… which means the price for all the imported goods we buy goes up, since it takes more dollars to buy the currencies needed for wholesalers and importers to purchase those goods.
Which means higher prices on consumer shelves… which means elevated inflation the Federal Reserve is so desperately trying to tame.
Decreasing demand for dollars also implies lack of demand for U.S. Treasury securities… yet Uncle Sam must, out of sheer necessity, sell trillions of dollars of Treasuries every month just to keep the country running.
To sell enough Treasuries amid that globally decreasing demand, the U.S. would have to pay higher interest rates to attract buyers… which means D.C. will be spending worryingly more on debt-repayment costs (we’re going to hit something close to $900 billion in interest payments this year, nearly double the record set in 2022).
That would be disastrous for America…
I could go on, but frankly why ruin the rest of your day?
The BRICS+6, +23, and +40 already promise to do that.
My point buried here at the very end is simply that you cannot and must not believe the fairy tale that the dollar is a perfect fit for the world, and that this “de-dollarization” trend isn’t likely to be much of a Big Bad Wolf.
Those who prepare now for the crisis that’s already unfolding (by owing non-dollar assets like gold and silver, Swiss francs, bitcoin, and oil stocks) are going to survive best when America finally realizes the slipper doesn’t fit.
