The anti-dollar contingent around the world who have preached that since Russia already trades its own currencies independently from the dollar and China has been trying to make the same move, are spinning the blogs claiming this is a “Zionist banker” conspiracy and this proves that all nations are tired of debt making Zionist banking. Well aside from the prejudice, this is not about merely debt and banking. I warned in the Greatest Bull Market that during a massive Sovereign Debt Crisis, there is nothing that remains standing. This is a complete control-alt-delete.
There was nothing that survived during the Great Depression from stocks, bonds, commodities, tangible assets, to currencies. This is what we are facing. The complete meltdown of the world economy thanks to the convergence of many factors. Just about anything that can go wrong is going wrong and the end game is not looking pretty. As we can see from this chart of the bond market, while Andrew Mellon first bragged when the stock market crashed “gentlemen buy bonds”, those who ran into the bond markets either were left with nothing as sovereign debt defaulted, or their US bonds were suddenly devalued by FDR and the gold redemption closes were reneged upon.
The Russian central bank tried to shore up the currency with a rate hike to 17%, but when that proved ineffectual, confidence in the bank evaporated and the sellers piled on. This is an example of the problems we face with all governments. Right now, people generally look to government with a demigod perspective that they are in charge and all powerful. I have been behind the curtain and been on the other side of phones calls from various central banks in the middle of a panic. They are no more in control than you or I. All they can do is pound their chest and hope people will do as they preach.
The collapse in Russia is being caused by a collapse in energy prices. The Middle East has become addicted to high energy prices and thus they have increased their budget taking into consideration expectations of perpetual high energy prices. However, with all things, there is a cycle. Our original forecast back in 1998 that oil would rise to $100 by 2007 was at first laughed at. By 2000, even the Department of Energy wanted us to forecast energy prices for the nation.. What has to be understood is rather simple. Oil had to rise in price in order to generate (1) new improvements in extracting, and (2) alternatives. We saw that rally and by 2007 the year-end closing was $95.98. The rally ended with the highest closing coming on the 13 year mark in 2011 closing that year at $98.83 in line with the Economic Confidence Model.
