Is there anything that could disrupt the current monetary system?

 Having followed this question now for a decade I came to the conclusion that so long as the US dollar remains the primary global reserve currency we are unlikely to see any major changes to or current monetary system. The catalysts for major change would have to come from some kind of major political realignment in the US that no longer priortized US dollar hegemony. The last two major elections in the US seem to leave the nation politically gridlocked with no impetus for major change emerging as we reported earlier this year. 

So, at this point, the only question to ask is if there is anything that could disrupt the current monetary system? Of course, if the present system were to implode under some kind of major financial crisis, we would see an immediate power struggle to control whatever new monetary system emerged. That's unpredictable both in terms of timing or in terms of who would control such a new system. 

There is one obvious other scenario out there that could eventually disrupt the current system if there is no major crisis leading to collapse of the present system. It is clear that the world has divided into two major competing factions. The US/West led by the western central banks and institutions such as the IMF and the East led by the BRICS nations. The proxy war in the Ukraine has caused monetary system control issues that mostly are behind the scenes to emerge more into the public arena. The Russian invasion into the Ukraine led to the US/West weaponization of the US dollar and the global SWIIFT payments system in retaliation to the Russian move into the Ukraine. 

While the military confrontation gets most of the news media and public attention, anyone who has followed these monetary system issues for awhile understands that the real war is for control of who will decide what money is and who will control it's supply and distribution for commerce. That is where the real power lies and why nations (both West and East) are willing to use military power to gain the advantage.

We have reported here that the BRICS nations led by Russia and China have long talked about ways to bypass the US dollar and undermine the monetary power structure controlled by the western central banks and the IMF. For many years this discussion has continued, but without much actual change to the present US dollar dominated system. If that system is ever to be undermined, it will most likely happen as a result of the direct efforts of these eastern nations to make it happen. 

With that background, here is a link to an interview in April 2022 with Russian economist Sergey Glazyev. In this interview, Glazyev lays out the most detailed plan I have seen on how the BRICS nations can eventually bypass and undermine the US dollar. 

Russia's Glazyev introduces the new global financial system

If you want to read a detailed description of how the BRICS hope to disrupt the US dollar hegemony, this article is worth your time to read. I cannot predict whether this plan will be successful or not, but a key component of it is to get the world to move away from trading oil in US dollars (the so called petrodollar system that has run the world since the 1970's). Just yesterday Reuters reports that China is pushing hard to get Saudia Arabia to switch to using Yuan for oil sales. This excerpt from the article is worth noting:

"At the start of Friday's talks, Prince Mohammed heralded a "historic new phase of relations with China", a sharp contrast with the awkward U.S.-Saudi meetings five months ago when President Joe Biden attended a smaller Arab summit in Riyadh."

The article makes it clear that this meeting between China and Saudi Arabia is part of the ongoing effort to undermine the US dollar:

"President Xi Jinping told Gulf Arab leaders on Friday that China would work to buy oil and gas in yuan, a move that would support Beijing's goal to establish its currency internationally and weaken the U.S. dollar's grip on world trade."

As events unfold, what we should monitor is to see if Saudi Arabia moves away from the US dollar for oil sales (added note 1-17-2023). First to perhaps the Yuan and then later to the new proposed alternative reserve currency proposed by Russian economist Glazyez. If anything is going to disrupt the current US dollar based monetary system, it would likely be something along those lines. 

Added note 12-22-2022: Alisdair Macleod offers his thoughts on the potential for a major change in the current monetary system in this article. It delves into the "end of the petrodollar" speculation. This is a view that has been around for quite some time, yet the US dollar based system has persisted. We have stated here for quite some time we think it will take a major crisis in the current system to change things. We still hold that view here. We don't try to predict the timing of any such event.

Added note 1-9-2023: It was brought to my attention that Russian Official Medvedev recently posted his predictions for what could happen in 2023 on his Twitter account (see them here). While many of these seem far fetched, #10 on his list (pasted in below) did get may attention and does relate to what this blog monitors. I passed his prediction #10 on to one expert and he replied that it was possible that one could unfold some time in the future. Certainly the proposal outlined by Russian economist Glazyev above fits in with this prediction. Here it is:

"10. The Bretton Woods system of monetary management will collapse, leading to the IMF and World Bank crash. Euro and Dollar will stop circulating as the global reserve currencies. Digital fiat currencies will be actively used instead."

Added note 2-24-2023: This new article by Alisdair Macleod is worth reading. It updates the potential for the BRICS nations (led by Russia) to move forward with a new monetary system that could disrupt the present dollar based monetary system. It also covers recent news related to CBDC's suggesting we are not likely to see those disrupt anything any time soon or perhaps forever.

Added note 3-13-23: For those following the bank problems in the US, this new update from Jim Rickards is probably as good a take on things as you are going to find.

Did the US Election Open the Door for Change?

The short answer is no.

Not much new to report here. The US midterm elections were basically another tie just confirming that the public is split 50-50 which is not news. It's been that way for some time in the US. The slight shift towards the Republicans in Congress will mean the nationalists do have a bit more leverage if House of Representatives does fall under Republican control as expected (they are expected to have a 5-10 seat majority as this is written). 

The Republican side of the House did become significantly more nationalistic, so that is more of what changed than the actual numbers in terms of seats held by the Republican party. Several of the incoming new Senators are also more nationalistic than the people they are replacing, so the Senate will also move a bit more nationalistic. 

I don't expect any of these election results to provide any impetus for major change in the monetary system any time soon. The more likely result is just continued gridlock and no desire for major changes to the status quo in the monetary system. 

As we have said here for quite some time now, the only force for major change out there that we can see is a major implosion/collapse of the present monetary system. That would force some kind of major change. It's impossible to forecast what that change might look like with neither political party having complete control. It's anyone's guess as to who the public would blame for all the pain that would come with such a collapse. For that reason, I would expect both parties to continue to just try to keep the present system wobbling along and do their best to avoid a major negative event. 

Not much else to report. If I see something changing, I'll add a post here.

Final post election update 11-17-22: It's now confirmed the US is returning back to divided government and probably a lot of gridlock over the next two years. None of that suggests the people vying for political control will have much interest in making major changes to the current monetary system. It's still unclear who the public might blame if the current system just imploded in that time frame for any reason. Usually, whoever is President during such an event gets most of the blame whether deserved or not. It does matter because it will determine who the public trusts to move forward after a major negative economic event. So, we likely either get two more years of not much happening or a major political realignment away from whoever is blamed for any major negative event if that takes place. There is nothing to suggest US policy designed to maintain global reserve currency status for the US dollar will change if no major economic events disrupt the present system. That means likely nothing here to report again for some time.

Where Do Things Stand - What Things Should We Monitor?

This blog was started because out of the 2007 great financial crisis (GFC) there was growing concern that the existing monetary system most people have lived with for their entire lives might be unable to be sustained long term. This blog attempted to monitor events and look for indications that some kind of major change or transformation in our present system might be on the horizon. The existing system I will define as a system based upon the US dollar as the world's global reserve currency, operated and administered by the world's central banks, and payments systems and fiat currencies fully controlled by those central banks. Any major change to that system (whether you may view that change as good or bad) is important to understand because it would clearly impact all of us. If the US dollar were to lose its status as the global reserve currency, it is very likely every individual that uses money would be impacted and that includes all of us. It is possible the impact could be dramatic. So, the premise here was that it is important to monitor events to see if major change is in progress or might be coming sooner rather than later. A further goal of this blog was to try and learn as much as possible about how leading experts around the world viewed this situation and what proposals exist to reform or fully replace the presetnt monetary system should it fail. A mantra here has always been, "what matters is what actually happens, not what I or anyone else might prefer to happen". 

 With all this in mind and with the US and the world clearly engaged in a more open struggle to determine which way the future will unfold, this article is an attempt to try and provide an update on where things stand and what should we monitor going forward to get an idea of what will "actually happen" regardless of what we may personally wish would happen. It is critical to have as firm a grasp on reality as possible to make personal financial decisions. This new article by Jim Rickards seems to sum up the where we stand situation as clearly and succinctly as any I can find. Below is a relevant quote from his article:

"The bottom line is the world is looking to turn away from dollar dominance in global finance. Given the severe sanctions regime against Russia, it may end sooner than most expect."

So, if Jim's analysis is correct (and I believe it is) the biggest global battle in progress is the battle to determine if the existing US dollar based monetary system as administered by the major central banks will continue to dominant the world's power structure or if it will replaced by something new and different. 

After years of following all this and based upon direct input from a variety of experts like Jim Rickards my take is as follows.

There appear to be two major competing factions in the world over where we will go in the future (see recent article by Robert Pringle on this). A globalist view sees us moving towards a more centralized global governing structure where major global institutions make policy and the world's monetary system becomes more and more digitized and centrally controlled over time. A nationalist view sees us moving towards a breakdown of the existing more centralized power structure with individual nations reclaiming more national sovereignty. 

So, while many view the current world conflict as East vs. West, my take is that the real battle is between the globalist and nationalist factions that exist in both the East and West. This can lead to strange alliances we would not expect. Nationalists in nations thought of as adversaries might work together on the big picture battle against a "globalist view" of the future for example. I think this view of things provides a better basis for understanding the information narrative wars we all see around us every day across all media platforms from mainstream media to social media to alternative internet based media.

What Should We Monitor?

My best guess is that we should watch to see how the ongoing battle between the globalist view for the future and the nationalist view unfolds. It seems as if these two factions have been somewhat gridlocked for many years with both sides having advantages and disadvantages in terms of gaining more leverage over the other side. 

So, the first big thing to monitor is if we see a shift indicating one side or the other is gaining more leverage to move the future in the direction it prefers. If things stay gridlocked, we can expect that the present monetary system will continue to prevail for as long as possible. That is where we have been since 2007. At any time going forward, that could change, so it is important to understand the battle underway (between globalists and nationalists) to control any major changes to the global power structure going forward. 

The biggest upcoming event to monitor is the outcome of the midterm elections in the US. Both sides of this struggle for control of the future are all in to win those elections. We can expect, given the high stakes for control and loss of control in the US, that just about anything could happen to try and influence voters between now and November. If the Republican party achieves a significant win this fall (regains control of the House of Representatives), I would view that as a shift in leverage towards the nationalist side of this conflict. If the Democrat party holds on to the House, I would view that as a shift in leverage towards the globalist side.

The other biggest thing to monitor is what happens globally in the struggle to disrupt the present US dollar centered monetary system and global payments system. The globalists are more likely to want to preserve the US dollar based system as long as possible and, if a major transition takes place, to move to a globally accepted fiat currency system controlled by the same basic institutions who run the present monetary system (central banks, IMF, etc). The global nationalists, which in my view would now include the BRICS nations, are more likely to try and replace the present US dollar centered monetary system with an alternative system where they would be less subject to being controlled by the western central banking institutions and the IMF (the opposite of a globalist vision of the entire world uniting under a global governance power structure). So, this is what I would encourage people to monitor in the coming year. 

Who decides what money is and how it will be distributed  to the population holds immense power over what actually happens all the way down to the individual level. These big picture issues (and which side controls them) are likely more tied to how the future will unfold than any single issue politics such as cultural social issues or even things like inflation and employment. Those are the smaller battles in the information narrative war.

As I view things, those individual political issues are symptoms of how the big picture issues are decided along with which side (globalist or nationalist) will have the most control of the global power structure. That is why this blog focuses on monitoring the big picture issue of the future of the monetary system. Whoever controls the money and payments system controls how things work as Jim Rickards explains in his article linked above.

Added comment 8-17-22: I see no reason to change anything stated above. It appears to me that things are unfolding very much as expected with the November US elections being the biggest upcoming event to monitor. Unless something major happens, I'll likely not have much else to say until those results are known.

Added comment 9-21-22: While I have nothing new to report and things appear to continue to unfold as expected above politically in the US, some readers may have interest in this new interview Jim Rickards did with Steph Pomboy. It's somewhat of an update on things with Jim now more concerned about policy makers creating a deep recession and/or global liquidity crisis that could be worse than the GFC of 2008. Obviously, if that happens, the potential for the present monetary system to become unstable would go sharply up. Below are the links to Part I and Part II of the interview. Part II is the first 25 minutes or so of the second link:

Part I - Deep Recession and/or Liquidity Crisis?

Part II - Double Digit Inflation if the Fed Pivots Too Soon?

Information War is Not Focused on Monetary System Change Right Now

Not much has changed since the last update here. Certainly we have not seen anything yet dramatically impact the present monetary system other than inflation and the Fed attempted response to inflation. None of that implies a major change to the present monetary system. Instead, it is just more effort to try and preserve the existing system by getting inflation under control and continue to prop up the US dollar as the global reserve currency (see Reuters link below). Clearly, Russia (and China along with perhaps other BRICS nations) would be happy to see the US dollar undermined and we can assume they will continue working towards that end. So again, no major change to the status quo so far. If we were to see a major drop in the US dollar or the ruble, that would indicate something worth noting is probably taking place. But not so far. (see chart of ruble vs dollar since sanctions were imposed here).

This blog does not attempt to delve into politics other than to try and assess the political trends in place and how they might impact changes to the present monetary system. Right now, world events seem to suggest that a major "information narrative war" is in full swing in the United States with tangential impacts all around the world. My own take on this is that much of competing information narrative war we see every day all around us is instigated by various competing factions in the intelligence agencies that influence what information flows out to the public, led by the competing US intelligence factions. In my view, all that noise they generate makes it especially difficult to sort out true information from intentional disinformation used by all the competing factions to try and gain more leverage with the general public to their side of the information war. This always ramps up during election cycles and I expect that to be the case again this year. 

Conclusion: My conclusion from the above is that the information warriors are engaged for now on swaying the upcoming US elections; so the monetary system is not a prime area of focus for them right now. While whatever happens in the political realm can significantly impact the monetary system, I would be surprised if anything major happens to change the present monetary system before the US midterm elections in November. 

I also expect the "information narrative war" to just keep ramping up until the elections and won't be surprised at anything that happens in the political world leading into the fall. Fewer people vote in mid term elections so both sides know they can win by swaying just enough of their base voters who do vote to show up. It is possible to significantly change the balance of power with a relatively small number of voters in the key races that determine that balance of power. As always, both sides will do just about anything to win. Whoever "wins" then immediately faces an ongoing intense effort to undermine their ability to govern. All that moves monetary system issues to the back burner. The only monetary issue even being talked about in the US right now is inflation.

Added note 6-18-2022: Just to insure that we understand that current US policy is devoted to maintaining the global reserve currency status of the US dollar, Fed Chairman Powell makes it clear in these recent remarks as reported by Reuters:

https://www.reuters.com/markets/us/feds-powell-us-digital-dollar-could-help-maintain-international-primacy-2022-06-17/

Added note 6-25-22: BRICS Announce Potential Rival for US Dollar

Added note 6-28-22: The Move Away From Western Based Global Cooperation Continues

Added note 6-30-22: New Article by Robert Pringle - We Remain Stuck in a Bad Money Trap, Why?

End of Global Cooperation?

In the last update here I made the comment pasted in just below dated 4-18-22. Nothing major that I am aware of has changed since. However, in regards to a key point that we may seeing the end of "global cooperation" going forward from here, I did see this article about the idea that Russia and other nations may be moving forward with some kind of plan to back the ruble with commodities (possibly to include gold). Obviously, if Russia and other nations make a move like this, it will be significant news potentially impacting the global monetary system. But I could not help but notice one part of this article discussing a recent interview by a high level Russian official (Nikolai Petrushev). It provides some insight into the very key point I had mentioned below about the weaponization of the monetary system creating trust issues around the world.

Here is the key paragraph with a quote from Russian official Nikolai Petrushev (added underline is mine)

"On the subject of the financial sanctions themselves, and the freezing of Russia’s FX reserves held abroad, Patrushev states that by imposing sanctions against Russia, the “the West is hitting not only Russia, but also itself”, and has damaged trust in the US dollar as the world’s de facto reserve currency:

“The current global financial system is built solely on trust, including in the United States as the issuer of the world’s reserve currency. Half a century ago, the gold factor was present, but in 1971 the States untied its currency from its quotes, which made it possible to issue money virtually without control.”

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Previous Update as of 4-18-2022:

Nothing major in terms of an update to report as a change from anything below as the war in the Ukraine just continues to drag on for now with no clear end of the conflict in sight. So things are still pretty much the same in terms of economic impact on the monetary system. Jim Rickards did do another pretty in depth interview to update things from his point of view which you can find here. Jim is a good source because for the most part he tries to offer objective analysis based on the latest information and he adjusts things as new information comes in as best he can. But no one really knows where all is going for sure and what the full impact long term is going to be. The easiest observation to make is one that Jim goes into this most recent interview  --- It is most likely the the period of "globalization" we have had for some time is coming to an end and we probably are entering a new world where there are at least two and maybe more competing power blocs that now are more concerned about being able to be independent from the other bloc(s) (for survival) and far less motivated to move forward with "global cooperation". The weaponization of the monetary system has probably destroyed any trust left that people can count on not having their assets confiscated if they behave in a manner not acceptable to those in control of the monetary system. Once that kind of trust is lost, it can take a long time to ever restore. 

Is the Current Geo Political Conflict a Trigger for Major Monetary Change?

I have not posted anything here for some time simply because there were no major events likely to lead to major monetary system change taking place. Now, with military conflict underway and the world watching to see if this will be resolved without further escalation, it's reasonable to ask if this situation could be the trigger for major monetary system change. I'll offer some thoughts on that here.

My answer right now would be it is too early to tell. We need to see if this military conflict is resolved without further escalation or not. The trend right now is towards increasing escalation with both sides making moves to ramp up pressure on the other side. If that trend continues, we certainly could arrive at a place where the current global financial and monetary system is destabilized. Below I'll bullet point some things I plan to watch over the coming weeks/months.

• Does limited military conflict expand beyond borders into broader scale military conflict? (not yet)
• Is the oil and gas supplied into global markets by Russia cutoff by sanctions? (so far it's not)
• Does a monetary system alliance emerge between Russia and China to bypass the US dollar? (not yet)
• If so, how does that impact the global reserve currency status of the dollar? (nothing so far on this)
• Are important strategic commodities needed in the East and West cutoff from each other? (not yet)
  
• Will gold emerge from all this as a more prominent factor in the financial system? (not yet)
• Is the world trending to more "global monetary cooperation" or "competing monetary systems"? (an East vs. West trend seems in place right now rather than global cooperation)
• Is what is happening a simple military conflict or are there deeper chess moves being made?

Please note that despite all the dramatic events taking place right now, I still really have no final answers to the questions listed above yet. That is why I say it's too early to tell if these events are the start of major monetary system change or not. It may take weeks/months to see the answers to these questions emerge, but these are the things I would suggest to monitor over time.

One other comment. War is horrible. I hope the conflict now underway is resolved as soon as possible with the least possible loss of life and hardship on the regular citizen who always bears the worst brunt of war. The prayer here is for military conflict to cease as soon as possible with the best possible future outcome for all the regular citizens (on both sides) who suffer most in the midst of war. While trying to understand the monetary and financial implications of events is important to do, it pales in comparison to the loss of innocent human life and suffering that comes with war.

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Update as of 4-18-2022:

Nothing major in terms of an update to report as a change from anything below as the war in the Ukraine just continues to drag on for now with no clear end of the conflict in sight. So things are still pretty much the same in terms of economic impact on the monetary system. Jim Rickards did do another pretty in depth interview to update things from his point of view which you can find here. Jim is a good source because for the most part he tries to offer objective analysis based on the latest information and he adjusts things as new information comes in as best he can. But no one really knows where all is going for sure and what the full impact long term is going to be. The easiest observation to make is one that Jim goes into this most recent interview  --- It is most likely the the period of "globalization" we have had for some time is coming to an end and we probably are entering a new world where there are at least two and maybe more competing power blocs that now are more concerned about being able to be independent from the other bloc(s) (for survival) and far less motivated to move forward with "global cooperation". The weaponization of the monetary system has probably destroyed any trust left that people can count on not having their assets confiscated if they behave in a manner not acceptable to those in control of the monetary system. Once that kind of trust is lost, it can take a long time to ever restore. 

Update as of 3-8-2022 on the bullet point list above:

• Does limited military conflict expand beyond borders into broader scale military conflict? (not yet, but war by proxy creeps closer)
• Is the oil and gas supplied into global markets by Russia cutoff by sanctions? (Yes - US,UK, but not the EU)
• Does a monetary system alliance emerge between Russia and China to bypass the US dollar? (not yet, but some media speculation about it out there)
• If so, how does that impact the global reserve currency status of the dollar? (nothing so far on this, most assume long term impact)
• Are important strategic commodities needed in the East and West cutoff from each other? (Russia says it is making a list and will release it later)
  
• Will gold emerge from all this as a more prominent factor in the financial system? (not yet, but price has reacted upwards -one source advises me that gold cannot be linked to any currency below $15,000 per ounce if anyone tries to do that)
• Is the world trending to more "global monetary cooperation" or "competing monetary systems"? (an East vs. West trend seems in place right now rather than global cooperation)
• Is what is happening a simple military conflict or are there deeper chess moves being made? (the indications are that this is a deeper chess game beyond just this initial military action by Russia)

Still too early to tell if all this results in actual major monetary system change. I am advised by an expert that all this will result in calls for such change, but no one knows where that will go yet.

Added note 3-12-22: For those interested in Jim Rickards take on all this, you can find that in this recent interview.

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Update as of 4-4-2022:

There is a lot of debate/discussion going on all over the world in regards to the recent decision by Russia to demand payment for natural gas in either rubles or gold. Also, the recent decision by Russia to pay 5,000 rubles per gram of gold to banks willing to sell gold to them at that price point.

Questions being asked are:

-Is Russia in essence putting gold back into play in global trade?

-Is this just an effort to bypass US/EU sanctions or is it the start of an effort to try and destabilize the US dollar?

-Will Russia actually formally back the ruble with gold?

-Will China formally back the Yuan with gold?

-How will the US dollar react to all this over time?

-Who will win the apparent Currency War? (interestingly predicted by Jim Rickards a decade ago in Chapters 1 & 2 of his book - Currency Wars.

I don't have answers to these questions. I can offer some comments I have seen and gotten from a variety of experts around the world for those who may be interested.

-one expert told me they do not think the US dollar will quickly or easily be destabilized, but these moves do indicate efforts towards that end. This expert did also say that if Russia and or China were to use gold backing for currency, that would be a very significant event. This recent article (from someone else- Charles Hugh Smith) kind of lays out this point of view.

-others believe these events increase the chances of not only the US dollar, but all western fiat currencies losing trust and confidence. Here are a couple of different articles taking that view:

Edging Towards a Gold Standard  (here's a vdeo discussion with the author of this article)

Russian Ruble Relaunched linked to gold and commodities

While I cannot answer my list of questions above, I can offer a few observations that seem factual to me at this point in time:

-any movement towards some kind of global monetary system or cooperative global currency appears to be dead for now. The world seems currently to be breaking down into at least two competing spheres of influence with currencies and commodities being weaponized by both sides. 

-gold has emerged out of the shadows as one of weapons in play now. We know both Russia and China have been stockpiling huge gold reserves for years. There are official estimates which are substantial, but also many rumors/reports of much larger reserves than are officially being reported. It is pretty clear that we are now seeing why that took place as having national fiat reserves blocked from use by sanctions shows everyone that "the global monetary system", such as it is, cannot be trusted to honor its normal rules once things break down.

-it appears very likely that we are seeing the start of a long and bitter currency war that will leave all kinds of wreckage in its path. Both sides likely suffer significantly and, as usual, the regular people just trying to live normal lives and earn a living will suffer the most.

-distrust of both government and all kinds of "establishment" institutions seems to be at the highest point I can recall in my lifetime, making it all the harder for those in power to unite people towards any sort of common goals. 

I will just continue to monitor events and provide an update if I see something important to update. But really, this blog has pretty much covered all this for years and the information already presented here is totally relevant to current events as best I can tell.