Energy, war in Europe, and disastrous COVID War policies are speeding a tectonic change that doesn’t bode well for the so-called Western Alliance, led by the U.S. and the petro-dollar standard.

A more definite bi-polar geopolitical world is quickly and chaotically emerging.

On the one side are Eurasian centered powers led by China and Russia, who have decided they no longer want or need to play by the rules of a U.S. dominated globalist economic and political order.

On the other side are western-style nominal democracies that are wracked with self-doubt, hamstrung by elitist and extremist pollyanna policies, and riddled with compromised players abetting the implosion.

To put it succinctly, the West is blowing it, and pain is coming.

In a recent interview, Alasdair Macleod, Head of Research at Gold Money precious metals, said this could be the year where the dollar sees a catastrophic devaluation of anywhere from 25 to 50 percent.

His dark forecast, and recommendation to shore up positions in hard assets like precious metals and commodities, isn’t news to TJ readers.

By any sober reckoning, whether the Doomsday Clock (90 seconds to midnight), The U.S. National Debt Clock, spiraling inflation or looming recession, the hour is getting late.  

The following outlines the main problems, along with some policy moves that might help in averting the worst.

Money and Crypto Innovation

The quickly emerging Bi-Polar Geopolitical future means the U.S. will no longer be able to engage in loose and otherwise destructive and decadent monetary and fiscal policies without much more severe consequences.

The dollar reached highs in strength in 2022, but as Gerald Celente pointed out, it wasn’t that the dollar was objectively solid, but only that it was losing purchasing power more slowly, relative to other currencies.  

Macleod believes the end of the era of the Petro-Dollar hegemony may be only a year or two away. He argues that overspending and lack of savings of western nations, pollyanna energy policies, weaponization of the legacy global financial system, have all played into the hands of China, Russia, and BRICS.

It’s hard to argue otherwise.

So what can the West and the U.S. do?

Russia and China are both making gold related moves. Russia has tied its currency closer to gold. And according to Gold.org, China upped its gold purchasing in the latter part of 2022, topping a general trend of central banks shoring up gold reserves.

According to a 9 January report:

“Central banks bought 50t on a net basis during November, a 47% increase m-o-m. Of this, three central banks accounted for gross buying of 55t, while two contributed to gross sales of 5t. The People’s Bank of China reported an increase of 32t, the largest reported purchase in November and the first announced increase in its gold reserves since September 2019.”

Turkey also moved to increase its reserves, said Gold.org, which compiles its data from IMF and IFS sources. 

The following graphic shows the current top 20 countries in gold reserves:

Data from gold.org

The U.S. and Germany, along with Italy and France, all surpass Russia and China in gold reserves. But U.S. gold reserves actually dropped, as others were buying in late 2022.

Dipping into gold reserves, depleting strategic oil reserves, and sending loads of armaments and hordes of cash off to a war in Europe, when negotiations might re-introduce some world stability after three years of COVID chaos, doesn’t seem like a sound strategy to many.

But that’s what the Biden administration is doing. 

The U.S. should be conserving its resources, not squandering them. And here’s where cryptos can play a significant role. Sensible regulation and leveraging the power of cryptos could make a difference in the current dynamic.

Some smart crypto-related moves might include:

1. Accepting bitcoin as legal tender for payments
   1. If bitcoin is a “digital gold commodity,” the U.S. should be looking to hold it just as it holds reserves of gold and other stores of value. The acceptance of bitcoin for payments via solutions like Lightning Network would also throw a huge monkey wrench into the China’s digital Yuan and its banning of cryptocurrencies
2. Western Governments regulating stablecoins to be backed by national currencies, and foregoing the creation of CBDCs
   1. Requiring U.S. dollar pegged stablecoins to have dollar reserves (and Euro-pegged stablecoins to have Euro reserves, etc.) would be a framework that could provide consumer protections and buoy national currencies, while allowing private sector innovation to continue.
      1. Privacy rights inherent in physical cash could be better retained and emulated via a regulated stablecoin system
   2. Countries are reticent about the idea of China’s digital Yuan as a world reserve currency, and with good reason. It undoubtedly provides granular data regarding its every use straight back to the mother country. What’s more, it can be frozen at the flip of a digital switch, providing unprecedented power to freeze liquidity. In short, it’s a surveillance and control tool, as much as it is a currency.
3. The U.S. should recommit to financial and monetary policies which strengthen our financial system
   1. Pursuing ideological and geopolitical weaponization of the dollar against Russia, and even Iran has inflicted more damage on us than our adversaries. BRICS is growing more viable as a consequence, and that alone spells huge trouble. It’s likely too late to undue the substantial damage. But better late than never.
4. The U.S. should regulate the crypto sector with an eye toward unleashing its efficiencies and innovations, while offering reasonable protections to consumers from scams and corrupt players and companies
   1. Western nations should commit to allowing crypto innovations like DeFi, web3 technologies, NFTs, DAOs and tokenization to compete with and transform traditional banking, tech companies, and other sectors. The economic benefits could be enormous, and represent a huge engine of growth that regimes like China literally can’t take advantage of the way western nations still can, if they so choose.

Energy

As the Trends Journal has pointed out in “Top Trend 2023: Going Green,” a powerful green energy lobby now dictates western energy policy.

The problem? Current green energy technologies can’t compete in many crucial applications with traditional technologies and resources, and they have their own serious negative environmental impacts. 

China and Russia, show every intention of continuing to power their industries and economies in a pragmatic way, using the most efficient and cost effective energy resources.

Western nations, in contrast, are deceiving the public about the abilities of green technologies, while quietly envisioning and preparing to sell “degrowth” and “post-growth” policies to their citizenries.

A sounder and more competitive U.S. strategy might look like this:

1. An All-Of The-Above Technological Improvement Energy Policy:
   1. Instead of forcing moves to green technologies via mandates and subsidies that pervert market mechanisms, the U.S. could work with traditional industry players (oil, natural gas, electricity, coal) to set goals to continue to innovate to progressively meet higher standards in terms of efficiency and carbon emissions.
   2. Cheap land use, fast track zoning and regulatory approval, tax exemptions and other incentives—but not tax boondoggle giveaways—could be used to encourage green tech and start-up companies to locate in former industrialized powerhouse cities like Buffalo, Pittsburgh, Detroit, Cleveland, St. Louis, Akron, etc.
2. Returning production of crucial resources to the U.S.
   1. The U.S. can’t possibly compete in a bi-polar geopolitical future without ensuring its own energy independence, as well as production of rare earth and other resources. According to politico.com, China currently accounts for 63 percent of rare earth mining and 80 percent of processing. That has to change.
      1. Land and resources which are deemed important to national security should be forcibly repatriated from foreign entities (primarily China), with smart negotiation regarding offset compensation, including accounting for hundreds of billions of stolen IP by China.
   2. The U.S. should work with the entire Americas region to mutually develop and power an all-of-the-above approach to energy development and supply. From lithium in Bolivia, to oil in the Gulf of Mexico, to natural gas in the U.S. and Canada, the Americas should seek closer regional cooperation and integration.
   3. Green energy should be prioritized in use cases where it makes technological sense, instead of forcing it in applications where it currently has the most trouble competing. 
3. Demanding That China and Other Major World Economies Abide by same Green Energy Rules as Western Nations
   1. China has long since shared in the benefits of industrialization pioneered by western countries. And their inclusion in the WTO around 2000 allowed them to become a leading world supplier of material consumer goods. Meanwhile they found ways to avoid commitments to open their own markets to western products, or required agreements with western companies that allowed them to steal intellectual property, and develop their own domestic copycat alternatives.
   2. China should have to meet the same “green energy” standards imposed on developed western nations, or face penalties, loss of investment, tariffs and other consequences

These aren’t the only issues, obviously, surrounding a Bi-polar realignment. But if the West is to have any chance to sustain a positive and prosperous future for its citizens, it would do well to wake up to some hard realities regarding the future of money and energy, and adopt more pragmatic policies going forward. 

For related reading, see “AS EUROZONE ECONOMIES DRAGGED IN 2022, THE EU AWARDED A GRANT TO STUDY ‘DEGROWTH’” in this issue.