Before 1971 everything was priced in gold with the dollar as a substitute for convenience, but after Nixon permanently removing the implied ‘L’ on the back of every dollar printed, the strongest currency in the world was freely floating. This created havoc. Oil producing economies got crushed. The dollar (unofficially) needed a tether. It found one in the oil crisis of the 1970’s and the ensuing petrodollar system.
Since then everything has been prices in energy (mainly but deminishingly oil) with the dollar as a substitute for convenience, but due to the genius of American creative thinking and petrodollar recycling the dollar via the US debt markets to a larger degree than would otherwise occur actually owns itself. Before This Creation (Etc.) the relatively unconnected world would have been relatively impossible to manage from an accounting stand point, so everyone went along. It’s wonderful how money and water have such a similar set of characteristics.
The recent weaponization of the US debt market against Putin and Russia was like everything, a double edged sword. Due to China’s 13 digit size in ownership of US debt and the economic engines of OPEC + countries that one move decreased significantly any real escalation potential for the short term. It also was an acknowledgement that that the current monetary hegemony is entering its’ final stages of peaceful dominance.
As of today the with oil wrapped in us debt and China unable to risk writing down 1 trillion + in US debt on it’s books, Putin has 2 choices. He can go make the Putin name synonymous with the Kim family, or he can negotiate.
Despite the US economic engine being stalled out since 1971 when loan growth relative to GDP topped out and has been consolidating since, and the ensuing of monetization future American economic prospects since 1982 via that same monetization it seems at this point that the US debt market has successfully supplanted itself for any real asset and the US stock market’s silver to the debt market’s gold is safe(duh). I think everyone sees the aim’s of Putin and Xi and acknowledges the tenuous nature accumulation period ahead as there has been little whisper of any alternative routes, but if the US government would just mirror the principles of FDIC onto the loans that banks give out up to some preset limit so as to discourage subprime business lending, we would quickly acquire the traction necessary to increase the coefficient of federal debt spending to economic growth. This simple variation of the Japanese use of the BoJ’s balance sheet would improve the outcome as it substitutes purchases of zombie assets with potentially productive a microeconomic, localized, and stimulative measure that changes the prospects of America’s eminent future with the stroke of a pen. (These types of changes are the only ones deemed reasonable judging by the direction of every political action in the last 40 years.) Hand in hand with this should be an educational bill that helps America retool as a productive society ready to compete in the digital age. As the digital revolution, much like the industrial revolution, is behind us we must move hard in the direction future growth or be content in knowing that America’s best times have passes. As there is forever and always a pursuit of happiness, no one is ever content.