"The Kazan Catastrophe"
by The ZMan
"Back in the ancient times, if you wished to buy product from someone you arrived at their location with money, or they arrived at your location with product. The product was inspected, and the money was inspected. Once both sides were satisfied, the exchange was made, and the deal was done. It did not take long for a class of middlemen to turn up who brokered such deals. They inspected the goods, arranged transportation and safeguarded the product and the money.
World trade has not changed much since the ancient times. Middlemen still facilitate most of the trade. They are called banks, insurance companies, freight brokers, shipping companies and so forth, but they are all part of this vast and essential middleman economy that makes it possible for the local Walmart to have shelves stuffed with goods from Asia. It is what makes it possible for the Chinese company selling dog food to get paid by Walmart.
One thing to note about this setup is the two greatest seafaring nations in the history of the planet, the United States and Britain, do very little shipping. Instead, they control the flow of goods around the world through control of the insurance markets and the financial system used in global trade. If you are involved in global trade, you are certainly using the American financial system and either directly or indirectly the British maritime insurance system.
The dollar being the world’s reserve currency has been to this point the main driver of the explosion in global trade. The buyer in South America can do business with a seller in China, because his bank is connected to the American financial system through his country’s central bank. He does not have to get RMB from his bank to pay the Chinese vendors, because the exchange is done automatically through the dollar dominated global financial system.
This is about to change with the launch of an alternative payment system that was announced at the BRICS summit in Kazan Russia. The Russians and the Chinese have been working on creating an alternative to SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunications. It is the platform that networks the world’s banks to facilitate the flow of money around the world. The new system seeks to replace SWIFT for trade among the BRICS countries.
For most people this is an eye-glazing topic, but in the fullness of time it could be an event that generations of historians study as an inflection point. What the BRICS countries are seeking to do is wrest control of the global financial system from the West, specifically the English-speaking countries, at least for the members of BRICS and those countries willing to trade with BRICS. By extension, it is an effort to reduce the power of the dollar and thus the power of the American empire.
What this new system proposes to do is make it easier for participating countries to conduct business in the currency of other participating countries. Instead of China needing dollars to buy oil from the Saudis and therefore preferring dollars from other countries for Chinese goods, the Chinese will be able to buy oil in RMB and the Saudis will be able to buy Chinese goods in whatever currency they possess. The new system would handle the conversion and exchange rates instantly.
As an aside, that last part is interesting. In the United States, a business does not get paid by the credit card company for a few days. Often, the delay is longer. Of course, there are fees for taking credit card payments. In Russia and China, the movement of money is instant. The system is treated as a public utility, so fees are relatively small compared to what we see in the West. This is owing to much better and newer technology and a different attitude toward banking.
That aside, the significance of this proposal is enormous. The BRICS countries represent half the world’s population. The Arab oil countries, particularly Saudi Arabia, are onboard for this new system. The Saudis let expire the fifty-year-old deal with Washington that established the petrodollar. China, India and Russia are the driving force behind this new arrangement and represent three of the most important economic powerhouses in the world at the moment.
What this means for the West is far less influence over the rest of the world through the control of the financial system. The main reason China, Russia and India have pushed for this new system is they have grown weary of Washington abusing its position to bully the rest of the world. The sanctions war unleashed by Washington against Russia in 2022 was the final straw. If Washington would use the dollar to try regime change in Russia, it would do it to anyone, especially China.
What the BRICS summit in Kazan represents is decades of belligerently incompetent foreign policy in Washington. Ten years ago, it was inconceivable that these important countries would come together to create a parallel financial system, as all of them were committed to the dollar and the Western system. They were committed to the “rules-based order” because they assumed it served their interests, but decades of abuse by Washington has convinced them otherwise.
What this means for the West is clear. What we see forming up is a trading and cooperation block that includes all the countries outside the West, representing the bulk of the world’s population and the majority of economic activity. Add in the fact that the West has let its manufacturing base shrivel and seems to be at war with its agricultural base and you can see the problem. Economies based in providing services tied to the financial system are facing a cliff now.
For the United States, this could not come at a worse time. Debt is already at staggering levels and is accelerating. The productive and innovative portion of the population is aging, while the unproductive portion is exploding. Add in decades of infrastructure neglect, the demographic and cultural catastrophes, and now is not a good time for a decline in the dollar. America is an empire that debased its currency via the perfidious subversion of its own rules.
Contrary to some claims, the dollar is not about to collapse, but what Kazan signals is the steady decline in the dollar. As the rest of the world begins to trade outside the dollar, it means dollars and instruments denominated in dollars, like debt, will lose value on the global market. This means the American banking system must slow the creation of dollars to prevent inflation. This means the cost of borrowing dollars must go up and stay up in anticipation of declining dollar demand
The steady decline of the dollar means a steady decline in the American standard of living, baring a revolution in Washington. Being the world’s mint and banker only works if the world accepts what you are minting. A rentier economy reliant on skimming from every transaction is only possible if you control the currency. The parasitism that has become a feature of our economy is going to become more obvious. That will bring political consequences as well."
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