Month: March 2023

Yesterday, we explained that the reason why the stock price of First-Citizens Bank & Trust exploded on Monday after the FDIC revealed that it would “acquire” much of the now failed Silicon Valley Bank, is because in exchange for paying $500 million to the FDIC, the Raleigh, N.C. bank  would get $16.5 billion in clean assets, and would also get a taxpayer backstop for future losses to boot.

But while the transaction was immediately accretive to First-Citizens, which doubled its market cap moments after the news hit…

… the question is who would end up footing the bill. The logical answer, of course, is “US taxpayers”… unless of course the FDIC found someone else to front the massive costs that have emerged as a result of the ongoing bank failures.

Well, moments ago Bloomberg reported that the FDIC may have found someone to “volunteer” and pick up most of the tab: that someone are the very same large, megabanks that have directly benefited from the ongoing crisis of confidence shaking their small, regional peers.

According to Bloomberg, the Federal Deposit Insurance Corp, which is facing almost $23 billion in costs from recent bank failures, is “considering steering a larger-than-usual portion of that burden to the nation’s biggest banks.”

The agency has said it plans to propose a so-called special assessment on the industry in May to shore up a $128 billion deposit insurance fund that’s set to take major hits after the recent collapses of Silicon Valley Bank and Signature Bank, and whose purpose is to “insure” the roughly $10 trillion in guaranteed deposits (those under $250,000) yet which is a small fraction of that total amount.

The regulator — under political pressure to spare small banks now that politicians and the Fed have decimated small banks with both their actions and inactivity — has noted it has latitude in how it sets those fees. Behind the scenes, Bloomberg reports, officials are looking to limit the strain on community lenders by shifting an outsize portion of the expense toward much larger institutions, according to people with knowledge of the discussions. That would add to what already may be multibillion-dollar tabs apiece for the likes of JPMorgan Chase, Bank of America and Wells Fargo.

Talks for setting the size and timing of the assessment are in early stages. Leaning heavily on big banks is seen as the most politically palatable solution, some of the people said, asking not to be named describing private deliberations.

To be sure, the contentious question of how to spread the cost of SVB’s and Signature’s failures is already a hot topic in Washington, where lawmakers have pressed FDIC Chairman Martin Gruenberg, Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell over who will shoulder the burden — especially after an unusual decision to backstop all of those banks’ deposits while refusing to backstop all uninsured deposits across other banks, thus keeping the bank run dormant. The extraordinary measure saved legions of tech startups and wealthy customers whose balances far exceeded the FDIC’s typical $250,000 limit on coverage, and sparked a backlash against VC “billionaire bros” who were the latest beneficiaries of depositor bailouts.

The news initially hit the KBW Bank ETF, but as traders assessed the broader implications of the report, they may concluded that more capital from the big banks to offset the pain caused by small banks may end up boosting confidence in the broader banking sector, and with some 40 minutes to go until he close, the KBWB ETF rose to session highs amid fresh optimism that the acute phase of the bank crisis is now in the rearview mirror.

 

 

Authored by Mike Shedlock via MishTalk.com,

Germany has hit a brick wall on clean energy, postponing a ban on internal-combustion automobile engines. Let’s start there…

EU Drafts Plan to Allow E-Fuel Combustion Engine Cars

Reuters reports EU Drafts Plan to Allow E-Fuel Combustion Engine Cars

The European Commission has drafted a plan to allow sales of new cars with internal combustion engines after 2035 if they run only on climate neutral e-fuels, as it tries to resolve a spat with Germany over moves to phase out combustion engine cars.

The draft proposal, seen by Reuters on Tuesday, suggests creating a new type of vehicle category in the European Union for cars that can only run on carbon neutral fuels.

Such vehicles would have to use technology that would prevent them from driving if other fuels are used, the draft said.

The proposal could offer a route for carmakers to keep selling combustion engine vehicles after 2035, the date when a planned EU law is set to ban the sale of new CO2-emitting cars.

Preposterous E-Fuel Assumptions

Eurointelligence comments on E-Fuel Assumptions. 

ARD German TV reports on a study by the Potsdam institute for climate impact research, which reveals the utter lack of reality in the German debate about e-fuels. Even in the best-case scenario, Germany will struggle to get enough e-fuels to meet its indispensable demand, from shipping, air transport and the chemical industry. These will all still require liquid hydrocarbons as their energy source. In other words, there won’t be anything left for cars. The whole FDP debate about the exemption for e-fuelled power cars after 2035 is a smoke screen.

The politics of this is that the FDP is trying to arrest its political decline by appealing to rural voters, who are dependent on the motorcar for transport. A recent poll in Germany has shown that around two thirds of the population opposes the end of the fuel-driven car.

E-fuels are based on the extraction of hydrogen from water through a process called electrolysis. In a second stage the hydrogen then combines with carbon dioxide to produce hydrocarbons. The idea is to use green energy for the production of e-fuels, for use by ships and airplanes. The same goes for parts of the chemical industry. Together, they account for 40% of Germany’s total demand for liquid hydrocarbons. The institute’s simulation assumes the relatively optimistic assumption that air transport stays at current levels.

A far more likely scenario is that there won’t be enough e-fuels around even to satisfy the indispensable demand. So far, only 60 production facilities are currently in the pipeline worldwide. Of those, only a small fraction are funded. Even if they all get funded, they will only produce a tiny fraction of what Germany itself demands. The idea that there is enough left for cars is completely unrealistic.

What this is telling us, beyond the petty FDP politics, is that the Germans are fighting tooth and nail to squeeze the last hydrocarbons into their cars, rather than focus on next generation technologies. All for the sake of a couple of percentage points in the polls.

It is the classic losers’ strategy.

Europe Backtracks on Its Gas-Car Ban

The WSJ reports Europe Backtracks on Its Gas-Car Ban

The implausibility of a net-zero carbon energy future is becoming so obvious that even Europeans are starting to notice. Witness the weekend decision to step back from the ban on internal-combustion automobile engines that the European Union had intended to implement by 2035.

The eurocrats in Brussels had formulated the ban as part of their plan to reach net-zero carbon-dioxide emissions by 2050. But what regulators imagine would replace conventional engines remains a mystery. Battery technologies don’t exist to replace fossil fuels in driving distance or ease of refueling, and no one can say if or when such batteries will materialize. 

Electric vehicles also require rare-earth minerals often sourced from dirty mines in China. They’re only as green and affordable as the electricity used to charge them. In Europe that means coal-fired power for which consumers pay a huge price owing to the costs of forcing intermittent renewables such as wind and solar into the grid.

Resistance from Berlin and several other European governments has forced Brussels into all but abandoning its engine ban.

Consumers will be allowed to buy internal-combustion autos as long as those cars can run on synthetic fuels, which are fuels made from captured carbon or renewable energy. Brussels still seems to hope that these cars will run only on such “e-fuels” by that deadline. But doubts about the technological feasibility of that pledge may explain why environmental groups were aghast at the weekend decision.

No Country is Prepared

Electric cars are coming, like it or not. No one anywhere is prepared for it. 

Germany is scheming preposterous e-fuel ways to make it appear to work. Eurointelligence picks up on that point but misses the broad picture.

One cannot set a date and force it to happen if the science does not match.

In the US, Biden is forcing electric vehicles whether the infrastructure is ready or not. And it’s obvious the infrastructure is not ready and likely won’t be ready.

Nonetheless, California, Oregon and Washington state still have internal-combustion-engines bans slated for for 2035. 

A Big Green Mess in Germany With Coal a Stunning 31 Percent of Electricity

Meanwhile, please note A Big Green Mess in Germany With Coal a Stunning 31 Percent of Electricity

Germany managed to avoid a harsh winter from the reduced supply of natural gas from Russia. 

It did so by ramping up the use of coal. Ironically, the Greens backed this policy.

Hoot of the Day

In reference to California, Oregon and Washington, the WSJ conclusion is my hoot of the day: “You know your state capital has taken a wrong turn when your lawmakers would do well to learn a lesson from Brussels.“

And in case you missed it, please note Biden’s Energy Policy Mandates Cause Severe Shortage of Electrical Steel and Transformers

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An odd narrative which emerged following the dramatic collapse of Silicon Valley Bank was that it was the “first Twitter-fueled bank run,” with notables such as Peter Thiel and Bill Ackman taking the blame for influencing businesses to withdraw funds from the bank.

Also promoting this absurd narrative (without a clue about the underlying causes of the collapse, such as failure to hedge against interest-rate risk) was the ‘woman-owned and operated’ Alethea Group, which circulated a dossier of sorts accusing ZeroHedge and others of potentially contributing “to increased online panic about SVB.”

Interestingly, Alethea – run by a former staffer for Sen. Angus King – cropped up in 2019, and last November received $10 million from Ballistic Ventures, whose general partner is Ted Schlein. Ted “provides counsel to the U.S. intelligence community, serves on the Board of Trustees at InQTel, and was recently named as a board member of the CISA Cybersecurity Advisory Committee.“

Is this the same Alethea whose board member Ted Schlein “provides counsel to the US intelligence community” and serves on the Board of CIA’s Venture Capital firm InQTel?https://t.co/JbmnsW3F9jhttps://t.co/DVUip7QEWs https://t.co/hW1qUH4IK1

— zerohedge (@zerohedge) March 17, 2023

Connecting the dots…

What did we learn recently from the latest “Twitter Files” from Matt Taibbi?

Last June, the advisory board recommended that CISA [on whose board Schlein sits] should work with and provide support to external partners “who identify emergent informational threats,” and find ways to mitigate “false and misleading narratives.”

Last June, the advisory board recommended that CISA should work with and provide support to external partners “who identify emergent informational threats,” and find ways to mitigate “false and misleading narratives.”

…The group worried about how to “strategically approach MDM…

— Michael Shellenberger (@ShellenbergerMD) March 24, 2023

So, the US Government is farming out ‘misinformation’ research, and a CISA board member doled out $10 million to Alethea as part of that effort.

Bloomberg, (which excluded ZeroHedge from their report referencing the Alethea dossier after we told them what bullshit it is), now reports that “SVB’s demise swirled on private VC founder networks before hitting Twitter.”

“It wasn’t phone calls; it wasn’t social media,” said one Silicon Valley startup founder who wishes to remain anonymous. “It was private chat rooms and message groups.”

By the time most people figured out that a bank run was a possibility on Thursday, March 9, it was already well underway. -Bloomberg

According to the report;

Gunjit Singh, the San Francisco-based co-founder of Electric Sheep Robotics, first heard chatter about Silicon Valley Bank’s financial straits in January via WhatsApp messages. Initially he dismissed it. His company, which makes robotic lawn mowers, had a line of credit and most of its cash with the bank, but the worry at that point was mostly theoretical. “There are rumors about everything,” he said.

The rumors, of course, turned out to be true. Silicon Valley Bank had liquidity issues thanks to the combination of rising interest rates and a large portfolio of long-term, low-interest assets. When it moved to shore up its financial position in early March, many people started taking the risks more seriously. 

It was Wednesday, March 8, the day before the company’s stock tumbled 60%, when Alfred Chuang became aware of worries over Silicon Valley Bank’s health, mostly via email and phone calls. Chuang, an investor at VC firm Race Capital, said chief executive officers of public companies began warning him about the bank that evening. “I knew it meant one thing: They were withdrawing money,” Chuang said. Race Capital “exited out of SVB in record time.”

The rest of the Bloomberg report, available to BBG subscribers, lays out what happened in painstaking detail. But the bottom line is this;

This was not a “Twitter-fueled bank run,” and those accusing ZeroHedge or other financial media outlets of contributing to it for accurately reporting on what was going on can go pound sand.

You mean Zero Hedge wrote 20 articles about a bank that was the biggest bank failure since Lehman? Clearly only Putin can be behind this https://t.co/bNhN5nCGDB

— zerohedge (@zerohedge) March 17, 2023

Via SchiffGold.com,

In the aftermath of the failure of Silicon Valley Bank and Signature Bank, everybody is trying to figure out what happened, who’s to blame, and what can be done to prevent it from happening again. One of the most popular “solutions” is more bank regulations. But in his podcast, Peter Schiff explained why regulations are the problem, not the solution.

During a congressional hearing on the bank failures, a common refrain from Democrats was that it was caused by “deregulation.”

Deregulation! Deregulation! Deregulation! Like the D in the regulation is the problem. The D is not the part that’s the problem. It’s the regulation that is the problem, and deregulation, to the extent that we actually had any, didn’t cause the problem. If we had any deregulation the problem is we didn’t deregulate enough.”

Politicians would have us believe that if we just had more bureaucrats overseeing banks, there wouldn’t be anything to worry about. They think that some politically connected people they appoint to a government job will somehow be so smart that they can figure out the problems and protect everybody.

They’re not. Chances are the regulators are dumber than the people that they’re regulating. Because, if the regulators were smarter, they wouldn’t be regulators. They could make a lot more money in the private sector.”

The best and the brightest aren’t the regulators. And competency isn’t generally the most important criterion in government hiring.

Also, the government sector has very little accountability.

Nobody cares. If you screw up in government, nobody loses any money.  I mean, the public loses money. But the politicians don’t care about that. So, you’re never going to have the most competent people in government. That’s why you want the free market to regulate banks, as well as everything else.”

People often claim that advocates of the free market don’t want any regulation. But Peter said that’s not true. In fact, the free market is another way of regulating behavior and conduct.

You can have the government regulate, or you can have the market do it. When the market does it, it works a lot better than when the government does it. In fact, when the government basically usurps the job that would be better done by the market, they short-circuit the market safeguards. They basically prevent the markets from doing their job and regulating, and they substitute the judgment of these incompetent bureaucrats.”

So, how can the market regulate banks?

The same way the market regulates everything — competition and individual self-interest.”

In a truly free market, people wouldn’t just put their money in a bank without doing some homework.

That’s your hard-earned life savings. You’re not just going to throw it into any old bank. You’re going to do some research. And even if you’re not competent to do the research yourself, you’re going to make damn sure somebody else did the research, and you’re going to follow their lead and subscribe to that service.”

Meanwhile, banks would know this. They would value their reputation for safety and soundness. Bankers would be rewarded for sound, prudent stewardship of deposits.

I’m going to succeed as a banker by nurturing my reputation for sound, prudent banking. So, in a free market, the banks that are the most sound, the most prudent, take the fewest risks are going to be the ones that succeed because they’re going to gather the most deposits, and those riskier banks, well, they’re not going to make it. That’s the free market.”

But in a government market, the FDIC ensures all of the deposits. After the collapse of SVB and Signature Bank, the government made it clear that the insurance limits now go to infinity.

The result?

Who cares where you put your money? No bank is safer than any other bank. No matter what they do, no matter what hair-brained scheme they concoct, your money is safe.”

In effect, the government has eliminated competition based on safety and soundness. Bankers are no longer rewarded for playing it safe.

He’s not going to get any more customers by avoiding risk than he will by assuming risk because the government has taken that out of the equation. So, that is why there is so much risk. That is why the banks are so insolvent.”

The government has replaced free market regulation that would rein in risky behavior with government regulation that encourages risky behavior.

Of course, this system empowers government people. That’s why they don’t want a free market. They want to be able to appoint people of their choosing to “oversee” everything. This gives them power.

They don’t want a level playing field. They get power by tilting that playing field.”

In this podcast, Peter goes on to talk about a very interesting point that came out during the congressional hearing regarding bank “stress tests.”

After so much media hype (including Trump himself) about the imminent arrest of the former President, it appears things are not going so well for the “we got him this time” crowd as the New York grand jury hearing evidence in the hush money probe is not scheduled to meet about the case until late April.

AI mock up of Trump’s arrest

Politico reports, according to a person familiar with the proceedings, the break would push any indictment of the former president to late April at the earliest.

Politico claims this is due to a “previously scheduled hiatus”, but that seems an odd admission now – why wouldn’t that have been brought up when the world was praying for the perp-walk of the former president?

Interestingly, as The Epoch Times’ Jack Phillips reports, this month-long delays comes as an attorney in former President Donald Trump’s orbit who testified in front of a Manhattan grand jury earlier this month believes that there has been a shift in Manhattan District Attorney Alvin Bragg’s case against the 45th president.

“Well, I think I got through to them, because [Monday] I understand they called back another witness by the name of David Pecker, who used to run the National Enquirer,” Costello, a former Michael Cohen attorney, told Newsmax on Tuesday.

“Basically, what they’re doing is really gerrymandering this,” he said of Bragg’s probe into Trump.

Costello said he had represented Cohen, himself a former Trump lawyer, and told reporters last week that he does not believe Cohen is a credible witness against Trump.

Trump had predicted he would be arrested last week. After that did not come to fruition, the former president repeatedly attacked Bragg, and earlier on Wednesday, Trump said he had “gained such respect” for the grand jury.

Update (1325ET): Josselyn Berry, Governor Hobbs’ Press Secretary, has resigned after responding to the Nashville school shooting with a tweet that appeared to advocate violence against “transphobes.”

BREAKING: Josselyn Berry, the Press Secretary to Arizona Governor Katie Hobbs, has resigned after posting this image on Twitter. pic.twitter.com/M9zUz84gbd

— Ben Kew 🏌️‍♂️ (@ben_kew) March 29, 2023

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As Paul Joseph Watson of Summit News detailed earlier, there was widespread outrage after Arizona Gov. Katie Hobbs’ press secretary responded to the school shooting in Nashville by posting a tweet that appeared to advocate violence against “transphobes”.

A transgender-identified individual killed three children and three adults after a rampage at The Covenant School, a private Christian school for students aged three to 11, on Monday.

Hobbs’ spokeswoman Josselyn Berry responded to the carnage by posting an image from the 1980 movie Gloria showing a woman brandishing two handguns.

The image was captioned with the text “Us when we see transphobes.”

This is Governor Katie Hobbs’s press secretary, Josselyn Berry, advocating for violence against those who oppose the radical Trans agenda. pic.twitter.com/5dH7aCmi8U

— Charlie Kirk (@charliekirk11) March 29, 2023

The sickening nature of the response to children being murdered has understandably caused massive outrage, with many calling for Berry to be immediately fired.

“This is what @katiehobbs press secretary decided to tweet after a trans militant shut up a school. Any Republican would be fired for this in an instant. We’re done with the double standard. @joss_berry must be fired,” asserted commentator Matt Walsh.

This is the contact information for the governor’s office. I’ll be giving it out again tomorrow on my show. And the next day. And the day after. We are going to start holding these people to the same standard and the same rules. pic.twitter.com/VEqxaWAvmj

— Matt Walsh (@MattWalshBlog) March 29, 2023

“This is the contact information for the governor’s office. I’ll be giving it out again tomorrow on my show. And the next day. And the day after. We are going to start holding these people to the same standard and the same rules,” he added.

The Arizona Freedom Caucus has also called for Berry’s immediate dismissal.

“Less than 12 hours after the tragic shooting in Nashville by a deranged transgender activist [Hobbs’] Press Secretary calls for shooting people Democrats disagree with,” the group tweeted.

For all who are wondering…

The vile tweet encouraging violence is still live on @GovernorHobbs Press Secretary’s Twitter account https://t.co/tq22p1cQCW

— Arizona Freedom Caucus (@AZFreedomCaucus) March 29, 2023

“Calling for violence like this is un-American & never acceptable. [Berry] should be fired immediately,” the GOP group added, before noting that the “vile tweet encouraging violence” had been seen by millions.

The New York Post contacted Hobbs’ office, which has yet to respond.

Twitter appeared to take no action against Berry’s account, which is now on lockdown.

Many were reminded of the infamous Sam Hyde quote.

“When we win, do not forget that these people want you broke, dead, your kids raped and brainwashed, and they think it’s funny” – Sam Hyde pic.twitter.com/NgnURq4oKB

— ScooterPhy (@ScooterPhy) March 28, 2023

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Brand new merch now available! Get it at https://www.pjwshop.com/

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After a dismal 2Y auction and a solid 5Y, moments ago the Treasury concluded the week’s coupon issuance when it sold $35BN in 7 paper in a passable auction.

The high yield of 3.626% was down sharply from the 4.062% in February if above January’s 3.517%; it also tailed the When Issued 3.615% by 1.1 basis points; this was the 5th tailing 7Y auction in the past 6.

The bid to cover of 2.394 was the lowest since November and was on the lower end of the range from the past year; it was certainly below the six-auction average of 2.49.

The internals were likewise mediocre at best, with Indirects awarded 63.2%, down from 65.5% last month and below the 66.4% recent average; and with Directs awarded 21.4%, the highest since October, Dealers were left holding on to 15.4% of the auction, modestly above the recent average of 14.0%.

Overall, this was a passable, if mediocre auction, which however considering the bone-crushing rates volatility in the past two weeks, the fact that it wasn’t even worse is probably a victory.

 

By now everyone knows that small banks – which have little to no capital markets exposure and are almost entirely reliant on NIM and debt transformations courtesy of their balance sheets in many cases with catastrophic results – are hanging by a thread and all it takes is one (alleged) tweet for deposits to be drained from bank XYZ, sending the bank into the waiting arms of the FDIC within hours, while Jamie Dimon will be delighted to collected the deposits. But while the large banks (and money markets) have been clear beneficiaries of the deposit flight, a question ahead of earnings season which starts in two weeks with JPMorgan, is how are they doing on their non-interest income which for most banks amounts to roughly half of their total revenue.

The answer, courtesy of mid-tier investment bank Jefferies which after the financial crisis remains perhaps the only one with an “off” fiscal year end  (not Dec 31, but Nov 30) reported earnings last night one month ahead of the group, and in the process sent a flashing red alert for anyone expecting strong bank earnings this quarter. That’s because the bank reported profit for fiscal Q1 which plunged as a bump in equities and fixed income trading failed to offset a slump in investment banking.

Investment banking revenue dropped about 42% to $568 million in the period ended Feb. 28, the New York-based firm said late Tuesday in a statement. That fell well short of the $616.5 million average estimate of analysts in a Bloomberg survey. Meanwhile, sales and trading revenue grew 33% $639.4 million. Total revenue of $1.283BN dropped 24% Y/Y while EPS of 54c plunged 56% from the $1.23 a year ago.

The silver lining: while the bank was hit by the freeze in underwriting and advisory, it benefited from the turmoil in the secondary market, and fixed-income was a growth engine for Jefferies, posting a 63% gain to $330.7 million amid continued volatility across markets caused by economic uncertainty and rising interest rates. Revenue from equities trading also grew 11% from a year earlier to $308.7 million. Of note: the surge in market vol stemming from Silicon Valley Bank’s collapse happened outside Jefferies’ fiscal first quarter, but it will be captured in the Q1 period for most other banks that have a conventional March 31 quarter end.

“Despite the significant decline in M&A activity and a continued lull in the IPO and leveraged finance markets, our investment banking business continues to build on our momentum and growing market position,” Chief Executive Officer Richard Handler and President Brian Friedman said in the statement.

Capital markets will reopen, though probably not until the third or fourth quarter, Handler said after results were announced. “We saw capital formation early in the year, then the music just stopped. It won’t be a turn of the switch,” he said.

Handler said he sees pent-up demand for mergers and acquisitions, but interest rates will determine whether deals return (spoiler alert: higher rates aren’t helping). The recent banking crisis will cause even more complications for the Federal Reserve, he said.

To address the broader decline in revenue, the company’s non-interest expenses fell to $1.125 billion from $1.3 billion a year ago. Costs have been a focus for investors with persistent inflation putting pressure on spending and wage growth across the globe.

As Bloomberg notes, Jefferies’ results offer an early snapshot of how Wall Street’s biggest banks may fare as they report earnings for the first three months of 2023. Investment banking revenue plummeted last year, after corporate dealmaking and sales of new securities waned during 2022’s market swings.

The shares gained less that 1% Tuesday in regular New York trading to $30.20, and have declined about 8% this year.

Authored by John Rubino via Substack,

A multi-polar world is bad news for the American Empire but great news for gold…

Since the 1970s it’s been virtually impossible for a country to function without access to US dollars. And Washington maintained this highly-favorable status quo by putting various kinds of pressure — from sanctions to election theft to outright invasion — on anyone who stepped out of line.

This weaponization of the world’s reserve currency has, not surprisingly, created resentment in a lot of foreign capitals. And after a long gestation period, that resentment is now erupting into a rebellion against dollar hegemony. Among the big recent events:

The BRICS coalition has become the hottest ticket in geopolitics. Brazil, Russia, India, China, and South Africa (the BRICS) have been toying with the idea of forming a political/monetary counterweight to U.S. dominance since 2001. But beyond some aggressive gold buying by Russia and China, there was more talk than action.

Then the floodgates opened. Whether due to the pandemic’s supply chain disruptions, heavy-handed sanctions imposed by US-led NATO during the Russia-Ukraine war, or just the fact that de-dollarization was an idea whose time had finally come, the BRICS alliance has suddenly become the hottest ticket in town. In just the past year, Argentina, Indonesia, Saudi Arabia, Iran, Mexico, Turkey, the United Arab Emirates (UAE), and Egypt have either applied to join or expressed an interest in doing so. And new bilateral trade deals that bypass the dollar are being discussed all over the place.

Combine the land mass, population, and natural resources of the BRICS countries with those of the potential new members and the result is more or less half the world. And now things are getting real:

China brokers a peace deal between Saudia Arabie and Iran, two bitter historical enemies who want to join the BRICS alliance but can’t if they’re in an undeclared war. Should they stop competing and start cooperating they could dominate the Middle East and raise China’s clout in the region, at the petrodollar’s expense. An example of the press coverage:

Eurasia’s geo-economic integration took a great leap forward as a result of the Iranian–Saudi rapprochement, which unlocks the Gulf Cooperation Council’s (GCC) trade potential with Russia and China. Its wealthy members can now tap into two series of Iranian-transiting megaprojects in one fell swoop through this deal, with the North-South Transport Corridor (NSTC) connecting them to Russia while the China-Central Asia-West Asia Economic Corridor (CCAWAEC) will do the same vis-à-vis China…

…Only two weeks after Saudi Arabia announced an effort to establish diplomatic ties to Iran in a deal mediated by China, more news surfaced that Saudi Arabia was also planning to reopen its embassy in Syria for the first time in over a decade.  Rumors are swirling that Iran, Saudi Arabia and Syria are on the verge of geopolitical and economic agreements that sidestep the US. 

Russia and India agree to trade oil for rupees. Russia is now India’s largest oil supplier, with 35% of that massive, growing country’s imports. The U.S. is not happy about this — but India doesn’t seem to care. From a recent article:

Even the US itself seems to have finally accepted that it can’t reverse this trend, which is evidenced by former Indian Ambassador to Russia Kanwal Sibal recently telling TASS that “Lately, the discourse from Washington has changed and India is no longer being asked to stop buying oil from Russia. In a recent visit to India, the US Treasury Secretary actually said that India can buy discounted oil from Russia as much as it wants so long as western tankers and insurance companies are not used.”

African leaders travel to Moscow. Representatives of 40 African nations traveled to Rissia for the Second International Parliamentary Conference “Russia – Africa in a Multipolar World.” According to the press release, the attendees:

… discussed the potential for collaboration across a range of sectors, their contribution to the African continent’s economy and security, and their work in the realms of science and education, politics, and techno-military area.

During the conference, the African continent was invited to work together to form a new multipolar world order. This is especially important given the significant human resources of Africa, which is home to more than 1.5 billion people and has enormous mineral reserves in its soil.

Brazil and Argentina announce a common currency. In February, the two dominant Latin American economies announced plans for a common currency called the “sur” for use in bilateral trade. South America is a big, resource-rich place with numerous grudges against its intrusive northern neighbor. So a de-dollarization movement there, while not as immediately consequential as what’s happening in the Middle East or Asia, is both plausible and potentially serious for the dollar.

Lower Dollar, Higher Gold

Even in an emerging multi-polar world, there’s no obvious replacement for the deep, liquid US capital markets. So the dollar won’t disappear from global trade. However:

• If the BRICS have the commodities and the US and its allies are left with finance, pricing power for crucial things like oil and gold will shift to Russia, China, and the Middle East.

• Falling demand for dollar-denominated bonds as reserve assets will send trillions of dollars now outside the US back home, raising domestic prices (which is to say lowering the dollar’s purchasing power and exchange rate).

• The loss of its weaponized reserve currency will lessen the US’ ability to impose its will on the rest of the world (witness China as Middle-East peacemaker and India buying Russian oil with rupees).

To sum up, tomorrow’s world is multi-polar, and for the US and its allies, inflationary. That means a commodities bull market — at least in dollar terms — and extreme financial instability as the US Empire is forced to live within its means. It won’t be pretty but for gold bugs and commodity bulls, it might be extremely profitable.

I’ll leave you with this:

First CNN does a segment on de-dollarization, now Fox News also.

What is going on here?

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pic.twitter.com/uBocFnLIMJ

— Wall Street Silver (@WallStreetSilv) March 27, 2023