While global powers play out the greatest game of financial chicken, we are no longer spectators, but strapped on a collision course for hardship.
I don’t want to be the scare mongering freakazoid dentist. I already do that to my patients. But this needs to be put into perspective.
Russia invading Ukraine, truly a sad and head scratching event. I don’t get it, you don’t get it, probably nobody gets it but the guy who decided to do the invading. There’s too many variables to figure out Putin’s motives.
But mark this moment in history. What Putin has done is set in motion what I believe is the end of the US Dollar’s monopoly as the world’s reserve currency.
Remember playing the game of monopoly? Think of each player around the board as a country. Even though they’d have their own swiss francs, yen or peso’s in their personal purse, to be able to play the game, you had to use monopoly money. Every time the silver shoe passes, the central banker instantly made $200 monopoly money appear out of thin air and gives it to you.
The power of a reserve currency is because everyone has to use it. If you want to pay for commodities like oil, gas, wheat or gold. It’s priced in US Dollars. Hence, every player/countries bank carries a boatload of US dollars in their reserves to make payment for imports and exports move seamlessly.
Last week you heard about Russia being booted from SWIFT. Society for Worldwide Interbank Financial Telecommunication…just sounds like a Jame Bond Villain organization. Pretty much gmail (42 million messages sent each day) to help settle transactions, trades and currency exchanges, but for international banks.
By putting Russia on mute, we’ve made it difficult, but not impossible, for them to make international transactions.
What’s more, rejecting Russian made oil like a psycho ex… but forget they help support you by filling your gas tank every week. Speaking of which, have you seen the price of gas?
Also think of this in the perspective of a Russian citizen who may not have wanted this war. The Ruble has lost half its value since the start of war. If I told you now, you only get half of your retirement savings. Oh, also, because the Russian stock market is closed, you’re also cut off from even being able to sell assets.
Last week I spoke about raising fee’s to just keep up with inflation. It might be even more if we don’t find a quick alternative for rejected Russian oil.
Financial warfare will be just as devastating, maybe even more, then a physical bomb, as it inflicts a shrapnel of tax across the world. This war has poured financial napalm on an already supply chain constrained, pandemic fatigued, worker shortage, inflation environment. Our governments firing financial weapons at enemies without considering the recoil effects is going to have far reaching effects that I don’t believe we can yet fathom.
Lam
Sorry for being such a debbie downer this week. Most citizens want to come home to their families, have a nice meal and feel secure. And in this environment, there seems to be a lot of instability. I hate seeing how high gas prices are. My staff were telling me today filling a tank cost them over $100. So it’s a good time to think about why this is. Why does the government get to make financial decisions that reverberate and cost all of us? We’re getting the greatest crash course lesson on how macroeconomics affects us all.