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De-Dollarization

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I read a few Telegram channels, one of which recently posted about the fact that Saudi Arabia has terminated its agreement with the US to accept payment for its oil only in USD. I believe the writer sees this as part of the ongoing unravelling of the old order and ponders its significance. I penned the following, but was unable to post on his channel since he has quite wisely instituted restrictions on the length of replies and also does not allow long replies to be split over multiple posts. This indicates to me that he is actually running the channel on his own and does not have “staff” to manage the spam.

Anyway this is what I wrote :

I get that your commenting on this, is that you see it as part of the entire systemic unravelling that we’re currently witnessing. This system is ending, probably messily, because it is unsustainable and because those “in charge”, who really don’t know what they’re doing, have embraced some horrible ideas. But the attractiveness of USD versus any other currency is actually a pretty complicated subject, and not due solely to Saudi oil being sold solely in USD (or not), or for that matter US interest rates or Bond issuance levels. There are more significant factors at play.

The first is that, however bad things look for US debt levels, the issuance of US debt fulfills a global function. US bonds act as collateral for money creation in the global economy outside the US. As a simple example, Japanese banks issuing USD loans (“creating money out of thin air”) to Chinese companies, accept only US Bonds as collateral. This creates sustained demand for US Treasuries, because their value to the holder is not the payment of the Bond coupon or the return of the principal at redemption, but the value of the project they are used to fund, which, bit of a random guess, may have an ROI of anywhere from 30% to, I don’t know, 200% ?? A big number. The 5% yield on the Bond itself is irrelevant. The US financial markets are the biggest and therefore most liquid. No bank would accept Chinese bonds (no rule of law) or Japanese, (60% of the market is owned by the BoJ), certainly not Eurozone, since the Eurozone must eventually collapse and default (the ECB can’t create currency or borrow). There is no alternative to the US Bond market as collateral.

The second point is, Saudi oil notwithstanding, some huge percentage of international trade is settled in USD, so there is sustained demand for USD through usage. If I’m a Brazilian exporter, selling my product to 20 different countries and settling all in USD is far more efficient than having to settle in 20 individual currencies. Sure, Oil is the most important global commodity, and the Saudi move is ‘interesting’, but it is not clear what effect it will have, if any. KSA is still a ‘US aligned’ country and Oil will still be priced and traded in USD. All this talk of the BRICS creating their own currency is (currently still) laughable. To replace USD, all these currencies would have to agree to create either a new currency and it would have to be somehow collateralised. No one will use a Chinese Communist CBDC. China may be buying all the Gold, but this currency will never be Gold backed i.e. convertible. If any foreign party thinks they will be able to swap pieces of freshly printed paper for Chinese Gold and take it home, they will be very disappointed. Similarly, tokenised “ownership” of Chinese held Gold under a Chinese gold-backed CBDC is also laughable. China does not permit private property. Full Stop. If these countries, who are not really “allies”, try to set up some kind of clearing system they will still have the problem of where Gold is located, how to transport Gold from one location to another and under what conditions can balance transfers take place.

But the main problem of Gold backed currencies is that the supply of “money” is restricted to the amount of Gold available to back it. Since economic activity is fundamentally driven by the amount of currency available to flow within the economy and enable transactions, the restriction of this flow would immediately create deflationary collapse within the these emerging economies and the resulting social disruption would probably be terminal for any number of regimes unwise enough to try it. On the other hand, if these countries decide to replace USD in transactions they would have to print their own currency to act as ‘the means of exchange’. Since this could not be Gold backed, if it were instead unbacked, or backed by some irredeemable ‘notional’ value, then this would have the opposite effect of initiating a Weimar or Zimbabwe style collapse in the value of the currency, leading to hyperinflation.

At the deepest level, the current system is only the way it is because the US is willing to run a huge deficit, otherwise it would not need to borrow, its bonds would not be the backing of the world’s fiat currency banking systems and its currency would not be the global currency of trade and finance. This is the product of the Anglo free market system and its resulting 20th century ascent to global dominance, and has enabled the US to project force throughout the world, debatably to the detriment of any involved, not least the US itself. The flip side of this is that the rest of the world is engaging in mercantilism, trying to run surpluses and accumulate wealth domestically at the expense of their trading partners. Which of these countries would choose, or be able, to reverse roles ? None, of course.

Under these circumstances, the most probable outcome of these initial attempts at “de-dollarization” will be completely perverse. USD will increase in value in the coming years. As these threats of devaluation of non US currencies become clearer, all asset holders outside the US will come to view the US as the only safe haven and start to transfer as much of their wealth there as possible. This is why the US dollar will go much higher against all world currencies and why, having bought those USD, foreigners will buy US assets; the primary beneficiary will be the most liquid US stocks. These inflows will do a lot to sustain US fiscal profligacy for a few more years, so the increase in US interest rates will not be harmful to the US’s ability to service this debt, since they will be able to refinance it for a long time to come with continued foreign buying. The Fed’s ‘ace in the hole’ is that all the gold on its balance sheet is valued at $35 an ounce (or something equally unrealistically low). So for the next few years USD will outperform all other fiat currencies, but in the end, Gold will ultimately outperform USD.

Once digital money is forced on us, then private digital money will take the place of public (government) digital money in private transactions and we will end up with two tier money. Probably not BTC on the main chain, (although Lightning network is very interesting with some great privacy projects like NOSTR), or some other privacy coin like Monero (XMR) or Pirate Chain (ARRR), which will be decided by the market.

But whatever happens, “they” won’t win.

Covid19, Globalisation & Localism

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The range and complexity of issues surrounding the Covid19 pandemic has opened the debate about globalisation. These factors include the origin of the virus in Wuhan, the fact that the CCP covered up the virus and have behaved reprehensibly, e.g. buying up supplies of PPE throughout the world before going public, not to mention flat out lying about the numbers of dead, and the response of governments throughout the world, although particularly in the UK, to alleviate the economic impact of the lockdown.

There is an emerging realisation that reliance on China is a bad idea. Alongside the reprehensible way the Chinese have interacted with the world following the outbreak, the crackdown on free speech in Hong Kong has shown Xi’s regime to be a force for evil in the world. The unlawful seizure of Hong Kong is analogous to Hitler’s invasion of the Sudetenland, with the difference that it is unwelcome by the population of Hong Kong and we know where that eventually led. Anyway, it seems fairly probable that the pressures on globalisation which have been unleashed will only grow. We contend that these pressures were one of the major inputs in Brexit and logically point to a new future founded in localism.

Brexit was the assertion of control by a people who refused to be governed by a system over which they had no control and which was ultimately unanswerable to them. This genie is out of the bottle now. Our Italian friends will get it next, hopefully.

Technology is huge part of this. Technology is largely not subject to control by central authority (OK maybe the anti gravity and zero point energy stuff is controlled by the guys in Nevada or wherever 😉 ) but the everyday stuff is tumbling from the future into our lives. Technological advance has already created the conditions for localism; enhanced communication enabling instantaneous peer to peer communication, enhanced technology such as 3D printing putting vast capability into the hands of more and more of the population increasingly cheaply. These open the way for a resurgence of ‘cottage industry’ and micro societies, only on a far more efficient level. #WuFlu could just be the catalyst. There is also a whole discussion on cryptocurrency and the emerging parallel economic ecosystem based on blockchain tech.

As our grasp of the bigger picture and our role within it becomes more comprehensive, consensus is emerging that in order to preserve civilised society we cannot treat people as being economically expendable and outsource their livelihoods based solely on a narrow measure of profit (ie one which ignores certain costs), such as importing cheap labour under free movement or by offshoring to a mafia run state like China.

I believe we will eventually start to evolve a theory of organisation where we ‘think as a species’.

Each of us is voluntarily and individually responsible for adopting behaviours that promote overall well-being, without the requirement for centralised coercion. Individual self interest is not incompatible with this, since causing harm to our neighbours is harmful to the environment of which we ourselves are a part. If a new economic model is to emerge in keeping with this strain of thought, people in the UK will start to act with ‘economic localism’ as a way of reflecting these ideas.

The UK (our ‘somewhere’, the one we can influence) is big enough that we can viably operate all areas of the economy. We can have all kinds of industry. We can have a thriving agricultural sector. We can provide enough fish from our waters etc. We can be self sufficient. But we can also continue to trade globally within this framework. But further, the damage to the financial system required by the suspension of the preexisting economic model, as evidenced by ‘Rishi’s splurge’, will wake people up to alternatives. These include blockchain based distributed monetary systems as opposed to ‘fiat money as debt’. Money is nothing but ‘effective demand’ thus this technology will also impact political interactions; collective ‘centre of opinion’ will eventually come to be arrived at by blockchain token voting, i.e. true verifiable consensus, supported by digital IDs, with anonymity secured by cryptography.

The old pre-digital world ended probably about 20 years ago. A lot of dead wood will be razed by this pandemic. Scarcity will decrease and economics (the science of scarcity) will also change irrevocably.

Hong Kong

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I saw a recent post in CapX which I found utterly laughable.

It suggested that we should create a new Hong Kong in the UK and relocate hundreds of thousands of people here. No disrespect to the Hong Kong BNOs, but idea that we can institute a 15% tax rate in a specific area of the UK because it would be good for economic growth (which is true) and not then institute a 15% tax rate throughout the UK as a whole is intellectually dishonest. It simply won’t happen.

I have detected amongst much of the social media comment, a kind of adoption of the narrative that ‘there is nothing we can do because it’s China’. There’s a sense of resignation permeating our politics.

I spoke to a Singaporean friend today and his comment was that ‘HK is a shithole now. There’s no way China is going to back down’.

This need not be true.

First of all, China is in breach of an international Treaty, the Sino British Joint Declaration of 1984. This was to resolve the issue of the 150 year lease of New Territories, which was due to expire in 1997. At the time, Deng Xiaoping assured Maggie Thatcher that he was steering China towards a more democratic system of government and under these influences, the UK also agreed to hand over Hong Kong Island and Kowloon, which had been ceded in perpetuity to the UK, on condition that Hong Kong independence would be maintained for 50 years until 2047.

The 2019 institution of an arrest warrant applicable in Hong Kong which would not be subject to Hong Kong judicial review, even where the alleged crime for which extradition was sought was not a crime in Hong Kong was the first trespass on Hong Kong law. The UK remained silent.

Ever since then the situation has deteriorated.

Trumps speech earlier however was electrifying.

These guys get it totally. Boris and Raab should be ashamed of themselves.

But anyway here’s the thing. We can still retrieve the situation.

China under the CCP is viewed with suspicion and hostility by powers in the region.

Therefore, the obvious approach is for the Anglosphere 5 to form a political coalition with other regional powers, India, Japan, Korea, Taiwan, the Philippines and even Vietnam, and it would probably also include Thailand and Singapore to form an economic blockade against China.

The world’s economies are currently all disrupted, so fear of economic damage is no longer an impediment to instituting economic sanctions against China. All those countries should jointly issue notification to China of their immediate rescinding of recognition of China’s membership of the WTO and institute an immediate customs halt on all imports from China.

The central banks of all those countries should immediately prohibit all the banks licensed within their regulatory orbit from accepting or making any payment to any Chinese or Hong Kong bank.

At the same time they should issue a demand that China immediately vacates the illegally occupied Spratley islands.

They should demand that Carrie Lam immediately stands down as leader of the Hong Kong government.

They should demand that Hong Kong holds free and fair elections to replace the CCP placemen in the Hong Kong legislature.

Given the failure by the British to consult Hong Kong people before handing over Hong Kong and Kowloon, when 70% of Hong Kong people were in favour of British rule, and given the fact that China has now explicitly abrogated the Treaty, they should also demand that the Hong Kong people be given a referendum on whether they want independence from China, to stand as a free and independent nation in perpetuity.

This will bring about the collapse of Xi’s regime. This should certainly now be the world’s objective. He is a nasty thug whose government has imprisoned Uyghurs and Falun Gong and murdered them for their organs.

Do not be under any illusion about the barbarity of the Chinese Communist Party. As president Trump alluded to in his speech tonight, as discussion around the handover occurred, and following the conclusion of the 1984 agreement, the world had hoped that the spirit of liberty in Hong Kong would come to infect the whole of China.

Five years later, this nascent yearning for freedom by PRC Chinese was brutally put down in Tiananmen Square. Chinese army soldiers shot unarmed protesters. Armoured vehicles crushed their bodies and minced them into a pie of human flesh and bone which was then incinerated and the ashes flushed into the sewage system. Utter inhumanity.

The virus has shown that all humanity is connected. What happens anywhere happens everywhere. I don’t know if this is true, but supposedly President Kennedy had a placque somewhere with the inscription, “Where We Go One, We Go All”. This is certainly now true. The Chinese Communist Party is a threat to all of mankind, which makes the attempt by Cameron and Osborne to cosy up to the murderous mafia don Xi, all the more sickening.

Hong Kong is a microcosm of the issues facing the world and the parallels with Brexit are screaming at us. We have to act now. The people of Hong Kong absolutely have the right to their freedom, just as do we all.

I am deadly serious. This is as important as facing down Nazism and the Soviet Union in the 20th century and as technology more than ever before in our history has the power to enslave or free us, our choice now in favour of freedom is required to determine what kind of future humanity will have.

Hong Kong

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To me, Brexit was an absolute expression by the British people of our right to decide our own destiny and a refusal to allow ourselves to be governed by an unaccountable, unanswerable body, that would never take responsibility for the outcome of its decisions. This is an extension of the long standing impulse within British and Anglosphere political history of rejecting arbitrary authority in favour of self determination; Magna Carta, Henry VIII’s break with Rome, the Civil War and execution of Charles I for his claim of Divine Right, the 1688 Glorious Revolution and of course the American Revolution was an expression of this which also had quite a successful outcome.

Recent discussion about political alignment shows political beliefs as a two axis system, the well understood left right division, upon which is superimposed a north south, authoritarianism versus freedom divide.

Now that the Tories have magically found the magic money tree, the old Conservative claims of not having the money to spend to make people’s lives better has gone away, somewhat deflating the economics inspired left right dynamic, so the real schism in politics now is between authoritarianism and freedom.

Once Brexit had occurred, the aftermath saw much talk of ‘Global Britain’. Surely, the one thing that would have massive traction with the world’s population, to the benefit of all, would be for us to engage with the world on the basis of sharing and promoting our doctrine of individual liberty.

It is in that context that I am utterly demoralised by the failure of the UK to intervene publicly in the Hong Kong situation.

By intervene, I mean make some public statement and really kick up a huge stink about the trashing of Hong Kong by Beijing that has been going on for approaching a year now and the fact that this is in breach of The Sino-British Joint Declaration, which is an International Treaty (and as we all now know from Brexit, these are binding in perpetuity).

This Treaty required China to maintain Hong Kong law until 2047, “one country, two systems”. The attempt in 2019 by the Hong Kong government, under pressure from Beijing, to allow extradition to China of anyone, without Hong Kong judicial review (which would have allowed China to extradite people wanted for political dissent or any reason for that matter, even where the charge was not a crime in Hong Kong), was a violation of this Treaty and resulted in the unrest which has been going on since June of last year.

The CCP will no longer tolerate this dissent and have put their own placemen into HK. If the legislature has been captured, then in order to stand up for their legal rights there is no alternative open to Hong Kong people other than to demonstrate publicly on the streets. HK police are becoming increasingly violent in their behaviour towards those demonstrating. Pro Beijing gangs are also involved in battling pro democracy protesters.

The situation escalated at the weekend with a fight breaking out over occupancy of the chair in one of the Legislative Council committees responsible for debating new legislation being brought in to stamp out this dissent. This shows that the CCP are now going flat out to suppress any kind of democracy in Hong Kong. It is now reported that the Hong Kong government will pass a law which mandates a penalty of 3 years in prison for anyone who insults the Chinese national anthem.

Why is this illegality and thuggishness not being opposed by the UK ?

It’s not as though this has come out of the blue. The current incumbents (i.e. the Xi Jinping regime) have form in their lurch towards extremist authoritarianism. The attempt to stamp out the Uyghurs and Falun Gong (a slightly loopy sect of spiritualists) by throwing them in concentration camps (where some of them are murdered for their organs – freshly removed to order, a healthy human heart can sell for about $200k) is evidence of China’s increasingly out of control ruthlessness and inhumanity under Xi.

And as for coronavirus, the evidence that it came from the Wuhan lab is very strong. OK I know this is being hotly debated by ‘experts’. If it was from the Wuhan lab, it was obviously released by accident since it killed thousands of Chinese people, but China didn’t tell the world about it, then allowed travel to seed it globally, lied about it and locked up journalists who talked about it. They also censured a doctor for a post on wechat warning fellow doctors that something serious was afoot which went viral and eventually reached the government. He subsequently died from it. They have clearly enlisted the so-called World Health Organization to shill for them in support of its deception and are now engaged in a massive disinformation campaign across social media seeking to deflect blame.

In this context, the attempt to cosy up to China by the UK via the state visit in 2015 under Cameron and Osborne, plus the Huawei decision, is utterly shameful. We’ll come back to that.

The point about all this is that this is clear evidence of the abuses that occur under authoritarian regimes and the fact that the effects of the pandemic are being felt globally now indicates that the failure to stand up for democracy in Hong Kong, by the only country that has a legally binding treaty with China which could be enforced in international law, is a foreign policy blunder of epic proportions.

The is because what is happening in Hong Kong is a microcosm of the challenge humanity faces right now. The virus has demonstrated, as never before, that the world is now connected as never before. Therefore this battle between authoritarianism and freedom will take place globally.

The plane of authoritarianism versus freedom is distributed across both sides of the left right divide.

Ultimately authoritarianism can simply be defined as being ‘use of force to compel, or deny, causing harm, or loss, or obstruction of potential’. I can add ‘usually under the pretence of legality’. The authoritarianism in socialism is also the reason why it always fails. Authoritarianism is harmful under all circumstances.

The right wing view is that the left have been willing to tolerate authoritarianism, because, according to their narrative, it’s the only way to stop evil, greedy Tory capitalists (and Jews of course) from exploiting them and condemning them to poverty, by forcing the sharing of these ill-gotten gains “more fairly”. Naturally, anyone who objects to having their hard earned income redistributed at the whim of someone else is siding with these Tory fascists. The left blithely think that once their gang is in control it will only be used to compel people to do good, which of course is tragic nonsense, but also fuels their sense of moral superiority that induces their support for authoritarianism without considering the consequences of its inevitable eventual abuse.

The left view is obviously the mirror of this. They see authoritarianism as being a right wing thing which enables ‘Tory toffs’ to rule based on their sense of entitlement, who think their opinion is worth more than anyone else’s (think the Grieves et al of this world – Brexit blockers) while having zero comprehension of how hard most people’s lives are and therefore causing them to be dismissive of people’s economic needs when setting fiscal, economic and law and order policy. They observe that when Tories say they want to adhere to strict economic principles such as prudent economic management, (e.g. remain in Europe for the sake of the economy), that this doesn’t usually work out too badly for said ‘Tory toffs’ themselves.

But the game changing factor that has entered the equation and tilted the political debate on its axis by 90 degrees is technology and I believe that technology will very rapidly become the central arena of the authoritarianism vs freedom battle.

Technological development is not a democratic process; new technology is tumbling from the future into our lives at a rapid pace and we don’t get a say in whether we want it or not.

That said, technology has brought huge transformative benefits to our lives.

We now have instantaneous peer to peer communication amongst people from across the globe. Virtually all aspects of computing and associated areas (such as 3D printing) have put vast capability into the hands of more and more of the population, increasingly cheaply. Computing has brought forth cryptography (computing was arguably the product of cryptography; Bletchley Park) which has a couple of implementations; communications (Signal, WhatsApp etc), and consensus i.e. blockchain technology, which can include blockchain based distributed monetary systems as opposed to ‘fiat money as debt’. Money is nothing but ‘effective demand’ thus this technology will also impact political interactions; collective ‘centre of opinion’ will eventually come to be arrived at by blockchain token voting, i.e. true verifiable consensus, supported by private (i.e. non government) digital IDs, with anonymity secured by cryptography.

The flip side of this is technological authoritarianism. Surveillance cameras everywhere, geolocation tracking via our mobile phone’s traversal of the network beacons, Google, ‘Big brother’s little sister’, monitoring our every mouse click and internet interaction. Etc.

Plans for the future include 5G mesh technology providing even greater detail about our movements, as a whole host of Internet of Things devices connect us to Skynet, where our every digital financial transaction is also monitored and available to scrutiny, (although this would only be on the say so of a judge, (oh no, hang on, he would be paid his salary by the state)). But don’t worry. Think of the benefits.

Now the reasons why the UK hasn’t intervened in Hong Kong are hard to fathom.

Idle musing leads me to think of 5G and Huawei and the 2015 state visit. I would be very interested to hear about, how can we put this, the ‘financial considerations between the parties’ that led to the government adopting Huawei as supplier and its failure to kick them out now it’s obvious that Huawei is an appendage of the Chinese state and is likely to be damaging to our relationship with our cousins in the USA. Not to mention China’s clear breach of the Hong Kong Treaty.

It’s really not very confidence inducing.

Cooperation is the means by which true advances are brought about. So it’s vital we enforce the Brexit promise of defeating the globalist authoritarians (Team Blair and his Remain cabal, EU anti democrats and US Democrats). Allowing consensual collective decision making to be displaced by coerced implementation of decisions made by a few under this new technology infused environment, would be a disaster for humanity.

If we do not stop it we will see an authoritarian, technology powered Chinazification of the world.

We’ve just celebrated VE day and remarked how amazing it was that all those men went off and did their duty.

This is the next war.

Democracy

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Democracy is nothing more than the principle of allowing voluntary collective human action, arrived at by some sort of consensus.

If we accept it as a truth that all are equal and of equal value, then all must be given a voice.

Our Parliamentary system is our evolved attempt to provide the means of consensual cooperation to ourselves as a nation.

The right to select our representatives in Parliament can arise from nowhere other than the fact that each of us holds individual sovereignty ourselves and we only confer it collectively upon our representatives in Parliament in Trust, for the duration of that Parliament, in order for them to act in our common interests and with our consent.

Up to this point in our history, we have used one person one vote and a first past the post counting system as the means of estimating that consensus and securing that consent.

The referendum was fought on a one person one vote, first past the post counting system.

A vote carried out on this basis is the actual expression to Parliament of what ‘we the people’ believe is the common good and it must form the basis of Parliament’s understanding of what its instructions from us are.

The vote was to Leave the European Union.

But the ‘self-considered superior’ (SCS) side refuses to respect the result.

I do think they are actually horrified that the great unwashed (TGU) should be considered their equals, which is why the SCS also treat with disdain the interests of TGU with regard to suppressing incomes through permitting mass immigration, destroying the chance of good service from the NHS by swamping it with new customers and requiring the country to build so many new homes in order to stave off house price rises that puts decent housing out of reach of TGU due to massively increased demand from uncontrolled population growth.

As everyone knows, the law of the land is the common law.

Parliament creates statute.

If Parliament breaks the connection between its answerability to ‘we the people’ and consensus then it’s fairly obvious that we will no longer be bound by statute but will revert to common law only, which is the default position.

That is the inescapable logic of what these Remainers are doing. It’s also obvious that Parliament is full of jumped up nobodies who haven’t a clue what they are doing and the harm they are doing to the country by destroying the mechanism by which we function as a nation.

If Brexit is stopped then resistance will go on by other means for a long time. May’s attempt to ‘limit the damage’ is so unbelievably short-sighted that it’s an absolute tragedy. She has caused a de facto hard Brexit by maintaining the uncertainty for so long; by saying one thing and doing another, by saying different things to different people and by her sheer mendacity which is now blatantly obvious to everyone outside her bubble. Also tragic is her sheer lack of ability to accept the reality of the vote and look for the opportunities to direct a new course of action outside the EU. The Conservative Party in Parliament are equally responsible for her failures, having failed to remove her. The ERG and DUP would now be entirely justified in bringing down the government, indeed we as a nation need them to do so in order to save our democracy.

Think what it will say to the world if we allow our democracy to be snuffed out by these Remainer simpletons whose self‑regard far outstrips any competence at anything we in the real world recognize as a valuable skill.

Think what it will say to the world when we have succeeded in reasserting it peacefully, and thereby go on to experience a very long period of great prosperity in which all participate.

No anger from me. Just cold hard resolve that these stupid people will not be allowed to destroy our system of government.