With the Petrodollar Dying Can a US – Japan Alliance Slow a Rising China?

Massive changes in world alliances are occurring now, with the rapid decline of the petrodollar. This decline is led by China’s drive to move the Middle East into their sphere of influence. This past week, Reuters hinted at the petrodollar’s inevitable demise with an articletitled ‘The waning power of the petrodollar’.

Russia – Saudi Arabia Relations

Saudi Arabia is the cornerstone of the petrodollar system. The ‘blossoming friendship’ between Russia and Saudi Arabia is another direct threat to this arrangement. Saudi Arabia agreed to cut crude oil shipments to its customers in August by more than 600,000 barrels per day and will meet with Russia, among other nations, on July 24 to discuss compliance. According to a Moscow Times report, Saudi Arabia agreed to an arms deal valued at $3.5 billion with Russia.  They will also consider investing in a LNG plant currently being built by Russia.

But, to replace a global reserve currency, currently the US dollar, an alternative system must be implemented to replace the existing one.

New US Stance on China

By fixating on the theme of ‘Russia – Trump collusion’ charges, commentators in the US miss the reality that China is clearly the bigger (if not biggest) threat to US hegemony. While both Russia and China are two of the top three military powers in the world, the size of the Chinese economy (approximately ten times the size of Russia’s) gives China a substantially greater ability to inflict severe harm to the US economy than Russia. As forecast last November, instead of selling out US strategic assets to China, the Trump administration, to its credit, has implemented a more nationalistic approach to benefit its own citizens and not its personal interests. A Bloomberg report partly confirms this, as Chinese ‘cross-border purchases plunged 67 percent during the first four months of this year’ due to ‘tighter capital controls and increasingly wary counterparties’. This reflects a clear contrast to a prior administration that approved the sale of sensitive US missile technology to China. Interestingly, related entities, like a foundation, haven’t been (as of today) criminally prosecuted since witnesses strangely commit suicide before they were scheduled to testify. Also, the Trump administration is focused on potential Chinese spying. Guo Wengui, a Chinese dissident residing in the US, has claimed that China has ‘at least 25,000 Chinese intelligence officers and more than 15,000 recruited agents conducting espionage operations in the US’.

China’s Solution

China is moving towards implementing some type of gold backed currency or trade note to minimize the role of the US dollar as the world’s reserve currency. Russia’s largest bank has just this week begun trading physical gold on the Shanghai Gold Exchange. Since virtually all business and consumer transactions today are done digitally, the viability of a gold standard remains in question. The days of going to your local store and buying an item for a gram of gold are long gone. China’s central bank (PBOC) has developed its own digital currency and there have been rumors that China will roll out a cryptocurrency backed by gold. Several firms have already introduced a gold-backed cryptocurrency.

Japan’s Plan

With the world’s third largest economy, Japan maintains its place as a key participant to stunt Chinese ascendance. The Japanese central bank has bought stocks at unfathomable proportions as they now own at least ‘71 percent of all shares in Japan-listed ETFs’. Japan has officially moved to a policy of ‘unlimited money printing’ according to Forbes. While central bank manipulation can prolong unsound economic policy, there is no dispute that Japan’s massive debt load (approximately 234% debt-to-GDP ratio) can never be paid back.  So, before the Japanese Yen begins its inevitable decline on the path towards hyperinflation (like Venezuela or Zimbabwe), Japan must transition to an alternative system. Since they have negligible natural resources and a military force incapable of invading countries for profit, Japan appears to have settled on Bitcoin as their solution. On July 1, the consumption tax on the sale of Bitcoin was officially eliminated and over 260,000 retail stores are now poised to accept Bitcoin via a specialized application.

A fundamental appeal of cryptocurrencies (and blockchain technology) is its decentralized nature and its empowerment of individuals to bypass the central banking system of control. Japan has moved to the forefront of the break with central bank authority. The nature of China’s government, which censors the Internet and restricts free speech, cannot be expected to yield control to the individual in lieu of the state.

China’s Overreach

There may be some signs that more nations are wary of China’s ambitions. Last month, China attacked India and destroyed two Indian bunkers. After it flew six warplanes over the Miyako Strait between two southern Japanese islands in a military exercise, China dryly told Japan to ‘get used to it’. The US, India and Japan have aligned against this Chinese threat with recent naval exercises.


Perhaps, more nations will align with a renewed US led by President Trump who has worked to destroy the US deep state and who vowed at his inauguration to ‘seek friendship and goodwill with the nations of the world’ and ‘not seek to impose our way of life on anyone’ versus an increasingly imperialist China. Unfortunately, according to US military intelligence, defense cooperation and economic ties between Russia and China is slowly expanding. However unlikely, it would be most beneficial for US interests to drive a wedge between the Chinese-Russian alliance to forestall this progress.

The potential transition from the US as the world’s only superpower to something else will be a historic moment. It will inevitably arouse concern from countries historically allied with the US. These counties could take the advice of Philippines President Duterte who speaking on behalf of his own country said ‘We cannot forever be the little brown brothers of America. … We have to develop, we have to grow and become the big brother of our own people’.

Originally Published on News with Chai

Middle East Realignment Driven by China’s Drive to End Petrodollar Dominance

China’s goal is to become the leading economic superpower and to move the world away from the US dollar. They have been forming alliances with Middle Eastern countries including Iran, Qatar and Turkey. The petrodollar system is the primary reason the US dollar is still the world’s reserve currency as oil producing countries like Saudi Arabia do not sell their oil in currencies other than US dollars. Without this agreement, the US dollar would eventually lose its role as the global reserve currency. China has been working with countries in the Middle East to sell their oil in yuan and thereby weaken the US. 

The Chinese strategy has been to internationalize their currency via a number of different projects (see list below). A Zerohedge report in April articulates how China and Russia are joining forces to bypass the US dollar in global trade. The Shanghai Cooperation Organization (SCO) described as a ‘Eurasian political, economic, and security organization’ is one of the means of executing that vision. Its members include China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. Earlier this month, India and Pakistan were admitted as members. These countries are expected to further enhance their economic relations via trade. For China to successfully meet its goals, a larger base of countries must join this block. 


According to this report, bilateral trade between China and Iran grew to $31.2 billion in 2016. Iran is currently listed as having ‘Observer status’ in SCO. As Russia has long wanted Iran to attain full membership status, China recently signaled its support. Incidentally, Iran announced earlier this year that it would stop using the US dollar in its official statements. Iran and China conducted a naval drill in the Gulf a few weeks back.


President Tayyip Erdogan implied last December that Turkey is taking steps to allow commerce with China, Russia and Iran to be conducted in local currencies. A Chinese report confirmed that to ‘increase the trade volume and foreign investments between Turkey and China, and decrease their dependency on the US dollar during financial transactions, China and Turkey have started direct trading with their local currencies’. Current trade volume of $28 billion is expected to increase.

Turkey even dropped hints at shuttering the Incirlik air base to US air operations. With the US support of the Kurds in their fight against ISIS, there may be a stronger motivation to act. In fact, Turkey refused German lawmakers access to the base leading Germany to announce plans to withdraw 280 troops, as well as surveillance planes and refueling jets, from the Incirlik air base. If you are interested in understanding the historical importance of thie Incirlik air base read this and this. Turkey is listed as a ‘Dialogue partner’ in SCO.


Over two years ago, Qatar launched the first Chinese yuan clearing hub in the Middle East. According to Qatar’s central bank governor, Sheikh Abdullah bin Saud al-Thani, it would create ‘the necessary platform to realize the full potential of Qatar and the region’s trade relationship with China’. Since it opened, Industrial and Commercial Bank of China has cleared more than 590 billion yuan ($86 billion) in transactions in Qatar. Zheng Chunyi, General Manager of ICBC Doha, confirmed that ‘Qatar, the United Arab Emirates and Kuwait are the most active Middle East countries using the RMB clearing center for direct payments with Chinese mainland and Hong Kong’. 

Iran-Turkey-Qatar Axis

The newly formed Iran-Turkey-Qatar axis (as evidenced by events such as this, this and this) is tied together by each countries’ burgeoning relationship with China. While Russia has a greater military presence in the Middle East (via Syria) and draws the most attention from Russia-phoebes in the US, China is the key financial player. Together, both Russia and China have emerged as a direct threat to US supremacy in the region. Although Iran has always had better relations with China, Turkey and Qatar have been solidly aligned with the West as each country still maintain US military personal at their bases.  Perhaps, both countries are hedging their bets based on a calculation that will see a rising China and declining US.

The Petrodollar

Since the inauguration, President Trump has not mentioned the 28 page document (known simply as ‘The 28 pages’ and discussed during the campaign) which implicated members of the Saudi Arabian government for their involvement in the 9/11 attacks on the World Trade Center. He in fact visited Saudi Arabia last month, participated in a sword dance and signed off on a $110 billion weapons deal. Why? The answer is the petrodollar. The key part of this agreement is that the US must defend Saudi Arabia as long as they sell their oil in US dollars.

It would appear that China is taking no chances and is working on pushing Saudi Arabia into its sphere of influence. Byron King from the Daily Reckoning speculates that China is looking to modify its terms of its oil trade with Saudi Arabia as follows:  

‘China is currently modifying the terms of its oil trade with Saudi Arabia. Specifically, China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar. If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974.’

Whether the speculation is true or not, the threat to the US dollar as the reserve currency is real. The petrodollar system is under an attack directed by China.

From a US perspective, options are limited and further actions like a US invasion of Syria could make the situation worse. Since the US military has decided to back the Kurds to fight ISIS, there is less of a chance to win back Turkey. In my opinion, the best option would be for the US to maintain the current petrodollar system as long as possible until a new one backed by cryptocurrencies is ready. I outlined this in my prior post titled Global Currency Reset Happening Now as Bitcoin Price Explodes. Unfortunately, the US Senate doesn’t have a clue. 

Projects that will Further Internationalize the Chinese Yuan

– China’s yuan inclusion in the International Monetary Fund’s currency basket

– China International Payment System (CIPS) is an alternative payments system to SWIFT

– Asian Infrastructure Investment Bank (AIIB) is an international financial institution that will finance infrastructure projects in the Asia region

– Bilateral Currency Swap Lines completed between China and over thirty counterparties to enable greater overseas trade of the yuan

– Silk Road Gold Fund to facilitate gold purchase for the central banks of member states

– Shanghai Gold Exchange launched to set a new benchmark price for gold bullion

This post originally appeared on News with Chai blog.

CAGE MATCH: Conservative Leadership vs. Alex Jones

Originally Published Under the Title: The Secret Reason Why Many Conservative Media Figures Won’t Denounce Alex Jones

Currently under fire for her controversial interview with Alex Jones, Megyn Kelly tweeted the following a few days back:
“…How does Jones, who traffics in these outrageous conspiracy theories, have the respect of the president of the United States and a growing audience of millions? President Trump, by praising him, appearing on his show, and giving him White House press credentials, has helped elevate Jones, to the alarm of many. Our goal in sitting down with him was to shine a light – as journalists are supposed to do – on this influential figure, and yes – to discuss the considerable falsehoods he has promoted with near impunity.”

Legitimate question – why does Alex Jones have the respect of President Trump? As a presidential candidate, President Trump in fact said that Alex Jones has an ‘amazing reputation’. To date, he has not revoked his statement about Mr. Jones thereby making him conspirator-in-chief. So, in light of this, how can anyone take President Trump seriously? But curiously, as the NY Times states, many conservatives have never publicly denounced Alex Jones.

I have constructed a hypothetical conversation between Rush Limbaugh and President Trump which will provide the answer to why conservatives won’t denounce Alex Jones:

PT: Rush, great to see you.

RL: Mr. President, great to see you. You know, I’ve been meaning to ask you, and I say this with all due respect, but why are you so fond of this Alex Jones guy? I remember calling him a Democrat kook years ago. He is just nuts.

PT: Uh, huh. Well, Rush..

RL: No really, Mr. President. I don’t think you are helping yourself by associating with him.

PT: Rush, you and I know all about fake news.

RL: Sure, drive-by media, but..

PT: Let’s start with the Kennedy assassination, you don’t actually believe the official Warren Commission report, do you?

RL: No, of course not. Wait, you’re not going go all National Enquirer and implicate Ted Cruz’s dad for this?

PT: Well..

RL: Sir, this is crazy. My theory is it had to be the mob or Castro but..

PT: Rush, you know the CIA admitted that it covered up the assassination and there are still missing documents.

RL: Ok, fine, but that was over 50 years ago and we all know about that.

PT: Well, you know what my buddy, Bruce Willis, said to Vanity Fair in 2007 – he was afraid of getting killed:


“They still haven’t caught the guy that killed Kennedy. I’ll get killed for saying this, but I’m pretty sure those guys are still in power, in some form. The entire government of the United States was co-opted. One guy did it? I don’t think so.”

RL: Ok, what does this have to do with anything? Look – I get all the Clinton conspiracies. We all know about the Clinton body count. I covered the Seth Rich murder conspiracy on my show. Sean [Hannity] laid out how he felt last October. You brought up Vince Foster during the campaign. But 9/11 being an inside job? Do you know how crazy that is?

PT: You know about the $2.3 trillion missing from the Pentagon.

RL: Yeah, whatever, that kind of stuff happens.

PT: Rush, you know there was no way those buildings were brought down by fire.

RL: Here we go.

PT: Look, I am a builder and know everything there is to know about building structures. I even said so on 9/11 during an interview that there were bombs in those buildings.

RL: Ok…

PT: Rush, you read the 28 pages right?

RL: Yeah, basically faulted elements of the Saudi government. And, why are we still friends with the Saudis anyway?

PT: Don’t you find it curious how close the Bush family is to the Saudis?

RL: Yeah, but they didn’t have anything to do with it. Why, George W. Bush is a fine man. You are not going with this Bush did 9/11 theory are you?

PT: Let’s just say the Bushes are not so innocent in all this. Just view this.

RL: Is this stuff true?

PT: Of course, these are official government documents and there is lots of circumstantial evidence. Its also plain common sense.

RL: Huh.

PT: Make sense?

RL: Yeah, I guess I finally understand why the Bushes and Clintons are such good friends. And all the new world order stuff..

PT: Yeah.

RL: I also get why you were so tough on Jeb. Wait, so why are we fighting all these wars – Afghanistan, Iraq, Libya. For goodness sake, I was selling Club Gitmo t-shirts!!

PT: Rush, you’re not the only one. Talk to Congressman Walter Jones. He went from calling out France, you know, the whole freedom friesthing to deeply regretting his support for the Iraq war. He even said a few years back that Dick Cheney is probably going to hell.

RL: Wait, so Ron Paul has been right all along?

PT: Ron Paul, good guy – can never be president – but very honest man.

RL: So, Sandy Hook? Pizzagate? Are they all true?

PT: Look, not all conspiracies are true. There are some crazy ones going around. I even heard of one that Jared is a Mossad agent. All the truth will come out eventually.

RL: So, what do we do?

PT: Well, don’t worry, there are plenty of us who know. Alex is one of the leaders. Until we reach a critical mass, we can’t go public yet. Information will come out in pieces. Look, we have gotten the concept of the deep state out there. Before my inauguration, barely anyone had even heard of it. So, we are making tremendous progress, tremendous. Still a lot of hate, a lot of division. We need to come together. In the future, expect more revelations. Like what my buddy Vladimir said. He just accused the CIA of planning the JFK assassination. And you remember how I hinted about not having any columns when I spoke to the CIA?

RL: Ok, I get it. So, what I am going to do?

PT: Rush, the choice is yours, I understand the risks and won’t ask you to do anything you aren’t comfortable with doing. The truth will get out, regardless of what happens to me. It’s up to you to choose which side of history you want to be on.

RL: Thank you sir. This conversation never happened.

Originally Published on News With Chai

Global Currency Reset Happening Now as Bitcoin Price Explodes

A major risk to the solvency of the banking industry is the notional amount of financial instruments such as interest rate swaps known as derivatives. A recent report stated that US banks have over $200 trillion of derivatives exposure. This shouldn’t be a surprise as Forbes covered global derivatives exposure over four years ago: 

the risk that is still staring us in the face: the lack of transparency in derivative trading that now totals in notional amount more than $700 trillion. That is more than ten times the size of the entire world economy. Yet incredibly, we have little information about it or its implications for the financial strength of any of the big banks.

Moreover the derivatives market is steadily growing. “The total notional value, or face value, of the global derivatives market when the housing bubble popped in 2007 stood at around $500 trillion… The Over-The-Counter derivatives market alone had grown to a notional value of at least $648 trillion as of the end of 2011… the market is likely worth closer to $707 trillion and perhaps more,” writes analyst Jenny Walsh in The Paper Boat.

“The market has grown so unfathomably vast, the global economy is at risk of massive damage should even a small percentage of contracts go sour.  Its size and potential influence are difficult just to comprehend, let alone assess.”

To understand the risk of derivatives to the global economy, one should understand the history of fiat currencies and how money is created by central banks. Mike Maloney has a great series that I recommend:
Mike Maloney’s Hidden Secrets of Money

While there are real industries that make real products, one can nevertheless sense that global markets are rigged and current economic wealth is really an allusion created by the central banks. 

Recently, there has been a parabolic price move in Bitcoin (along with several other cryptocurrencies). As of this writing, Bitcoin is trading at over $2700!

According to investment manager Jeffrey Gundlach, China’s instability is one of the main drivers of this spike.


Bitcoin up 100% in under 2 months. Shanghai down almost 10% same timeframe, compared to most global stocks up. Probably not a coincidence!

A recent credit downgrade may have also had an impact according to The Telegraph and Bloomberg.

Forbes adds the following:

..it looks like Chinese money is going into bitcoin, global stocks and bonds. But not gold. Remember, the story of the latter 2016 and early 2017 period, out of China, has been the Chinese government’s efforts to restrict domestic capital from leaving China. It doesn’t appear that they are winning.

China has hinted at attempts to implement regulations to remedy the matter.

In a translated summary of his findings uploaded to Twitter by cnLedger, Xuedong stated, among other items, that “most Bitcoin investors are young people” and that exchange behavior such as faking trading volumes “should be examined and regulated.”

Bitcoin’s future in China “cannot work out without regulations,” he said, speaking in the wake of the US refusal of the first Bitcoin ETF.

The rise of bitcoin buying in China was simply a reaction to an inevitable currency devaluation. It was not the root cause of this devaluation. China is caught trying to balance competing interests: keep up with the latest technology to further grow its economy vs preventing a currency devaluation that could potentially lead to an economic catastrophe.


In addition, there is increasing implementation of Bitcoin recently on a global scale. Here are some examples:

The Japanese are Using Bitcoin More than Expected
Australia Will Recognize Bitcoin as Money and Protect Bitcoin Businesses, No Taxes
Bitcoin Coming To Russian E-Commerce Giant Ulmart Starting September 1 
India’s Zebpay Has More Mobile Users Than All Korean Bitcoin Apps Combined 
You Can Now Pay Bitcoin for Parking at 27 UK Airports 


Fidelity Investments is acknowledging the increased demand by allowing clients to see digital currencies on its website.


Incidentally, for years, rumors of China and Russia joining together to dump the US dollar have been discussed. If true, they could be holding up their economies until the right time to move towards a gold standard. This bombshell report from Zerohedge seems to confirm the idea.


Speaking on future ties with Russia, Chinese Premier Li Keqiang said in mid-March that Sino-Russian trade ties were affected by falling oil prices, but he added that he saw great potential in cooperation. Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.

If Russia – the world’s fourth largest gold producer after China, Japan and the US – is indeed set to become a major supplier of gold to China, the probability of a scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

“We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets,” First Deputy Governor of the Russian Central Bank Sergey Shvetsov told Russia’s TASS news agency.

In other words, China and Russia are shifting away from dollar-based trade, to commerce which will eventually be backstopped by gold, or what is gradually emerging as an Eastern gold standard, one shared between Russia and China, and which may day backstop their respective currencies.

I suggested in a prior post that Bitcoin would be the best alternative for the US to counter the economic alliance between China and Russia. If there is a move toward some form of a gold standard (i.e. gold backed trade note), virtually all fiat currencies (those not backed by gold, silver, oil, etc.) will hyper-inflate. In that case, people will lose confidence in central banks and the only viable alternative will be cryptocurrencies like bitcoin.

There are small hints that the Trump administration is pro-Bitcoin: 

CNNMoney reported:

His budget director, former US House member Mick Mulvaney, had been dubbed the “Bitcoin Congressman” by some of the currency’s backers.

And vice president Mike Pence’s chief economist Mark Calabria has given speeches in support of bitcoin as well. Calabria was formerly the director of financial regulation studies at the libertarian-leaning Cato Institute before joining the administration.

In addition, there was a mysterious Sean Spicer tweet – Did Sean Spicer actually tweet a Bitcoin transaction?

But, there have been some like blogger Michael Krieger who think that President Trump is completely controlled by Wall Street. Maybe he has a point. Just look at the number of Goldman Sachs alumni in his administration. Also, the manipulation of markets (stock, commodities, bond, etc.) continues unabated. Others, like Brandon Smith, are adamant in spreading a completely bogus theory that President Trump has been selected by the central bankers to be a scapegoat for future economic calamity. No one with even a primitive understanding of economics can possibly blame President Trump for some future economic collapse. In that case, blame will be placed squarely on the FED. I easily refute Mr. Smith’s assertion and lay out the Trump strategy to end the FED in my prior post.

So, what is the solution? One approach, suggested by Dr. Ron Paul (back in 2011) would be to declare bankruptcy and return to a gold standard. The market manipulation could end with a new system in place. That would be an incredibly dangerous approach in my opinion. Imagine the 10-year bond moving up 300 basis points (i.e. from 3% to 6%) over a short period of time. With banks completely leveraged and holding trillions in derivatives, they would become effectively insolvent. The whole economy would then implode.

I think a better approach, which is maybe what the Trump administration has settled on, is to try to stave off bankruptcy (via Plunge Protection Team) until an alternate system (like Bitcoin) is in place. Ultimately, Bitcoin is an enemy to all central banks including the FED. As individuals opt to use cryptocurrencies (i.e. wire transfers, payments) and move away from using fiat currencies, the central banks lose their control over people. The central bank will effectively be irrelevant. This alternate system which is being implemented right now is part of the global currency reset that has been discussed for years.

The president of the Federal Reserve of Minneapolis, Neel Kashkari, made some interesting comments about Bitcoin recently:

“This is a topic a lot of people across the Fed are paying attention to and watching how it evolves.”

“The problem I have [with bitcoin] is while it says, by design, you’re limiting the number of bitcoins that can be created, it doesn’t stop me from creating NeelCoin or somebody from creating Bobcoin or Marycoin or Susiecoin.”


Perhaps Mr. Kashkari didn’t realize he was actually making an endorsement for Bitcoin with his statements. Central bankers shouldn’t be the only ones allowed to create money.

In fact, anyone can should be able to create their own cryptocurrency. You can get essential instructions from one of these articles:

How To Create Your Own Cryptocurrency
How Anyone Can Make Their Own Digital Currency

(Wow, maybe this can convince some unfortunate, misguided individuals that the Jews really don’t run the world and control all the banks.)

Back in 1980, as the price of gold and silver exploded higher, the FED raised interest rates several times. They also stopped the Hunt brothers from cornering the silver market. Today, a similar interest rate increase is not possible as the national debt (as % of GDP) is much higher than it was back then.

Although the precious metals markets are rigged, as evidenced by the Deutsche Bank settlement, highlighted in this Bloomberg article, Wall Street has limited resources for manipulating cryptocurrencies. There are no ETFs (Exchange Traded Funds) approved by the SEC that directly track cryptocurrencies like Bitcoin. So, there is limited potential of selling short Bitcoins. There could be future raids on one of the exchanges (i.e. Mt. Gox) but this will only be temporary setback and not stop the momentum of cryptocurrencies.

We can only hope that the transition is smooth. I wouldn’t count on it.

An earlier version of this article was posted on 5/25/15 at the Newswithchai blog.