While much of the conversation in the US today is focused on the Twitter files and the fact that it is now becoming very clear that US intelligence agencies were quartered within Twitter's org chart and leading some of the efforts to censor speech on the platform and shadow ban individuals who were exhibiting wrongthink, President Xi from China was in Riyadh wooing the Gulf Cooperation Council and making power moves in international oil markets. This is a theme that we have been covering for years here at the Bent. The prospect of countries like China and Russia convincing those who dominate oil markets in the Middle East to begin settling oil trades in currencies other than the US dollar is something that the US empire should be very worried about. A lot of the leverage that the US has over others in the geopolitical playing field is driven by the fact that countries have to convert their local currencies to dollars when conducting international oil trades. This drives a significant amount of demand for the dollar and is a big part of why the dollar is currently the reserve currency of the world.
Once countries begin settling oil trades in their native currencies demand for dollars will take a material hit. That's why today's news out of Riyadh should be on your radar. There have been small steps that have been taken in the last four years that have gotten us to this point. Mainly, political posturing from Xi, Putin and others explaining their intent to begin making trades in this way. However, it seems that today was an escalation with China signaling that they have the necessary exchange infrastructure in place to begin settling their oil purchases from Saudi Arabia and other producers in the Middle East in yuan. Things should get very interesting from here.
This will come as a shock to many who haven't been paying attention, but this move is not surprising in the least bit. In a world that is becoming increasingly multi-polar as super powers drift further away from cooperation with each other it makes sense that they would not want to benefit who they deem to be an enemy by driving demand for their currency. Why prop up demand for the dollar when the US is sanctioning and/or levvying burdensome tarrifs on your economy? Working a deal with oil producing countries to settle in your native currency is a very logical thing to do.
Keep an eye out on this trend in the coming months. Even though something like this should have been expected your Uncle Marty isn't convinced that this scenario has been priced in.
With that being said, it's a shame for China and others who begin to settle oil trades without the US dollar. If anything, this will only be a successful tactic temporarily because at the end of the day their currencies are poorly designed fiat currencies too. Bifurcating currency markets further should lead to more volatility.
At the end of the day, it only makes sense to settle these types of international trades in an apolitical currency that cannot be controlled by any one party or cabal of parties. Eventually everyone is going to become privvy to this glaringly obvious fact and begin settling their trades in bitcoin. It probably won't be happening in the short or medium-term because the bitcoin market needs to become significantly more liquid before taking on settlement trades of that size, but it is the only logical end state for a world in which trust at the international level is erroding.
Be aware, freaks!
Clip of the day...
Sam Abbassi explains why fiat money will fail. Subscribe to the TFTC Clips channel to get high-signal-bite-sized pieces of content.
Great couple of days in Nashville. Enjoying the Fall weather.
Enjoy your weekend, freaks.