Hey Income Hunter,

Reuters reported yesterday that Russian gas flows via the Nord Stream 1 pipeline are restarting on time following completion of scheduled maintenance.

This comes after headlines earlier this week that German politicians warned citizens to be prepared for blackouts, gas shortages and energy bills of 1,500-3,000 euros. 

This smells like Putin positioning himself to force Europe to bail on the sanctions and deal with Russia directly for all its energy needs.

I mean, do they want to deal with the guys who have the … oil to go or the one that is begging for oil from Russia’s partners? 

Time to get real … does Europe have any choice?  

Today, I’ll share some insight into what is going on inside the ropes.

Gassing Up

The internal signs are all pointing to Russia gaining strength on the global stage. This is very powerful and obviously not anything the government, Fed or Wall Street want to accept.

However, even in the midst of lockdowns, China has extended its record purchases of Russian oil, squeezing out supplies from the Middle East and west Africa.

Russia has now surpassed Saudi Arabia and China as the world’s largest exporter of crude while Saudi Arabia is now exporting less. 

India is right with China in buying up Russian oil as the two combined bought an additional 1 million barrels per day. That not only helps Russia, but brings in refining profits for the importers as well. 

China Working With the Bank for International Settlements

China’s central bank (PBOC) has signed an agreement with the Bank for International Settlements (BIS) to establish a Renminbi Liquidity Arrangement (RMBLA) that will provide support to participating central banks in times of market fluctuations.

This is big, since the US worked closely with the BIS to have banks work on its behalf to manipulate the paper gold market to weaken gold and strengthen the dollar. 

Here is how the new liquidity agreement will work …

Each participant will contribute a minimum of 15 billion yuan or the U.S. dollar equivalent ($2.2 billion). The funds could be contributed either in yuan or U.S. dollars, and they would be placed with the BIS, creating a reserve pool.

Next the reserve bank of india (RBI) announced mechanisms for international trade settlement in INR (Indian rupees): 

The RBI stated that in order to promote growth of global trade, it has decided to put in place an additional arrangement for invoicing, payment and settlement of imports and exports in INR. 

Sounds an awful lot like the SWIFT system in the US. The transition to a new monetary system is speeding up.

Why would China and India Align With Russia? 

Pretty simple answer … If China and India do not align with Russia, their economies will collapse and hundreds of millions of people may starve for lack of energy. (See the chart below.)

This may have been what the West was missing. They never realized the guys with the energy hold all the cards.

Energy is your economy, without it you can’t survive. 

Now we have Saudi Arabia, Argentina, Iran, Turkey and Egypt joining the BRICS …

So, the bottom line is how could Japan and Europe not play in the sandbox with the energy exporters? 

Could Europe and Japan Be Next?

Japan is having problems firing up nuclear plants, so its supply/demand imbalance is also very tight. And, like Europe, the Japanese continue to import natural gas from Russia. 

What would happen if Russia told them you either deal directly in Rubles or we cut you off completely? 

We know Putin would play that game and, for the sake of guaranteeing energy for their people, you couldn’t blame Japanese leaders for aligning with the BRICS.

One ramification is that it would be a blow to the dollar, which could lead to its collapse under the prospects of a neutral basket alternative currency would emerge. 

Something to think about as we wonder if this is just a dollar correction or something bigger …

Bring It Home

It is certainly not easy to keep up with all the macro forces at work. However, we are talking about a once-in-a-century change.

It really has become everyone for themselves.

There’s no doubt that in that world the US can continue to be one of the largest economies – but it will need to accept a lessened role first.

Meanwhile, the point at which the US surrenders the dollar so we can get back to being a manufacturing powerhouse will be marked by the Fed pivot back to quantitative easing.

That’s when commodities will soar once again.

We are getting closer by the day.

Stay tuned and as always …

Live and Trade With Passion My Friend,

Griff