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Gold Banning, Oil Caps by G7 — But Russia ‘Default’ Still Unconvincing
Sophisticated investors understand Russia has not indeed ‘defaulted’, despite claims by the G7 — meanwhile, investors are racing to find ways to enter the restricted Russian markets, to benefit from its growing prosperity.
Mainline papers are saying Russia has defaulted, as it can’t service its debt. Last time we checked, global was near 70 rubles to the AUD dollar, which means it’s actually growing stronger regardless of the sanctions.
Indeed, Russia does not have particularly large foreign debts, and the only reason it hasn’t been able to pay them is because sanctions have blocked this. The G7 also wants to impose a gold ban. But this won’t make the slightest difference to Russia’s economic situation, as it sells to China and the Middle East.
Even wilder than this, these countries are now considering fixing Russian oil prices. What do we think? This will only lead to:
- Oil becoming unavailable in the market. The markets don’t work this way. Imagine you were to succeed at fixing Saudi Arabian oil at a hundred dollars, but you want to fix the price of Russian oil at half of this, in a situation of shortage, this oil would vanish from the market.
- This missing oil would enter onto the black market. Or it would mix around in different avenues and then reach astronomical levels.
- Even worse prices. During a period of high inflation, you actually intensify supply and demand shortages. Which means this will only hurt G7 countries and intensify inflation further.
Investors still strongly want to invest in the Russian ruble because it is so backed by oil. Through all of this, what can only be called craziness, let’s shine a spotlight on the G7 itself.
Let’s first take a broad lens view of things:
The G7 was first and foremost supposed to be a meeting, or gathering, of the leaders of the top Western economies. When it was formed all of those years ago back in the 70s was all about looking at economic issues.
Today, we have high interest rates from looming recessions and interest rates, supply chain damage, all of this growing desperation on the horizon, including food banks popping up in modern Western cities like Britain — and yet, the sole agenda of the G7 today seems to be on Ukraine and, as an aside, competing with China’s belt and road initiative.
So clearly, what we’re seeing is a shift in Western economic and production power, with the G7 becoming much more propagandistic than actually serving their original function.
Expect an energy crisis in spring (winter for Europe)
A growing number of sophisticated financial thinkers are saying that Europe will freeze in their winter owing to its sanctions of Russia, who is a major player in oil supply. Australia is better off, considering its warmer climate but it won’t escape the energy problem.
Ultimately, it’s only possible for the G7 to price-fix Russian oil prices if they get the permission of OPEC, who is responsible for setting the price of oil. However, there’s no reason for OPEC to agree to price cutting.
Furthermore, they need the unanimous agreement of all of the other players in the market. However, why would the Qataris, while Saudi Arabia agreed to this deal? We very much doubt that the gold or oil sanctions will have any intended negative impact on Russia — now is a good time to invest in solar panels!
Indeed, Habeck admitted as much, as cited by RIA Novosti: that the price caps proposed by America for the buying of Russian oil is only a good idea if enough nations agree to participate. “Let’s see how they will move forward”.
It must be said that this plan to fix the price of Russian oil and to ban gold was proposed by the G-7 button has not actually been implemented. However, it reveals the growing irrationality and desperation and the threat of BRICS to the Western power balance.
Today more than ever, you need to be hyper aware of data propaganda. Entities like the G7 have apparently become so far removed from the practical realities of citizens that what should be a sophisticated attempt to deal with the realities of struggling families, fighting to deal with mortgage payments and to afford rent and food, is irresponsibly managed.
In this farce, all attention is being focused on the Ukraine-Russia conflict and imposing sanctions that ironically intensify the economic consequences from a broken supply and demand chain that has been weakening at an alarming rate particularly since the pandemic was enforced.
So our take is that it’s extremely important to focus on not going into debt, saving money, and building local communal networks to locally handle things as they further break apart.