The American Depression
Russia has allegedly stopped selling their gas for dollars to unfriendly nations. Buyers must now use rubles. The 2 year treasury is yielding more interest than the 10 year treasury. America is not the economic powerhouse of 1945. America is in a depression.
Most of America’s economic power comes from foreigners using the dollar as the world’s reserve currency, especially for gas and oil purchases. Yesterday, March 31, 2022, President Putin decreed that unfriendly nations (NATO) buying Russian gas must use the Russian ruble as payment.[1]
Via Elliot Smith of CNBC,[2]
“‘In order to purchase Russian natural gas, they must open ruble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow,’ Putin said in televised remarks.
If such payments are not made, we will consider this a default on the part of buyers, with all the ensuing consequences. Nobody sells us anything for free, and we are not going to do charity either — that is, existing contracts will be stopped.’”
While nations such as Germany and Austria are already preparing for rationing, it does not appear that the decree is being enforced as of yet.[3][4]
Via Sam Meredith of CNBC,[5]
“Instead of stoking panic in Berlin and Rome, German Chancellor Olaf Scholz and Italian Prime Minister Mario Draghi believe the decree does not apply to them.
Russia’s state-controlled gas giant Gazprom said Friday it was continuing to supply natural gas to Europe via Ukraine in line with requests from customers, according to Reuters. CNBC has contacted a spokesperson at Gazprom for further details.”
While that situation is being sorted out, the 2 year US treasury note is yielding more interest than the 10 year treasury. On March the 29th, March the 31st, and for most of today, the 1st of April, loaning the US government money for only 2 years has yielded more interest than loaning them money for 10 years. Usually, if someone wants to take a long time to repay a loan, then they will need to pay back more money- interest. An inverted yield curve is a line on a graph that shows that short term loans are yielding less interest than long term loans, by dipping down instead of going up with time.
An inverted yield curve is a sign of an impending recession.[6]
According to Reuters,[7]
“NEW YORK, March 29 (Reuters) - A key part of the yield curve inverted on Tuesday, as the 2-year U.S. Treasury note yield briefly rose above the benchmark 10-year U.S. Treasury note yield for the first time since September 2019.
An inversion of the two-year, 10-year part of the curve is viewed by many as a reliable signal that a recession is likely to follow in one to two years.”
September 2019 was the beginning of the Repo Crisis. The Repo Crisis was the catalyst for the economic depression that has been called a lockdown for the past two years. The Fed “solved” the crisis by printing money and lowering interest rates while the government told everyone that a virus was a reason for the inflation, job loss, impoverishment, and police state (lockdowns).[8-11]
The inflation of today are the good times because the Fed is stuck between a rock and a hard place. Either the Fed acts as the lender of last resort by printing the money that the US government needs to stay solvent and the dollar becomes worth less and worthless, or it stops printing money, raises interest rates, dries up the supply of affordable loans, and causes defaults on a record scale.[12]
Printing money will only accelerate nations abandoning the dollar for international trade. Some already are. Srijonee Bhattacharjee writing for AlJazeera notes,[13]
“Now with several Russian banks having been cut off from the international financial messaging system, SWIFT, Russian businesses have a much tougher task to make and receive payments for trade as they are primarily denominated in US dollars.
The Indian government is reportedly considering alternative methods of exchange to ensure that receivables of Indian exporters against sales to Russia that are stuck are cleared. On Wednesday Bloomberg News reported that the Indian government is considering a proposal from Russia to use a system developed by the Central Bank of Russia for bilateral payments.”
Russia has allegedly stopped selling their gas for dollars to unfriendly nations. Buyers must now use rubles. The 2 year treasury is yielding more interest than the 10 year treasury. America is not the economic powerhouse of 1945. America is in a depression.
[1]https://www.hamiltonmobley.com/blog/the-death-of-the-petro-dollar
[2]https://www.cnbc.com/2022/03/31/putin-says-russian-gas-must-be-paid-for-in-rubles-from-friday.html
[3]https://www.bbc.com/news/business-60925016
[6]https://www.hamiltonmobley.com/blog/the-inverted-yield-curve
[7]https://money.yahoo.com/u-2s-10s-treasury-yield-205525677.html
[8]https://www.hamiltonmobley.com/blog/risky-debt
[9]https://www.hamiltonmobley.com/blog/gm0y7pp8tk6fltxk1jjvnwsk1wsfwd
“The Fed is already stuck in a liquidity trap as they had been gradually raising interest rates since December 2015 because the economy had been improving.[3] However, on July 31st and September 18th, 2019 the Fed began lowering rates (buying assets)[4] in preparation for a downturn and then in response to the September 15th and 16th repo crisis.”
[10]https://www.hamiltonmobley.com/blog/g16m2k3xa0ggswu0bxcruvubfvxhme
“Quantitative Easing (QE) is financial jargon for printing money. Today, the New York Federal Reserve announced that they would print an additional $1.5 trillion (inflation) today and tomorrow in the repo market because of the coronavirus with even more inflation to follow to keep the repo rate low.”
[11]https://www.hamiltonmobley.com/blog/g6gv7zymafxibj7i7t0wyurnx9is45
“The Coronavirus is being blamed for the current depression by Federal Reserve Chairman Jerome Powell.
However, just as unhealthy people can die from the common cold, the catalyst for the depression is the Coronavirus quarantines but the reason is taxation, regulations, debt, and inflation.”
[12]https://www.hamiltonmobley.com/blog/printing-money-lowers-interest-rates