Separating noise from signal is always a crucial challenge for an analyst. It’s particularly tough to do during times of significant geopolitical change. In such times, one side generally is gaining a formidable edge as the other grows ever more desperate to keep its slide from getting worse. To that end, the weaker side typically piles on propaganda – i.e., noise – to make it appear as if the underlying trends are in its favor. The job of the analyst, and by extension, our readers, is to cut through that noise to discover what’s really going on. Understanding the role of propaganda in geopolitical analysis is crucial, as it empowers our readers to make informed decisions.
Amidst the noise, the signals suggest that the U.S. may be in a weaker position as the Global South continues to make gains. However, there are also promising signs that the U.S. could reverse its downtrend before it becomes insurmountable. As we will discuss later in this article, some of the apparent desperation and dangerous aspects may just be noise, indicating that the U.S. may have a greater chance of changing course than I had previously thought.
The clearest signals relate to military strength and indicate that the Global South is continuing to gain ground on this front. Propaganda can obscure a lot, but military trends tend to be harder to cover up with misdirection because there are complex numbers that defy even the most sophisticated efforts to hide the truth, figures such as the level of destruction and the numbers of soldiers and civilians killed.
Today’s most significant ongoing conflict is the war in Ukraine. Russia, despite some aid from China and other allies, is fighting it mostly on its own, but Ukraine is essentially a proxy for the West. Specifically, its weapons and financing have mainly come from the U.S., along with contributions from European countries.
If your only source of information has been mainstream news, you might have believed, at least until recently, that the war is close to a stand-off. However, you can gain a different perspective from neutral media sources available on YouTube and Telegram. Except for a brief period in 2023, the war has been one-sided in favor of Russia. Moreover, Russia has suffered fewer casualties than Ukraine. One reason the war has lasted more than three years is that Russia has sought to limit casualties, relying heavily on its superior weaponry to gain the upper hand. Until recently, Russia’s gains have been gradual, but these small, steady advances have led to a dominant position.
Today, even mainstream media has trouble denying that Russia is in control, with the question now being simply how much territory it wants. The most credible sources suggest Russia wants complete control of the four oblasts that are largely Russian-speaking, plus the Black Sea port of Odessa (founded by Catherine the Great). There’s widespread recognition that Russia doesn’t seek to control the entire country but wants to ensure the war ends with Ukraine forever barred from joining NATO. That might involve formally dividing Ukraine into different parts.
Russia’s powerful Oreshnik missile
It’s essential to emphasize that Russia’s success stems from its superior weaponry. Russia’s technological edge has been enormous, exhibiting technologically superior air defenses and far superior missiles, especially its hypersonic missiles. And its most powerful missile, the Oreshnik, hasn’t even been a factor yet, except for one relatively recent test.
That’s likely to change, with Russia poised to employ the Oreshnik in the coming weeks to hasten the war’s end. Since Oreshinik’s initial missile test, tweaks have further enhanced its superiority over anything in the West. While intermediate-range Western missiles typically travel at Mach 1, the Oreshnik travels at speeds approaching Mach 20 and hits its target traveling at Mach 10, with temperatures that approximate those of the sun’s surface. Moreover, the missile is armed with six warheads, each of which follows an evasive course to its target. Each of these six warheads has another six warheads, meaning the missile has a total of 36 separate warheads. Western air defenses are powerless against it. If there are air defenses that could lessen the impact or another missile with similar characteristics, the only candidate would be Chinese weaponry. According to rough calculations, the Oreshnik is approximately 100 times more potent than any comparable Western weapon, and its impending deployment will solidify the Global South as having the dominant military presence.
Countries allied with Russia or China may not have access to those countries’ most sophisticated weaponry. Still, they will likely be able to obtain weaponry more advanced than anything in the West. Though both China and Russia were low-key about any arms supplied to Iran, it’s a good bet that the hypersonic missiles and air defenses that Iran used were provided in part by one or both. And while the propaganda surrounding everything related to the Iran-Israeli conflict was very heavy, evidence indicates that Israel took a bad beating. One general rule when it comes to propaganda is that Google tends to tailor its responses to align with mainstream media. That said, if you Google ‘Israel and Cyprus’, you will see that there has been a flood of Israeli refugees pouring into Cyprus. That, along with information presented on YouTube channels from India, suggests Israel got the worst of it by far.
While on the subject of Israel, the entire world should hope it recovers. This speck of a country has produced giant successes in science and technology. If the world becomes a place where all countries are pulling in the same direction, Israel will have a significant role to play. Its recovery and potential contribution underscore the importance of a unified global community.
“Signs of a major change are on the horizon, promising a shift in the geopolitical landscape. The current dynamics are not set in stone, and the future holds the potential for significant transformations.”
Times, they are a-changing
While a military edge is a crucial factor in any geopolitical contest, it does not necessarily guarantee dominance in other spheres, including the economic sphere. The U.S. maintains a critical advantage over the Global South in the form of the dollar, which, despite some challenges, remains the world’s reserve currency. This status of the U.S. dollar, conducted through the somewhat outdated SWIFT system, remains functional, and countries have become accustomed to it. In contrast, the BRICS countries have openly expressed their desire for an alternative reserve currency.
While the signals from the military front are clear, there aren’t comparably clear signals about the future of the world’s monetary system. However, a major clue recently emerged. It suggests both that a big change is coming and – very welcome news – that the leading players, behind the scenes, are taking steps to ensure it doesn’t lead to economic catastrophe. It’s essential to prepare for the inevitability of change in the world’s monetary system to avoid being caught off guard by potential economic shifts.
That clue was in Asia Times, an online publication widely read in the West. It recently published an article titled “New Tech, old hurdles: Why digital yuan won’t dethrone the dollar.” Its author, Anthony William Donald Anastasi, is an American who emigrated to China and has a mid-level position at a small Chinese business school. I sense that this article was expertly crafted propaganda, with a twist. The twist is that while the digital yuan would be a critical part of a new monetary reserve currency, the article aims to offer assurance that the new currency will be introduced gradually, rather than abruptly. I’d guess that it’s intended to address Chinese fears of economic chaos, which could follow a too-rapid shift out of the dollar. While that chaos might hurt the U.S. more than China, no country would be spared pain.
Why do I conclude that? The reasoning behind the article’s title is revealing. Several quotes stand out. For example:
“The US dollar benefits from a robust institutional architecture over decades, including transparent central bank communications…”
On the contrary, it’s an open secret that major banks are also major market manipulators. Indeed, in recent years, the scale of manipulation, especially in the precious metals markets, has increased dramatically. The motivation is the fear that if the dollar starts falling too fast and the uptrends in gold and silver sharply accelerate, it could lead to conditions that trigger an economic catastrophe.
These fears are not misplaced. The reason precious metal prices can be so easily manipulated is that the U.S. markets for gold and silver are paper-based. In other words, the vast majority of buying and selling doesn’t conclude with someone taking delivery of physical gold and silver. The manipulation to hold the metal markets lower comes in the form of massive short selling by the banks. Technically, when banks short gold or silver, they’re required to have access to the metals to fulfill potential buyers’ requests. In other words, banks are expected to have sufficient quantities of precious metals to cover their short positions. Still, if the derivatives trades are not physically delivered, the short sellers can get away with it. Only very recently have some players demanded delivery of the metals underlying the contracts they have bought. If a sufficient number of longs demand physical delivery, the major bullion banks such as J.P. Morgan, Citi, and Bank of America, who typically have substantial short positions in precious metals, could be in a world of trouble.
Years ago, Andrew Maguire was the first to find concrete evidence of this manipulation, and he remains well ahead of the curve today. He argues the risks extend beyond the effects of a frenzy of gold-buying, leading to customers demanding delivery of gold that the banks don’t have in their vaults. That’s due to a “pyramid of derivatives” attached to these markets. In the best-case scenario, the banks technically own the gold. But banks don’t like to sit on assets that don’t earn interest, so they probably have leased much of their gold to other parties, who in turn have released the gold (or silver) to other parties. The bottom line is that numbers as high as quadrillions of dollars could be on the line if gold and/or silver were to start flying.
And if you’re thinking the Fed could just print a quadrillion dollars, it’s not that simple. Such money printing would be akin to trying to satisfy a massive thirst with saltwater – the more you drink, the thirstier you become. With precious metals, the more dollars that are printed, the greater the desire for gold and silver.
Returning to the Asia Times article, there was another quote intended to be reassuring, or more accurately, to distract from what is really going on. But it was anything but reassuring:
“China’s legal and regulatory frameworks governing finance remain comparatively opaque, presenting challenges for international investors seeking reliable protections for their assets.”
Domestically, China already operates on a gold standard, meaning that any Chinese citizen can exchange gold for yuan and vice versa. But that’s not true for countries that do business with China – or is it? Recently, China anointed Hong Kong as the de facto worldwide center of Chinese trade. A central gold vault, facilitating global trade, played a crucial role in Hong Kong’s rise to prominence. Moreover, credible sources have stated that Saudi Arabia will not only become a foreign host to the Shanghai Gold Exchange but is also in the process of acquiring major gold vaults.
It’s rhetorical to ask if there is anything that provides more reliable protection for your assets than gold. But guess how many times gold was mentioned in the Asia Times article? Not once.
While the U.S. and China are rivals, for reasons of survival, they’re likely working together. For the U.S., a transition to a new reserve currency without embarrassment or economic collapse could be spun as a victory in turn. What is the most likely way this could happen?
A major, and we mean major, revaluation of the gold held by the U.S.
For historical reasons, the 8,000 tons of gold the U.S. supposedly holds is valued at approximately $40 per ounce. Revaluing that gold to a very high number – say, $20,000 or more an ounce – would back up about 20% of U.S. government debt with gold. Moreover, I’d bet that even if the U.S. does not have the 8,000 tons, it will somehow find it and perhaps find even more. It won’t be disclosed that we borrowed a good chunk of that. The lender? Again, the question is rhetorical: the answer is obviously China. However, other countries may be covertly participating in this world-saving scheme.
The revaluation will likely lead to the end of the dollar as a reserve currency. One result will be much higher inflation. Remember that, even in this best-case scenario, which is likely, we will still have a significant amount of debt and will need to avoid a deep recession. In other words, there will still be substantial risks, but they will be manageable.
There are many caveats. If we don’t get this best-case outcome, there would likely be considerable economic chaos. On the other hand, if gold is revalued, the uptrend in gold and silver could pause. Though unlikely, gold could even fall to as low as $3,000 as part of a very complex arrangement among the major powers.
Any cash investors hold could be used to capitalize on a possible temporary drop in metal prices. I’d still bet, however, that continued gains in the metals are more likely than significant drops. Overall, the signals still indicate that we’re in an environment where portfolios should be sharply overweighted in resources, especially gold and silver. Other positions should be leveraged to inflation, for example, investing in small caps would be one approach. We continue to believe that, on balance, foreign stocks will prove to be more reliable investments than U.S. equities.
These are incredibly challenging times for investors and the world at large. We remain committed to keeping investors as informed as possible about the current economic realities, including those that may be less favorable, and focusing on investments that we believe can help keep you financially secure.
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