The end of fiat hoving into view…
Tragic though the situation in Ukraine has become, the real war which started out as financial in character some time ago has now become both financial and about commodities. Putin made a huge mistake invading Ukraine but the West’s reaction by seeking to isolate Russia and its commodity exports from the global marketplace is an even greater one.
Furthermore, with Ukraine being Europe’s breadbasket and a major exporter of fertiliser, this summer will bring acute food shortages, worsened by China having already accumulated the bulk of the world’s grains for its own population. Inflation measured by consumer prices has only just commenced an accelerated rise.
Because they discount falling purchasing power for currencies, rising interest rates, and collapsing bond prices are now inevitable. Being loaded up with bonds and financial assets as collateral, the consequences for the global banking system are so significant that it is virtually impossible to see how it can survive. And if the banking system faces collapse, being unbacked by anything other than rapidly disappearing faith in them fiat currencies will fail as well.
Unforeseen financial and economic consequences
Back in the 1960s, Harold Wilson as an embattled British Prime Minister declared that a week is a long time in politics. Today, we can also comment it is a long time in commodity markets, stock markets, geopolitics, and almost anything else we care to think of. The rapidity of change may not be captured in just seven calendar days, but in recent weeks we have seen the initial pricking of the fiat currency bubble and all that floats with it.
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