by Peter Schiff, Schiff Gold:
The Great Game of geopolitics faces a new challenge. The new hotspot is Israel and the Muslim Middle East. Ukraine is all but over, and the US is likely to abandon her to her fate — like Afghanistan.
We shall have to see how both will play out. Meanwhile, energy prices are set to keep inflation and interest rates high, undermining governments, banking systems, and businesses dependent on cheap credit.
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This article concentrates on the consequences for currencies, which are simply unbacked credit valued by the public’s faith in them. To assist a proper understanding of money, the relationship between gold, which is universally accepted as legal money, and detached fiat currencies is explained as an objective/subjective relationship.
There are a number of moving pieces behind a gathering fiat currency crisis. Putting this jigsaw together reveals an increasingly certain crisis for G7 currencies. There is little doubt that both China and Russia are fully aware of this danger and are ready to defend their own currencies and economies by reverting to gold standards. And once the crisis for the fiat dollar and other G7 currencies starts, it could develop remarkably quickly and be unstoppable.
It all comes to he who waits…
According to NBC,[i] the US and the entire 50-nation Ukraine Defence Contact Group, is exploring the possibility of a ceasefire in Ukraine. These talks are reportedly about what Ukraine might have to give up in order to secure a deal with Russia. With Ukraine now little more than a footnote in news broadcasts, public and political support in the western alliance have fallen away.
And now there is Israel’s fight against Hamas, which for the western alliance is the new concern. Ukraine is being abandoned. With the US clearly signalling her changing military priorities, Putin is bound to stand firm. Not only does he want the US out of Ukraine, but out of Europe. He has always wanted to remove the US-led threat to Russia’s western border, and with the failure of the Ukraine campaign it now looks like he will succeed. Furthermore, both Russia and China want unfettered trade with Western Europe, which is prevented by the EU kowtowing to the US foreign policy.
The alliance will have no option but to simply walk away and leave Ukraine to its fate — just like Afghanistan. It will be two dramatic foreign policy failures in the Biden administration’s first term, only ameliorated by another new priority: rescuing Israel from Muslim oblivion. But America and her allies are now at a significant disadvantage in the Middle East, which in the last year or two has openly sided with the Russia—China axis. Having supported the Israelis against Hamas from the outset, the western alliance faces nearly the entire Muslim world of about two billion people strongly against any military intervention.
US Secretary of State Antony Blinken has an impossible task persuading regional forces to support Israel against Hamas. Hamas might not be popular around the Gulf, but the Gazan Palestinians are evoking world-wide sympathy while the Israelis are inviting condemnation. Blinken has trid to persuade the Israelis to use smaller bombs to limit collateral damage — not an approach likely to win respect and support in the region.
In short, the western alliance is getting entangled in an impossible situation through its support for Israel. Russia’s involvement has been limited to reassuring her Muslim population and the Muslim nations to her south by voicing the two state solution. Iran is taking a different view, as demonstrated by her Hezbollah mouthpiece, Hassan Nasrallah in a widely anticipated speech last week. He did not actually declare war, pointing out that Hezbollah was already skirmishing with the Israelis in Northern Israel. It was what Nasrallah did not say, which was important: Hezbollah was already at war, which is likely to escalate without a formal declaration.
Instead of just standing by, Iran is likely to become more directly involved. And in these circumstances, if the US is drawn into attacking Hezbollah or Iran, it is difficult to see how such an escalation can succeed. Iran has very sophisticated weaponry and knows the precise locations of US assets in Northern Syria and Iraq. Furthermore, it can easily block the Straits of Hormuz, depriving the world of oil and natural gas.
With the dying of American influence, Iran now counts among its supporters the Saudis, and pretty much the entire Muslim world. And it is not beyond the bounds of possibility that an escalation of these tensions would lead to the closure of either the Red Sea at Bab-el-Mandeb or Suez, or both.
Will the US risk provoking Iran and the Houthis in Yemen to close off these choke points? Common sense and Blinken’s attempts at diplomacy say no. But if that is the case, Israel’s very survival could be threatened. No wonder it will suit Putin and his partner President Xi to stay well clear of this dispute. Time will tell as to how this plays out. But it is the economic consequences which matter to us, and for that matter to the Asian hegemons as well.
