THE UNOFFICIAL WW3 / MACLEOD FINANCE

The unofficial WW3

The intensification of conflict between the western alliance and the Asian hegemons is speeding up. America and NATO have lost control, and their fate is now in the hands of Russia and China.

ALASDAIR MACLEOD

A number of disparate elements are coming together, demanding resolution. 

But the western alliance is not as battle ready as Russia. 

The former has not innovated weapons sufficiently and doesn’t possess the hypersonic missiles of Russia, China and her allies. 

And the Europeans, including Britain, are too socially degraded as cohesive nations to recruit sufficient troops for their depleted armies. 

Talk of recruitment or even national service in these nations is unrealistic. 

It is not an exaggeration to say that politically, European NATO members are disintegrating.

The pressure to go nuclear is mounting, particularly for America which wants Russia destroyed and has proved to be unconcerned with collateral damage to its allies.

Her wars and operations in Iraq, Libya, Syria, and Afghanistan have created acute refugee problems in Europe. 

And countless Ukrainians have been slaughtered without any regret. 

But America can now only maintain her global dominance by unleashing a third world war. 

That she can retain European allies in this path to Europe’s own destruction is irrational.

Only last week at the G7 meeting in Italy, plans to sequester and divert interest on Russia’s reserves to fund Ukraine’s armaments were finalised. 

Legally, this is theft of Russia’s property. 

The West has signalled to the rest of the world its contempt for property rights — and Russia has made sure the world is aware of it.

This is the year of Russia’s chairmanship of BRICS, to be followed by China in 2025. 

Not only is the membership due to be expanded, but having failed to get a gold-backed trade settlement onto the Johannesburg agenda last August we can be sure that Russia has updated her plans for this year’s meeting in Kazan in October. 

This article looks at how this might pan out.

Meanwhile, the war in Ukraine is destroying that nation’s manhood mainly to save Biden’s skin in the presidential election in November. 

It is remarkable that in modern politics the callousness of Caesar in Gaul when he proudly massacred a million souls for his own glory is being repeated today. 

We look at Biden’s timing from Russia’s strategic point of view. 

And as defeat for NATO in Ukraine looms, America appears to be provoking China into precipitative action over Taiwan almost as a side bet.

Led by America, an increasingly desperate western alliance is pushing these conflicts towards direct engagements with Russia and China. 

Though far from an exhaustive list, the following questions arise:

·      Has the western alliance the manpower and other resources to escalate conflicts against the Asian hegemons? 

And with the majority of the world’s population either in the Asian hegemons’ sphere of influence or determined to not join the western alliance, can the alliance succeed despite passive but mounting hostility from the rest of the world?

·      Will Russia get a gold-backed trade settlement currency approved in Kazan? 

If so, how will it be comprised? 

And what will be the consequences for the dollar-based fiat currency system?

·      What are likely to be the legal and financial consequences of the theft of interest from Russia’s Euroclear account?

·      What are Putin’s intentions over Ukraine, having put out renewed feelers for peace last week? 

And what was the peace conference in Zurich all about, from which Russia was excluded and China decided not to attend?

·      What actions are China likely to take against an increasingly aggressive America in the Pacific over Taiwan?

The resolution of these issues is largely interdependent. 

This article flags up likely answers and gives its readers some guidance as to how these issues relate to each other. 

It would appear that their complexity works against the West which is proving incapable of sufficient strategic judgement, compared with that of the Russians and Chinese. 

It compares the blundering ability to think just one move ahead instead of a more considered and patient approach.

The social background

In any war, the likely victor needs to have a fighting ethic. 

The Spartans versus Greeks, the Roman legions, the Crusades. 

The alliance of Wellington’s army and Blucher’s Prussians against Napoleon at Waterloo. 

And in modern times, the toleration of slaughter in the trenches in the First World War followed by the Allies’ defeat of Germany and Japan in the second world war. 

Men wrenched from their working lives with the threat of death require a belief that what they are doing is for the nation or for God.

These motivations do not exist in the west today. 

National identity is fatally fractured, wokeness has replaced the cohesive morality of Christianity, and there are no material rewards. 

But Russia is not a godless society, and the homeland is being threatened. 

And that is why President Putin has the national backing that western leaders lack.

The rest of the world looks on, refusing to be drawn into conflicts initiated by dying empires. Nations are fence-sitting, many with large Muslim populations antagonised by America’s support for Israel over Gaza.

These are the social truths behind the conflict between the United States with its NATO partners and the two Russian hegemons, Russia and China. 

Skirmishing in various theatres of war with special forces is one thing, but escalation requiring civilian boots on the ground is another. 

In this, Russia has proved herself capable of motivating her men, and China’s command of her citizens suggests the same. 

Instead, Sunak and other European leaders are talking of enforced enlistment — good luck with that.

Warfare has also evolved from the battlefield tactics of yesteryear. 

In the West, we assumed that we can beat Russia through a combination of special forces (i.e. the brilliance of our SAS and Navy Seals) and technology. 

Both these are turning out to be the triumph of hope over experience. 

The west has failed to innovate her defence capability sufficiently and doesn’t possess the hypersonic missiles of the Asian axis. 

And China’s applied technology is now superior to anything we can muster.

In short, as we drift into a seemingly inevitable third world war, these shortcomings will become increasingly obvious, and being built on sand NATO’s fragile unity will likely collapse.

With the exceptions of the USSR and China, the post WW2 settlement saw the United States colonise the world. 

She has hundreds of military bases “protecting” her allies. 

Her currency has been the only settlement medium for commodities and international trade. 

America is determined to protect this privileged position. 

And it is through both the Shanghai Cooperation Organisation and the rapidly expanding BRICS networks that Russia and China are overturning America’s order.

The importance of BRICS is generally not understood in the west, being a silent struggle for global supremacy. 

Nowhere is this more evident than in plans for the SCO and BRICS to do away with the dollar for settling trade. 

It is set to expand from the current ten members to considerably more, as nations gain the necessary confidence to turn against America’s hegemony. 

New BRICS members will be required to turn their backs not only on America, but to the dollar as well. 

A new trade settlement arrangement will be required for that objective to be achieved.

The BRICS currency solution

In the plans for a new BRICS currency, probably the most important adviser is Sergei Glazyev. 

He has Putin’s ear. 

The failure of his initial proposal to make the agenda in Johannesburg was probably a setback rather than the end of his project. 

But there is a larger geopolitical picture to consider.

There can be little doubt that gold will be involved in some way. 

Not only did Glazyev write an article in the Moscow business magazine Vedomosti proposing that a proper gold standard should be reintroduced for Russia’s rouble, but the various briefings and leaks point to gold having a role in the new trade exchange medium. 

If Glazyev is any guide to Putin’s thinking, then gold will be the stabilising factor for Russia, BRICS, and the wider Shanghai Cooperation Organisation.

The reintroduction of gold as the keystone to reserve currencies for all the nations involved is certain to have a major impact on the dollar, the euro, the yen, the pound, and any other fiat currency not in the scheme. 

Almost certainly, it will accelerate the collapse of the dollar, not just because the redemption of these currencies for gold, energy, and commodities generally will accelerate, but because international faith in the value of these currencies relative to the new will be undermined. 

This raises two issues: it will almost certainly lead to the destruction of trade with and between the old order western alliance, and it will also threaten the values of SCO and BRICS member nations’ currencies unless they are also credibly linked to gold’s value.

On the first issue, neither China nor India is ready for such an aggressive step. 

It will destroy much of their existing trade, and in China’s case the central plank of her foreign policy is not to initiate aggressive economic action against her geopolitical enemies, preferring them to make the errors. 

China will therefore respond to events having already planned ahead for them.

The second issue, being the threat to members’ own currencies from a properly functioning trade settlement medium, is likely to be Glazyev’s greatest challenge. 

Only a few of the members have sufficient gold to back their currencies, though many of them have already been selling their dollars for bullion. 

Assuming the wider currency issue is not overtaken by events, the only practical solution is to propose a framework at Kazan, the basis of which is already rumoured to consist of backing by gold and a mixture of participating currencies.

One can imagine that many participants will not want to have their own currencies in the scheme for fear of losing control over them: the Saudis could fall in this camp. 

Glazyev’s plan is therefore likely to rely heavily on the yuan and rouble as new reserve currencies, but not in the front line like the dollar. 

Their trade weighted involvement would justify these ratings anyway and should be acceptable to the Kazan delegates.

If these principal currencies are to have a role in a viable alternative to the dollar, then it is for them that gold backing becomes important. 

As Glazyev pointed out in his Vedomosti article there are substantial benefits for Russia to turn the rouble into a gold substitute anyway. 

While China will not want to take this initiative, except to protect the yuan in a dollar collapse, she could confirm her long-term intention to do so, and to give her statement credibility reallocate to her monetary reserves some of the bullion stocks she has been hoarding off-balance sheet in various government accounts.

It would be an important step in the direction of displacing the dollar, but tactfully handled and presented as a future ambition will probably not be associated in western minds with a deliberate act of dollar destruction by China. 

Therefore, we should expect to see a BRICS agreement in Kazan for a new currency in principle, perhaps with a new committee appointed to come up with a concrete proposal for the following year’s summit when China will be chairman.

Stealing from Euroclear

At the G7 summit in Italy, it was agreed that the interest on Russia’s currency and bond balances in Euroclear be redirected in support of Ukraine’s war effort. 

This interest is as much Russia’s property as the principal which was defaulted on by the US and her allies in the name of sanctions.

There are far greater western-owned assets in Russia, which Putin might seize in retaliation. 

But as Jim Rickards, a lawyer qualified in these matters pointed out in a series of recent interviews, Russia could sue Euroclear wherever it has offices, including Hong Kong, Singapore, Dubai, and Beijing. 

This is where the structure of Euroclear might lead to its downfall.

On shareholders’ equity of less than €10 billion, it acts as the settlement agent and depository for €37 trillion in bonds, equities, and derivatives. 

In order for Euroclear to remove risk of settlement failure, it owns these securities as its own property, issuing electronic certificates of entitlement in their place. 

This is what the dematerialisation of certificates means.

The reasons for this arrangement need not detain us here, but a successful action by Russia under international law in any of the jurisdictions above might require Euroclear to cede some of its property beyond its shareholders’ interests. 

In other words, sell some of or borrow against the pool of securities it owns on behalf of you and me.

It could be an attractive option for the Russian state to sue Euroclear in an attempt to undermine western capital markets. 

In effect, this would compromise the standing of Euroclear with respect to its obligations on all investments in its care. 

In any event, the G7’s cavalier treatment of another nation’s property will not go unnoticed in the global south.

The war in Ukraine

Despite western propaganda to the contrary, it is clear that Russia is gaining the upper hand in the proxy war against America and her NATO partners. 

It has reached the stage where Russia has come up with another peace proposal, as a test of Zelensky’s backers’ resolve. 

At the same time, 92 national delegations attended a peace summit in Switzerland, to which Russia was not invited. 

Joe Biden decided to not attend, preferring the easiness of a Hollywood fundraiser instead.

Biden’s absence spoke volumes about how Ukraine is now seen to be a lost cause. 

Doubtless, that’s why Victoria Nuland who has led on US policy in Ukraine for a decade or more resigned in March. 

Biden’s problem now is how to defer a US defeat until after the presidential election in November. 

America is already ramping up an alternative conflict against China over Taiwan as an alternative theatre of war to Ukraine, but the Chinese are refusing to take the bait. 

But from Putin’s position, he has to decide whether by pushing for an early victory or by delaying, how it might influence the US presidential outcome.

If he defeats Ukraine, which means at least capturing Kiev and driving out US and NATO forces, it will be a political failure for Biden, bookending his hasty retreat from Afghanistan in 2021. 

Trump’s chances of being re-elected should be enhanced. 

It is more likely that Trump will agree to a peace settlement, and the Deep State facing up to reality would probably take the opportunity to concede the policy failure, so long as Russia offers an acceptable fall-back solution.

 Alternatively, if Biden is re-elected it is more likely that aggressive anti-Russian US foreign policy will escalate. 

Therefore, the odds appear to favour a renewed Russian intensification of its military operation in the coming months. 

Perhaps it is this dawning reality driving European NATO members into a panic over the Russian threat, even talking of conscription to bolster their inadequate armies. 

But with their high levels of government debt as a starting point for most of these participants, it would become an economic suicide note, even without a social rebellion of their civilian populations.

Therefore, it appears that not only has Putin the upper hand over Ukraine, but the timing of his end game is being determined by his reading of the US’s presidential election. 

Furthermore, with Ukraine running out of press-ganged volunteers, human resources and battlefield morale strongly favour an early push by the Russians.

The gold backstop

As noted above, there is a strong case for putting the rouble onto a gold standard. 

But being in partnership with China, it is not a decision solely for Putin. 

A premature move is unlikely to have the support of the SCO and BRICS memberships. 

Nevertheless, if America’s mindless doubling down on its losing geopolitical bets continues, a move to undermine the dollar’s credibility by announcing a gold standard could be the only way to avoid escalation towards a nuclear conflict.

It is too soon to make that assessment. 

But as NATO’s prospects in Ukraine continue to deteriorate and western markets increasingly realise that the dollar is being discarded by nations representing the majority of the world’s population, priced in gold the dollar is bound to depreciate. 

This is why central banks not in the western alliance’s camp are reducing their dollar exposure.

Undermining the dollar even more, selling by foreigners is bound to drive up the cost of financing the US Government’s deficit. 

Rising bond yields will spread from New York to the rest of the world wherever there is a government committed to budget deficits. 

Financial asset values will decline, and economic slumps ensue. 

It is getting difficult to argue for a more positive outcome.

Forward thinking Chinese and Russian leaders have been aware of this danger for some time, which is why they have been careful not to provoke it. 

Equally, they have insured against it by accumulating substantial gold reserves to secure their currency and credit values against a full-scale western currency and financial asset crisis.

In default of alternatives, it now appears to China’s households, whose annual savings total the equivalent of $6 trillion, that gold has become an attractive investment option. 

As the crisis facing the western alliance develops, the pace at which these savings migrate from bank deposits into gold is set to increase. 

The quantities involved could easily trigger a crisis in gold and silver paper obligations, if bullion banks in London and New York fail to deliver physical bullion.

As I stated earlier in this article, the resolution of geopolitical issues is interdependent, which makes it virtually impossible to judge the timing of an inevitable currency crisis for the West. 

The only forces trying to manage this risk appear to the Chinese and the Russians. 

Our politicians are unaware of the magnitude of these dangers. 

For those of us trying to protect our wealth in these uncertain times, it is time to batten down the hatches and get out of credit before its value is destroyed.