THE FINANCIAL WAR / MACLEOD FINANCE

The financial war

US and Israeli attacks on Iran have undoubtedly been well planned with Mossad assets on the ground. Whatever the outcome, it will become a financial war against the US dollar.

ALASDAIR MACLEOD

It would appear that in America and Israel the lunatics are running the asylum. 

Against all common sense, and one understands senior military advice, President Trump in league with Benjamin Netanyahu decided to wage war against a very large country, Iran. 

Effectively, Hormuz is closed because there will be no traffic into and out of the Gulf, driving oil prices sharply higher. 

Inflation expectations will rise, if only on the back of oil prices, stock markets will be badly hit, and precious metals soar (see the note on the gold price at the end of this article).

The military action

There are early claims of key Iranian figures being killed in the first bombing wave. 

Maybe. 

But inevitably, a US-cum-Israeli military operation will unite Iranians against the aggressors, negating hopes of an army mutiny or of widespread dissention supporting the attackers. 

It will require boots on the ground and prolonged fighting resulting in US and Israeli casualties. 

Afghanistan should have been a doddle in comparison and look how that ended.

Even before then, we should note that Iran is almost certainly supplied by Russia with hypersonic missiles, virtually impossible to shoot down. 

How they will be deployed is crucial. 

Russian Iksander short range missiles can attack both Isreal and naval assets within 500 kilometres. 

The US better hope that Iran doesn’t have Oreshniks, capable of taking out aircraft carriers at over 3,000 kilometres at speeds approaching Mach 10.

By the time of the mid-terms in November, the outcome for Iran will probably be little more than a memory, while the negative consequences remain hanging in the air like a foul odour attributed to the President.

Attacking Iran is to attack a close ally of China and Russia and integral to their geopolitical partnership, confirmed in a trilateral strategic pact signed only a month ago, presumably in anticipation of an attack on Iran. 

This pact does not commit the other parties to join in a war when one is attacked, but it does mean assistance will be provided to Iran at the discretion of the co-signatories.

Consequences for the dollar

If the US and Israel were to succeed in toppling Iran’s theocracy, it would bring US troops into Central Asia, disrupting the various silk roads across the continent, access to the Gulf, and the Indian Ocean. 

It would place American power in the midst of the Shanghai Cooperation Organisation membership. 

It’s unlikely that China would stand idly by.

By her actions, it seems that China has prepared for an escalation of US hostilities. 

An attack against Iran can only have been most likely now that the US ceded defeat in her proxy war in Ukraine against Russia. 

China all but instructed her banks and insurance companies to sell any holdings of US treasuries just a few weeks ago. 

And she has permitted, even encouraged gold and silver prices to rise strongly, creating a liquidity crisis in silver and putting a dollar debasement trade on the table.

Since Trump’s Liberation Day (2nd April) Xi moved swiftly to establish a gold for yuan facility and widen access to her CIPS settlement system. 

These two moves have made China’s offshore trade and those of her partners independent of the dollar. 

The final piece of her jigsaw would be to reveal her true gold holdings prior to fixing a gold exchange rate for yuan.

Russia is equally prepared for a gold standard, as Sergei Glazyev, senior Russian economist, adviser to Putin, and Commissioner for Integration and Macroeconomics within the Eurasian Economic Commission argued as long ago as December 2022 in a paper for Vedomosti, the Russian business journal. 

Furthermore, the rouble/yuan forex pair is the most established currency link between Russia and China making an international gold exchange standard between these two hegemons eminently realistic.

Russia and China are now prepared to wage all-out financial war against the US and her dollar.

It might not be necessary, with the US President being the dollar’s worst enemy. 

Gold and silver will undoubtedly move significantly higher measured in dollars, as will oil and the entire commodity complex. 

Sleepy US investors are having their noses rubbed in the dollar’s appalling outlook. 

No longer will there be talk of interest rate cuts by the Fed. 

Now it will be fretting over the timing of the next rise, and the consequences for the CPI of higher gas prices.

For what it’s worth, early indications in unofficial Chinese transactions gold is trading tonight (28th February) at $5,560, up nearly $300:

Note translated from Chinese: 

“The grey market in the Chinese market is a completely free market transaction outside the open market and not subject to regulations. 

The dark market reflects the real market supply and demand (including speculative demand), but because it is a place outside the law, there are also phenomena such as large capital manipulation. 

The dark market reflects market sentiment and has reference value.”