Welcome to our Friday mailbag edition!

Every week, we receive some great questions from your fellow readers. And every Friday, I answer as many as I can.

This week, the conversation continues about the all-digital dollar we’ve been warning about – following my recent visit to Sweden

And one of your fellow readers questions the Fed’s incompetence.

Let’s dive in…

The BRICS countries and the Saudis are making their moves on the dollar and testing the water to end the petrodollar system. But where is the strong currency that can replace it?

No currency has the strength of the U.S. dollar and no country the potential of the growth in business over the next five years as the USA. Billions of dollars have been invested into U.S. based industries; gigafactories, semiconductors, 5G, pharmaceuticals, etc.

And do you think that the U.S. will sit back and do nothing and watch its economy go into free fall? Of course it won’t! Nobody knows what lengths the Pentagon will go to stamp U.S. authority and might on oil trading across the globe.

– Malcolm G.

Thank you for your thoughts, Malcolm!

You’re right to imply that the BRICS countries don’t have a “strong currency” to end the petrodollar system.

Granted, China’s yuan is often cited as the closest contender to the U.S. dollar’s long-lasting reign as the world’s primary currency.

But this is really nothing new…

Going as far back as March 2018, the Chinese government launched a crude oil futures contract on the Shanghai International Energy Exchange (INE) denominated in Chinese yuan.

It enabled any oil producer in the world to sell its oil for something besides U.S. dollars… in this case, the Chinese yuan.

Thus, the petroyuan was born.

This created a new, non-U.S.-dollar benchmark for the price of oil. It also allowed oil market participants to completely bypass the petrodollar system. That had never happened before in the petrodollar era.

It’s no surprise that China is using oil in its strategy to establish its currency on the world stage.

Oil is the largest and most strategic commodity market in the world. Every country needs it.

But oil-producing countries also need to be able to invest all the money they receive for their exports. And that’s the problem.

Because no matter how many yuan you have, you can’t easily use or invest them anywhere outside China.

That’s because, unlike the U.S. dollar, the yuan is not a freely convertible currency. Its exchange rate against other currencies, including the U.S. dollar, continues to be managed by China’s central bank.

Beijing’s tight control over the yuan also partially explains why it hasn’t caught on with international investors.

At the end of the day, for a currency to become popular, it has to be safe, have a stable value and market depth, and have the ability to move without restrictions.

Now, smaller BRICS economies may not have these problems. But they often lack the scale needed to move a large volume of cross-border transactions.

So, in that regard, I agree with you: The BRICS countries continue to lack a strong currency to replace the dollar.

The U.S., as you pointed out, has the scale and economic muscle to welcome all those dollars from international investors.

But here’s something people often forget: There’s no law that oil exporters must accept U.S. dollars for their oil.

Governments can decide what makes the most sense for them economically and geopolitically.

This is exactly why BRICS as a whole, and China specifically, have been trying to cozy up to the Saudis.

Remember, in August, the BRICS announced it was bringing not just the Saudis, but also Iran and the UAE, into its group. These are the world’s top oil producers.

By doing this, the group is solidifying its role in a crucial global trade sector: oil exports. This places BRICS in a unique position to challenge the U.S.

This move could siphon off a portion of U.S. oil trade. That’s the petrodollar trade you mention.

Keep in mind that China has already begun using the yuan for most of its energy imports from Russia. Russia is now using China’s yuan to settle 25% of its trade with the rest of the world. 

Meanwhile, India’s largest refinery, Indian Oil Corp, and two other refineries there began paying in yuan for some of their Russian oil imports.

Throughout the year, China has been building up its Russian crude oil reserve, which hit its highest level in three years.

Now, I’ve already mentioned on numerous occasions that I don’t see the “dumping of the petrodollar” scenario unfolding tomorrow.

More than 90% of all oil traded around the world is still priced in U.S. dollars. That’s not the type of thing that can change overnight.

Now, I can’t speak to what lengths the Pentagon will go to keep the petrodollar system ticking. That would be pure speculation at this point.

But as I’ve been writing, the BRICS aren’t the only ones working to challenge the U.S. dollar. There’s a more imminent threat coming from within our own borders.

The Federal Reserve, the White House, and the financial elite are set to enact the biggest change to our money since 1971.

I’ve found evidence that they’re colluding to virtually “ban” cash – leading to the end of the dollar as we know it. And that brings us to our next question…

Cash-free in a country like Sweden may work. But here in the U.S., probably not. Having worked for some 30 years with the homeless and the poor at soup kitchens and food pantries, I know that many, if not most, would never be able to enroll in any such payment card.

Many have no current driver’s license card for some reason and thus do not have the picture ID to open a bank account. I have lost count of the number of ID cards that I have purchased for people just so they can take a job that they had applied for and been hired pending the ID.

I am retired on a very comfortable income, and I am not a socialist, but a discussed Republican. We have rigged the economy to benefit the 10% and s— the rest.

– John O.

Hi, John, thank you for your thoughts. It sounds like you have done commendable work for your fellow citizens throughout your life.

You are absolutely right – the homeless and poor are the least able or likely to have IDs or bank accounts.

They are also, therefore, the ones that would be sadly more detached from the rest of society from a financial perspective, if we became a cashless or near-cashless country.

This is one of the greatest problems that arises from the move to a cashless society.

And it’s not just a risk for the homeless and poor. Older pensioners can also be shut out by a cashless world if they are not tech-savvy or are just used to using cash.

In fact, here in the U.S., a Gallup poll found that older Americans are much more inclined than younger Americans to want to carry cash. Of those 65 and older, 73% said they like to have cash on them at all times. For those aged 50-64, it’s 64%.

And 56% of all Americans say they like to have cash with them at all times when they are outside their home. That’s up from 54% since Gallup’s previous poll in 2016. 

Now, you say we’ve rigged the economy, and I couldn’t agree more. It’s the Great Distortion I’ve been warning about in these pages, which has distorted the economy for the benefit of an elite few at the expense of Main Street.

I’m afraid that because the economy is rigged, many of the elites that run or benefit from that imbalance don’t care as much as they should about those that are left behind.

The growing pay gap is a case in point.

Over the past decade, average CEO pay increased by $5 million to $16.7 million per year, nearly triple. Meanwhile, average workers’ wages rose by $15,460 to $61,900.

I’m not opposed to people making money. But when the system is rigged to help the rich get richer while the poor get poorer, it’s not fair.

Yes, it’s true that more people in Sweden have bank accounts than in the U.S.

In fact, it’s about 100% of the adult population (from the age of 14) there. That’s compared to in the U.S. where about 81% of adults have bank accounts.

And it’s also true that people with bank accounts are more able to go cashless, from a practical perspective, than people that are unbanked or don’t have appropriate IDs with which to open a bank account.

And that’s another problem.

Because be that as it may, we might see the U.S. move to a cashless society, or one based on digital currencies, sooner than you think.

As I wrote last week, most countries, including the U.S., are already moving in that direction – even if they are doing so at different paces.

However, this brings me to one of the other great problems with becoming totally cashless or even mostly cashless.

We lose the choice over what financial information we share. And with that, we lose more control over our privacy. And that’s why I want you to be prepared.

See, I set out to uncover what a cashless society in America could look like. And I put my findings in this video report

…Along with a way to get “payback” with a few strategic investments that could deliver 250% profits or more. Watch it here to learn more.

I do not agree they don’t know what they’re doing. They appear to follow the dot plots consistently, and they watch PCE change rather than CPI, thus ignoring food and fuel price changes. And they continue QT.

I admire they are trying to work the excessive and growing federal fiscal stimulus. There is your inflation driver! The Treasury in my view is still getting bargain rates. Interest may yet crash the federal budget, the dollar, and the economy. And idiots in the White House will blame everybody else.

– Jaspal S.

Hi, Jaspal, thank you for your email about the Federal Reserve’s interest rate policy. 

It’s true that it does have a policy. And the dot plots – which anonymously represent each voting member’s rate opinion – provide some color.

The accuracy is contingent on how the Fed interprets the data, though. And that can change.

In December 2015, for instance, the Fed’s 2016 dot plot forecast four rate hikes. In the end, we only got one – in December 2016. And in March 2020, the Fed didn’t even present a dot plot.

The issue at hand, to me, is whether the Fed’s current policy truly impacts inflationary pressure in the real economy or if it adds to overall financial instability. 

For instance, as per its own report, there are 732 banks at risk of failure, largely due to the speed of rate hikes slashing the value of their Treasury portfolios and making it more difficult to respond to customers extracting deposits.

The reality is that there are external factors that the Fed simply can’t control.

That includes the price of commodities such as oil and wheat, for example. Such commodity prices move because of matters from geopolitics to harsh weather to war. 

As for blame, the Fed has not accepted blame for its role in inflating the money supply and printing money (electronically) in excess during the Covid crisis and post the financial crisis period before that. 

This did cause inflation in assets that relied on cheap money, more than say, oil. And in that way, yes, the Fed did have a hand in inflating the housing market and housing prices.

However, the Fed hasn’t been open about its role in inflating prices by virtue of cutting rates and printing money.

As we’ve written about in the past, the Fed didn’t appear to notice the housing price boom until oil prices started rising last year.

And the Fed has been focused on the “hot” labor market as a main cause of inflation, arguing it needs to be tamed.

And yet, as I wrote on September 21, average incomes have been declining throughout the Fed’s recent rate hikes.

As for commodity prices, the Fed can’t ignore food and especially fuel price changes.

It does like to consider the inflation indicator PCE in its “core” forms, meaning ex-food and fuel. But even core PCE or core CPI figures are impacted by fuel prices. 

For instance, transportation services and medical care services are included in core PCE. 

Transportation costs are driven partly by oil prices that fuel vehicles. Hospitals can’t run without paying energy bills, ambulances can’t pick up and deliver patients, and equipment needs power to operate.

That’s why fuel is an underlying driver of any inflation measure, and it can’t be isolated out.

And it’s impacted more by geopolitical factors. Factors like OPEC and other oil exporting nations like Saudi Arabia and Russia, cutting production and thus supply, which can push up prices.

The Fed can’t control that. The Fed can’t control weather or war that impacts crops and therefore food prices.

The point is that the Fed is misleading the public into believing its policies have more isolated influence on inflated prices than they do. Even lower PCE last month still means prices are inflating, just at a lower speed.

In terms of quantitative tightening (QT), yes, the Fed has a plan. And it has reduced the total value of its book of assets from just below $9 trillion to just below $8 trillion over this year. 

That still remains nearly double what it was during the aftermath of the financial crisis of 2008. 

Our national debt has just popped over $33 trillion. The Fed can’t control that either. That’s because we don’t “earn” enough in tax revenues to offset our spending.

The result of issuing so much debt while the Fed has increased rates by so much so fast is that interest payments on that debt have inflated. They are set to triple from $475 billion in 2022 to $1.4 trillion, or about 3% of GDP, by 2030. 

Thus, the Fed’s current policy is costing taxpayers more in terms of a record deficit or distortion between what the U.S. earns and what it spends.

I agree with you. No one in the White House, Fed, or Treasury Department is addressing these issues or taking responsibility for them.

For example, the Fed didn’t cause the deficit directly, but it did cause inflation in the cost of servicing our debt, which amounts to the same thing.

And as for pointing “blame” away for inflation or other problems – that’s a hallmark of Washington politics. 

That’s why it’s important to ignore what the Fed says it can do, at this point, and protect the value of your own wealth.

In our Rogue Strategic Trader publication, for example, we’ve positioned readers to fight this with a small gold mining company.

Except we’re not buying shares. We’re using a unique investment vehicle that allows us to claim a stake in this firm at a price 98-times cheaper than the shares.

It’s just as easy as buying the shares… But at Strategic Trader, we’ve used this strategy to deliver returns as high as 50x.

Paid-up Strategic Trader subscribers can get our full research on that here. If you’re not a paid-up subscriber yet, you can learn more here.

That’s it for this week’s mailbag! Thanks again to everyone who wrote in.

If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition.

I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice.

And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at [email protected].

Happy investing… and have a fantastic weekend!



Nomi Prins
Editor, Inside Wall Street with Nomi Prins