Where Black political leadership failed on Ukraine …

Angus Roxburgh recently wrote an honest and insightful piece for The Guardian about how Western nations can bring about a quicker end to the conflict in Eastern Europe. Mr Roxburgh recommends that all interests of each stakeholder be taken into account in order to reach a resolution.  In the article he states the following:

“To get Putin to the negotiating table at all, everything would have to be up for discussion – including Ukraine’s borders, Russia’s age-old security concerns, perhaps even the very logic of basing today’s international frontiers in that part of Europe on what were internal borders in the USSR, drawn up by communist leaders precisely to prevent Soviet republics and regions from being viable independent states. The outcome of the talks does not need to be predetermined. The important thing is to talk rather than fight.”  

I agree with his assessment.  Americans in general and Black Americans in particular have begun and ended their analysis of the conflict with the mantra of Russia’s “unprovoked” attack on Ukraine.  In the world of geopolitics, I doubt there is such a thing as “unprovoked.”  Most Americans, for example, fail to incorporate into their conclusion that the Japanese attack on Pearl Harbor was unprovoked when history demonstrates that United States’ aggression in the Pacific, particularly the restriction of access by Japan to oil supplies, was enough to rile up the Japanese to embark on a plan to push the United States out of the Pacific.  Japan’s attack was not unprovoked. It was a responsive measure.

A similar argument can be made by Russia.  For decades they have been apprehensive about the West, particularly the North Atlantic Treaty Organization’s encroachment on then Union of Soviet Socialist Republics now Russia’s borders.  The fall of the USSR and NATO’s influence on Eastern Europe has been enough to give Vladimir Putin a few nightmares.  I could make the argument that Mr Putin’s 2022 invasion was also a preemptive strike much like Japan’s preventive strike in 1945.

To make this kind of analysis requires stepping outside of the flashing disco ball and looking at all sides of the issue, especially if the issue has some sort of ramifications economically.  Stepping outside of the issue in order to account for as many factors as possible aids in strategic positioning.  For the black community, applying this rule puts it in a position to garner more tangibles from trading in the political markets.

For example, black political leadership has fallen in lock step with the media and political narrative that the Ukrainians are Luke Skywalker and Russia is represented by the evil Darth Vader.  Black leadership never took on the burden of educating the black community on the factors and environment that turned Anakin Skywalker into Darth Vader.  The overnight conversion of a group of Americans, who on 23 February 2022, couldn’t find Ukraine on a map, into flag waving Ukraine supporters on 24 February 2022 is near stunning. 

Black leadership apparently did what it did best: exchanged aggregated black support for a few political campaign finance crumbs from the leadership of the Democratic and Republican parties. 

True black political leadership would have leveraged black community political and demographic clout on a peace campaign.  Imagine black elected leadership getting 20 million blacks to write their representatives and the leadership of NATO expressing their displeasure with military action; recommending and urging a peace settlement; threatening their own domestic and foreign economic embargo as a response to unfair treatment of blacks in Ukraine; and not participating in the 2022 or 2024 U.S. elections if their demands were not met? 

This kind of leadership could have cemented American blacks not only as a domestic political force but as a player on the world stage.

This kind of leadership calls for vision.  Unfortunately, the black community’s current leadership does not have this kind of vision…  

Alton Drew

3 May 2022

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Will isolationism force the U.S. government’s currency to compete with other domestic currencies?

Over the past month, Americans have been moving their attention from the pandemic to the war in eastern Europe.  Not fully appreciated by an American public glued to the media scenes of evacuees, missile fire, and troop advancements is the closer economic alliance of China and Russia.  United States government officials have been prognosticating with unfounded confidence that economic sanctions against Russia in addition to stiff resistance from Ukraine’s military will thwart Vladimir Putin’s plans to pull more of Ukraine into the Russian orbit.

What I am seeing is a greater incentive by Russia, China, and other nations to go their own way by expanding alternative payment systems that move capital that underlies trade between Europe and Asia.  Speculation has increased that sometime in the future, the world may go from pricing oil in dollars to pricing oil in yuan.  With Russia being amongst the world’s top producers of oil, accepting yuan as payment for oil would put Europe in a pickle: dumping the long established petro-dollar for yuan.

As the United States continues to lead from behind on the eastern European portion of the world stage, I don’t hear many Americans contemplating what a new world order would look like where the United States issues a currency that finds itself limited to buying Caribbean vacations.

One currency scenario in a post petro-dollar world could see the greenback sharing legal tender status with alternative currencies.  These currencies could be digital, virtual, or actual (paper & coin).  The issuers, from 30,000 feet down, look like competitors, with potentially hundreds of communities issuing, circulating, and using their own currencies.  Right now, I would classify the issuers in this post petro-dollar world into three main entities.

The first entity is the public corporate body or government.  The government issues a currency in exchange for tax receipts.  The public corporate body’s currency is created by its ability to coerce, by law and force, individuals to pay a tax in exchange for protection of property and person.

The second entity is the private corporate body or corporation.  The corporation issues currency to consumers in exchange for revenues.  The private corporate body’s currency is created by its ability to provide the consumer with goods and services that consumers are willing to exchange their work energy for.  The private corporate body’s currency is backed by goods and services.  The greater the quality of these goods and services, the higher the demand for their attached currency.

Last is the private bank.  The private bank’s currency is created by its ability to store and secure its customer’s commodity wealth.  The currency the private bank issues, the tradeable receipt, allows the bearer of the currency to redeem her tradeable receipt in the form of a commodity.  The currency is commodity-backed.

An isolated U.S. government means that the currency it issues will incur reduced demand and a lowered value.  Domestically, the government issued currency will purchase fewer goods as competing imports diminish in availability.  The currencies of private corporations that provide valuable goods and services and private banks may see an increase in their value.  The taxpaying consumer will want to make a switch.

Under this scenario, government, if it is to survive, may have no choice but to enter agreements with private banks and private corporations to set a domestic exchange rate which in turn allows government to collect taxes via the use of alternative currencies.

The war in eastern Europe may set in motion events leading to competing currencies in America. 

Alton Drew

21.03.2022

For consultation on how this political or legal event impacts your foreign exchange trade, request an appointment at altondrew@altondrew.com.

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Biden’s strategy on Ukraine can push Russia to find an alternative to SWIFT and price oil in yuan …

Elected officials and financial analysts have been expressing concerns that China’s currency, the yuan, could become the world’s reserve currency, replacing the American dollar as the go-to currency when seeking out a safer haven of assets like U.S. Treasurys or American real estate. In response to Russia’s invasion into Ukraine last weekend, the United States and a number of its European allies announced an initiative to remove certain banks from the Society for Worldwide Interbank Financial Telecommunication, a financial communications network used by 11,000 financial institutions in 200 countries for the movement of financial transactions. The United States, as a leader of the effort, hopes to hasten Russia’s withdrawal from Ukraine by making it very expensive for Russia to maintain a military presence in the country.

It’s not like Russia has been opting for staying in reactive mode to such a move. Russia and the rest of the world watched as the United States was able to persuade other SWIFT members to give Iran the boot.

Russia has a number of alternatives, albeit slower in today’s world of digital communications including telex, phone, and email. Russia also has the Structured Financial Messaging Solution, a communications system similar to SWIFT but used inside the country.

But what about cross-border payments? SWIFT connected Russian banks to 11,000 other financial institutions in 200 countries. SFMS is not comparable. But suppose Russia was amenable to pricing and selling its oil in yuan versus rubles? That would facilitate the use of a neighbors cross-border payments system–CIPS.

CIPS, the Cross Border Interbank Payments System, facilitates international payments for the People’s Republic of China. Twenty three Russian banks are already connected to the network, connecting these banks with between 1,189 and 1,253 financial institutions in over 100 countries.

And I should mention that the world’s second largest country, India, is also exploring a cross border financial communications network where Russia could be incentivized to circumvent SWIFT by importing more India goods.

Politically, an aggressive move to implement these alternatives to SWIFT could serve to weaken President Biden’s weaponized finance option. If Russia is able to sell oil priced in yuan and China is able to persuade more countries to use yuan for payment of exports, Mr Biden may have to convince his “coalition of the willing” to put boots on the ground to end Mr Putin’s “war of choice.” Mr Biden would also be the president who governed during the dollar’s fall from reserve currency grace.

Alton Drew

01.03.2022

Ukraine: Calling America’s bluff ….

America’s ‘primacy’ on the world stage was always a fluke. The United States came late to the party during both World Wars I and II with its mass manufacturing prowess facilitating its last man standing status. The US dollar became Europe’s reserve currency, and because the Europeans colonized the shit out of everyone else, the dollar became the world’s reserve currency.

But from the mid 1930s to the early 1970s, the US gradually removed itself from the gold standard. By 1973, the world’s currencies were backed by a dollar that was backed by nothing. For forty years increases in money supply and undisciplined fiscal spending have deflated the dollar’s value resulting in everyday Americans finding it harder to get by.

On the global front, not only were Europe and Asia getting tired of America’s promotion of its brand of “democracy”, they were becoming tired of a currency that lucked out in being the world’s reserve currency. Thus the beginning of a more than two decade challenge, starting with the euro, to America’s dominance.

All wars are trade wars. Once you understand this, you abandon the “John Wayne, kumbaya Jesus” view of the world. Ukraine is just another stage in world reordering.

Putin and Xi could have a falling out, but America does not have the political will or intelligence to stop this train.

Alton Drew

24.02.2022

Interbank Market News Scan: China’s overnight bank rate decreases; Ukraine’s hryvnia shows strength; Bitcoin strengthens.

Interbank, China. “The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, decreased 4.3 basis points to 2.112 percent Monday.” See article here. Source: China.org.cn

Interbank, Pakistan. “Pakistani rupee continued to rise against the US dollar in the inter-bank market on Monday due to positive sentiments generated by the release of a $1 billion tranche by the International Monetary Fund (IMF).” See article here. Source: GeoNews

Interbank, Bank of England, inflation. “Almost certainly, 2022 will also see the most above-target inflation numbers since that change. The Bank will be heavily criticised and proposals will be made for reform. What has gone wrong?” See article here. Source: The Critic

Foreign exchange, National Bank of Ukraine. “Last week the hryvnia exchange rate has somewhat stabilized amid a decrease in rising demand for currency and increase in supply of currency, the press service of the National Bank of Ukraine (NBU) wrote on Facebook.” See article here. Source: Ukrinform

Foreign exchange rates of interest …

EUR/USD=1.1451

GBP/USD=1.3527

USD/MXN=20.667

USD/GTQ=7.5163

USD/NGN=415.7

USD/GHS=6.3313

USD/VND=22,646.8

USD/JPY=115.191

USD/INR=74.497

USD/BTC=0.00002

USD/ETH=0.00034

Source: OANDA

DXY=95.58 Source: MarketWatch