Financial War With Iran to Backfire?
The financial war with Iran may be a precursor of a "hot" war soon. But let's remember that talk of an attack on Iran's nuclear facilities has been floating around for years, as has been talk that Iran will close off the Straits of Hormuz. And the fact is, neither has occurred. Whether either might is speculation at this point.
What's not speculation, though, is something we mentioned on April 14th:
...the U.S. has already prevented Iranian banks for conducting international business. They've done this by denying access to the SWIFT system, which is how banks wire money internationally. This didn't get too much press coverage, but it could be taken as an act of war against Iran.
Now there's more to the story.
The U.S. has threatened any nation that does business with Iran with denial of access to the SWIFT system. Most of the European countries will comply with the U.S. on this. Asian countries are a mixed bag so far. We'll have to wait and see what happens.
However, one country that's already responded is China - you know, little old China. They've told the U.S. that they intend to buy Iranian oil and don't care if the U.S. prevents them from using the SWIFT to transact the business. They will use gold.
India indicated they may do the same, but China is the bigger story here. China needs lots of oil and has lots of gold. We're witnessing a major new chapter in the history of gold as money. If China goes ahead with this plan, it will also mark a shift in the way other countries do business - without the U.S. dollar.
The dollar has been the reserve currency of the world since World War II. Any international business transactions need to use dollars - until now. While China and Brazil had already established alternative methods to settle business transactions without the U.S. dollar in the last few years, these have basically been limited or regional agreements between small groups of countries. Oil is big, BIG international business, so this goes a step further than the limited regional agreements we've seen so far.
Not only is this a major event in the history of gold as money, but it now weakens the stranglehold that the U.S. government has had on the SWIFT system. If China can transact its oil transactions without using the SWIFT system, the U.S. use of this system as a kind of club to threaten other nations to do its bidding will be weakened.
Perhaps more importantly, the whole fiat paper money system will be circumvented. Therefore it will be interesting to see how this ultimately affects the world's monetary system, which has relied on paper money created out of nothing for decades.
This could also cause the U.S. policy of using the SWIFT system as a weapon of financial war to bully other countries to backfire. By the way, the U.S. has imposed a deadline of June 28th for "compliance" to its demand that countries not trade with Iran for oil. So June 28th may be when we see whether China begins to transact for oil with gold.
At the very least, it looks like this may be the next battle in today's currency wars, a battle between China and the U.S.
What's not speculation, though, is something we mentioned on April 14th:
...the U.S. has already prevented Iranian banks for conducting international business. They've done this by denying access to the SWIFT system, which is how banks wire money internationally. This didn't get too much press coverage, but it could be taken as an act of war against Iran.
Now there's more to the story.
The U.S. has threatened any nation that does business with Iran with denial of access to the SWIFT system. Most of the European countries will comply with the U.S. on this. Asian countries are a mixed bag so far. We'll have to wait and see what happens.
However, one country that's already responded is China - you know, little old China. They've told the U.S. that they intend to buy Iranian oil and don't care if the U.S. prevents them from using the SWIFT to transact the business. They will use gold.
India indicated they may do the same, but China is the bigger story here. China needs lots of oil and has lots of gold. We're witnessing a major new chapter in the history of gold as money. If China goes ahead with this plan, it will also mark a shift in the way other countries do business - without the U.S. dollar.
The dollar has been the reserve currency of the world since World War II. Any international business transactions need to use dollars - until now. While China and Brazil had already established alternative methods to settle business transactions without the U.S. dollar in the last few years, these have basically been limited or regional agreements between small groups of countries. Oil is big, BIG international business, so this goes a step further than the limited regional agreements we've seen so far.
Not only is this a major event in the history of gold as money, but it now weakens the stranglehold that the U.S. government has had on the SWIFT system. If China can transact its oil transactions without using the SWIFT system, the U.S. use of this system as a kind of club to threaten other nations to do its bidding will be weakened.
Perhaps more importantly, the whole fiat paper money system will be circumvented. Therefore it will be interesting to see how this ultimately affects the world's monetary system, which has relied on paper money created out of nothing for decades.
This could also cause the U.S. policy of using the SWIFT system as a weapon of financial war to bully other countries to backfire. By the way, the U.S. has imposed a deadline of June 28th for "compliance" to its demand that countries not trade with Iran for oil. So June 28th may be when we see whether China begins to transact for oil with gold.
At the very least, it looks like this may be the next battle in today's currency wars, a battle between China and the U.S.
The U.S. vs. China
U.S. weapon of choice: SWIFT System
China weapon of choice: Gold
We'll have to wait and see who wins this round.
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