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Dan of FMT: Greetings if you join us at FutureMoneyTrends.com, and here with one of the keynote speakers of the KC Research Conference, the KC Summit in San Antonio.
Remember the LMO. Of course all the resource investors know exactly that feeling right now. Bud, thank you so much for joining us.
Bud Conrad: Yes, good to have you talk to me.
Dan of FMT: Yeah, no. It’s always great talking to you. The audience seems to really enjoy our talks, because mainly, you go after the big picture stuff, and kind of share your thoughts.
You’re the chief economist for KC research, we’re really grateful to have you. What is your talk kind of about today? What are you focused on?
Before the interview, we’re talking about Russia. That’s a really big deal. That is on everybody’s mind with the Russia and the US. Is there a new Colder War coming? That’s actually a rip off from Katusa’s new book, “The Colder War.” Is there a new Colder war coming?
Bud: We’re in it in the sense that I believe that wars are increasing. We’ll have much more effect on world economies than the traditional things that traditional economist like I often claim to be, focused on.
You can argue whether you’re a Keynesian, or a Monetarist, or an Austrian economist, whether the money supply, the debt, or the government spending are the issues that drive things. I say the geopolitical situation, meaning wars, demographics, ethnicity will dominate the future for what affects our culture.
What we should be looking at in particular are the increases in world conflicts particularly Ukraine, also, this ISIS operation that has made Obama announced a new war in Iraq. The fourth in four presidents. Plus difficulties in Africa, and the Gaza area.
When you add them up, there’s problems of all kinds that are more of the a geopolitical class than whether or not Janet Yellen is going to tweak a word, or an announcement about the Fed’s expectations for our economy.
We need to be much more concerned about these difficulties. I’d be happy to talk about each one, but let me try an angle on you. The angle that I’m worried about is that we, the United States, have been more responsible than we realized for the results of what’s happening of the increased conflict in the world.
Dan of FMT: A lot of people feel that the US is the good guy out there, but this is now our third time interact.
Bud: Fourth time.
Dan of FMT: Is it our fourth time?
Bud: George Bush Senior, Clinton, George Bush Junior, and now Obama.
Dan of FMT: There’s so much I forgot.
Bud: Is anybody learning? Are we getting tired with this? I’m sure they are.
Dan of FMT: Yeah. I’d like to focus more on what’s going on with Russia and the United States specifically what’s going on in Ukraine recently. Just as new relationship.
I guess not a new relationship, but certainly renewed relationship between China and Russia. Almost liked a block verse the US.
Bud: I’m sure you’ve read the news of what’s happening in Ukraine in the sense of conflicts that seem to have a reason spontaneously by the revolutionary desire from freedom of the Ukrainians.
A little peel back, the cover says the US spent $5 billion the National Endowment for democracy to fund revolutionary thinking within Ukraine, and to ferment the potential for having relationships quelled mostly with Europe than with Russia.
To some extent, that’s not a problem. If we are going to put missiles into Ukraine pointed at Russia, Russia who has been seen NATO creek towards it over the last decades since 1949 when the NATO was created. They just put their stake on the ground, and said no more.
This isn’t really a battle about Ukraine. It’s between Russia and the US. We’ve escalated by creating sanctions against Russia, and what they can do with their businesses, and most specifically their energy business.
Russia has responded in a way that’s pretty clever. In a financial way to turn to their neighbor to the south who needs resources. Russia is the biggest country in the world with the resources. Combining a resource‑ rich country with a people and a resource-demand country is obviously a marriage that makes sense.
$400 billion deal was signed between Putin and Xi Jinping to have China buy 20 percent of its natural gas from Russia over the next decade and build one of the largest pipelines ever built, and for Russia to pick up the credit card facilities from China, because Visa and MasterCard were being sanctioned.
For the BRICS, Brazil, Russia, India, China, and South Africa. A formal organization to build an international bank, BRICS Development Bank whose stated purpose is to provide development, but I think whose hidden purpose is to facilitate trade not using the dollar. Trading Renminbi for the products, or Rubles for products.
Dan of FMT: Yeah. The big news here is that they’re not using the US dollar.
Long term, how does that affect the petrodollar since Russia is now doing transactions outside of the dollar specifically with China?
Bud: The petrodollar arose in 1974 after the Middle East Crisis, where they had used oil as a weapon.
What became obvious is that that was dangerous for the world. Kissinger negotiated with Saudi Arabia, and then eventually all the Oil Republics to only accept dollars for oil. That was a two‑edged sword.
Oil exporters became unbelievably wealthy. We offer particularly that the Saudi’s Defense and support of their country. The dollar got an anchor, because it had been ripped off of its value when we went off the gold standard in 71. It has worked for 40 years.
What as other countries, Russia had taken dollars for its energy sales, but has now negotiated deals with a number of its customers in Rubles and in Renminbi. China itself has been advocating bilateral trade agreements with about 30 other countries were the trades are satisfied by swap agreements in their own currencies not the dollar.
That decreases the special privilege that we as a united, as an empire of the United States built our well fund that special status being the reserve status of the dollar.
That reserve status was built on the petrodollar which I just described that oil had to be bought with dollars that created the demand for the dollar, and allowed us to run huge trade deficits cause we could print money to buy oil and huge government deficits, because we were ahead running the trade deficits, and foreigners use the dollars they gained to reinvest in our government debt.
Our government debt is half owned by foreigners. There is something like $15 trillion dollars of denominated deposit of the resorts that are all dollars that if people lost confidence in holding things denominated in dollars, could go another way.
Another words, the effects of a major loss of the position of the dollar could be a financial catastrophe. I started with a political war catastrophe. The two could come together. That would be very difficult.
Dan of FMT: It appears that the dollar collapse is inevitable. It also looks like the stage is being set slowly. There is not going to be an overnight dollar collapse until the night off, you know what I mean? It’s not imminent. It seems like.
Bud: That’s up for you evaluation because in fact the dollar has been increasing recently due to all the small conflicts would have made people have less confidence in their alternatives.
The dollar has traditionally been the reserved currency and a flight to safety. I expect at some point that gold as the flight to safety, and both the Russians and the Chinese have bought lots of golds over the last few years. They know what’s going to happen, better than the rest of the world.
Dan of FMT: You mean the US will do something desperate like go to war with Iran in order to save the dollar?
Because, typically, the dollar rallies in times of crisis, a war. You would think that the United States would want to protect its interest in the US dollar being the reserved currency. Would they do something like like go to war?
I don’t think with Russia, but perhaps with Iran.
Bud: It’s an excellent question, but we’re already at war with Iran. It’s hard to say who started what, when. If you go back to Kermit Roosevelt deposing the elected leader, Mosaddegh, which created many political things back and forth between us. Sanctions are a form of war.
Dan of FMT: Yeah.
Bud: We have very serious sanctions on Iran. Some claim that happened, because they were ready to take non‑dollar for their oil.
Now, we’ve told them they can’t use our banks or dollars for oil. In a sense, what’s happening is they are also being driven away from us and away from the dollar.
Dan of FMT: Yeah. It’s kind of foolish of us, because now we’re forcing these countries to go to alternatives, especially, Russia.
Bud: Shooting ourselves in the foot.
Dan of FMT: Yeah.
Bud: By all these sanctions in Iran, and Russia specifically as very large oil resources in the world, and saying you can’t use dollars.
People that are doing it don’t realize how much damage it is in the long term for the regime that is held very well for 40 years.
Dan of FMT: Take us on the next conflict of war. You mentioned ISIS. How is that shaping out in the Middle East, essentially, it’s the new Al Qaeda. Only, this one is 10 times as powerful?
Bud: The serious problem there is that we helped ferment forerunners of that organization.
As Libyan freedom fighters were taken out of Libya through Turkey’s borders into becoming revolutionaries within Syria. It’s out of that group that the ISIS group grew.
Dan of FMT: We’ll be OK. It’s surprisingly the mics pick up ourselves and run everything else out..
Bud: We probably have trained some of the people that are in ISIS.
Dan of FMT: The picture McCain with one of the leaders.
Bud: It looks like Al-Baghdadi in the background. One of the pictures that’s on his own Twitter website. If it really is Baghdadi, I don’t think that’s doing McCain any good. It might not be. We don’t know.
Dan of FMT: But the point of that sort of conflicts is the most recent decision by the government is to spend $500 million on training 5,000 rebels to go fight their brothers.
The other ISIS members that were supposed to be the moderate, and I don’t know how to identify it. The moderate rebels, moderate fundamentalists, and at the same time those 5,000 guys are supposed to fight Assad. By the way ISIS has something like 31,000.
This is a program that is guaranteed to fail in my view. The question is what? Obviously, more escalation. Let me say something that I think is a shift through. You may not focus on easily.
I take a position that we should advocate peace. We’ve been at it long enough in the Middle East. We spent a lot of money. We’ve got enough people hurt, damaged, post traumatic syndrome. We need to bring troops home. We need to find ways to cooperate. We need to pro find helps for people, rather than more wars.
That would be what I would advocate, and it’s quite a shift when you consider where we’ve been.
Dan of FMT: It is, and unfortunately, as soon as the war drums beat, Americans pretty much fall in line with their President, especially, if there was an attack which for now, they we’re not getting the attacks, but we’re being told. Eminent attacks, something will happen in New York. Something will happen on 9/11 anniversary.
It makes people willing especially these decapitations going on. That’s only going to stir Americans and Westerners up. Now, you have French bombing Iraq. French didn’t even participate in the last one. The last round of war with Iraq. It seems like your message is great, and I’m sure most people will agree with you. It’s really hard, because Americans have a condition that we are the good guys, were the police. Wouldn’t you say?
Bud: You got a good insight on that. It’s a bit of a problem.
Maybe it’s the sign and plug for you that we are far more much too shaped by main stream media. You’re a member of your own independent view of what’s on in the world. Interviewing somebody like me with an independent view.
Dan of FMT: Yeah.
Bud: It’s the way that more people would wake up to some of the things we talked about like John McCain having a picture on his website of potentially serious Islamic fundamentalist, potentially terrorist.
It seems like a strange thing, but wouldn’t be reported in the mainstream. You brought it up.
Dan of FMT: Yeah.
Bud: We’ll do better if more people look on a wider scale for others sources to find out what’s going on.
Dan of FMT: We need to wrap it up. I wanted to just kind of close off when you speak, or when you’ve already spoken. Right?
Bud: I spoke.
Dan of FMT: What is the message you wanted to leave the audience with, as far as when they come out here?
Bud: One of my message is that has gotten quite, but of fun was that after I said I had enough of war.
I want to advocate peace rather than saying leave it, which is what many people have said. “Leave the country if you don’t agree with it.”
I want to say, “I am going to stay here.” My reason is that I have children and grandchildren. I showed some pictures of very cute. I’m not bias or anything, grand kids. To say we should advocate peace for our kids and for our grand kids.
I hope that that’s a message that has some amount of heartthrob. It certainly does for me. It’s the reason that we should work to make a change away from more war to more peace.
Dan of FMT: That’s a great message. Bud, thank you so much for joining us.
Bud: Thank you.