If Russia accepts US $60/barrel of Russian oil and Counters that it will, ALTERNATIVELY, trade the barrel for 1/2 GRAM of gold. The US can't POSSIBLY call that, in any way, too much because the US agrees--insists even -- that gold is currently in a "free market" and trades for about $1800/oz. So, 1 barrel x 1/2 oz/barrel x 1 oz/28.35 gms x $1800/oz= $31/barrel.
The US will be *ecstatic*...not! Can you understand why not?
http://www.zerohedge.com/news/2022-12-29/end-western-rehypothecation-pozsar-style
The End of Western Rehypothecation- Pozsar Style
VBL's Photo
by VBL
Thursday, Dec 29, 2022 - 8:58
Housekeeping/PSA:
This was written on December 26th for GoldFix subscribers and was unlocked today because it may be too important to keep under wraps given Pozsar’s newest release. Last night we read ZeroHedge's 5800 word analysis and explanation of Pozsar's Dec 27th missive on rehypothecation. We strongly recommend you read it after this (many GoldFix Founders are also ZH premium subscribers) Then we strongly recommend you subscribe if you want to stay anywhere near the curve as this unfolds more. We can't sugar coat it. But we've been watching this unfold for years, and at some point it will accelerate greatly. That's when someone will be needed to make sense of the moving parts quickly. We recommend you find someone soon. If not GoldFix or ZH, then someone who speaks your language. It's no joke.- VBL
TL; DR
Put a fork in rehypothecation as a tool of financial leverage to generate outsized returns by G7 nations using BRICS resources. It's done.
WHAT: is Zoltan's Gold-mageddon
WHY: is it the death of rehypothecation
HOW: Will futures markets react
WHAT-IF: It can be stopped
Intro
Authored by Goldfix
Below is the playbook for the most likely way the end of Western rehypothecation happens. The writing may get a little wonky as we alternate between academic & trading mindsets, and the mechanisms can be debated, but this is largely how it will happen. When it is done, whoever is holding the bag; be it bank, nation, economic model, or citizenry, will almost certainly collapse economically. Perhaps slowly like frogs in pots, or perhaps all at once.
Anyway..here we go
Pozsar’s Gold-mageddon Math
Here is Pozsar’s hypothetical situation restated. He muses out-loud what would happen if Russia first accepted Oil’s peg at $60. Russia, in his scenario, reciprocates by pegging 1bb oil at 1/2 gram of gold which currently is equivalent to $30. The economics of the Oil/Gold/Dollar triad would look like this (where g=grams; bb=barrels)
IF: 1bb= $60 pegged ( If x=y)
AND: 1bb = 1/2g pegged (And x=z)
WHERE: gold/dollars are not pegged to each other.
THEN: 1/2g = $60 given free exchange-ability. (Then y=z)
Why?
This whole thing starts out as: Nations need energy for economic growth. Oil is, on balance, currently the most desirable energy source globally. These nations, in turn, then seek to exchange something for oil their counterparty will accept as a Standard of Trade. A Standard of Trade is something universally accepted for transactions with other parties.
Russia, in Pozsar’s example would be telling the world it will take Gold as payment for Oil, because (and this is key) some other nation will accept that same Gold as payment from Russia to buy stuff too. Gold thus becomes a standardized settlement medium for three economically interdependent nations.
Russia would make the USD and Gold compete as mediums of exchange. You can now buy Oil for either $60 or 0.50gram gold. The MOE you use to buy oil is the one you simultaneously have the most of and the least alternate use for in other economic trade7
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