“G7 of the East”- Changing the Global Monetary System

Zoltan Pozsar is a macroeconomist and investment strategist. He’s a recognized expert on global macroeconomic and financial market trends and has written extensively on global imbalances, U.S. monetary policy, and the global economy.

He’s the Director of Credit Strategy at Credit Suisse and a Visiting Fellow at the Peterson Institute for International Economics.

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Let’s cover his previous recently released report before covering his latest release.

Dusk For The Petrodollar, Dawn For The Petroyuan, And The Coming Commodity Rehypothecation.

In his previous report, Zoltan Pozsar details how Putin may cause a financial crisis in the West by requiring Russian oil exporters to pay in gold instead of dollars, linking oil prices to gold, and introducing the Petrogold currency.

This would lead to a banking crisis as most western banks would find themselves with a synthetic gold short.

This means the banks would find themselves in an “asymmetric liquidity position” due to long OTC derivative receivables hedged with futures.

He warns that this could cause an unexpected mobilization of reserves and an expansion in balance sheets and risk-weighted assets, which would be unwelcome at the year-end turn.

“Banks active in the paper gold market would face a liquidity shortfall, as all banks active in commodities tend to be long OTC derivative receivables hedged with futures (an asymmetric liquidity position). That’s a risk we don’t think enough about and a risk that could complicate the coming year-end turn, as a sharp move in gold prices could force an unexpected mobilization of reserves (from the o/n RRP facility to banks) and expansions in balance sheets (SLR) and risk-weighted assets. That’s the last thing we need around year-end.”

This statement refers to the risk posed to banks trading paper gold by potentially establishing a Petrogold currency.

If this were to go ahead, banks active in the paper gold market would face a liquidity shortfall because they tend to be long OTC derivative…