He Who Makes the Rules

One of the most interesting people in my neighborhood is a man who I've never met. I know nothing about him other than he's paying more attention to world events than everyone else in town.

There is a gentleman in my neighborhood who doesn’t appear to live in a house. It’s probably an incredible story that has yet to be told, frankly. He’s very private from what I understand. I’ve never actually spoken to him but there’s a story there that is dying to be told. Alternative reading of that last sentence: I’m fascinated by this man and I’m incredibly curious about his background, life choices, and general story but I’m not comfortable asking him.

He’s hard to find these days. When we first moved into the neighborhood, I’d occasionally see him riding his bike around. But I haven’t seen him physically in a long time. This man owns land about a block away from us. The lot is in between two other lots; each of which have houses built on them. His lot, though, has no house. Instead, the curb appeal is an old Pontiac covered by a tarp and a “do not trespass” sign that hangs between two wooden posts. While I don’t think he lives on the property full time, there are nights where he’s definitely sleeping there as a camper would sleep in the woods.

From what I can tell, he has no real belongings. He obviously doesn’t have a house on his property even though he stays there at least on a part time basis. Around the neighborhood very little is known about him. There was some chatter on a local Facebook page about a year ago and one person who had engaged with him previously said he wants to be left alone. Fair enough. When I first moved into the neighborhood a few years back I asked a couple neighbors if they knew anything about him and they didn’t seem to know he was even there.

I don’t know anything about him other than I’m pretty sure he’s much smarter than he’s probably given credit for. He appears to be very aware of what is happening in the global currency markets. I swear, I’m not making any of this up. A few months ago when I was jogging by his property on my usual morning run, I saw something that sealed the deal for me. This man is paying attention to things that others are not paying attention to:

His property had a for sale sign. And he was asking for rubles. 43 million of them to be exact. The ruble is obviously the domestic currency in Russia. I took that picture two months ago.

He Who Holds the Barrels Makes the Rubles

The action in the ruble since economic sanctions against Russia has been incredible. After the Russian currency essentially collapsed in response to those sanctions, the reversion has taken out the mean. The ruble is now “crushing it” in investment lingo.

Before the sanctions, it took about 75 rubles to get a dollar. Immediately following the sanctions, the price of a dollar in rubles hit 120, indicating a 60% collapse in ruble purchasing power relative to USD. But he who holds the energy makes the rules:

In the last few weeks, there were unlawful measures taken against Russia by a number of Western countries to freeze Russian assets. By doing this, the collective West has undermined the reliability of their currencies. I made a decision to take actions to switch payments for natural gas sold to so-called ‘unfriendly countries’ into the Russian ruble in the shortest time possible.

That was Vladimir Putin back in late March. Since then, the Ruble has strengthened ridiculously fast and it now only takes 53 Rubles to get back a dollar. Given who relies on Russian energy exports (the EU), it would seem economic sanctions on Russia might be creating unintended consequences. And to be clear, this is not meant as an endorsement of Russia or Putin. But it sure seems as though Western hubris is quickly becoming a factor in geopolitical positioning.

At a time when it the dollar’s status as global reserve currency could be coming to an end, one has to wonder where the power truly lies if USD weaponization loses its sting. The G7 nations make up 7 of the 10 largest economies on the planet by GDP. But the 2nd largest economy is China, which is a BRICS nation not a G7 nation.

Four of the five BRICS nations (Brazil, Russia, India, China, South Africa) are among the top 12 largest economies globally. China is 2. India is 6. Russia is 11. Brazil is 12. As I’ve said before, I’m not a geopolitical expert. I’m not really an expert in anything, to be honest. But this quote seems important:

To politicize the global economy and turn it into one’s tool or weapon, and willfully impose sanctions by using one’s primary position in the international financial and monetary systems will only end up hurting one’s own interests as well as those of others, and inflict suffering on everyone.

That’s Xi Jinping from just a few days ago at BRICS Summit in Beijing. At that same meeting, Putin also mentioned a 38% increase in trade between Russia and BRICS nations. Then there’s also this nugget from Putin while at the summit:

We are exploring the possibility of creating an international reserve currency based on the basket of BRICS currencies.

Energy is Life

Who knows how this ends? There seems to be a strengthening of alliance among the BRICS nations. And, again, he who holds the energy makes the rules. China needs Russia for energy. Russia needs demand for its exports. It’s a relationship that works well and aligns two global powers that are both antagonistic toward US establishment interests. When looking at the top oil producers globally, the top 3 BRICS nations actually exceeded the output of US oil production last year.

To add context, here are the top oil consumers:

Looking at this data, it becomes clear how important Saudi Arabia is with its 9 million daily barrel production surplus. If that country aligns with the BRICS nations, the West would have serious problems as Canada is the only G7 country in the top ten consumption table that isn’t at an oil production deficit.

May You Live In Interesting Times

Again, I’m not an energy expert. I’m just very interested in monetary history and currency narratives. This stuff all seems to be colliding at the moment. What is the value of the largest military in the world if the energy to mobilize that military can’t be deployed or acquired? Is there an active policy out of Washington that might be depleting the ability of that military to mobilize?

The US strategic petroleum reserve is now 497.9 million barrels. It’s under 500 million. The last time that happened was 1986. In 1986, we consumed roughly 16.3 million barrels of oil per day domestically. Or roughly 20% less than we do today.

Unless something changes dramatically, it looks like there is going to be a problem with energy in the United States. Probably faster than many realize. A lot of people are going to feel it and not even know what hit them. But the guy who is asking for 43 million rubles will probably do just fine.

Disclaimer: I’m not an investment advisor. I share what I do and why I do it. I’m not an expert in energy or geopolitics. I stack seeds, silver, sats, canned food, and 9 milli ammo. You probably should too.