A combination of negative factors have triggered a domino effect that is likely to unseat the dollar as the world reserve currency.
Several analysts and experts had seen it coming for years now, but now the avalanche effect is started.
The fear of the corona virus slowing down consumption and production, the over-inflated US debt and the war on oil prices combine into a perfect financial storm.
Can crypto offer an alternative? The recent downtrend of Bitcoin price would seem to indicate otherwise. But it is limited compared to the downturn of the stock exchanges of countries which are tightly connected to the production of oil.
Who started the war and who is going to finish it?
The oil war was initially started by Saudi Arabia to force compliance by Russia in reducing oil production. Due to the corona virus effect, the world is now consuming less oil.
Yet Russia’s economy depends strongly on energy and didn’t budge. The last time a similar war was waged, it forced the dissolution of the Soviet Union.
This time around it is quite different. Russia has increased its gold reserves markedly in the last decade and has very little debt.
They can sustain a confrontation over a long time and the more likely victim is the shale/fracking industry in the USA.
Right now Russia produces oil at $ 7 per barrel. Saudi Arabia spends $ 7 a barrel, while the US production cost is $45 a barrel.
US fracking companies have already sustained major losses in the last couple of days. The whole sector might need a major bailout if the situation doesn’t change soon.
Saudi Arabia is over-extended on its debt, but can isolate itself therefore sustaining the war better.