Transcription
Now, by the way, I think, at least in the short term or intermediate term, we have a very actually bullish case for the for some of the reasons we talked about earlier. It's back to Jeff Curry, who's a great expert on this. Curry and I agree with Curry; he indicates that we'll probably be back in a super cycle for commodities, with all commodities going up, including oil.
Now, why did the war magnify or motivate or inflame the super cycle? The fundamentals were getting set up to go into a super cycle where commodity prices had been weak and were going to start going up. The war changed all that in the sense that everybody realizes now that you better not be short commodities because they can be cut off. We can see helium's been cut off, oil's been cut off, fertilizers have been cut off, all of that stuff through the strait.
And then, if they start thinking further about it, they say, "Oh, and the US has all these sanctions, and they can sanction you, and then they can cut you off. The US can cut you off." So, if you look at all these possibilities for cutting things off in the supply chain for commodities, what's your conclusion? You want to hoard commodities and have a little stockpile.
And the ones who did this wisely, actually by accident almost, were the Chinese. The Chinese have huge stockpiles of oil, as well as other commodities. Now, the reason for that, by the way, was accidental, and that is going back to the restrictions the US put on exports of chips to Huawei. That was 8 years ago. So, the US sanctions cut off the exportation of chips, certain types of chips, to Huawei. And the Chinese concluded, "Well, if the US can do that with chips, they can do it with oil, or they can do it with other commodities. And we better stockpile. We better be buying oil and hoarding it. We better be buying grain and hoarding it," and so forth and so on. So, the stockpiles of commodities are very high in China, and they're very high because of the US sanctions that were imposed on Huawei 8 years ago.
All these sanctions ripple through; they have effects. And this is one effect. And I think with the war, I agree with Curry. And Curry has basically said everybody is going to be in a position, all countries, where you don't want to be short commodities. That's going to be the policy conclusion. So, what does that mean? That means everybody's going to be demanding more commodities to build the stockpile of inventories for precautionary purposes. And that means what? It's a supply and demand thing. If the demand goes up, the price goes up.
It's interesting because it seems that there are so many examples of US foreign policy decisions actually backfiring because now China has that tremendous leverage of having the stockpiles, and it's not immediately constrained by supply disruptions of oil because it has the reserves and it has a certain leverage. And it doesn't have to necessarily play along with Trump and try to coerce Iran into accepting an unfair deal that Iran deems to be unfair to them. And it does seem that, as you said, commodities, and of course also maybe shifting away from US-controlled systems and frameworks, would become one of the main drivers to protect your own sovereignty. And I think that's something that perhaps we can see now as an outcome of the still ongoing war against Iran.
Do you think that the UAE exit could accelerate the decline of the petrodollar system in any meaningful way? Not really. And the reason for that is that I know there's a lot of talk about this and hype about it, but the reality is, if you sell oil, and oil is for the most part priced in dollars, you receive dollars. And the question is, well, where do you put the dollars? And you put them in dollar-denominated assets because if you look at the world stock markets, for example, you've got almost three-quarters, I should say two-thirds, two-thirds of the international capitalization in stock markets there is in dollar-denominated stocks and equities. So, and the bonds are the same way. So, there's no place to hide, basically. You have to put the money in dollars because the capital markets, whether it's equity markets or bond markets, are completely dominated by dollar-denominated equities and bonds.
So, I think that the petrodollar discussion is kind of a tempest in a teapot, to tell you the truth, because there just aren't any alternatives, so right now anyway. It may be at the margin, at the edges, or there's a little give, but not very much.
The one thing you were pointing out at the end of the thing, this kind of backfire idea about US policy: If you look at US policy, the global perceptions of favorable versus unfavorable of various countries, as this comes out, and the US used to have a rating that was plus 22%. The net number was plus 22%, so a very positive view of the United States. That's fallen now, and the number is actually minus 16% now. And Russia, the net number is only minus 11%. So, the US is behind Russia in terms of international perception of favorable versus unfavorable. The US is more unfavorable than Russia. And now, look at China. China is plus seven. China has actually a positive rating. So, you've got China is positive, you've got Russia negative, and the US even further negative. And those are the three great powers. So, China, the pivot is definitely towards China. China is a huge winner in all of the international diplomatic endeavors that are going on. And even with the conflict in Ukraine, Russia ends up with a better standing than the United States does. And that's because of why? Russia's in a hot war in Ukraine, but the US is in a soft war with everybody because of two things: tariffs and sanctions.
Those are weapons of war. Tariffs and sanctions are weapons of war. If you put a tariff on something, that's against somebody; you're going against them. Obviously, if you put sanctions on, that's more blatant. People actually recognize sanctions as a weapon of war. Tariffs, not so much; they don't think of it. But they are. Tariffs are negative; you're attacking. If you put a tariff on somebody, you're attacking them.