Transcription
There is a very old saying in geopolitics. You can be an empire or you can be a debtor. But you cannot be both. For 80 years, the United States defied this rule. They printed the money and the world accepted it. They sanctioned their enemies and the world obeyed. They were the masters of the universe.
But this week, the master had to go begging. In Caracas, the United States is doing the unthinkable. After years of trying to destroy Nicholas Maduro, after seizing his planes, freezing his accounts, and putting a $15 million bounty on his head, Washington is suddenly desperate to make a deal. Why? Because the petrodollar is dying and they need Venezuela's oil to save it.
And in Washington, the new Treasury Secretary, Scott Bessant, is facing a nightmare. He needs to borrow $3 trillion this year just to keep the lights on. But his usual customers aren't buying. So he is forced to look across the ocean to the very country the US calls its greatest enemy, China. Do you see the irony? The United States is currently waging an economic war against the two countries that it needs the most.
I worked at the IMF for many years. I have seen this pattern before. When a superpower starts begging its enemies for resources, it is not a 4D chess move. It is a liquidation sale. Today we are going to look at the two desperate deals happening behind closed doors. The oil deal in Venezuela and the debt deal with China. Because if either of these deals fails, the American economy does not just recession, it stops.
Let us start with the humiliation in Caracas. If you want to understand how weak the American empire has become, you do not need to look at the GDP numbers. You just need to look at who they are shaking hands with. Five years ago, the United States declared that Nicholas Maduro was not the president of Venezuela. They recognized a man named Juan Guaidó. They froze Venezuela's bank accounts. They seized their airplanes. They even put a $15 million bounty on Maduro's head, like he was a cowboy outlaw in a western movie. The goal was simple. Collapse the Venezuelan economy, force a regime change, and take control of the world's largest oil reserves.
So, what happened? Maduro is still there, but the American oil strategy is dead. You see, the United States made a catastrophic miscalculation. They assumed that if they sanctioned Venezuelan oil, the world would stop buying it. But the world is hungry. China continued to buy. India continued to buy. And here is the detail that keeps the US Treasury awake at night. They did not pay in dollars. Venezuela became the first laboratory for a post-dollar oil market. They started selling their oil for Chinese yuan and increasingly for USDT crypto. By sanctioning them, the US forced Venezuela to build a financial immune system. They proved to the world that you can sell oil without Washington's permission.
And now the tables have turned. While the US has plenty of oil in Texas, it is the wrong kind of oil. It is light sweet crude. But the massive American refineries in the Gulf Coast, they were built 50 years ago to process heavy sour crude. Without that heavy oil, the refineries choke. They cannot produce enough diesel and if diesel runs out, the American supply chain stops. So we see the unthinkable. American diplomats are quietly going back to Caracas. They are issuing waivers to companies like Chevron to pump oil in Venezuela again. They are offering debt relief. They are essentially begging the man they tried to overthrow to please, please turn the pumps back on. This is not diplomacy. This is surrender. It proves that when push comes to shove, the United States needs the global south's resources more than the global south needs the United States' permission.
But if the situation in Venezuela is embarrassing, the situation in Washington is absolutely terrifying. While the diplomats are begging for oil, the Treasury is begging for cash. This is where the new Treasury Secretary, Scott Bessant, finds himself in a trap. The American public thinks the Treasury Secretary's job is to manage the economy. It is not. His job is to be a salesman. Every single year, the US government spends trillions more than it taxes. To fill that giant hole, they have to sell paper, US Treasury bonds. For decades, this was the easiest job in the world. The entire planet lined up to buy American debt because it was considered risk-free.
But this year, the math has broken. The United States needs to sell $3 trillion in new debt just to survive the next 12 months. And the question Mr. Bessant has to answer is who is going to buy it? He looks at Japan, traditionally the biggest buyer. But Japan is in a currency crisis. They are not buying American debt. They are selling it to save their own yen. He looks at Europe. They are stagnant, fighting their own recession. He looks at the American banks. They are already stuffed full of government paper, sitting on unrealized losses.
There is only one buyer left on the planet with deep enough pockets to bail out the United States, China. And this is the absolute comedy of the American position. On one hand, you have the politicians screaming about a trade war. You have threats of 60% tariffs. You have generals talking about conflict in the Pacific. But quietly behind closed doors, the Treasury Secretary has to pick up the red phone and call Beijing. He has to say, "Please do not sell our bonds. In fact, please buy more."
Because if China decides to stop buying, or worse, if they decide to liquidate the hundreds of billions of dollars of US debt they already hold, the American system breaks. Interest rates in the US would explode overnight. Mortgage rates would hit 10%, 12%, 15%. The stock market, which is addicted to cheap money, would collapse. The United States is currently trying to hold a gun to China's head while China is holding the deed to the United States' house. Mr. Bessant knows this. He is a hedge fund manager. He understands leverage. He knows that you cannot declare war on your own banker. So while the news channels talk about how tough the US is being on China, the reality is the opposite. The US is trapped. They need China to fund their deficit. And China knows it. They are watching Mr. Besson sweat. They know that without their money, the American dream cannot pay its monthly mortgage.
When you put these two stories together, Venezuela and China, you see the full picture of the collapse. For 50 years, the American superpower rested on two pillars. Pillar number one was the petrodollar. The deal was we protect you and you price oil in dollars. That forced every country to hold dollars to buy energy. Venezuela has just proven that you can break that pillar and survive. Pillar number two was the hot treasury bond. The deal was you give us your savings and we give you a safe return. China is now proving that the return is not safe and the savings are being weaponized.
We are witnessing the end of what the French finance minister Valeri Giscard d'Estaing called the exorbitant privilege. For 80 years the United States had a magic trick. They could print green paper and the rest of the world would give them real things in exchange. They printed paper and Saudi Arabia gave them oil. They printed paper and China gave them electronics. They printed paper and Brazil gave them coffee. It was the greatest economic deal in history. But the deal relied on trust. Trust that the dollar was neutral. Trust that the dollar was safe. In 2022, when the US froze Russian reserves, they broke that trust. They told the world, "The dollar is not a currency. It is a political leash."
And now the consequences are arriving. While Washington runs around trying to put out these fires, the BRICS nations are simply building a new plumbing system. We are seeing a massive shift to deal bilateral trade. Brazil is selling food to China in yuan. India is buying oil from Russia in rupees. We are settling our trades without touching the US banking system. The R5 project (real ruble rupee renminbi rand) is moving from a theory to a necessity. We are not trying to destroy the dollar. The United States is doing a fine job of that by itself. We are simply building a lifeboat.
The United States is entering a new phase. I call it the imperial liquidation. They are forced to make deals they hate. They have to tolerate Maduro. They have to tolerate a strong China. Not because they have become nicer, but because they have become poorer. The US is not invited to the new table. And for the first time in history, they cannot afford to buy their way in.
So what happens next? The United States government will likely try to save face. They will call the new deal with Venezuela a humanitarian gesture. They will call the begging mission to China strategic macroeconomic cooperation. But do not be fooled by the headlines. The reality is that the US economy is cornered. They have run out of leverage. When you are an empire, you dictate terms. When you are a debtor, you accept terms. And right now, Washington is accepting terms from the very people it tried to destroy.
The United States will eventually have to make a choice. A choice between two devastations. They can either default on their debt, tell the world we cannot pay, which would bankrupt the global financial system instantly, or they can inflate their way out. They can print the money they cannot borrow. They can devalue the dollar to make their massive debt pile seem smaller. History tells us they will choose inflation. It is the politician's way out. It is the slow death for you, the regular citizen, whether you are watching this in America, in Europe, or in Brazil. This means the price of saving the American empire will be paid by your savings. Your groceries will get more expensive. Your energy bills will rise. This is the tax of the falling hegemon.
But there is an alternative. The world is not ending. It is just changing management. The rise of the multipolar world led by the BRICS is not a threat to be feared. It is a return to balance. It is a return to sanity. It is a return to an economy based on real resources, not weaponized paper. The unthinkable deals you saw in the news this week are just the beginning. The era of the dollar is closing. The era of the real economy is beginning. My advice to you is simple. Do not listen to what the US politicians say. Watch who they are shaking hands with. Because while they talk about strength, they are shaking hands with the people who hold their debt and their oil. The transition has already happened. The world just hasn't realized it.