REPO MARKET and NEXT FINANCIAL CRISIS

Federal Reserve is injected hundreds of billions of dollars into the financial system. This look like the pre-financial crisis of 2007-2008. If banks do not have enough liquidity and do not trust each other, the financial system is in a big trouble. On Sept. 17, overnight repo rates jump to 10% from less than 2% the week before. The Fed intervention in this overnight lending market will continue until next month and could reach $400 billion. The repo market is about $2.2 trillion.

MARITIME INSECURITY IN THE STRAIT OF HORMUZ

MARITIME INSECURITY IN THE STRAIT OF HORMUZ

All the elements of war are in place between the United States, the West and Iran in the Strait of Hormuz (two miles wide). This maritime region is the world most important chokepoint representing a daily transit of 1/3 of all seaborne-traded of crude oil and other liquids. This Strait of Hormuz is the world most busy territory for the transportation of oil where more than 18 million barrels of oil transit every day.The Iranian violation of international maritime law in this region is an integral part of the dynamic of development of new world maritime order influence by the geo-politic of oil and the new political will of maritime nations to expand their national sovereignty in the maritime territory. This dynamic is characterized by new challenges to the freedom of navigation as it was established by international maritime law. Iran recent activities in the Strait of Hormuz is an expression of defiance to UNCLOS. This defiance is based on a geo-strategy that define the Strait of Hormuz as a maritime territory that must be totally under the control of Iran. China is developing the same geo-strategy in South China Sea. Dominant power (global or regional) must control the oceans in this period of development of the “blue economy”. This new ambition of maritime nations is a determinant factor of transformation of international relations. As a maritime nation, China is the world number 2 economy with capacity to influence the transformation in the global maritime order. Today, China is the world biggest investor and country of development of maritime industries and the “blue economy”. The Chinese “Belt and Road Initiative” is a demonstration of this reality. But, Iran doesn’t have the same economic and political influence on the world order. Iran is struggling to define its position as a dominant regional power in the Middle East. Challenges created by the American economic sanctions and the ambition to develop the atomic bomb are creating enormous pressure on the Iranian regime. By multiplying incidents on the Strait of Hormuz, the Iranian regime is sending an important message to the international community. The Strait of Hormuz is an important maritime territory. Disruption of the freedom of navigation in this region will have important negative impact on the world economy. In this moment of increase tension in international trade, the Iranian strategy of leveraging chaos is not the best solution. This systematic violation of international maritime law by the Iranian regime will increase the marginalization of the Islamic Republic in the international community and all factors of destabilization of this country.

DE-DOLLARIZATION

The De-dollarization is slowly transforming the architecture of international finance. The predominance of US dollar is diminishing. Shift of the world center of economic development from the West to emerging nation is creating a new equilibrium that is at the origin of de-dollarization. The phenomenon will be exacerbated by the current trade tension created by Washington. Dynamic of de-dollarization could lead to the creation of new alternative payment systems that will not be dominated by the US dollar. Countries at the forefront of the de-dollarization are China, India, Iran, Russia and Turkey.  In Europe the SWIFT is gradually being called into question. Creation of a new payment system could strengthen the process of de-dollarization. More than 60% of the world’s foreign exchange reserves and 70% of global trade transactions are in US dollar. The multipolar world is creating a multipolar currency system.