Breaking up Is Easy
There are two ways of looking at the world. The first is to assume that people are basically good and law-abiding. The second is that people will abuse any and all systems and must be watched and controlled.
Of course, one of the great paradoxes in society is that when people are treated like criminals — that is, watched and controlled — they tend to believe they are outside of society and act like criminals.
On the other hand, when law-abiding people see other people break the law and get away with it, they start thinking about breaking the law themselves. Add in the fact that the people who create laws have a natural impulse to create more laws, and it's a wonder that society exists at all.
The Great Unraveling
This decade, we will see the breakdown of international laws that have governed the world since the end of the Soviet Union in 1992. The U.S. made a deal with the rest of the world that it would be the policeman of the oceans and everyone could trade unhindered.
This arrangement is ending very soon. One of the biggest themes of the 2020s will be deglobalization.
When I first started writing about Wall Street in 1995, I learned the word “fungible” as it relates to the oil markets. It meant that the oil markets were the same all over the world. The price of Brent crude was the price of Brent crude from Tokyo to Tasmania.
This has ended, and we now have two oil markets. One is aboveboard and trackable, and the second is run with what is known as a dark fleet. These are old oil tankers sold to anonymous sources. They move oil from places like Iran, Russia, and Venezuela to places like India, Malaysia, and China.
Oftentimes the oil is mixed with other blends or refined and sold back to Europe at a nice profit.
This dual energy market is leading to a dual monetary framework. The BRICS nations (Brazil, Russia, India, China, and South Africa) are working on an anti-dollar currency system that could include up to 16 countries. Brazil and Argentina just announced yesterday that they are in talks to develop a common currency.
The question is what happens when one of these dark ships gets attacked by pirates and the U.S. Navy decides it no longer cares to protect Russian oil or BRICs currency or free trade at all...
The Value of Money
The U.S. government is also going after international money laundering. The DOJ just charged a Russian owner of crypto exchange Bitzlato with "conducting a money-transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements."
The government says Bitzlato was used for over $700 million spent in the narcotics trade and financial scams.
The DOJ seems to believe that ensuring dirty money remains dirty will somehow stop international criminals. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
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It won’t, of course; it will just put more onus on the rest of us. This got me thinking about money laundering laws in general. It might surprise you that money laundering wasn’t even illegal until 1970, which is when the Bank Secrecy Act was signed. That was the law that made your bank report transactions that were above $10,000.
The $10,000 was meant to be a large number. If you weren’t a millionaire, you wouldn’t have to worry about it. The price of a house in 1970 was about $24,000, so that reporting transaction would be about $200,000 today — an amount the vast majority of people would never have in a bank.
The problem is $10,000 is now the price of a well-used car. It's easy to get flagged with that amount, but that’s not good enough. The glorified hall monitors in the government want to know what you are doing with your money down to the penny. Last year, they introduced reporting laws on Venmo-type transactions that are more than $600 and announced that they were hiring 87,000 new IRS agents.
Controls are getting tighter and tighter. According to the government, there have been eight banking acts since the 1970s, each one more onerous than the last. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 is a name only Congress could approve of and is proof of the idea that laws are named for the opposite of what they actual do.
There is also a great schism happening in technology, which I will write about next week.
No one knows what the world will look like in five years, but you might consider two or more competing blocks of oil, money, and technology.
All the best,
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