China buys Cuban pied-à-terre, Ukraine counterattacks amid charges of sabotage, and central banks dump the greenback for gold.

(Originally published June 9 in “What in the World“) China will pay Cuba billions of dollars to let it build a military facility on the Caribbean island for spying on the United States.

Both Washington and Havana have said the reports are untrue. But if they are, Beijing would appear to have provided the “tat” for Washington’s “tit” after deploying U.S. Marines to Taiwan in 2020 for the first time since China and the U.S. normalized relations in 1979. While the Marines were sent to Taiwan under indicted former U.S. President Donald Trump, President Joe Biden has since expanded the number of troops there to help Taiwan bolster its defenses against an invasion by China that Washington has convinced itself is inevitable.

The situation in the Caribbean has eerie echoes of the 1962 Cuban Missile Crisis, when the Soviet Union retaliated against the U.S. placement of nuclear missiles in Turkey by putting nuclear missiles in Cuba. With Washington and Moscow on the verge of nuclear war, then-Soviet leader Nikita Khrushchev agreed to withdraw the missiles in return for then-U.S. President John F. Kennedy’s promise to quietly withdraw the American missiles from Turkey.

The historical parallels are particularly potent because, during the Cuban Missile Crisis, President Biden was a 19-year-old freshman at the University of Delaware, pursuing a double major in history and political science.

Indeed, parallels have been drawn between the showdown between Kennedy and Kruschchev and the game of chicken Biden and Russian Vladimir Putin played before the latter invaded Ukraine. Only in the latter contest, the roles were reversed, with Biden in Kruschchev’s role, putting missiles in Poland, and Putin was Kennedy, responding by threatening to invade Ukraine in retaliation. Only Biden, unlike Kruschchev, didn’t back down and Putin was forced to make good on his Kennedy-style threat to invade Ukraine.

Biden was also aware a year ago of a Ukrainian plot to sabotage Nord Stream 1 pipeline carrying natural gas from Russia under the Baltic Sea to Germany. Both Nord Stream 1 and 2 were sabotaged last September, eliminating the leverage gas exports gave Russia over Germany and removing the latter’s reservations about providing weapons to Ukraine.

Some have accused the Biden Administration of masterminding the attacks in collaboration with Norway. But German investigators have since learned that a group of Ukrainian divers rented a yacht called “Andromeda” in Germany to stage the attacks, using a front company in Poland.

If the Ukrainians did sabotage the pipelines to goad Germany into supporting efforts by the North Atlantic Treaty Organization to aid Kyiv’s efforts to repel the Russian invasion, it raises more questions about the pretexts Biden has been using to justify his own gradual escalation of aid to Ukraine.

To recap: last December, after the Nord Stream sabotage, Biden approved delivery of Patriot anti-missile batteries to Ukraine. Then in January, Biden reversed his refusal to give Ukraine M-1 Abrams battle tanks after the United Kingdom said it would give it British tanks, a move that also prompted Berlin to agree for Ukraine to receive German-made Leopard tanks. Last month, Biden set the stage for Ukraine to receive F-16 fighter jets after a three month, stage-managed campaign to justify a decision that had been made as early as last November.

Ukraine has apparently launched its long-delayed Big Spring Counteroffensive, attacking Russian lines across the Dnipro River in Zaporizhzhia province and in eastern Donetsk province in what appears to be an effort to sever the land bridge between Russia and Crimea. The attacks are upstream of the Kakhovka Dam, which was allegedly sabotaged earlier this week, causing catastrophic flooding of Kherson province. While both Ukraine and Russia have accused each other sabotaging the dam, some analysts have said Russia had more to gain from the disaster. But it’s the southern side of the Dnipro controlled by Russia that appears to have suffered the most severe flooding. Others say Russia simply failed to properly maintain the dam, leading to a structural failure.

Speaking of averting disaster, the U.S. narrowly averted a disastrous default on its debt last week after Congress passed a bill raising the debt ceiling. But the damage may have already been done.

China’s central bank bought 16 tons of gold last month, boosting its gold reserves for the seventh straight month as faith in the U.S. dollar fades among central banks worldwide. After a buying spree that has seen it buy 144 tons of gold since last November, the People’s Bank of China is now sitting on more than 2,000 tons of gold.

Given heightened tensions between Beijing and Washington, it may come as no surprise that the People’s Bank of China might want to reduce the preponderance of dollars in its reserves. China has also for years been trying to promote its renminbi for international trade at the expense of the dollar.

But the PBoC isn’t the only central bank hoarding gold: in the first three months of this year, central banks around the world bought a record 228 tons of gold, led not by China, but by Singapore, whose Monetary Authority bought 69 tons of gold, according to the World Gold Council.

Geopolitical uncertainty and inflation are feeding demand for gold, but central banks are also trying to reduce their holdings of U.S. dollars. A survey last month by the World Gold Council of central bankers found that 62% of central banks see shifting more of their reserves into gold, while roughly half predicted shifting more of their reserves out of U.S. dollars. Central banks typically park their dollar reserves in dollar-denominated U.S. Treasuries.

While interest rate hikes by the U.S. Federal Reserve have helped boost the value of the dollar against other currencies, dollars buy less gold than ever: the price of an ounce of gold is hovering near a record high of $1,960 an ounce.

That the U.S. Congress this year again willingly risked defaulting as part of budget negotiations has already threatened the financial world’s faith in U.S. creditworthiness. Central bankers are also reportedly concerned that the U.S. is weaponizing the dollar as part of efforts to sanction Russia for invading Ukraine.

Ultimately, however, faith in the dollar depends on confidence in its value as a store of wealth. That value is eroded by inflation—dollars buy fewer goods and services over time. Further interest-rate increases by the Fed may offset this, first by lowering inflation and second by offering increasingly higher yields than gold, which pays nothing in interest.