I’m amazed to see financial threats being made this openly. Like real military threats, real financial threats are usually made via backchannels. But, then again, President Obama has threatened Russia openly with sanctions.
MOSCOW, March 4 (RIA Novosti) – An adviser to Russian President Vladimir Putin said Tuesday that authorities would issue general advice to dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine.
Sergei Glazyev said the United States would be the first to suffer in the event of any sanctions regime…
Glazyev noted that Russia is a creditor to the United States.
“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”
Is it just bluster? As recently as last year, the answer would be yes. But China holds approximately $1 trillion in U.S. Treasury bonds; and if Russia ‘goes there’, China will not want to be left behind.
And for several years now, China has been working with its partners (including Russia, Japan, Brazil, the UK, France and Germany) to set up facilities for trade & finance that would enable them, collectively and at long last, to be independent of the U.S. dollar. Even before this crisis, some experts were predicting that 2014-15 would see those efforts bear fruit.
Leave it to John F.-n Kerry and Barack Obama to be just stupid enough to push Russia and China further along a road that they are already well-and-gladly on.
Russia’s threat also comes via its Foreign Ministry:
MOSCOW, March 4 (Reuters) – Russia said on Tuesday that it would retaliate if the United States imposed sanctions…
“We will have to respond,” Foreign Ministry spokesman Alexander Lukashevich said in a statement. “As always in such situations, provoked by rash and irresponsible actions by Washington, we stress: this is not our choice.”
“We have frequently explained to the Americans … why unilateral sanctions do not fit the standards of civilised relations between states,” Lukashevich said.
Lukashevich did not describe any measures Moscow might impose in retaliation but said the Russian response would not necessarily mirror the U.S. sanctions.
Translation: Dumping Treasury bonds.
If China were to follow suit, it would mean a spike in U.S. interest rates; followed by further Quantitative Easing (QE) from the Federal Reserve to absorb the ‘returned’ bonds and keep rates down; followed by $150+ oil (or $6+ gas) as the dollar’s value collapses on international markets.
The question for me is: Does the U.S. have a compelling national security interest in the Ukraine, that would make it all worth it? We well might; but Obama hasn’t yet explained it.
So, get your supplies of inexpensive Russian ammon while you can.
Jeff, what are the ramifications of this?
And if the Europeans don’t at-least remain neutral in an anti-American “Bond Dump”, Putin can shut-off the gas pipelines that supply Central Europe, Poland, Germany and Ukraine. Scandinavia and the British Isles use Norwegian and North Sea pipeline-gas, but the Germans and ex-Warsaw Pact will be very-cold this Winter.
Can you say “Cold War”, comrade?
cashless – my second-to-last paragraph is “below the fold” and only added recently, so you may have missed it:
The long-term effect of various countries working over the next few years to decrease the dollar’s importance to international trade and finance is, basically, that the dollar’s international buying power is headed way down. Which means that imported goods (think oil) get more expensive for us. Potentially a lot more expensive. Domestic goods also get more expensive, since most things nowadays use an import at some stage of production or distribution, and since we will need to export more goods.
Two out of three of those are not going to happen.
No one is going to leave the US market, for obvious reasons, and the dollar is too deeply entrenched to be that easily unwound as the leading world currency.
But as far as “dumping bonds” — or more precisely, refusing to buy new ones — that can absolutely happen, and when it does, the governmental gravy train screeches to a halt.
The end result is major tax hikes or massive cuts.
Moreover, from a geopolitical standpoint, it plays right into Putin’s hands; the more he can raise the price of oil, the better his economy is and the more crippled Europe’s becomes, thanks to their “green” initiatives that have left them essentially unable to meet their power needs otherwise. It also means his vassal states like Iran have impunity to act, since no one is going to imperil the movement of oil in and out of the Persian Gulf and they can charge essentially whatever they want.
And here in the United States, the imbecile Obama is doing everything in his power to block our own energy resources from being used, and will continue to do so because the eco-psychos cannot be lost from the fragile support of the Obama Party.
Putin is no fool. I doubt he planned to act at this point, and certainly would not have had Ukraine not gone and held a revolution, but now that he is acting, he is well-positioned to do some significant damage, especially with an imbecile like Barack Obama in charge.
NDT, I respectfully disagree. The countries I listed trade a great deal among themselves, possibly now more than they each trade with the U.S. (I would have to look it up.) It’s no longer a foregone conclusion that they would stay with us, if we forced them to choose.
And getting rid of the dollar’s entrenchment is exactly what some have been working on behind the scenes, the last few years. Getting rid of the dollar as the international centerpiece *will* happen, sooner or later. The question is when. Maybe 2014 is still too early. Or maybe not.
Except that the Fed (QE) can take up the slack. Not that that is good; it’s a less obvious (and I say, more pernicious) form of taxation.
Would a northward migration to Canada if things go pear-shaped be viable? I know the Canadian economy is tied to ours, but aren’t they in a stronger position than us economically?
A few headlines from Drudge over the last few hours
– Russia test fires ICBM
– Turkey scrambles jets after Russian plane flies near coast
– Iranian general: Obama threats joke of the year
– Participation in labor force at 35-year low
– Gay troops perform first drag queen show on American military base
The US is ready for anything. Anything, I tell you!
Thanks for using the word “Stupid” to describe Kerry and Obama, Jeff. The topic is important and directness is appropriate.
Did not see that Jeff, thanks. Scary times we are living in…
They are, indeed, because they were smart and elected, what for them was a conservative when the economy turned south, not the Idiot Of The United States who spent like a drunken sailor, even though previous attempts to spend ourselves into prosperty did not work, then imposed the most massive “reform” of health insurance that crippled the medical industry, burdened employers, and left thousands under- or unemployed, AND without insurance. An idiot who seems to do everything in his power to sabotage the economy in the name of making it better. In other words, he’s using bloodletting to improve our health.
I would rather not have to move to Canada. But hey, if America’s collapse starts accelerating and the Canadians are feeling merciful, I’ll be heading north. Calgary or Edmonton sounds nice.
I went Googling for more details — wow, I spent my junior-high-school years on Kadena AFB, way back in the mid 1980s!
The general hugeness of Kadena — it’s like a self-contained small city — somewhat mitigates the shock value of a drag show, for me personally. (And I suspect that overall, it was probably less outlandish than the traditional hijinks during the Equator-crossing ceremonies on Navy ships.)
On the other hand… would someone explain to me again just exactly how dressing as the opposite sex just for laffs — which is what drag-queens are about — is consistent with supporting all those Transgender Military Personnel Bravely Serving In Silence?
Throbert, your guess is as good as mine. Personally, I don’t like drag: the way the queens portray women is kind of misogynistic, when you think about it. (God forgive me for using that over-used word)
I imagine it may be a “laugh at the ridiculousness of it all” thing, or a “I’m uncomfortable so I’ll laugh to relieve the stress” type of comedy. Again, I don’t see the appeal. And I understand the purpose of drag queen MCs at leatherman events even less.
I vote for MASSIVE CUTS, please.
Hey guys, I’m giving up politics and blogs for Lent, so this is going to be the last you hear from me outside of Sundays for the next 40 days. See you guys on the other side!
We have a huge amount of fossil fuel that could be used to counteract $150/barrel oil.
Most Americans, I believe, think our fossil fuels would lower the price of fuel in the United States. But that goes against the basic tenets of capitalism. In a global economy, the fuel is sold to the highest bidder without favor.
But, supply and demand still occurs and the selling price of Russia’s natural gas could be subjected to competition. However, natural gas moves by pipelines in huge quantities, not by ships churning along at a snail’s pace. Furthermore, liquifying natural gas is enormously expensive and labor intensive.
Just over half of Russia’s budget is predicated on energy export. Europe consumes a third of that export. The next best alternative to natural gas is coal. We all “know” that man-made global warming has made coal the most evil of villains in the strangulation of mother earth.
The availability of “cheap” energy is the driving force of every economy the world has ever known. That is why Utopians are always chasing the solar energy rainbow. But the storage of energy and the transmission of energy is as important in the equation as the availability of the energy itself.
I mention all of this, because Russia is playing the game of tacit threat directed at the EU by messing with psyches concerning their access to natural gas. That is a two edged sword. If they get too cute, the EU will turn to other sources in spite of their determination to worship Gaia.
Perhaps the US is feeling more and more isolationist in its awareness that using its own natural resources for itself is the best solution for a world which is trying to reach our standard of living while pulling us down at the same time.
Shades of Chavez come into play. We would have to “nationalize” our fossil fuels in order to keep them at home.
True, ILC; I should have added “at this time” to my statement. I don’t think they’re at the stage now where they can completely unwind from the dollar and isolate the United States economically, but I do agree with you that that time is fast approaching if we continue along the Obama downward trajectory.
Fair ’nuff. We agree that a cusp approaches. I just wonder if we might, almost, maybe have reached it. I also acknowledge that it might still be a few years off. (As in, 5 or less.)