The U.S. government has been threatening Russia with economic sanctions as punishment for Russia’s invasion of the Ukraine. Russia has responded to these threats with a threat of their own: an end to the current Currency War.
… one top Kremlin adviser is even suggesting that Russia could abandon the U.S. dollar and start dumping U.S. debt. In addition, he is also suggesting that if sanctions are imposed that Russian companies would not repay the debts that they owe U.S. banks.
This would be the economic equivalent of dropping the nuclear bombs on Hiroshima and Nagasaki. James Rickards discussed this possible scenario in Currency Wars. Mr. Rickards participated in a type of Financial War Games that he won by proposing that Russia issue a gold-backed ruble as a way of destabilizing and destroying the U.S. economy. Mr. Rickards also discovered that the U.S. government and military don’t believe that such a thing is even possible.
Not only is such a scenario possible, it is growing more likely every time the Obama administration tries to intervene in world conflicts. The fact is that the rest of the world is laughing at
us our government. They are laughing because the U.S. government is broke. The economy is being strangled by the pols and bureaucrats in Mordor on the Potomac. And the current administration has reset relations with Russia…right back to the late Cold War days of my youth.
And this is not the first time that Russia has threatened the U.S. with financial Armageddon. From The Dollar Vigilante:
And in November 2013, the Russian lawmaker, Mikhail Degtyarev proposed a bill to ban the use and possession of the dollar, saying, correctly, it was like a Ponzi scheme. He warned that the Russian government would have to bail out Russians holding onto dollars in the event of a dollar collapse.
“If the U.S. national debt continues to grow, the collapse of the dollar system will take place in 2017,” said Mr. Degtyarev of the Liberal Democrat Party. “The countries that will suffer the most will be those that have failed to wean themselves off their dependence on the dollar in time. In light of this, the fact that confidence in the dollar is growing among Russian citizens is extremely dangerous.”
This is what happens when the Fed expands it’s balance sheet by 500% in a period of 5 years. The only economists who don’t realize the danger are the PhD economists in the U.S. The threat of hyperinflation is there, even if it isn’t being realized at this time.
Threats only work when you can back them up, like Master Blaster:
Categories: Bad News Everyone!