Below is our translation of an article from RIA Novosti with commentary by Vince Dhimos.
It is hard to imagine that a country teetering on the edge economically could even think of bullying other, very powerful countries with sanctions or even assassination of high officials. A while back, Russia ditched almost all its Treasuries (as mentioned below) to avoid the potential bite of sanctions. It knew that the US was capable, in a fit of rage, of prohibiting it from selling its Treasuries and then just keeping the cash. Stealing – sort of like “we’re keeping the oil.”
And, as also mentioned below, China has ditched significant amounts of Treasuries, and so have European central banks and mutual funds. Clearly – I mean clearly if you’re not a US government official – the world is losing its faith in US Treasuries and it would be a good time to drop the bullying role. But apparently US officials have forgotten how to be even a little humble. That is one reason the title of the article below says “it’s going to hurt.”
Here it comes. Good and hard.
"It’s going to hurt": the US did not manage the liquidity crisis
Jan 1, 2020
MOSCOW, Jan 10 - RIA Novosti, Maxim Rubchenko. In the US, the liquidity crisis has sharply worsened, with which the country's financial authorities have been struggling for four months. From September to December, the Fed poured 366 billion dollars into the economy, but that did not help: in the last week alone, another 99 billion had to be added.
There’s no more money
At a weekly loan auction (repo) held on Wednesday, bank applications significantly exceeded the limit of $35 billion. As a result, the Federal Reserve provided loans for 41 billion, and taking into account other auctions, the total volume of cash injections into the American economy for the week reached 99 billion.
This signals a new round of the liquidity crisis, which the authorities have been trying to cope with since September 16, when bank applications for short-term Fed loans suddenly almost doubled - from 27 billion to 53.2 billion. This led to an increase in lending rates from 2.29% to 4.75%.
The next day, banks filed loan applications for more than $80 billion - and the rate exceeded ten percent.
Another key indicator, the federal funds rate (at which banks provide short-term loans with excess reserves to other banks), for the first time exceeded the target range of 2.3-2.35% set by the Federal Reserve. Dollars in the interbank market had not been this expensive either in the midst of the 2008 crisis or when the "dot com bubble "burst in 2002.
To save the financial market from paralysis, the Federal Reserve Bank of New York went to buy securities - government bonds, bonds of federal agencies and mortgage obligations – from banks. In just two days (September 18 and 19), $128 billion was poured into the market.
But that was not enough, and the Fed announced the repurchase of short-term treasury bonds (for up to a year) in the amount of $60 billion per month. The market calmed down for a while.
However, on December 16, bank applications for loans again exceeded the limit, and the regulator again began to pump up the economy with money. In total, from September to December 20, the Fed, through repo auctions and the repurchase of short-term government bonds, pumped 366 billion dollars of additional liquidity into the national financial system – a record since the 2008 crisis.
Experts were sure: now the situation is normalizing. Nothing of the sort. Moreover, in the new year, cash injections increased: from 255.95 billion in the last week of December to 258.9 billion in the first week of January.
United by debt alone
According to analysts at the Swiss Bank for International Settlements (BIS), the main reason for the lack of liquidity in the United States is a sharp decline in the issuance of loans by major US banks.
"In recent months, the assets of primary lenders have concentrated on treasury bonds, which has limited their ability to provide financing in the short term on repo markets," the BIS report said. In fact, the largest US banks today are saving the national economy from default.
The fact is that against the background of a record public debt ($23.17 trillion as of January 23, 2020) and the Trump administration’s unpredictable trade policy, many investors are jettisoning US government bonds.
China, which until recently had the largest portfolio of US debt securities, sold them more than two hundred billion dollars’ worth last year, the Bank of Russia sold almost one hundred billion since the end of 2018. Other central banks, as well as private European and Asian investment funds, are actively reducing their Treasuries portfolios.
The US Treasury was faced with a drop in demand for securities, which are the only way to cover the budget deficit. Since the Fed is not entitled to direct issuance, the “quantitative easing” scheme tested in the crisis of 2008 was again launched to save the situation: the largest national banks acquire government bonds, and the Fed then redeems them for freshly printed dollars, while ensuring decent profit for partners.
As a result, large banks had no incentive to lend to small and medium-sized companies – which lost short-term loans. Now the Fed has to exceed repo auction limits, since the law does not prohibit printing money for this purpose.
Optimists and pessimists
Many American experts believe that the Fed, having launched a new phase of "quantitative easing" in parallel with additional injections of liquidity through repo auctions, has found a reliable remedy for the new financial crisis.
The Bank of America (BofA) report notes that while in October only seven percent of investors expected accelerated global growth in the New Year, then in December it was already 29%. At the same time, fears of a recession fell by 33 percentage points, and the vast majority of respondents (68%) today are confident that the global economy will avoid a recession in 2020.
BofA analysts emphasize that, believing in future growth, global investment funds are reducing investments in reliable instruments with guaranteed returns and increasing investment in stocks. No wonder the S&P stock index overstepped the boundaries of the technical corridor in which it has been since the end of 2018.
However, some experts warn that a bubble is forming in the market. “And the more the Fed pours in money, the more difficult it is to return to normal monetary policy without causing a stock market crash," said Scott Skyrm, chief analyst at the Curvature Securities repo investment market.
And it will be necessary to return to normal politics. Otherwise, the dollar will collapse and inflation will accelerate.
“Whether Fed Chairman Powell will be able to contain inflation and continue this policy until the November elections is the question,” Scott Skyrm points out. “If not, he will have to answer to a very angry president.”
A question arose at Quora that Vince Dhimos has decided first to answer at New Silk Strategies.
Q: ARE US DEMOCRATS AGAINST THE TRADE WAR WITH CHINA?
The trouble with the US political system has always been that the two parties and the candidates within the same party must struggle hard during each election campaign to distinguish themselves from each other. Because they are not fundamentally different in vital aspects of economics, military affairs and foreign policy. They're for an eternal war and an eternal ballooning debt. This is why while some Democrat candidates carp at Trump for his trade war, none of them are offering any specific proposals on how to end it and their ideas are all over the map, as reflected in this Reuters article.
And the trouble with the trade war is that it was something that most ranking Democrats and Republicans have actually desired to some degree or other in recent decades. Because it was a pipedream gone sour. They had hoped the free trade relationship between the US and China would drive a wedge between Russia and China, and just the opposite happened, and they had hoped China would become America’s workshop without costing Americans a dime. In fact, it degraded the US manufacturing base.
It all goes back to the 80s when Congress was debating whether or not to grant Most Favoured Nation status to China. At that time, it was the Democrats who resisted the most. In general terms, most politicians agree they were right. The US has created a monster.
Nixon had floated the idea of free trade with China amidst his project of opening up to China and establishing better relations with the country.
Nixon’s economic policies suggested he wanted an America that could get rich, or stay rich, without doing any of the traditional things that make or keep countries rich. It was also Nixon who initiated talks with Saudi Arabia to persuade that country and its Gulf State partners to use only US dollars in its oil trade and to keep all its reserves in US Treasuries, thereby creating a new currency concept, the petrodollar. He knew that the more a currency is used in world trade settlements, the stronger it gets, and the idea was to have the dollar become the hegemon among currencies, giving the US unlimited economic and political clout. The offer was that if Saudi went along with this, the US would use its military to protect its oil fields and the ruling family, who passed as royalty but in reality were nothing but uncouth glorified dictators. In 1974 Nixon and King Faisal in fact did sign such an agreement, which was kept under wraps and became a taboo topic among economists. Indeed, Nixon was the president who had just taken the US off the gold standard, and not only is there something inherently sleazy about having a currency held afloat with absolutely no real backing but it was clear to keen analysts that this arrangement could lead the US – through blackmail or excessive zeal to please the Saudis – to wage wars purely to please these dictators. So no one wanted to talk or write about the deal and the vast majority of Americans were therefore unaware of it, enabling the US to contrive conflicts with countries like Iraq and Syria that were disliked by the Saudis but posed no actual threat to the US people without having the sheeple suspect skullduggery. And of course, the pressure was twofold, since the countries on the Saudi blacklist were equally hated by Israel, creating a perfect storm for the hapless Shiites in the Middle East.
The idea of getting something for nothing, which underlay the petrodollar deal, was the child of the same brains that cooked up the China trade scheme, which, if properly managed, would allow China to become a colony for the US that would do its dirty labour and allow America to focus on finance instead of the economy. It was therefore akin to the Fed’s currently fashionable idea of just simply printing up dollars out of thin air, and the political class’s idea of using petrodollar hegemony as a bludgeon to beat into line any country daring to oppose US policies, even to the extent of renouncing their own economic interests, as Trump is currently trying to do with Germany.
Americans on both sides of the aisle and in both the grassroots and among the Establishment elite, in thrall to the Exceptional Nation narrative, have never been able to admit that the scheme of making China into a giant sweat shop; of allowing a brutal dictatorship to forge US foreign and military policy, thereby effectively turning the US military into a mercenary force; of simply printing money instead of addressing the real sector of the economy, and of bullying Europe into buying overpriced US LNG instead of the cheap Russian gas delivered by pipeline – in short, all these schemes, are blatantly sleazy and deeply immoral and no respectable nation would ever dream of treating other nations so shabbily. US and Israeli propaganda maintains that the Muslims are to blame for all the conflicts in the Middle East – ignoring the massive Western role therein – while the US political class blames China and Russia for its own economic shortfalls. Yet it is a “Christian” nation that is stealing the sustenance of the rest of the world and threatening their security with its degenerate policies, which lack even an ounce of love and tample the golden rule.
The unconsidered China trade scheme has not worked out to the US’s advantage, and those who promoted free trade with China in the 80s would now like to walk back their mistake.
But unfortunately, China has grown far too strong for any economic measures to work out well in America’s favour.
Bluntly put, it is too late.
Trying to undo the mistake of letting China get fabulously rich by attempting at this late hour to make it poor again is akin to murdering one’s grown child as a birth control method. The child is fully grown and is stronger than anyone could have imagined. And it comes in a package with Russia.
This baby can’t be put back in the womb and then extirpated. It’s grown up. We need to deal with it, and to do that, we also need to grow up. That will be the hard part.
Vince Dhimos answered a question at Quora.
Q: HOW CAN MONETARY POLICY INSTRUMENTS AND FISCAL POLICY INSTRUMENTS BE USED TO INCREASE COUNTRY PRODUCTION?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
The economic experience of the US ever since the creation of the Federal Reserve in 1913 is solid proof that finance cannot solve economic problems in the long run. Finance attempting to intervene in economic crises has only succeeded in exacerbating the problem, as clearly evidenced by the ballooning US sovereign debt and the fact that the Treasury is no longer finding sufficient buyers of Treasury bonds (due to the low interest rates) — obliging the government to print more money. Billions are now being printed daily to solve the repo (sometimes called “overnight lending”) market crisis, but money printing (quantitative easing) was originally intended only as a temporary stop-gap measure. Now it is a permanent part of US finance and has been since the 2009 crisis.
The Fed has in fact tried to use money printing as a financial policy instrument to revive a wilting economy. The aforementioned repo market is a little-known means of securing quick (often just overnight) loans for cash-strapped companies. Last fall, the supply side of this market fell short of the demand for loans, due mostly to the low interest rates creating a cash shortage in the banks. To “solve” this problem, the Fed – which had caused the problem in the first place – was obliged to resort to quantitative easing (although it refrained from using that now-toxic term so as not to frighten the public). Now it is printing billions of dollars a day to prevent the repo market from collapsing. As I have said many times before, financial instruments do not provide permanent relief to economic problems. This is why the Fed is not an appropriate agency for this solution.
Further, there is now no escaping this debt trap. This is because, if the Fed raises rates to attract bond buyers, it will not be able to afford to pay the service on its debt. But by keeping the rates artificially low, it is stuck in the rut of simply buying its own debt, and the only way to do that is to keep printing more dollars. But this poses the inevitable risk of hyperinflation as in the famous example of the Weimar Republic, where workers had to carry home their cash from the banks in wheelbarrows.
No economy has ever survived such a debt crisis.
The Fed has been busy kicking the debt can down the road for decades, but the wall is now in sight. And then?
RUSSIA VETOES WESTERN CONTROL OF AID TO SYRIA
Vince Dhimos answered a question at Quora.
Before I post the Quora Q and A, I need to comment on the absolutely slimy coverage of the UN Syrian aid vote. Every Western site I visited on this issue claimed, absolutely falsely, that Russia had voted against aid to Syria. That was a vicious lie! Russia and its friends in the UN proposed introducing aid from 2 points at the border with Turkey. But the West wanted to control the crossing points into the country that it had tried to destroy, and demanded two additional entry points from territories controlled by the West. This is one more important reason you should not get your "news" from sources controlled by the US Establishment. And that includes most European sources as well. This is best explained by this article: https://swprs.org/the-propaganda-multiplier/.
Q: WHY DOES RUSSIA FAIL TO GET UN APPROVAL FOR SYRIA CROSS-BORDER AID DELIVERIES FROM TURKEY?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
For anyone who understands the geopolitical landscape, this is an easy question. Western countries are pushing for 4 different crossing points and without approval by the Syrian government. Russia and its partners want only 2, both passing through Turkey, which is partially aligned with Russia and has been cooperative with Russia for the most part.
The 2 crossing points proposed by the West, that do not pass through Turkey, are controlled by the West, which obstinately continues to impose sanctions that prevent the war ravaged Syrian people from acquiring food staples, energy and medicine. Further, it was the West that wholeheartedly supported the Arab Spring that brought hordes of jihadists to Syria from over 80 countries (as detailed here). Does anyone think the West really wants the Syrians to receive aid? Even as the US steals their oil – as the US president brazenly admits? The same scenario emerged in Venezuela, another country whose people were being starved and deprived of medicine by the sanctions imposed by the US and its allies but then suddenly, in a supposed burst of altruism, the US decided to send aid, and without consulting the legitimately elected government, started illegally crossing the border with trucks full of this “aid.” Imagine a reverse scenario in which the US were embargoed and Americans could not receive food and medicine because a powerful tyrant decided they should pay a heavy price for electing Trump, and then this same tyrant is suddenly overcome by a supposed paroxysm of compassion and tries to send “aid” across the Canadian border. Would the starving Americans, victims of the embargo, be absolutely delighted to receive this aid from their arch-enemy? No. They would say “for crying out loud, why don’t they just lift the embargo and let us buy food and medicine instead of pretending to be humanitarians all of a sudden?” They’d surely suspect the attempted “aid” deliveries were a planned spy mission or perhaps a delivery of guns to America’s internal enemies.
It all boils down to the fact that, with its open and public support for the Arab Spring, the West created and nurtured ISIS, Al-Qaeda and their spin-offs and rebrandings, as I showed at Quora:
Vince Dhimos's answer to Are there any sources for American involvement in the Middle East since 9/11? It’s for a paper.
Now since the West is responsible for all the havoc, in its zeal to please Israel and Saudi Arabia, who wanted to remove Assad from power, and since this same West created unbearable conditions for the Syrian people in their country by introducing, financing and arming these jihadists, and since the latter all but destroyed Syria until 2015, when the Russians finally went in and started restoring order, why in heaven’s name would the Russians allow the West to control entry points into Syria from areas controlled by the West? Of course they wouldn’t and they vetoed the UN proposal to allow this. If the West – and the UN that it controls in this issue – were to allow the Russians, the Syrians and their friends to control the aid delivery, there would now be aid flowing into Syria. Yet Pompeo hypocritically asserts that Russia and its friends in the UN have “blood on their hands” for vetoing the UN resolution to allow the West to control the aid.
The West not only backed the bad guys in Syria, it not only slapped inhuman sanctions on Syria, but it also imposes sanctions on any country that helps rebuild this war torn country.
Why in heaven’s name would Russia and Syria allow these Western criminals (stealing someone’s oil is a crime, folks) to control the aid convoys entering the country?
Vince Dhimos answered a question at Quora. BTW, have you noticed how most of these questions contain false assertions? That is your msm hard at work.
Q: HOW DOES THE US MAINTAIN THE STRONGEST ECONOMIC GROWTH AMONG DEVELOPED NATIONS EVEN THOUGH IT INVESTS A MUCH SMALLER SHARE OF GDP IN INFRASTRUCTURE?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
Westerners generally make the same assumptions, including the false one you made in this question.
You are confusing growth of the economy with jobs growth and stock market bubble. The stock market growth is a reflection of a dangerous bubble that is expected to pop one of these days, plunging the US into a recession. Stock prices are not used in calculating economic growth or GDP. As for the jobs growth, it does not match the low shipping statistics, indicating that these new jobs may not last long. Also remember that shale oil and gas are the bulk of the new jobs, but shale has been going bust. As Oil Prices Drop And Money Dries Up, Is The U.S. Shale Boom Going Bust?
This means investors are dropping out of the shale game and these jobs too are threatened.
The US does not have strong growth. It hovers around 1–2% of GDP, but that is only because the government tweaks the statistics. If they are adjusted for real inflation, there has been zero growth since about 2009.
China, however, which we are indoctrinated to believe is a loser, has had growth of around 7% for many years, though is now down to 6.1% thanks to the trade war. Thus it has slowed just a tad recently in the wake of harsh measures, but China does not intend to let the trade war slow it down too much. Trade with the US is not what shores up the Chinese economy. It amounts to less than 1% of China’s GDP.
BTW, the losses in GDP in the US and China due to the trade war are about the same. No one ever “wins” a trade war.
Below is our translation of an article from RIA Novosti with commentary and notes [in brackets] by Vince Dhimos.
The US has managed to plug a financial "hole" with 86 billion a day. So far
Even the permanently optimistic American financial press is gradually concluding that the US budget deficit is starting to create difficulties that the Federal Reserve can hardly handle. The financial system of our overseas partners can be compared to an unstable reactor, and their central bank is trying to make sure that the explosion does not happen, and it’s becoming more and more difficult to keep this “reactor” under control. The flagship of the American business press The Wall Street Journal reports: "The Federal Reserve’s control over rates is tested for strength by the growing United States government budget deficit. Debt issuance by the US Treasury is expected to contribute to the instability of the money market."
In this case, it is worth making a translation from the cautious language of specialized journalists into spoken Russian. The American habit of living beyond our means has become so widespread that even the use of the printing press to close financial holes is no longer enough to protect the financial system from toxic effects. By and large, a significant part of the welfare of the fading world hegemon [the US] after 2008 is based on a constant increase in public debt and budget deficits, combined with maintaining very low interest rates for the economy as a whole. In this sense, the US economy can be compared to a bicycle, which has one pedal at low rates and another at increasing budget deficits, which are financed by the growth of public debt. If interest rates on loans suddenly rise or if the budget deficit cannot grow further, then the economy first slows down and then begins to fall. [Let’s hold it right there for now. So you ask: just why has the debt bubble, irresponsibly created by the Fed to please its billionaire pals, forced the government to overspend? Here is a brief explanation from an Awara analysis of 2018: “[spending] must not only be high enough to maintain the bubble at the previous level but also high enough to generate a semblance of growth.”
Now the market is afraid that the budget deficit has reached a level that will disrupt this pattern. The practice of 2018 clearly showed that the American financial markets (and the economy as a whole) with the increase in dollar rates (that is, the cost of lending in the economy) are starting to fall apart right before our eyes.
The Wall Street Journal clearly indicates that it is the deficit of money in the American treasury that is to blame for the problems, and emphasizes that the solutions found are temporary: "The budget deficit, which is projected to grow over the years, will lead to a deterioration in the basic elements of the US financial system, which makes it difficult for Federal Reserve to manage interest rates, which (in their turn - Author’s note) affect how much consumers and businesses pay for loans. In September, the Fed was forced to intervene in money markets to suppress a short but alarming jump in short-term interest rates The central bank says it is ready to deal with any financial problems that may arise before the end of the year in the so-called repurchase agreement market, or repo market, worth $ 2.2 trillion, but a long-term solution has not yet been developed."
Although the so-called repo market is not very well known to the general public, it is in fact indispensable for the functioning of the modern financial system. Banks depend on it for short-term lending, with government bonds used as collateral. In turn, as American journalists rightly point out, the smooth operation of this segment of the financial market, hidden from the general public, "ensures a reliable supply of credit funds to the economy." The irony of fate is that American senators and congressmen, when they proposed a package of “hellish sanctions” against Russia, probably expected to ease the “repo market” in our country - at least, finance minister Stephen Mnuchin described exactly in his letter to Congress such consequences of the introduction of "hellish sanctions." No one has imposed sanctions on the States, but the situation in this key segment of the financial market looks very bad - it is not for nothing that the Federal Reserve has to plug up holes to the tune of $86 billion a day. To describe the situation in the simplest and crudest terms, there is a catastrophic shortage on the market of people wishing to borrow money secured by American government bonds (which, at least in theory) are a risk-free asset and by rights should be snapped up by potential lenders.
The need for cheap lending may so far be covered by the Federal Reserve, which actually acts as a "lender of last resort," but this is a temporary solution. The Wall Street Journal quotes the opinion of Mark McQueen, a bond portfolio manager at Sage Advisory, as saying: "The Fed cannot defend a trillion dollar deficit (budget – author’s note) Year after year. This is beyond their capabilities." [To better understand the repo market, here is some help: https://www.wsj.com/video/the-repo-market-explained/AB15EF0E-9407-41C7-921B-98F6B9789DC2.html ; https://www.youtube.com/watch?v=8SE2W5b8dp8 ; https://www.youtube.com/watch?v=34Hl253H4xw]
The desperate and clearly unplanned actions of the American authorities are starting to resemble the emergency measures that were taken in the crisis of 2008, only this time the actual word “crisis” is not uttered by any official to avoid making it a self-fulfilling prophecy. It cannot be ruled out that unforeseen stress, which began in the financial market in September and is not ending despite all the efforts of the American monetary authorities, is a sign of systemic problems in the economy and one of the symptoms of an impending recession.
CNN reports that at least one major international bank expects a recession in the US economy next year:
"The Fed believes that it has everything under control," wrote Philip Marey, senior strategist at Rabobank for the US market, in a note to clients. But the same forecasting model that led Rabobank to correctly determine the end of the recent Fed interest rate hike cycle now signals that the central bank will need to “lower rates to zero by the end of 2020,” Marey said.” The three rate cuts (this year – author’s note) will not be enough to prevent the economy from falling into a recession,” he wrote.
At the same time, the Bloomberg agency, referring, for example, to the testimony of Fed Chairman Jerome Powell to Congress, notes that if the US economy slows down, all these measures will not be enough: in that casel the Fed will not be able to reduce interest rates sufficiently to significantly mitigate (not to mention prevent) a serious economic downturn. <...> Theoretically, this gap (between the capabilities of the Federal Reserve and the needs of the economy – author’s note) can be filled by fiscal stimulus, that is, by the government either reducing taxes or increasing spending. In practice, this will be almost impossible.”
In 2016, Donald Trump said that the US economy is a big ugly financial bubble. Now he cannot allow this bubble to burst before the 2020 elections, and probably all kinds of short-term Fed decisions will be enough to achieve this goal. But after the election, at any moment, a situation may well arise in which real miracles are required from the President and the Treasury Department for the bubble to continue to exist.
Perhaps it is the recognition of these risks that makes Trump rush so frantically in the economic war with China and in forcing the European Union to finance the American military-industrial complex and NATO - he knows that he does not have much time left to save American hegemony.
SIGNS THAT THE US DEBT-FUELED ECONOMY MIGHT ACTUALLY COLLAPSE
From April 2018
“An enormous bubble has been created – and it will go on inflating as the new debt must not only be high enough to maintain the bubble at the previous level but also high enough to generate a semblance of growth.”
What's the importance of the US dollar in the world economy? Why?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
The US dollar has played a key role in all wars waged by the US in the last 50 years, which were waged in large part to please the Saudis, thanks to the petrodollar agreement signed in 1974 between R. Nixon and King Faisal. Nothing is made of this portentous event in the Western media because if people were aware of it, Westerners would stop supporting US wars and Europeans would exit NATO.
Bloomberg was the only outlet that dared to publish and discuss a copy of the original deal, but there were obviously Saudi influences on the US government that were not mentioned in the agreement.
To answer your question succinctly, the US dollar was the main cause of the horrendous wars in the Middle East over the last 5 decades.
I discussed this in detail at Quora:
Vince Dhimos answered a question at Quora.
HOW DID THE ONE ROAD ONE BELT POLICY FAIL BE IRRITATING ALL THE NEARBY NATIONS INCLUDING RUSSIA?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
In a world where the US president has recently brazenly announced that he intends to steal oil belonging to the downtrodden and war-ravaged Syrian people, where US bombs have killed thousands of unarmed civilians from Afghanistan to Libya to Iraq, where the US openly supports violent demonstrations in Hong Kong where people are being attacked by demonstrators using lethal weapons, it is absolutely amazing that a Westerner would focus on supposed “irritation” caused by the OBOR project, which, unlike grand projects of the US and NATO, is peaceful and non-military and has killed no one. But perhaps the source of the irritation in the West is that no genocide has occurred as a result of the OBOR?
I did a search using the search terms
one-belt one-road irritates russia
and found no hints that the project has irritated a single Russian. The only irritant to India is that the route runs through Kashmir, but if India can find a way to oust the occupier, Pakistan, it can have that section of the route for itself. Indonesia was initially irritated because of China’s growing clout, but lately the country’s leadership has been pleased to have the project revitalize its dilapidated infrastructure. Beyond the sound and fury, what country could stay mad at a project that eases trade and promises to boost the income of all who are affected by the project? As the Lord said to Saul on the road to Damascus, it is hard for thee to kick against the pricks. For comparison, has NATO launched any projects that actually promote the economies of its member nations?
Perhaps you are confused with the fact that Russia was initially not much involved in the project, for lack of funds. Well, that has changed. Russia and China are now cooperating in the Arctic leg of the OBOR and have created an Arctic route that cuts thousands of miles off the old Asia-Europe shipping route via the Suez Canal. Of course, this savings in fuel and contribution to reduced green house gases is, as we could expect, sneered at by cantankerous residents of the Western world, where numerous countries, with the usual grovelling obedience to the professional Washington Russophobes and Sinophobes, refuse to use the new route, preferring to pollute and overpay as before.
As for the so-called “failure,” the project continues unabated, and in fact, several nations have shown a pecuniary interest in building or expanding ports to accommodate the freight arriving from Asia or headed there via the new Arctic route. These include many states that have complained of the popular Western fiction of “Russian aggression.”
Funny how the prospect of mammon can change hearts and minds.
Vince Dhimos answered a question on Quora.
Q: WOULD PEGGING THE US DOLLAR TO THE PRICE OF GOLD LIMIT HOW MUCH CURRENCY THE FEDERAL RESERVE COULD PLACE IN CIRCULATION?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
It doesn’t matter what policy is adopted, but forget gold. The US is ideologically wedded to paper, or rather to electronic dollars. The bottom line is that the government or Fed should stop adding to a now-unpayable and irresponsible debt and must stop simply printing money, ie, using a financial solution to solve an economic problem. But that will not happn in the biggest Western “democracy,” where politics — not common sense — drives all policies.
The real US economy is anchored in real production and there is not enough production to merit the wild reckless spending in Washington. (Trump focused on shale oil but that is systemically unprofitable).
In October, according to CNN:
“The Fed announced on Friday it will launch a new program next week that will gobble up $60 billion of Treasury bills per month. The purchases will further boost the size of its already-massive $4 trillion balance sheet.”
This means more money printing to solve a problem that was created by the US trade wars coupled with overspending.
The US is not minded to use economic measures to solve economic problems, and financial “solutions” are not real solutions, just can kicking. The president who promised in his campaign to cut back spending, actually raised the debt tremendously. No politicians has the will to cut spending and reduce the debt. This is a systemic characteristic of Western “democracy.”
Washington has fallen prey to a money-printing mentality akin to a drug addiction. There is no solution now. The downward spiral will continue until the economy flat-lines.
If you think that is an exaggeration, name a viable presidential candidate who would dare to suggest spending less on arms, closing military bases, stopping foreign aid to homicidal countries, making billionaires pay taxes and cutting spending programs starting in 2020.
The following is our translation of an article from RIA Novosti.
MOSCOW, Feb 4 - RIA Novosti, Marat Seleznev. The problems of poverty in developing countries and third world countries are obvious. But the most prosperous states also suffer from social ills. Forty million Americans live below the poverty line, several million barely make ends meet, and most of the benefits of civilization are becoming less accessible to them. Economists are coming to a paradoxical conclusion: it turns out that being a beggar is much worse in a rich country than in a poor one. Calls to think seriously about revising social policy are getting louder. How the American dream turns into an American illusion is discussed at RIA Novosti.
“During these two weeks I saw and heard a lot,” - this is how the voluminous report on the visit of the UN Special Rapporteur on extreme poverty Philip Alston to the United States begins.
During an American tour, he looked into downtown Los Angeles and was surprised that hundreds of people in the Skid Row area were on the verge of survival. He witnessed a policeman in San Francisco trying to drive a group of homeless people off the street. The law enforcement officer froze and fell silent after the question: "Where can we go?" Alston saw completely toothless people - insurance did not cover dental services. Now they have no opportunity to get a normal job. He was shocked by storm drains filled with sewage in those states where the authorities do not deal with such communal problems.
"The United States is one of the richest, strongest and most technologically advanced countries. But neither wealth, nor strength, nor technology is used to solve the problem of poverty. Forty million Americans live in poverty," says Alston. Forty million people are one in eight United States citizens. Almost 13 percent of the country's population.
The poverty line for one adult in the United States, according to January 13, is $ 12,140 per year. $16,460 for two people, $20,780for three. The average annual salary in the country is 29 thousand dollars for a cashier, and 62 thousand fora policeman. Forty million Americans receive less than the official "living wage." Moreover, 18.5 million of them have incomes half that threshold, the UN said.
The vice of poverty
In the USA, it is customary to think (and the authorities are trying to support this idea) that the rich are definitely hardworking patriots, the main driving force of the economy. Poor people, by contrast, are considered losers and dependents, people who do not want to work hard. “Reality, however, is at odds with these views,” Alston points out.
In fact, the richest Americans are trying to pay less taxes, withdraw funds to offshore accounts and profit not from hard work, but from speculation. The poor either were born poor or were marginalized under the pressure of circumstances - illness, old age, discrimination in the labour market, family breakdown or the like.
"In the current economy, only a small percentage of the population is protected from impoverishment caused by a combination of adverse circumstances. The American dream is quickly turning into an American illusion: the mobility of the population in the United States is the lowest among wealthy countries," writes Philip Alston.
The UN spokesman also urges not to replicate racist stereotypes, according to which the majority of the poor in the United States are black or Hispanic. In reality, the army of white poor people is eight million more.
A separate problem is child poverty. In 2016, 18 percent of children in the United States — about 13 million — lived in poverty. Thirty-two and a half percent of the American poor are children, 21 percent of the homeless are children. However, not everything is so terrible. Yes, 95 percent of young Americans now have health insurance thanks to the expansion of Medicaid and the launch of the Children’s Health Insurance Program in 1997. However, according to the Stanford Centre for the Study of Poverty and Inequality, the United States ranks first among wealthy countries in terms of child poverty.
At the bottom
“The misery and poverty of millions of Americans is the same as in Africa or Asia. Maybe even worse than theirs,” Angus Deaton, Nobel Laureate in Economics, sounds the alarm. For many years he has been studying the problems of welfare in different countries. In an article for The New York Times, "The United States Can No longer Ignore the Problem of Deep Poverty," he tries to answer the question of whether the United States has the same kind of beggars as, for example, Ethiopia and Nepal.
Deaton's answer is not very optimistic. Americans, despite the country's economic power, suffer extreme poverty. And there are more poor people who have sunk to the very bottom than is commonly thought.
According to the World Bank, in 2013 there were 769 million beggars on the planet. In this report, the term “world’s very poorest” is used - meaning deep poverty, the worst level of welfare. Such people survive on $1.9 a day. Of the extremely poor 3.3 million are Americans.
But one important circumstance is missing in these calculations. The needs of the poor in different countries are very different. A peasant in the tropics does not need a lot of money for clothing or transport services. A villager in India is not burdened with house rents and does not waste money on utility bills. Even within one country, beggars have different needs: in Los Angeles they are warm and the homeless sleep on the streets, while in New York they have to look for an overnight shelter with a roof.
American economist Robert Allen proposes to improve the poverty assessment system. According to him, the cut-off line of $1.9, which defers to the World Bank, is suitable for poor countries. For prosperous states, you need to use the four dollar mark.
As a result, Deaton writes, 5.3 million Americans can be called absolutely poor, that is, 66 percent more than is commonly believed. For comparison: 3.2 million beggars in Sierra Leone, 2.5 million in Nepal and the same 5.3 million in Senegal.
Of course, people live longer in rich countries. With rare exceptions, everyone has access to clean water, normal food, and at least some medical services. But Deaton notes that the benefits of civilization are increasingly bypassing the poorest Americans. And life expectancy in the country (80 years, 43rd place on the CIA list is worse than Greece, Puerto Rico and Spain) is lower than it could be given the total wealth of the United States. In some regions, such as the Mississippi Delta or the Appalachian Mountains, life expectancy is even lower than in Bangladesh or Vietnam.
Many Americans face poor health. A joint study by Angus Deaton and economics professor at Princeton University, Anna Keyes, said that this problem most often affects white Americans with secondary education. Among them, the so-called mortality from despair - suicides, alcohol and drugs - is increasing.
The authors of the study suggest that the increase in the number of "deaths from despair" is associated with a deterioration in the economic and social situation of citizens - mainly representatives of the white working class. It is noteworthy that according to the results of 2015, mortality in this category was 30 percent higher than that of African Americans. In 1999, the opposite picture was observed. This is another confirmation of the fallacy of racial stereotypes: the level of well-being depends on many factors, but certainly not on skin colour.
“Fighting inequality requires significant changes in taxation nationally and globally. Many countries will have to rethink education and wage policies, as well as corporate governance,” according to the 2018 World Inequality Report.
Among the authors of the document are economists specializing in the problem of stratification of society and poverty: Tom Picketti and Emmanuel Saez. They believe that developed countries should radically change their social structure.
Poverty alleviation is proposed in three areas. The first is the application of progressive taxation. This discourages the rich from accumulating money and raising their own wealth. The second is the compilation of a global registry of financial assets. This will help identify capital owners and strike a blow at tax evasion and money laundering. Thirdly, ensuring equal access to education and work.
Finally, the authors’ general wish is that governments should invest in education, health, and the environment. And the main problem here is that the richest countries are actually impoverished. States have little free money, even the most prosperous of them being burdened with high sovereign debts; they can’t expand social programs indefinitely.
Angus Deaton does not call for a radical change in the tax system and the sharing of the wealth of billionaires. He asks the world governments and, in particular, the US authorities to pay a little more attention to internal problems. “Stop thinking that only non-Americans are truly poor,” the Nobel laureate addresses the American elite.
Shocked by a trip to the United States, Philip Alston wrote his report not only in dark tones. He saw a lot of good and spoke about examples of true mercy and mutual assistance. One of the Catholic churches in San Francisco, among services, provides the homeless with a roof over their heads. Volunteer doctors in Charleston (West Virginia) provide free services to thousands of patients, including dental services. Many municipalities are in favour of expanding social support for 20 percent of the poorest and most disadvantaged people. But all this is an initiative from below.
From above, according to Alston, inefficient social and tax policies are imposed on the American community. And the situation is only getting worse.
The World Inequality Report says that in 1980 in Europe and the United States, one percent of the adult population owned 10 percent of national wealth. By 2016, the situation in the United States had changed a lot. If one percent of the wealthiest Europeans accounted for 12 percent of the national wealth, then the American elite have “gobbled up” 20 percent.
According to a UN spokesman, the United States is at risk of becoming a world leader in extreme inequality. Tax reform is to blame. Among other things, a serious reduction in corporate income tax is expected, from 35 to 21 percent. "When calculating tax benefits, the Treasury directly says that one of the sources of income may be social security reform," he said. This means that social programs will go under the knife, because money for their implementation will become less due to a smaller influx of taxes from corporations.
“The consequences can be fatal for both the overloaded and inadequate American social protection system, and for those who rely on it,” warns Alston.