Below you will find our translation of an op-ed by Ivan Danilov from RIA Novosti with a foreword and notes [in brackets] by Vince Dhimos. As usual, Danilov takes his facts from the US financial press, but this time the American commentators have pulled out the stops and their straightforwardness and honesty echo that of the Russian commentator. It is no longer possible for Western financial journalists to hide the glaring facts about the precarious state of the US economy and the dollar.
Another wave of the pandemic is expected in the fall and that wave could be followed by another. Each wave will be accompanied by the issuance of more trillions in unbacked dollars. It’s the only trick the Fed knows at this point. There is no other way for a nation that has forgotten the value of saving. Say what you want about Russia and China, but they both know the importance of saving for a rainy day.
It’s the greatest loss America has ever suffered, but yet, it could be the most valuable lesson it has ever had.
Now, of course, America has received many valuable lessons, but like a lazy student who spends his time in class staring out the window and daydreaming, it has not yet learned any of them. Incredibly, it keeps making the same mistakes over and over again, supporting the same kind of warlike and irresponsible leaders as before. But if this time America learns that love and compassion for its neighbours is the only way to greatness – not trade wars, not blaming others, not sanctions, not wars, not quantitative easing, not self-aggrandisement, will it not have been worth it? God forbid that this pandemic cum rioting cum economic catastrophe will be another of the many lessons received but not learned?
If I have the gift of prophecy and can fathom all mysteries and all knowledge, and if I have a faith that can move mountains, but do not have love, I am nothing. 1 Corinthians 13:2
American top economist: "A crash in the dollar is coming in 2021"
June 12, 2020
The “coronavirus crisis” and riots, which have already led to billions of dollars in material damage, as well as damage to image that cannot be measured in money at all, are forcing the American expert community to look at the United States with different eyes. Not through the eyes of a delighted teenager, a professional propagandist or a naive viewer of an old Hollywood action movie who knows in advance that in the end America will defeat everyone and evil (that is, those who oppose Washington) will be severely punished, but through the eyes of a doctor watching the onset of a serious illness.
Among those who dare to look at the United States in this way, there is a certain pluralism of opinions. In the sense that some believe that all problems can be solved by disbanding police departments (by sharply cutting their budgets), after which racial peace and economic grace will arrive in the United States. But it seems to some that the United States needs to concentrate on its new cold war with China, probably implying that identifying a common and very serious enemy will become a kind of "sociocultural glue" with which the shattered American society can be re-assembled.
Both of these estimates, most likely, are very far from the truth, and their supporters can (and even should) be suspected of a certain bias, but it is more interesting to analyse the opinion of an elite that does not so much offer a "cure" but points out the possible exacerbation of all America's problems because not only American democracy and the image of the world hegemon, but the very foundation of American welfare, the US dollar, is also threatened.
It is noteworthy that the author of this forecast (or rather an apocalyptic financial prophecy) is not an ordinary expert or analyst, not a marginal journalist, but a representative of a completely different class, the “ideal American elite” in the person of Stephen Roach, who wrote a column for Bloomberg, published under the emotional headline, unusual for an American financial agency, "A crash in the dollar is coming."
Stephen Roach is a PhD in economics, a former member of the board of directors of the US Federal Reserve, a senior fellow at the influential analytical centre Brookings Institution, a former Asian leader and former chief economist at leading US bank Morgan Stanley, and now a senior fellow Research Associate at Jackson Institute of Global Affairs at Yale University, the most influential Ivy League university.
His column is noteworthy in that it immediately discards at least some attempts to give the current version of the world financial system at least some illusion of justice, validity or honesty. No, Dr. Roach calls things by their proper names – with the bluntness that many Chinese or Russian journalists will envy:
“The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a U.S. that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over.”
When regular attempts to de-dollarize Russian exports or European imports, and in general any part of the global financial system, come across in the information field the caustic sarcasm of “experts” explaining that the dollar cannot and should not be replaced, then you should remember this beautiful description of the problem: even a leading American expert recognizes that dollar status is a privilege that gives the United States unfair preferences, and that the standard of living in the United States is not supported by any magical achievements of the authorities, but by the use of these privileges against the rest of the world.
Despite the fact that all dollar problems worsened during the era of the coronavirus, the Yale economist indicates that the problems are systemic and structural in nature:
“Lacking in domestic saving, and wanting to invest and grow, the U.S. has taken great advantage of the dollar’s role as the world’s primary reserve currency and drawn heavily on surplus savings from abroad to square the circle. But not without a price. In order to attract foreign capital, the U.S. has run a deficit in its current account — which is the broadest measure of trade because it includes investment — every year since 1982.”
Covid-19, and the economic crisis it has triggered, is stretching this tension between saving and the current-account to the breaking point. The culprit: exploding government budget deficits.”
According to him, when the initial global shock passes and the world realizes the state of the American economy, in 2021 the dollar will depreciate to 35% against a basket of currencies of countries in which the United States conduct international trade, and, apparently, this is far from the limit of a possible devaluation. Protectionism by the Donald Trump administration and the deterioration of the US international image (and Dr. Roach recalls that “international leadership” is an element supporting the dollar’s status) will make the situation worse, ing the main problem unresolved: Americans really want to spend a lot (and the list of those wishing to spend a lot of money includes primarily the US government), but they have forgotten how to save money and basically do not want to re-learn how to do it. [Actually, it is not a matter of not wanting to learn. The US government is locked into the spending habit by politics. Lobbies, including the arms makers and the Israel lobby, in tandem with a culture of paranoia toward Russia and China (perpetually accused of “aggression”) among the grassroots, and Evangelicals adhering to the cult of Zionism, leave no alternative to government overspending.]
The warning from the former chief economist of Morgan Stanley, is particularly striking against the backdrop of news that the US Federal Reserve does not see a quick economic recovery after the coronavirus, and also expects dollar interest rates to be around zero for about two years.
The recent promise of Treasury Secretary Stephen Mnuchin to again turn to the US Congress for permission to increase debt even more (in fact, to print money and pour it into the budget) only strengthens the arguments of "dollar pessimists." But one must admit the obvious: the United States still has one, typically American, method of protecting its privileges. All they need to do is make sure that all other countries are even worse off than the USA itself, and then the American financial system and the dollar will look quite promising. The problem is that the world has changed dramatically since the 1960s. And now the United States is unlikely to have enough opportunities to carry out an operation of this kind with impunity, although Washington will definitely try using sanctions and provocations, including against Russia, China and the European Union. [Congress is already escalating sanctions related to the Russian pipeline project Nord Stream 2 and Germany is furious]
Iran was prepared to attack US ships if oil tankers were intercepted en route to Venezuela: report
By News Desk
BEIRUT, LEBANON (9:40 P.M.) – On Saturday, a news agency close to the Iranian Revolutionary Guards said that Iran had prepared to target American merchant ships in the Gulf in the event that the U.S. Navy intercepted Iranian tankers that were en route to Venezuela.
On its website, the Noor News reported that Iran sent a fleet of five fuel tankers to its ally Venezuela, which desperately needed gasoline in May, and Tehran said it would continue these shipments if Caracas requested more, despite Washington’s criticism of trade between the two countries.
Both of these nations are currently under strict sanctions by the U.S. and its allies, which makes it difficult for them to trade with other nations internationally.
“After increasing military threats against Iranian ships heading to Venezuela, an order was issued to the Iranian armed forces to identify and track several American commercial ships in the Persian Gulf and the Gulf of Oman,” the agency said.
Iran complained to the United Nations, last month, and summoned the Swiss ambassador to Tehran, who represents U.S. interests in Iran, about possible measures Washington might take against Iranian tankers.
A U.S. official had previously told Reuters last month that the United States, which had not blocked Iranian tanker shipments, was considering imposing sanctions on dozens of additional foreign oil tankers for its dealings with Venezuela.