Donald Trump and Elizabeth Warren agree to devalue the dollar, but not to worry, poverty is good for America
Presented below is our translation of an article by Ivan Danilov on the looming devaluation of the dollar. Commentary and notes [in brackets] are by Vince Dhimos.
Russian, Chinese and, even US, analysts have been talking about this possibility for years, but their conviction was that the dollar would drop spontaneously under the weight of the sovereign debt. But now politicians and Establishment-connected economists are finally getting around to softening up the public to accept a government-induced devaluation and are telling them everything will be just fine. Prominent influencers, writing, for example, in NYT, are batting around a figure of 27% for the devaluation. This will definitely make living even more expensive for the struggling little guy. It could push gas prices up by about that percentage, although domestically operating oil companies could possibly lower that a tiny bit (but not by much because shale producers need higher prices to offset their overhead). Part of the narrative is that a cheaper dollar will drive US exports, but the ulterior motive is certainly to achieve a soft default on the debt. You won’t hear Elizabeth Warren or Donald Trump mention that though! The coming devaluation is designed for the rich.
In case you missed the news of this bipartisan push for dollar devaluation in the US press, here is a pertinent article in CNN.
Further, a Fox Business article linked here explains how the US government and Fed can benefit by devaluing the dollar in order to resolve the sovereign debt issue. BTW, this article is certainly part of the msm’s sales campaign to soften you up to accept this idea. I don’t recommend swallowing this article’s view whole. The author, whose target audience is rich investors, is focused on cutting entitlements (which may be necessary, of course) but never mentions military spending, which is catastrophically high and unjustified because only the Pentagon and NATO think the Russkies are coming to invade your home and raid your fridge, and Congress doesn’t dare cut spending on arms procurement because they are wedded to arms peddlers, who are among their biggest donors (a marriage that undermines national security and ought to be punishable under criminal law!). That unwholesome lawmaker-arms dealer relationship is a structural defect in our body politic that won’t go away on its own, so in the final analysis, the US is wedded to profligate spending, even if the currency is devalued. In fact, barring a miracle, this marriage between Congress and arms sellers (and with Israel and Saudi as well, of course) will drive further currency devaluations ad infinitum until the middle class moves down to join the legally poor. This is why the US, barring a miracle, is ultimately doomed to fall off the cliff. Of course, if the US is forced to close most of its foreign bases and stop playing world cop, it could join the rest of the world and become a responsible productive economy. Then Washington and Wall Street could stop playing these reckless games with your currency.
The Fox News article linked above explains the mechanism of the soft default:
“A hard default, where the government simply refuses to pay its debts, would cause a global economic meltdown. Dollar-denominated Treasuries and federal reserve notes are the lifeblood of the global financial system. But a soft default – a one-time devaluation of the dollar which enables the government to pay back its debts in full, albeit at a lower intrinsic value – needn't be catastrophic.”
But Fox Business is part of the media campaign Ivanov tells us about, and is selling fiction here because the enterprising US Congress will always find a way to overcome the “one-time” restriction. Once the dollar is devalued, nothing will prevent a second, third, and on up to umpteenth devaluation any more than the Fed could have pulled off a one-time qualitative easing. Free money is too big a temptation.
At any rate, Danilov, based on his reading of the US economic press, warns that this is no longer a dress rehearsal. The devaluation, according to the US financial and economics press, is on the way, sometime during Trump’s tenure, but not to worry. The economic experts, for example, at NYT and Bloomberg, will make you feel good about paying considerably more for necessities and becoming even poorer than you are now.
“Save the US – devalue the dollar!”: New ideas on American restructuring
June 22, 2019
A ghost haunts American media, the ghost of restructuring. This is the only way to explain the general interest in the idea of the need for radical reforms of the fundamental principles of the American economy and politics. And this fad is affecting all parties to the intra-American political conflict, that is, both Trump supporters, and supporters of the Democratic Party.
Moreover, judging by the latest news releases in the most authoritative American media, both sides even offer similar radical solutions, and the only difference between them often comes down to the difference in colour and the tone of the ideological package in which they are inserted by prominent media propagandists. This similarity is noticed not only abroad, but even in the USA itself. And now The New York Times - the main political publication of the country - writes that the proposals for rescuing the American economy, which are being put forward by President Donald Trump and one of his main opponents from the Democratic Party, US presidential candidate Senator Elizabeth Warren, miraculously coincide. [sorry to interrupt this excellent analysis by Danilov, but I was wondering if you have noticed the subtle trick of the pols and their pals in the msm, namely, selling an idea or plan as “bipartisan,” suggesting that both left and right are for it. This is invariably a con because it is Congress’ way of pulling the wool over your eyes to do something that the people don’t need or want. “Bipartisan” means that the political class and msm are ganging up on you the people.] Since The New York Times is a publication with an unequivocally leftward ideological tinge, the ideological packaging for this coincidence is chosen so that readers can see the struggle for social justice in the radical measures that President Trump and his opponents are both promoting in their own way. This is a logical approach, because it is the only way to “sell” to (or to call a spade a spade, “foist” on) voters the idea of the need for a radical devaluation of the American currency.
"(Senator. - Ed.) Warren and Donald Trump agree, at least on one thing: American currency problems are detrimental to American workers," the influential economist (associated with the Democratic Party) said in The New York Times "think tank" Economic Policy Institute Policy Centre, Robert Scott (Robert E. Scott).
The so-called currency problems are such an elegant euphemism coined to describe harsh reality. The problem resides in the fact that both political forces in Washington believe the US dollar is too expensive, and for the sake of common (American) prosperity it urgently needs to be devalued. Mr. Scott immediately tries to reassure the reader, stating: “The new idea that the United States can achieve greater domestic prosperity by revaluing the dollar sounds unclear and a bit risky. Who would want to interfere with the workings of our currency? But the reality is that China and about 20 other countries are already doing this."
And then on the pages of the premier print publication of the United States there appears, just for reference, a recap of the theory on the world conspiracy against American workers, in which China and other 20 countries - "currency manipulators" – participate. Here we must make an important clarification: the list of potential manipulator countries (to which the author of The New York Times refers), compiled by the US Treasury, in addition to China also includes Russia, and several times in the American media, such as Bloomberg, there were inserts about high-ranking officials who threatened to give Russia the official status of a" currency manipulator,” which opens up the possibility to subsequently slap sanctions on our country.
The essence of the very "conspiracy" in which the non-Establishment Republican Trump and ardent Establishment democrat Warren (and also the author of The New York Times who sided with her) believe (surprisingly) is that foreign exchange manipulation by foreign governments has made American exports more expensive all over the world. And this made products made in China and other countries cheaper (than American ones. - Ed.). This is the main reason that America’s trade deficit has increased dramatically over the past 20 years, destroying almost five million production jobs, about 90 thousand factories and the livelihood of thousands of farmers in the country, Wall Street did not object to the appreciation of the dollar. This led to a flow of cheap imports and huge profits for companies that sell them, especially Walmart, Amazon, Nike and Apple. It also led to lower wages for 80 million American workers competing with countries, whose workforce was cheapened by these undervalued currencies. "
The leading economist of the Economic Policy Institute thinks (or pretends) that the decision is obvious: “devalue the dollar,” and he even mentions the specific dollar devaluation figure relative to all other currencies of the “manipulator countries”: 27 percent. But such a devaluation it will only work if the governments of other countries do not take retaliatory measures and start a so-called currency war – which will require repeatedly renewed US dollar devaluation measures.
As additional or alternative measures, sanctions are also proposed in the form of tariffs and attempts to force the main US trading partners to sign the new version of the Plaza Accord agreement, through which the Reagan administration solved a similar problem in the late 1980s. The problem is that Trump is not Reagan (although he wants to be like him), but China, the European Union (including Germany) and Japan clearly do not want a repetition of the situation 40 years ago, when the Reagan administration saved the American economy through crises in the rest of the world.
It is easy to see that discussions about the need to drastically devalue the dollar, at least by 27 percent to begin with, look rather strange in terms of real incentives for American re-industrialization – for only naiveté verging on stupidity could make anyone believe that after “balancing” the exchange rate of the dollar, production plants exported from the United States, would suddenly return to America on their own, especially if we consider that the purchasing power of American consumers will receive a rather sensitive “currency” impact.
By and large, devaluation (as well as accompanying or subsequent inflation) is beneficial not to the American workers, who are allegedly baked by Trump, Warren and The New York Times, but rather to American business and the government. Let's look at the situation from the outside, that is, through the eyes of competent, but unbiased observers from the Japanese business agency Nikkei: "Growing US business debt, already at a historical level, represents a potentially huge risk for the global financial system and the global economy, causing concern among market participants and politicians. Experts are becoming increasingly concerned about both the quality and quantity of debt in the US corporate sector, because loans to borrowers with lower credit ratings and already high debt levels are increasing."
In modern realities, such debts (corporate plus government) can only be resolved in three ways: through explosive economic growth (located somewhere in the sphere of unscientific fantasy), through mass defaults (possible, but very painfully, especially for the economic elite) and by devaluing the currency in which the debts are collected (to make it a little less disturbing, you can present it to the voter as a concern for social justice).
Conclusion: incontrovertible economic logic and political calculation indicate that the stars favour devaluation, although there are still chances for other scenarios.
Judging by the fact that the proposition “devalue the dollar, and Americans will be just fine” is being promoted openly through the mainstream left-wing media, and Donald Trump is publicly pressuring the management of the Federal Reserve to lower interest rates (which also reduces the dollar exchange rate), the idea is out there. True, this approach will have a major side effect, namely, it is unlikely the dollar will be able to retain the much-needed US status of a world currency.
But it may well be that Donald Trump has his own opinion on this matter, and the White House will try to make (yes, even by force) the whole world continue to use green paper even after a sharp drop in its value. It will be much better for the whole world if this fails.
We present below our translation of an analysis from gazeta.ru with commentary by Vince Dhimos.
As I was editing this translation, I received a push notice from Haaretz to an article on Trump's speech in Orlando yesterday pointing out the untruths and exaggerations in the speech. It fits in nicely with today’s translation.
However, this is not about Trump. It is about a US economy that is less and less equitable and social problems that signal deep trouble.
Here is the saddest detail:
“A survey conducted by the World Economic Forum at the beginning of this year showed that poor Americans no longer believe in the opportunity to get out of poverty on their own – only 10% of respondents believe that they will be able to realize their “American dream” if they work hard. More than two thirds of the respondents are sure that it doesn’t matter whether you work well or poorly, because you still cannot achieve a high degree of well-being.”
Poverty and drugs: how Americans actually live
Americans do not have enough money, education and equality
Olga Timirchinskaya June 16, 2019
The US economy has demonstrated steady growth in recent years, overcoming external and internal difficulties without visible losses. However, impressive macroeconomic indicators do not mean that the country's population is booming – in this case, just the opposite is happening. According to official statistics, about 45 million Americans live in poverty, despite record-breaking low unemployment. And they also have other problems.
The US economy continues to show steady growth – the latest review of the International Monetary Fund (IMF) shows that according to the results of 2019, the real GDP of the United States will increase by 2.6%. Analysts say that the effect of fiscal actions taken in 2017-2018 (tax cuts and increased costs) will then pass, after which the US economy will stabilizes to about 2% per year, but even this figure exceeds the achievements of most countries of the world.
US President Donald Trump said at the end of May that he would pick up 70-75% of the votes in the next elections thanks to economic success alone (for example, “victory over poverty”) and would easily remain in the White House. However, these triumphant reports and vociferous statements also have a flip side, which people prefer not to speak about from high tribunes. In addition, politicians are prone to beautiful speeches that only partially reflect the reality that exists – for example, after Trump's February speech to Congress, the Washington Post found in his speech 26 false statements and exaggerations in various figures.
Then Trump said: “Salaries are rising, and blue-collar wages are growing faster than expected, and 5 million Americans have stopped receiving food stamps. The economy is growing twice as fast, unemployment has reached a low level since a quarter of a century. ”
And according to the same IMF survey, the US macroeconomic achievements over the past 10 years have not had a significant impact on the lives of ordinary Americans – on the contrary, a number of social indicators look depressing, and positive changes in this direction are not expected.
Life expectancy in the United States is falling and this indicator is significantly lower than other G7 countries, although in the 1980s the USA occupied a middle position among the largest economies in the world.
A significant contribution to the drop in this social indicator was made by the increased suicide and death from drug overdose.
As analysts of the IMF calculated, the income of the average American family, taking into account inflation since the 1990s, has increased by only 2.2% - and this despite the fact that over the same period, real GDP per capita increased 23%.
There is another problem: the distribution of incomes in the country is becoming increasingly polarized.
According to statistics, the net assets of 40% of the poorest households are now lower than they were in 1983, and a growing share of the population earns less than half of the average income in the country. As a result, the level of poverty remains close to what was observed immediately before the onset of the financial crisis.
Recent studies show that nearly 45 million Americans are currently living in poverty.
Similar data in April of this year were given by one of Donald Trump’s main competitors in the 2020 presidential election, Senator Bernie Sanders. “Some politicians say that the minimum wage of $ 15 per hour is “too radical.” Here's what's really radical: in the richest country in the world, 40 million people live in poverty, and 40% of our citizens cannot afford even the most necessary things,” the politician wrote on Twitter.
A survey conducted by the World Economic Forum at the beginning of this year showed that poor Americans no longer believe in the opportunity to get out of poverty on their own – only 10% of respondents believe that they will be able to realize their “American dream” if they work hard. More than two thirds of the respondents are sure that it doesn’t matter whether you work well or poorly, because you still cannot achieve a high degree of well-being.
As the IMF notes, over the past decades, socio-economic mobility has been destroyed in the USA – in particular, half of young professionals now earn less than their parents at the same age (40 years ago, this figure was only 10%).
Moreover, despite the fact that a substantial part of the state’s revenues is spent on education, this did not help to reverse the situation with the knowledge level of Americans - American students consistently receive a lower score in math and reading than their peers from other G7 countries, the report says. Many US residents drop out of college without having completed their studies, and as a result, less than half of Americans aged 25-34 have a bachelor's degree. In addition, due to a significant increase in the price of education, the amount of student loan debt also jumped.
Existing problems in late March were also acknowledged by US Secretary of Education Betsy Devos. The official said that spending on education over the past 40 years increased by 180%, reaching $ 1.2 trillion, but no progress in terms of its quality is observed.
“We are still 24th in reading, 25th in science and 40th in mathematics compared to the rest of the world. I am sure that new investments will not bring results either,” said the secretary.
Devos proposed to reduce the total amount of funding for educational programs by 10% ($7.1 billion), but at the same time allocate additional funds for the development of schools.
Experts note that a lot of effort will be required to bridge the growing gap between the achievements of the real US economy and the life style of the majority of Americans. In particular, the political tools that can help solve the problem are paid family leave, helping families in need care for children and patients, increasing the minimum wage and the availability of social support programs. In addition, according to the IMF report, it is necessary to develop the health care system, especially for the poor, by financing those programs that showed the best results at the federal or state level. A more targeted approach is to support education, in particular, to pay special attention to the early education of children, and to the development of programs in the field of science, technology and mathematics. Experts believe that these measures will help cope with the current situation in society that are of serious concern.
The following is our translation of an article from rueconomics.ru with commentary by Vince Dhimos.
The discussion below arose in the context of the Saint Petersburg International Economic Forum, which is a huge assembly of investors from a large number of countries. The 2018 SPIEF had over 7000 attendees from 143 countries. With the American stock market in an obvious fragile bubble and with a loss of $5 trillion thanks to Trump’s trade wars, it is natural that some folks would like to escape to a more tranquil and stable investing environment in the country that, as I have shown here, has the healthiest and most stable economy in the world. But don’t be surprised that SPIEF gets short shrift in the West. For instance, if you look it up on Google, you find on the first page of results, ten mentions, only 2 of which are to articles published in the Western world. We often hear Russia accused of being isolated, but no country anywhere does a better job of isolating itself than the USA.
To be sure, this year's SPIEF is being boycotted by some US investors in protest of the arrest of a US investor on fraud charges. Which may be trumped up. Or not. But then, have we forgotten about poor Maria Butina, who has been jailed for joining and promoting the NRA? Oh, wait. Maria is Russian. So that would be inflitrating, not joining. When ordinary people join the NRA, they are joining. But when Russians do that, they are infiltrating. We can come up with a whole host of sinister sounding words for Russians, can't we? After all, Russians are born of bad seed. All of them. Yeah. They must all be jailed for being from a country that is not a country, but a gas station. After all, John McCain was a war hero. Failure to hate Russians sufficiently is disrespectful of his memory.
It is natural to wonder how the Venezuelan people are doing these days, with all the sanctions intended to hurt them by starvation and denial of medical care. Of course, Western msm rarely talk about the pain inflicted by their governments on the people they falsely portray as enemies. Due to the constant propaganda, we need to be reminded that these are people just like us and that the pain inflicted by the US is real pain and not an abstraction as it relates to their everyday lives. The Washington Establishment would like to have us think they deserve the pain for electing officials who are not dyed-in-the-wool American style predatory capitalists, or for not allowing the US vulture and its puppet Juan Guaidó to swoop in and grab their resources. But their political systems are like ours in that the little guy has no control whatsoever over the list of candidates available to them and they, like Americans, are generally confronted with a lot of bad choices come election time. Thus they don’t deserve punishment for choosing the lesser of an array of evils.
That’s one of the many reasons why sanctions are immoral, as I reminded you here. Another is that the US Establishment simply has no moral authority to demand that other nations comply with its wishes.
The author of our translated article is no doubt writing for the political base back home, which is naturally concerned that their tax money may be wasted on charity, an accusation that surfaces at times with relation to Russia’s relationship with Venezuela. So the author’s interlocutor reminds us that there is money to be made by Russia from Venezuelan oil because it is discounted due to sanctions and to the associated risks to the investor.
Ideally the Russians will be able to help Venezuela earn income from its oil while also making a profit for its efforts. That’s the way it always was, back when free trade was legal. Oh, that’s right. It’s still legal, just not allowed.
Finally, here we have just another example of the impotence of US sanctions. As the saying goes: the dog barks and the caravan moves on.
Russia will play the role of mediator in Venezuela’s oil exports
June 06, 2019
Cooperation between Russia and Venezuela in the oil sector, from an economic standpoint, is associated with a certain risk, says Vyacheslav Kulagin, director of the Center for the Study of World Energy Markets at the Institute for Energy Research, Russian Academy of Sciences.
Venezuelan Oil Minister Manuel Quevedo at the St. Petersburg International Economic Forum (SPIEF) said that Caracas is going to replace the American oil market with the Russian one, and noted that this is the main line of Venezuelan policy.
At the same time, Russia is one of the largest oil exporters in the world and does not need supplies of Venezuelan energy resources, if only because of the territorial remoteness of this country. Such deliveries, of course, are technically possible, but they will cost dearly.
“As for Russia, we have certain economic interests in Venezuela. So, only on this basis is our country interested in stability in this Latin American state. If we take the issue of direct deliveries, then Russia is naturally not the country that needs to import energy resources, not to mention deliveries from Venezuela,” Kulagin sums up.
Russia has enough of its raw materials, but the oil market leaves us with options for cooperation. After all, if one of the suppliers of oil is experiencing difficulties with sales, then, as the expert observes, he begins to sell his goods at a discount, and this really arouses interest.
“In this situation, those companies that play on the difference between discounts and market prices can make money on such a deal. This gives some potential for oil deals with Venezuela, but this is not a matter of theory, but of practice,” states Kulagin.
Moreover, this is not about Russia, as a state, but about individual Russian companies - whether they want to participate in Venezuelan projects, or whether they have no interest in such undertakings. And so, oil traders may well earn on such oil operations.
“On the other hand, all of these preferences, which Venezuela can give to the Russian entities, are an opportunity to make money but carry specific risks. It is necessary to soberly weigh the situation and understand who is ready to go and for what. And here we must not forget that a number of Russian companies have long-term agreements with Venezuela,” concludes Kulagin.
Accordingly, the return of Venezuelan debts, and they are quite large - for example, to Rosneft itself, can take place in the form of supplies of Venezuelan oil, which will immediately be resold on the world market, and not go to our country.
“By the way, such deliveries do not fall under the sanctions impact from the United States and its allies, so there is a prospect here, even though this does not mean physical deliveries of oil from Venezuela to the Russian market,” Kulagin summarizes.
Russian entities may receive oil payments from Venezuela, which will then be resold by them on the world market, but this is a deeper issue, and it cannot be said that such operations are simple - there are a number of nuances.
Venezuela may change the direction of its exports
Notably, Quevedo also stated that Venezuela wants to diversify the direction of its oil exports and place bets on such states as Russia, India and China. This is not surprising, since these countries will not comply with US sanctions against Venezuela, and India and China are the largest importers of oil in the world, which need more and more raw materials every year.
Only India and China are very far from Venezuela, and the nearest sea route to them passes through the Panama Canal, the "neutrality" of which is vigilantly guarded by the United States. Accordingly, there is a question whether there will be problems with such exports.
“In fact, oil can be delivered by sea anywhere that someone is ready to receive it, and there are no transport restrictions per se. Oil is transported in liquid form and the cost of its transportation in the final price is rather small. So, all the leading global companies freely trade in crude on the global oil market,” states Kulagin.
According to Vyacheslav Alexandrovich, oil transfer occurs between regions without any special problems, although there is a US factor here, but they are unlikely to deal with the detention of such goods from Venezuela, because the interests of third countries are also involved.
“The main issue is the quality of the oil, because refineries in different regions of the world are tuned to certain brands and grades, and if the parameters of the crude deviates, then it requires the application of technical operations,” concludes Kulagin.
For example, by mixing Venezuelan raw materials with fuel from the United States, American importers managed to achieve a product that is optimally suited for their national refineries. This is logical, because the Venezuelan oil is very dense.
“Accordingly, in the current situation, Venezuelans will have to trade according to special schemes. These schemes may not imply a situation where American sanctions could be imposed on companies that participate in them,” Kulagin said.
However, in any case, despite all the enthusiasm of the Venezuelans, selling oil is now much more difficult for them.
Author: Dmitry Sikorsky
In the following is our translation of an article from RIA Novosti with commentary by Vince Dhimos.
Years ago, I heard President Putin say, in a Kremlin recording of a speech at the Valdai Club, that Russia wants a “strong Europe.” Now that came as a shock to me because in Europe, a “strong Europe” means a united European Union and I had always assumed that Putin, as a believer in national sovereignty, would have to oppose the dictatorial system of the EU. But then I started to realize that an overarching goal of Russia and China was the dedollarization of world trade settlements that would reduce dollar hegemony and make it more difficult for the US to wage its constant wars and bully other countries. I guessed that he was in fact talking about a strong euro to challenge the dollar.
My analysis of July 4, 2017 shows, based on the EU’s own charts, that the euro is indeed the best candidate by far for edging out the US dollar in international trade settlements. It is clear from these statistics that the euro is not far behind the US dollar in world trade and is becoming a viable replacement for the USD.
The article below (as well as other Russian analyses) shows that I was right. The author shows that Europe has been quietly striving to replace the dollar with the euro in world trade to diminish the “bludgeon” power of the US.
Analyst Ivan Danilov writes:
“The struggle for financial sovereignty is particularly acute in the European Union, where applicants for the position of the next head of the European Central Bank are swearing allegiance to the idea of internationalizing the euro and protecting the European Union from dollar pressure.”
Not at all surprising considering Trump’s threats to sanction all countries trading with Iran. Europe is the region that wants and needs potentially lucrative Iran trade more than any other.
If the US finally comes to the realization that it can no longer deal from a position of raw power, it will desperately need real deal making skills, because sanctions will be out of the question. I think Washington will find that the only deal maker capable of soothing an angry Tehran in this new game is President Putin, who so far has shown remarkable skill and restraint in keeping Israel and Iran/Syria from launching a full-scale war despite the increasingly frequent Israeli missile attacks on Iranian bases in Syria.
US media: the planet is slipping the leash of dollar power, what to do
June 6, 2019
One of the most striking changes in the official foreign policy discourse of the United States in recent years is that the American media, diplomats, officials and experts no longer hesitate to say openly that the dollar is a financial weapon used by Washington to oppress its geopolitical rivals. A few years ago, a Russian columnist was accused of spreading conspiracy and of “writing Kremlin propaganda” for voicing the obvious thesis “the dollar is not so much a currency as an instrument of American hegemony.” Now the statement "The dollar lies at the heart of American power. Rivals create workarounds," has become the headline of a Wall Street Journal long read. The Americans have not only stripped away the mask of the imperial grin from their own financial system, but are also demonstrating a rather serious concern over their opponents (and even allies) trying to shake off dollar dependence.
Nowadays, defenders (including Russian ones) of Pax Americana have moved from the position "there is no problem with the dollar system" to the position "yes, the dollar system is Uncle Sam's whip, but you can’t dodge it, so everyone had better get right down to licking the American boots.” Actually, this simple message is read in numerous articles of both the world and Russian press, which periodically use international trade or statistics on transactions through the SWIFT system to demonstrate that neither the euro, nor the yuan, nor gold could “bite off” any significant part of the market in the US currency. This technique is very good in terms of propaganda, but is completely untenable in terms of economic theory.
The situation with alternative dollar currencies for international trade and interbank information exchange systems that can replace SWIFT is not an example of normal market competition. And it cannot be estimated on the basis of such parameters as “market share” or “consumer preference.” The situation can be explained with the help of a metaphor: imagine a country that is dependent on food supplies from an unfriendly state. In the absence of alternatives, the food supplier may blackmail customers any way he chooses, because hunger is the only alternative to subordination. Now imagine that the situation has changed and another importing country has appeared in the importing country, but the whole assortment it offers is reduced to buckwheat "with smoke" and canned stew, and is not very cheap.
Obviously, under the conditions of free competition, this second supplier has no chance to take a significant market share, but by the very fact of its existence it eliminates the possibility of blackmailing by hunger and breaks the entire system of relations between the victim and the blackmailer that existed before. With the dollar system – a similar situation – in order to “defang the dollar,” it is not at all necessary to create a full-fledged replacement. The emergence of enough currencies and trading systems will allow countries threatened by Washington to continue (albeit not in the most convenient form) foreign trade and financial activities, even with the introduction of total financial sanctions from the United States.
It is because of these risks that American experts and journalists of the Wall Street Journal find cause for concern in the attempts of the European Union, China, Russia and even India (!) To create their own foreign trade systems without the use of the dollar:
"US allies, seeking to weaken US control over international trade, are developing alternative systems that are independent of the US currency. The UK, Germany and France did not support sanctions, including a ban on dollar operations with Iranian banks. Thus, they set up a system to allow companies to trade with Iran without using dollars.
<...> Iran is a trading partner of long standing (of India. - Ed.), and India wants Iranian oil. India began using a similar alternative system in November, and, according to delivery reports, international companies are already using it to trade with sanctioned Iranian companies. China and Russia, also seeking to break away from US control, are promoting their own alternatives to the global bank transfer system, which the United States actually controls, and settles trade transactions in yuan and roubles instead of dollars. "
The dedollarization movement is gradually “grinding down” its administrative opponents in various countries that have suffered to some degree from American sanctions or diplomatic pressure. European, Chinese, Russian officials and captains of business are gradually getting used to the idea that it is necessary to build by-passes around the dollar system and there is simply no alternative strategy. The struggle for financial sovereignty is particularly acute in the European Union, where applicants for the position of the next head of the European Central Bank swear allegiance to the idea of internationalizing the euro and protecting the European Union from dollar pressure.
If the current ECB leadership sabotaged the efforts of the European Commission (and specifically Jean-Claude Juncker) to increase the use of the euro in the EU and insisted that "the market must decide everything," the next head of the ECB may well become a "Euro-nationalist." The Financial Times, with some surprise, reports that one of the likely candidates for the post of the head of the European Central Bank, the current head of the Bank of France, François Villeroy de Galhau, said: “we can expect the ECB to shift from its past neutrality a more positive tone (in the matter. - Ed.) of the international expansion of the euro. "
[I want to remind the reader here that France was the country hardest hit by US dollar sanctions when the Obama administration brought “criminal” charges against one of its banks in 2014. Allow me to quote from my analysis of 2017:
“Of course, no one in EU officialdom mentions this but the US absolutely shot itself in the foot by levying a fine of almost $9 billion against the French bank BNP Paribas for settling a payment to Iran in US dollars. It was a settlement that was declared “illegal” by the US even though it was lawful in France. They were fined for using dollars. In other words, it not only was seen as gouging but also as blatant disrespect for France’s sovereignty. The US was usurping the role of the UN and the International Court, but on whose authority? This was the epitome of heavy-footed monopolar behaviour and it was undoubtedly perceived as a slap in the face to all of Europe. Though no one dares to suggest this, it was quite likely the turning point in US-European relations that encouraged Europe to use euros as much as possible in dealing with non-EU countries.” If Galhau is named as head of the ECB, I think we can expect all-out war on the USD.]
His position suggests quite pragmatic measures: “The practical agenda for the development of the international role of the euro strongly converges in order to create a real (European. - Ed.) unification of capital markets - with the development of fully unified European instant payment systems, integrated capital markets and possible creation of a euro-denominated safe asset.” A safe asset is an analogue of US government dollar bonds, only in European performance - that is, it must be bonds of the entire European Union, and they must become a kind of safe haven for capital, which in the case of crises traditionally seeks refuge in US dollar government bonds.
The ability of the United States to use the dollar as a "sanctions bludgeon" is now lower than in the past, and will decline further. Washington is facing an unenviable choice: use the “bludgeon” to the fullest at last, or, conversely, show restraint and hold on the most stringent measures for the most extreme cases. Just because fear is often the most powerful weapon. If the first few years of Trump’s presidency have taught us at least something, then we can safely bet that the White House will choose the most aggressive option with the maximum short-term effect. The irony of fate: as American journalists rightly point out, these are the kind of actions that stimulate the rest of the world to get rid of dollar dependence as soon as possible.
Below is our translation of an analysis from RIA Novosti with commentary and notes [in brackets] by Vince Dhimos.
“In this context, two seemingly unrelated stories paradoxically fit together: sanctions against the European clearinghouse [INSTEX, explained here] created to continue buying oil from Iran, and [protect from] future sanctions against Gazprom’s European partners participating in the Nord Stream-2 project. In the Iranian case, the US is trying to control what oil EU countries can buy, and in the case of sanctions against Nord Stream 2, Washington will seek to establish control over what gas the European Union can buy.”
Remember I had said in my remarks on the war on Huwei that the US is acting just like a colonial master toward its colonial subjects:
“I recalled learning during my stay in Taiwan that that country had once been occupied by Japan and that it once served its colonial masters as a source of agricultural products but that the Japanese had made sure, by discouraging higher education, that the Taiwanese colony would not be allowed to develop industry. These examples from Israel and Japan embody the very essence of Neo-Colonialism.”
“There is an analogy here [in the context of the war on Huawei] with China and its colonial relationship with the US, which was quite happy to have China manufacture low-tech products with cheap labour and later even allowed the country to assemble high-tech instruments and information technology as long as the US masters were in charge of the technology and the Chinese refrained from learning the tricks of the trade. And herein lies the ulterior motive behind the trade wars.”
In fact, we also know from American history that the British forbade the American colonists to make their own iron, and again, this was to ensure that the Americans would keep buying all their iron from England. This is the very essence of colonialism and Trump is reviving this tradition in relation to its trading partners, even its allies.
Danilov describes this US attitude toward Europe (but without direct reference to neo-colonialism):
“...the administration of Donald Trump is not just trying to deprive the European Union of at least some chance of its own energy and financial policy. At the same time, it is seeking to de-industrialize Europe, as well as opening its market for American food products, which, firstly, do not meet European environmental requirements, and secondly, will bring European farmers to mass bankruptcy with their artificial low prices.”
Danilov’s mention of de-industrialization refers to Trump’s restrictions on European auto makers under the goofy pretext that foreign cars are a “security threat” and his attempts to thwart Airbus sales in favour of Boeing. Further, Danilov’s comment about Trump forcing US food imports on Europe are in reference to the latest trade talks between Trump and European Commission president Jean-Claude Juncker, where the latter insisted that US food exports did not meet European standards.
Further, with regard to Iran, according to a European Commission report,
“The EU exported over €10.8 billion worth of goods to Iran in 2017. EU exports to Iran are mainly machinery and transport equipment (€5.5 billion, 50.9%), chemicals (€1.9 billion, 18.1%), and manufactured goods (€0.9 billion, 8.9%).”
Thus Trump’s abandonment of the Iran deal was also part of this effort to de-industrialize Europe.
The following could be a sign of things to come:
“Even if Trump loses in 2020, (German officials. - Ed.) say that the trust that has buoyed transatlantic friendship for seven decades, may be lost forever. Germany has already started to create new alliances that will protect its interests in a world where the US won’t do this. And some of them don’t like Washington. "In the future, we must take our destiny into our own hands to a much greater degree if we want to be strong," Merkel said at a political rally on Friday in Munich. "
In other words, the most powerful person in Europe is exhorting Germany to stop being a US vassal and start acting like a sovereign country for a change. This is revolutionary! Remember that Trump’s ambassador to her country had tried to strong-arm the Germans to stop importing cheap pipeline-delivered Russian gas from Russia (under the transparent pretext of “energy security”) and start buying the extravagantly priced US LNG instead. It was absurd because the Nord Stream 2 pipeline was almost completed when this haranguing started and there could be no turning back. Trump crossed a line at that point and Germany was forced to say nein. Again, we must wonder if Trump is deliberately forcing Europe to break its alliance with the US or if he is really the knuckle-dragging caricature he appears to be. It is virtually inconceivable that Europe would stop all its major manufacturing activities and stop growing its own food just to please a crazed megalomaniac.
BTW, just today I saw a report on how the US is trying to force Europe to allow cooperation with US arms manufacturers, clearly as a way to make another buck off of Europe, but again under the excuse of “security” to get around WTO rules.
At any rate, wittingly or not, Trump is pushing Europe into the arms or China and Russia and far far away from the American sphere of influence. If these allies abandon ship, there is little chance they will ever come back.
The United States threatens Europe with sanctions. Europe is preparing for the last battle
May 31, 2019
The administration of Donald Trump openly threatens to impose sanctions on the European Union for interfering with US foreign policy. On the one hand, one can admire how tough official Washington is to defend its foreign policy interests. On the other hand, there are reasonable doubts that such a policy will be beneficial to the United States in the long term.
Relations between Washington and Brussels are far from ideal, and if it comes to real sanctions, then they may well pass the point of no return. Potential anti-European sanctions, which, judging by the statements of officials of the US Treasury Department, include a “disconnect from the American financial system,” may well lead to undesirable diplomatic consequences for the United States. Sooner or later, countries that are under various US sanctions will simply have to cooperate with each other in order to withstand American pressure. The Trump administration works on the principle of "look at successful predecessors and do the opposite." The "divide and conquer" principle is proven by historical experience (from ancient Romans to Machiavelli, Bacon and Napoleon), but the US sanctions policy is now based on the "unite all against us" scheme, which horrifies those mastodons of American diplomacy who still remember how masterfully the United States pitted its opponents against each other in the twentieth century.
This view may seem biased due to the fact that the shattering of the once “united West” is very beneficial to Russia, but analysts of influential American media are arriving at similar conclusions, looking at the situation not with delight, but with deep spiritual pain. Bloomberg Business Information Agency informs readers:
“Even if Trump loses in 2020, (German officials. - Ed.) say that the trust that has buoyed transatlantic friendship for seven decades, may be lost forever. Germany has already started to create new alliances that will protect its interests in a world where the US won’t do this. And some of them don’t like Washington. "In the future, we must take our destiny into our own hands to a much greater degree if we want to be strong," Merkel said at a political rally on Friday in Munich. "
It is in this political context that the consequences of the US Treasury’s intentions to impose sanctions against a special structure that the European Union is trying to launch to circumvent the US sanctions against Iran should be considered.
The Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker sent a letter threatening the leadership of INSTEX, a European clearinghouse created jointly by Germany, France and the UK [as a by-pass to SWIFT]. As noted by The Washington Post, “the idea of creating INSTEX is that a company supported by three major US allies can tie the hands of the American administration, since any step towards sanctions against INSTEX or companies trading through it will create a conflict between Washington and (the group) Berlin - London - Paris." The Europeans have not placed the bet, and the Washington Post has a logical explanation: “The experiment (ie, the mechanism for circumventing the Iran sanctions. Author’s note) Is being watched closely. If expanded, it could jeopardize the global dominance of the US dollar, which is the [currency] most frequently used for international transactions and allows the United States to have some control over the global economy. <...> If INSTEX or other alternatives are successful, international trading systems that bypass the US currency can limit the ability of future US (presidential -.. ed.) administrations to use sanctions as a foreign policy tool.”
The leaders of the European Union are squarely confronted by the question: what level of conflict with the US are they ready to go to pursue their own foreign and energy policy? In this context, two seemingly unrelated stories paradoxically fit together: sanctions against the European clearinghouse created to continue buying oil from Iran, and future sanctions against Gazprom’s European partners participating in the Nord Stream 2 project. In the Iranian case, the US is trying to control which oil EU countries can buy, and in the case of sanctions against Nord Stream 2, Washington will seek to establish control over what gas the European Union can buy.
Indirectly, both of these attempts to throw an energy noose around the neck of the European Union are connected with another key question (as relates to the future of the USA as a world hegemon): is the euro a regional European currency or is it a full-fledged competitor of the dollar in world trade?
It is worth noting that if the problem were confined to the sphere of energy and currency regulation, the chances of forcing Europe to preserve and deepen its status as an American colony would be much greater. However, the administration of Donald Trump is not just trying to deprive the European Union of at least some chance of its own energy and financial policy. At the same time, it is seeking to de-industrialize Europe, as well as opening its market for American food products, which, firstly, do not meet European environmental requirements, and secondly, will bring European farmers to mass bankruptcy with their artificial low prices. In this context, the threat of Trump himself to impose sanctions on German auto makers, as well as punish the European Union as a whole for state support of the Airbus concern, that is, the main competitor of the American company Boeing, which is now experiencing far from the best times [Danilov is referring to the 2 disastrous crashes of Boeing 737s that have grounded these aircraft indefinitely due to charges of negligence] - these are just pin-points of large American operations to transform the European Union into a kind of analogue of Ukraine. That is, to make it a territory that is rapidly losing any signs of belonging to a developed and high-tech world.
The leaders of the European Union, even if they are only interested in political self-preservation, and not a place in history, have only one rational way out of the situation: to move closer to those who are under similar pressure from Washington. Fortunately for Berlin and Paris, almost all potential geopolitical partners and possible situational allies are in a similar situation. Moreover, those geopolitical players who have not yet been thrown under Trump’s bus, such as Japan and India, have every chance of finding themselves in his crosshairs soon [India has, for example, weighed the possibility of buying the S-400 air defence system from Russia, against the warnings of Washington]. Judging by the fact that Angela Merkel cancelled her departure from politics, and her government continues to defend Germany’s right to cooperate with Gazprom (on Nord Stream - 2) and Huawei (on building 5G networks in Europe), at least the main central EU forces are preparing to fight the final battle against American geopolitical ambitions. And in this case, any success of Berlin will be very good for Moscow.
Below is our translation of a Chinese-language article from hainaxinwen.com, with commentary by Vince Dhimos.
Not long after Trump took office, I came to the alarming realization that the expectations of voters that a successful business man would have the necessary skills and experience to manage the US economy effectively were false because the ability to game the capitalist system to one’s own advantage does not teach anyone about macroeconomics and Trump’s clumsy handling of the economy was a sure sign of this. This was compounded by the fact that Trump does not consult with experts, believing that he is the only competent person on the planet. His own failures as a CEO leading to 6 bankruptcies was a harbinger of things to come.
On the other hand, due to the mental disease that has long affected Washington, Congress is all too eager to slap killer tariffs on China, and these lawmakers’ motivation has nothing to do with economics. They don’t care a fig about economics or the US economy – which is doing well only if you believe that the stock bubble currently being blown is not a stock bubble. Their goal is to harm China at all costs in order to weaken it. After all, they know Trump can spin a tornado into a nice day.
Back in the 80s when Congress was debating granting Most Favoured Nation status to the PRC, one of the talking points was the possibility of bringing China into the Western sphere of influence as a means of driving a wedge between that country and Russia, and I had the impression then that Russia was in fact the target, not so much China. US think tanks had for years imagined scenarios wherein Russia and China were at odds with each other over this or that issue but it was mostly wishful thinking, the product of their overheated fantasies. I suspect that now, after decades of denial, much of the US Establishment has finally realized that this imaginary wedge never existed and never will. It should have been obvious considering all the vicious US aggression toward both countries that could not but have driven them together in an effort to escape US fury. So now at long last, the psychopaths in Washington are conspiring to bring down China by various means: the sanctions on Huawei, inducing Google and other tech giants to stop doing business with the company, and now the absurd, crippling tariffs that, as the author of our translated article points out, are rejected by every sector of US society. As is shown here and elsewhere, the tariffs and counter-tariffs are costing US businesses and households billions (I just read this a.m. that the global tech markget is down cool trillion). Yet Trump and his cronies in Congress plough ahead with no signs of relenting. Their goal is the same as in Venezuela and Iran – make the economy scream to trigger the overthrow of the government and achieve a pro-US government in China. The mood among the Chinese grassroots suggests this will not happen.
A series of Reuters Interviews on the Chinese street show that some of the people are developing hostility toward the US and some refuse to buy US products:
A Pew survey shows the Chinese see US power as a major threat
“A survey by the Washington-based Pew Research Centre revealed 45% of Chinese people consider US power and influence to be a ‘major threat’”
A CNBC poll shows Trump’s trade war is not well accepted nationwide and is so unpopular in key states that it could cost him re-election in 2020.
The articles on this topic in the US press are surprisingly open and straightforward and almost all indicate the world economy is in for a shaky ride, but, for example, the soybean farmers they interview, whose livelihoods have been ruined, are generally clutching at straws in order to keep believing in Trump – who many Evangelicals believe was appointed by the Almighty – saying things like “I understand what Trump is trying to do but I think he is using the wrong method.”
Pain of Tariffs Tests Farmers’ Faith in Trump: ‘How Long Is Short-Term?’ (from 5-24!!)
The trade dispute with China has cost growers their No. 1 buyer, but they say the president is on the right course.
So let me get this straight: they understand that he wants to destroy the world economy but don’t agree with his method?
The Chinese reports are a little less forgiving, quoting farmers who have already given up on their trade thanks to Trump. They aren’t being nice any more.
The harm to the US economy from added tariffs has caused strong opposition from all walks of life
Abstract: Adding tariffs to harm the US economy - American society strongly opposes raising tariffs on China's exports to the US. The US Trade Representative Office announced on May 8 that it will start tariffs of US$200 billion worth of Chinese exports to the US from May 10. 10% increased to 25%. Sino-US economic and trade consultations are still in progress, and all sectors of the American society strongly oppose the US government to raise tariffs, thinking that this will only hurt
American consumers’ pocket book “crushed”
The American Soybean Association issued an announcement on the 7th, urging the US government to cancel the plan to impose tariffs on Chinese goods, and expects the US government to establish better trade relations with China through negotiations. Rick Huffenberg, president of the American Apparel and Footwear Association, said raising tariffs would only hurt American families, American workers, American companies and the US economy. Gary Shapiro, president of the American Consumer Technology Association, said that suddenly raising tariffs to 25% would "disturb the market and damage US companies."
Mr. French senior vice president of government relations, said that the sudden increase in tariffs will seriously hit US companies, especially those with limited resources that cannot mitigate the impact, "American consumers will face higher prices, and employment opportunities in the US will be reduced."
A study by the US-based business consultancy Global Trade Partnership in Washington showed that a 25% tariff on US$200 billion worth of Chinese exports to the US, along with an existing 25% tariff on US$50 billion in Chinese goods and the addition of tariffs on imported steel and aluminium products will result in a reduction of 934,000 jobs per year in the United States and a cost of living increase of $767 for a family of four.
Consumers’ pocket books will be “crushed”
The increased impact of tariffs on American consumers is real, and the people’s pocket book will be “crushed.” The Wall Street Journal reported that the addition of higher tariffs would have a huge impact on the average US consumer because it involved a range of consumer goods, including groceries, textiles, clothing, sporting goods, soap, lamps and air conditioners.
The US Chamber of Commerce opened a special page on its website called "Trade Works, Tariffs Don’t" last year, arguing that American companies and consumers are experiencing the impact of trade wars and marking the ongoing damage caused by trade wars to US states and businesses using shades of red from light to dark. Click on any state to find out the impact of trade disputes on the state's major businesses. The most severe damage, in dark red on the map, covers nearly 40 states.
Recently, a joint study by the University of Chicago and the Federal Reserve Board used the "example of washing machines" to prove the impact of increasing tariffs on consumer goods. The results show that since the United States imposed tariffs on imported washing machines in January 2018, the average price of washing machines has increased by 12%. The annual spending of American consumers on washing machines and dryers has increased by 1.5 billion US dollars. For $86, each dryer costs $92 more.
A study by economists at the Federal Reserve Bank of New York, Columbia University, and Princeton University found that the tax burden from US government tariffs—including tariffs on steel, aluminium, solar panels imported from China falls entirely on US consumption, costing US consumers and businesses at least $1.4 billion per month.
American farmers are experiencing "hard economic times"
American farmers have also been hit and their livelihood has been severely affected. In 2018, US net agricultural income fell by 12%. Soybeans, pork, dairy products and wheat prices suffered a precipitous decline, while equipment prices rose, resulting in a sharp drop in profits.
Lovi Nezl, a fourth-generation farmer of Bismarck Farms in Kansas, told this reporter that his farm has experienced "tough economic times" since last year because of tariffs. Last year the US government announced the issuance of $12 billion in agricultural subsidies to help American farmers who were damaged in trade disputes provoked by the United States. Nezl said that the subsidy money was obtained, but compared to the lost market and the reduced income, "this subsidy is not nearly enough."
Dr. Dar Fjell, Director of the Research Management Department of the Kansas Corn Association, told this reporter that most of the farmers' income has been invested in agricultural machinery, not only because of the increase in tariffs, but also because of the decline in sales, the decrease in income, and the increase in equipment costs. The construction of warehouses for the placement of agricultural machinery and equipment requires the use of iron, aluminium and other raw materials, which are subject to heavy taxes due to the trade wars, resulting in rising costs in this area. "I don't know how long this situation will last. The farmers have been waiting for good news, but they are waiting only to be disappointed again and again," he said.
Looking at the major media in the United States, examples of American farmers being affected by tariff increases are everywhere. Jim Tapon, a grain farmer in Kansas, said: "We have survived the difficult times of the 1970s and 1980s, but we are not making it this time." The family had to give up their farms after nearly 100 years of operation. Iowa’s pig farmer Howard Hill is losing money. He said: “We have patience, but we don’t have unlimited patience.” John Boyd, a farmer who grows soybeans, corn and wheat in Virginia, can't afford the equipment he needs, "I didn't buy anything"... The US Department of Agriculture's Bureau of Economic Research said that the trade war may have reduced the US agricultural trade surplus in FY 2019 to its lowest level since 2007, in part because "exports to China are expected to drop sharply."
Trade frictions between the world's two largest economies have also raised concerns about global economic growth. The International Monetary Fund, the World Bank and other institutions recently lowered their expectations for world economic growth. The World Trade Organization lowered its global trade growth forecast for 2019 from 3.7% to 2.6%, the lowest level in three years. Gian Maria Milesi-Ferretti, deputy director of the International Monetary Fund's research department, said in an interview with this reporter that the increase in trade barriers due to US trade policy and the trade tensions it creates will undermine the global supply chain and are one of the major threats to the current world economic outlook.
(This newspaper, Washington, May 9th)
Vince Dhimos answered a question in the Spanish language sector of Quora
In the 80s there was a heated debate in the American Congress over whether to grant China Most Favoured Nation status, allowing it to trade freely with the US. One of the points mentioned by a lawmaker during these debates was that if China were able to trade freely with America, that country could be pulled away from the sphere of influence of Russia and into the American sphere of so-called "freedom and democracy." For many decades, American think tanks and politicians believed that Russia and China could be forced apart by clever machinations on the part of Americans. The problem is, the US leadership continued to harass Russia and China in various ways, including with military threats against these countries. This hostile behaviour had the effect of driving them closer together.
American leaders are exceptionally dull witted and the poor things don't learn quickly. It took them about a half-century to conclude that Russia and China would always be partners in economic and strategic matters and that neither one would allow itself to be influenced by the US or pulled into its sphere of influence. They understood that all the nations that had allowed themselves to be manipulated by Washington had become little more than colonies.
Now for the first time, the Establishment seems to have finally understood this (even though a normal person could easily have seen it).
So now the US is taking another tactic, that of destroying China's economy and simultaneously courting Russia. Of course, the American officials are so obtuse that they have no idea how to go about this, and therefore, it is clear to both countries that they definitely need each other now more than ever. Perhaps within another half-century the US will devise a better plan.
If they don't, the US economy will continue to slide into irrelevance. So far, the US consumer and businesses have lost billions of dollars as a result of the American tariffs and China's retaliatory tariffs.
Soybean and pig farmers in the US are losing a lot of money because China has stopped buying American soybeans and pork. Despite the fact that the American government has meanwhile begun paying emergency subsidies to farmers, some of them have been forced out of business because the subsidies are insufficient. (How foolish for the government to destroy a farmer's livelihood and then force the tax payer to pay him for its mistake).
China was once a very big market for American natural gas (LNG), and in fact, several companies have built expensive LNG terminals and specially equipped ships for selling gas to China. But now that Trump has started his foolish trade wars, China is refusing to buy the American gas (it is incredible that the US Establishment could not foresee that China would impose retaliatory tariffs on American exports). The big winner is Russia, which is now finishing the pipeline from Siberia to China and will be selling to China all the gas that the US would have sold to that country had it treated other countries fairly.
The problem with Trump is that he never weighs the possible adverse consequences of his actions. This is the personality flaw that has caused him to declare bankruptcy 6 times in his personal businesses, and that should certainly have been a red flag for Americans.
A recent study by the US Chamber of Commerce shows that his disastrous tariffs on China have cost billions of dollars in various states that are key to his re-election as a result both of increased costs of the goods subject to the tariffs and of China’s retaliatory tariffs, which anyone with normal foresight could have anticipated.
Some would call Trump a failed business man. Will he fail as president?
Below is our translation from RIA Novosti. with commentary by Vince Dhimos.
All bets are off now that China has officially declared a “people’s war” on the US economy. As the comments section at the above-linked RIA site indicate, China is in a delicate position now. As the PRC admits, things will get very rough for both the US and China now that the economic war is on. But the bottom line for them is that the Chinese have a higher pain threshold. I think they may be thinking in terms of the 2020 elections. They know China can survive but are betting on Trump losing to a Democrat (they are hoping it will be Biden) thanks to the devastating effects of the Chinese gamble on the US economy. Presidents presiding over famines generally don’t get re-elected. Author Ivan Danilov assumes that, as a major offensive in this war, the Chinese will be ditching their Treasuries, with a devastating effect on the US dollar. I suspect that there may be a domino effect, with other nations joining in and ditching their Treasuries as well. After all, Trump has not been nice to his allies either.
Finally, here's a thought. Suppose China goes ahead with the dirty deed and ditches its Treasuries, and at that point, the dollar experiences some sort of slump as a result -- as one would expect -- and then reminds Saudi Arabia that, since the USD has taken a hit and will decline, it might be a good time to get out of the US dollar and start using the yuan. They could remind Saudi that China doesn't hold enough dollars any more to buy oil in USD. And then supposing the Saudis agreed. We have already seen that the Saudi-US relationship is souring and that Putin stands to become the head of a restructured OPEC. Just speculating of course, but it occurs to me that perhaps China has already had that chat with MBS. This could explain why Xi is feeling his oats right now.
China declares a "people's war" on the American economy
May 16, 2019
Judging by the reaction of the official Chinese media, Beijing does not expect a speedy or peaceful resolution of the economic conflict with Washington. Changes in the tone of the official media position of the Celestial Empire were noticed even in the USA: “China promises a “people's war,” since the trade conflict has taken a nationalist turn,” writes the US business news agency Bloomberg. It is noteworthy that the “people's war,” about which the Chinese state-owned foreign policy publication Global Times writes in its editorials, is not only a departure from the restrained and diplomatic rhetoric that was used before, but also a de facto recognition that, intentionally or not, the conflict with the United States is leaving (or has already left) the purely economic plane.
Global Times editor-in-chief Hu Xijin, [胡锡进Húxījìn] sometimes referred to in the US social network as a “Chinese oracle” because of his good knowledge of the state of US-China relations, explained on Twitter what the essence of the changed political and public discourse is: “China’s decision to raise tariffs and the fall of American stocks inspired Chinese society. Being tough with the United States, achieving peace through struggle, is the consensus of most Chinese. The US is planning new tariffs. “The state has reached a peak."
It should be recalled that the day before, Hu Xijin hinted: Chinese experts are actively discussing specific options for dumping the Chinese portfolio of US government bonds "onto the market," which caused a slight panic in the American financial media. The latter were quick to come to the conclusion that either China would not dare to take such a measure, or the use of such a radical measure would ultimately play into the hands of Donald Trump, although it would cause serious damage to ordinary Americans. “If China sells its bonds to the United States, Trump will win. The sale will weaken the dollar, which will help reduce the US trade deficit with China,” writes Bloomberg. This is an overly optimistic assessment that does not take into account how badly such an action by the PRC would undermine the US financial markets and how much harder the Chinese action would make it to build up US government debt, which is necessary to maintain American economic stability.
Peter Schiff, head of the investment fund Euro Pacific Capital, believes that the logical continuation of the current conflict does not bode well for the American economy, while many in the United States refuse to face the truth: The ignorance of the true nature of Sino-U.S. relations is staggering. China has been subsidizing the US economy for decades by lending us money and supplying us with manufactured goods. When China withdraws its support, our credit based service sector economy will implode!” he writes on Twitter.
However, one should not assume that it will be a painless process for China. Quite the contrary: the Chinese economy has been growing for decades, thanks in part to preferential access to American technology, capital and markets, and its “disconnection” from the American system (if it comes to total embargoes and “dollar sanctions”) cannot but inflict quite sensitive damage on China that will have to be stopped by long-term and difficult reforms. It is not for nothing that representatives of the Chinese official point out that in Chinese social networks, the confrontation between the USA and China is described as a conflict between two books, ie, “The Art of the Deal” (by Donald Trump) and a collection of Mao’s speeches on the theory and practice of “protracted guerrilla war.” Roughly speaking, the Chinese leadership is making a public bet that the Chinese system in general and Chinese citizens in particular have a “pain threshold” much higher than that of the American opponents. And that they can withstand difficulties that would simply break the American political system and American society.
The Chinese strategy is to "tolerate what the United States will not tolerate." This did not go unnoticed at the White House, but Donald Trump and his team took the information in a rather specific way, reducing it to Beijing’s supposed bet that the next president of the United States in 2020 will be a Democrat and ex-vice president under Obama Joe Biden. Trump stated in plain language that China had abandoned the agreements already reached, since he expects to agree later with Biden or "one of the very weak democrats." A pro-Trump press began active promotion of conspiracy theories of a relationship of his Biden’s son with Chinese business. The American tabloid The New York Post writes that immediately after the then US Vice President’s visit to China, Hunter Biden’s (Joe’s son) firm received a contract for a half billion dollars with a Chinese state bank. And it is precisely this that allegedly explains the very soft position of Biden himself on the economic war with China.
Regardless of how true the above charges are, you can safely bet that Trump, his entourage, some American security officials and even some of the “system politicians” from the Democratic and Republican parties intend to “push China to the brink. At this time, in their opinion, the question of whether the United States will maintain its status as a world hegemon in the 21st century is really being resolved.
Here you can trust the assessment of Trump’s chief campaign strategist Stephen Bannon, who told CNBC that there are “no chances” for the US president’s retreat in a trade war. If a month ago there were grounds for believing that Trump would agree to some kind of "truce" and certain (albeit temporary) concessions on issues important to the United States, now he is likely to really be escalating until the negative consequences are unbearable for either China or the United States itself.
The role of Russia in the context of the growing conflict between the US and China (as well as the role of the European Union, and other countries that can "shift the balance of power" in the struggle between two rivals of comparable strength) will only increase. Moscow got rid of its American bond package in time (for if it sold after China, it would have had to take losses), and now its hands are completely untied to gain maximum benefits from reorganizing the global economic and political system.
[COMMENTS AT THE RIA NOVOSTI SITE]
Let’s not deceive ourselves. China falls short of the United States in many respects. The Chinese economy is focused on exporting its goods to the USA and its allies. In terms of military power, China loses significantly to the US. In its potentials of operational control and transfer of troops, the United States now has no equal in the world.
China will collapse immediately if the entire US debt is sold, their entire economy is based on this, as is ours on oil!
The following is our translation of an article from Ria Novosti with commentary and notes in [brackets] by Vince Dhimos. As I was reading the article before it was translated, I had to chuckle at Boris Martsinkevich’s ironic style, a style quite common in Russian commentaries on Western silliness. It is nothing new. Mikhail Zoshchenko was a Soviet satirical short story writer who similarly poked fun at Soviet silliness, which differed little from today’s Western bureaucracies seeking to restructure the minds of their citizens with a heavily censored press and a social media where certain topics are avoided to prevent a plague of citizenry running around with its own thoughts not approved by the Establishment. Homo americanus is the new Homo sovieticus.
Like Zoshchenko, today’s Russian authors view with amusement the antics of Western “experts”, politicians, officials and the like, who take their own incompetent scolding, threats and sanctions oh so seriously. For these Russian observers, the West is a big comedy show, and the overpaid bunglers who run it are an endless source of mirth, especially when they put forth enormous effort to “punish” Russia and wind up costing themselves money and embarrassment while inadvertently benefitting the rogue state they worked so hard to bring under their control.
The salient example is the sanctions that Washington forced Europe to slap on Russia that wound up costing Europe $20 billion in lost revenues due to the creative Russian countersanctions that wound up diversifying Russian industry, agriculture and arms. The Europeans acted like the Keystone cops, diligently trying to please the police chief but falling over their own feet in the process while the perpetrators they hoped to bring to justice eluded them and wound up actually enriching themselves at every turn. So much absurdity. So much juicy material for the satirist.
Likewise, the bungling attempt to punish China wound up punishing the US with the biggest trade deficit on record. And the embargo of Rusal almost obliterated the US aluminium industry until Trump, was forced to call off the embargo with his tail between his legs. It’s all rollicking fun to the tongue-in-cheek Russian observer.
Sweden’s shutdown of its last nuclear reactors is based on “green” ideology, but as I always say, ideology does not solve problems, it creates them. Winters in Sweden are harsh, as the author reminds us. Yet Sweden puts politics ahead of practicality, leaving the country at risk of shivering this winter. The stuff of bitter satire.
Some of the subtle humour will not be readily grasped by Western readers, but it will make a Russian reader chuckle.
For example, the author writes:
“...the country [Sweden] began to buy electricity wherever it could - even in mighty shale-oil burning Estonia.”
The author couldn’t help taking a swipe at tiny Estonia, which, under the influence of Washington, has morphed from a Russia-friendly Warsaw Pact state in Soviet times to a fashionably Russophobic NATO member that proudly pays its full dues and, from behind the skirts of the Pentagon, snarls dutifully at Moscow, holding military drills right at Russia’s doorstep. Indeed it is a mighty country -- in its dreams. The EW system Murmansk BN can paralyze the entire NATO deployment on land, on sea and in the air, in less than a minute, as by Vince Dhimos we posted here just a few days ago.
And who benefits from all this politically correct silliness? Why Russia, of course, the world’s foremost expert in the decommissioning of nuclear power plants. You ban ‘em, we dismantle ‘em. With Britain, Switzerland, Spain and Germany coming off line next, they’ll be busy for a while and making money hand over fist. And then, when reality slaps these countries hard in the face, they may well wind up building the plants back up again.
You might call this genre of Russian commenting the crying-all-the-way-to-the-bank style.
Russia deprives Sweden of cheap energy. Next in line are Germany and Britain
On 29 April in Sweden, a call for tender was issued for dismantling two reactor vessels of the first and second power units of the Oskarshamn nuclear power plant and two buildings at the Barsebäck nuclear power plant. The tender was not the first. In January 2019, the consortium General Electric Hitachi completed the dismantling of the internal installations of the reactors of the Oskarshamn nuclear power plant, so that the winner of the next competition will continue the work begun. But before we talk about the new consortium, let us recall what the Swedish nuclear project is and what the Swedish energy sector looks like.
Sweden has the fifth largest area of any country in Europe, but the population there is less than Moscow’s, only ten million people. It is a large and sparsely populated country, in the bowels of which geologists have not been able to find enough coal, oil and gas. However, nature understands irony. There are several uranium ore deposits in Sweden. In such an amazing scenario, the country, of course, could not pass up nuclear energy.
But the Swedes did not invite any of the recognized majors to build nuclear power plants. The company AB Atomenergy [Swedish] has developed its own projects of boilers with nuclear reactors. Now installations of this type are not deemed the safest, but construction proceeded from 1964 to 1980, a time of romance for atomic physics, when experts were still not fully aware of the risks posed by the atom. Over 16 years, five nuclear power plants had been built in Sweden, with 15 reactors operating there. As a result, the country became the second on the continent in nuclear power: NPPs provided 40% of its total electricity generation. And this turned out to be sufficient, since almost the entire remainder of power is generated by hydroelectric power plants, and the Swedes very carefully and competently use their hydro resources. Hydroelectric power stations and nuclear power plants have nothing burning inside them, and there are no thermal emissions, so Sweden is rightfully considered one of the "greenest" countries on earth.
True, there are exceptions to this rule. In the south of the country, where there are not many good rivers, in the town of Karlshamn, the thermal power plant of the same name still operates, fired by fuel oil. Solar and wind power stations, though fashionable and eco-friendly, cannot satisfy all the needs of the citizens. Still, Sweden is not Spain or Portugal. The winters there are quite severe.
However, let's get back to the Swedish nuclear project. Its fate clearly shows what is going on in the minds of the Europeans. Until the end of the 70s, the Swedes were rightfully proud of their atomic successes: reactors of their own design, built domestically, clean air and plenty of electricity. But in 1979, the first of the three nuclear power plant accidents occurred - at the American Three Mile Island in Pennsylvania. Pennsylvania is quite a distance from Sweden, but in 1980 a Swedish national referendum was held, and it was decided to phase out nuclear power. Construction that was already underway was completed, but no new plants were started. Radioactive cesium, blown to Sweden from Chernobyl in 1986, only intensified anti-nuclear sentiment, with the result that in 2005, both Barsebäk reactors were shut down.
However, as time went on, the initial panic gave way to mathematical calculations, which showed that even if all the rivers of Sweden were dammed, there still wouldn’t be enough to satisfy the needs of households and industry. Environmental sentiment in northern Europe is very strong. The Swedes didn’t want to build new gas or coal fired power plants - and in 2010 parliament repealed the 1980 law. The Swedes began to resume the program to build nuclear power plants, and even the accident at Fukushima in Japan did not deter them.
True, ten years have passed, and there are still no new nuclear power plants in Sweden. This is because in 2014, the government included representatives of the Green Party, who faint upon hearing the words “nuclear power.” Since shutting down all the country's reactors would have been tantamount to death, the "greens" took a different turn. The owners of nuclear power plants were assessed an environmental tax of 33% of the cost of the electricity produced. This instantly made the Swedish nuclear generation unprofitable, and the country began to buy electricity wherever they could - even in mighty oil-shale burning Estonia.
To capture the new market, foreign suppliers dropped prices, and Uniper had no choice but to close two power units of the Oskarshamn nuclear power plant in 2015. How the Swedish government will deal with this is not quite clear. Already in 2017, following a tender, GE Hitachi consortium began dismantling everything inside the reactor vessel. In 2019, Estonia announced that, according to the requirements of the European Commission, it was forced to close part of the Narva power plants, causing Sweden to lose 25% of its capacity, and this is only the beginning. In other words, this energy import source for Sweden is closing down.
The dismantling of the internal equipment of the power units of the Swedish nuclear power plants was only the first stage. Now they have to dismantle the buildings themselves. The job has been awarded to two German companies, Uniper Anlagenservice and Nukem Technology. Both companies are recognized majors in their industry. For example, the Bavarian Nukem Technology has already decommissioned nuclear power plants in Germany and France, a research reactor and a fuel plant in Germany, and facilities in Spain, China, South Africa, Bulgaria, the Czech Republic, constructed a radioactive waste storage facility in Chernobyl, and decommissioned the Ignalina nuclear power plant in Lithuania.
And now for the main point. Since 2010, Nukem Technology has had exactly one owner - 100% of the company's shares belong to the Russian state corporation Rosatom. As a result of this transaction, Russia was able to ignore any sanctions, and German specialists now have access to the production capacity of unique equipment.
Let me explain. Nukem Technology, winning a public bid, faced the same problem every time: after developing a project for dismantling, they had to look for manufacturers able to create the necessary equipment - not serial, but piecemeal. The search took time, the lack of experience and qualifications of contractors generally put contracts on the verge of failure. But now the German engineers no longer have outsource equipment manufacturers, and there is no need to waste precious time: the nuclear industry of Russia can cope with any task.
Of course, in Sweden, everyone is well aware of who owns Nukem Technology, but its Russian roots don’t bother anyone. Anti-Russian sentiments and other sanctions are one thing, but the need to work with a radioactive object as safely as possible, efficiently and in time is quite another.
By the way, the Swedish contract is quite significant for Russia and Rosatom - the European market for decommissioning nuclear power facilities is estimated at several hundred billion euros. A number of countries have decided to shut down their nuclear power industry: Germany, Spain, Switzerland, and also Britain, are closing their second-generation nuclear power plants. The geography is vast, and here we have a clear opportunity to work and make money.
Relevant from New Silk Strategies:
RUSSIA: THE MOST STABLE AND HEALTHY OF ALL INDUSTRIAL ECONOMIES
How is Google Translate doing these days?
First, I need to say that GT is one of the most amazing feats of software engineering ever and it is a boon to translators who know how to use it wisely. Kudos to the unsung heroes of Google who developed it.
Of course, it operates on non-human principles, so naturally, it doesn’t think like a human translator. Here is an example from the above text:
Sweden is the fifth largest in Europe, but there are only ten million people in Moscow.
Human translator, same text:
In terms of surface area, Sweden ranks fifth in Europe, but its population is less than Moscow’s, totalling 10 million in all.
По площади Швеция — пятая в Европе, а вот населения тут меньше, чем в Москве, всего десять миллионов человек.
Although hard to consider given how tense things are between the U.S and Chinese along with Russia, how effective do you think they would be as allies and who would the U.S work better with? (for example like counter-terror operations)
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
At this point in time, the US cabal is stuck in a negative economic strategy that obviously will never work out in the long run. Their attitude toward Russia and China is juvenile and not worthy of adults. They appear to think — God knows why — that if they can bring down these two countries, they will somehow benefit, perhaps even prosper. And yet there is no rational reason to expect that, quite to the contrary. The fact is, if they could just stop this childishness, the US could make money by joining China’s Belt and Road Initiative.
A few years ago when China opened its Asia Infrastructure Investment Bank (AIIB), 14 European states joined and so did most US allies in Asia such as India, Malaysia and Indonesia, the South Pacific, such as Australia and N. Zealand and many more for a total of 97 member states at this point. It was symbolic that Saudi Arabia – on which the US had once pinned its hopes of propping up the dollar – was one of the first to join. Everyone saw the growth opportunities. Everyone except the self-proclaimed Exceptional Nation. Obama warned that the AIIB lacked "safeguards." What he apparently meant was that unlike the IMF, this Chinese bank was liable to lend even to countries that did not have cross dressers in uniform. It was just weirdness and stubbornness, very much like a debilitating mental disease. At this point, the US does not seem capable of admitting that it could benefit from any kind of business relationship with Russia and China as long as the founders of the business venture are either of these two countries. The US response to Russia’s incursion into Arctic oil exploration, for example, was to plan the construction of military bases there. For what purpose? Would making Russia poorer make the US richer? Wouldn’t it have been more rational to offer cooperation with US oil companies?
The US insists on being the big cheese and getting all the attention but it won’t listen to anyone that is not a worshipper. Frankly, it is never of any benefit to pass up a business opportunity, especially something like China’s Belt and Road Initiative (BRI), which is the biggest infrastructure enterprise even undertaken and is intended to involve all continents. There is nothing any bigger or potentially more lucrative that the US could invest in. But the US would rather lose than not be in the driver’s seat. If this attitude doesn’t cease at some point, the US will find itself eating the dust of Russia and China as the dollar drops in value and loses its hegemonic reserve status. It’s really a crying shame, all that wasted potential. I have never seen any other country with so much potential throw it all away just for the sake of false pride. I mean, if the cabal in Washington and Wall Street wants to commit suicide, that is their prerogative, but they are dragging down the whole country and there are people in the US who don’t deserve this.
I sensed the wind direction years ago when the Saudis joined the AIIB, and sure enough, just a few weeks ago, Saudi was baring its fangs and claws at the US, signalling the end of the honeymoon, as I reported here:
I suspect this kind of scenario may be the end stage of all democratic experiments in environments where a premium is placed on freedom. After all, democracy must by its nature focus on politics, not technically sound solutions, and eventually, the politics and the technically sound solutions must diverge fatally. I'd have to say we are there.
Maybe this whole process is like the life cycle of the sequoia, whose propagation is said to depend in part on a forest fire that helps open up the tough seed coat so it can sprout. At any rate, it looks more and more likely that destruction will come before redemption.