MEDVEDEV: IN THE WAKE OF SANCTIONS, REGIONAL RESERVE CURRENCIES
Russia, in case you haven't noticed, has been playing hardball with the west's sanctions and its attempts at "regime change." Well, as I've said many times, those kinds of games are games that two can play, and Russia's response to the sanctions game has been something that, in my opinion, Mr. Globaloney perhaps wasn't banking on, namely, "ok, if you're going to freeze all of our foreign assets, we're going to make you pay for our oil and gas in rubles. Or gold. We'll take either." They followed up on those "announcements" with removing the value added tax on gold and putting a floor on it. Et voila! the ruble regain most of its lost value and all of a sudden Europe was forced into making a choice: continue to by energy from Russia (in rubles), or from America, which has proven it can and will weaponize the dollar, and hence reveal its increasing untrustworthiness as a reserve currency.
There is of course, more to this than meets the eye, but I talked about that at length in the first quarter wrapup with Catherine Austin Fitts.
The lesson from all of this is, if you want someone to play the role of victim, don't hire Russia.
What I want to talk about now is one of the potential fallouts and implications from all of this in an article shared by M.D. (with our thanks), because for some time one of the things I've been predicting might happen as the Empire of Lies unwinds and its dollar goes the way of the Venetian ducat (another empire of lies), is the rise of regional reserve currencies, and an entirely new paradigm in world finance, that of two or more reserve currencies at the same time. The closest parallel we've seen in modern times was the post-World War One system of sterling and dollars, but now we could see a multi-polar system, and none other than former Russian president and prime minister Dmitri Medvedev is saying this openly:
There's much to note in this article, but I want to focus on two things. Firstly, Medvedev is an "atlanticist", i.e., one of those Russians who believe Russia's future lies with closer integration with the Atlantic powers, i.e., the "West," and thus he is decidedly not a Eurasianist. Yet, even for Medvedev, the handwriting is on the wall: the west has cut its own throat (sanctions), backed the wrong horse (the Ukraine) and has created such mistrust in its reserve currency (the dollar) that a complete realignment is not only needed but, over the next several years, will be the inevitable result as new regional reserve currencies will emerge:
It was something to behold. Dmitri Medvedev, former Russian President, unrepentant Atlanticist, current deputy chairman of the Russian Security Council, decided to go totally unplugged in an outburst matching the combat star turn of Mr. Khinzal that delivered palpable shock and awe all across NATOstan.
Medvedev said “hellish” Western sanctions not only have failed to cripple Russia, but are instead “returning to the West like a boomerang.” Confidence in reserve currencies is “fading like the morning mist”, and ditching the US dollar and the euro is not unrealistic anymore: “The era of regional currencies is coming.”
After all, he added, “no matter if they want it or not, they’ll have to negotiate a new financial order (…) And the decisive voice will then be with those countries that have a strong and advanced economy, healthy public finances and a reliable monetary system.”
Medvedev relayed his succinct analysis even before D Day – as in the deadline this Thursday established by President Putin after which payments for Russian gas by “unfriendly nations” will only be accepted in rubles.
The G7, predictably, had struck a (collective) pose: we won’t pay. “We” means the 4 that are not large Russian gas importers. “We”, moreover, means the Empire of Lies dictating the rules. As for the 3 that will be in dire straits, not only they are major importers but also happen to be WWII losers – Germany, Italy and Japan, still de facto occupied territories. History does have a habit of playing perverted tricks.
What this means is not necessarily that the dollar will lose reserve currency status, but rather lose its monopoly on that status, as it becomes a reserve for trade with north America and Europe. Elsewhere, particularly in the crucial Eurasian landmass, look for rubles, rupees, yuan and yen to acquire that status, particularly with the "smaller state major economies" like Australia, Indonesia, Malaysia and so on.
But there's something else lurking in this article, and it's worth noting.
While the Atlanticist ruling classes have gone totally berserk but still remain focused on fighting to the last European to extract any remaining, palpable EU wealth, Russia is playing it cool. Moscow has been quite lenient in fact, brandishing the specter of no gas in Spring rather than Winter.
The Russian Central Bank nationalized foreign exchange earnings of all major exporters. There was no default. The ruble keeps rising – and is now back to roughly the same level before Operation Z. Russia remains self-sufficient, food-wise. American hysteria over “isolated” Russia is laughable. Every actor that matters across Eurasia – not to mention the other 4 BRICS and virtually the whole Global South – did not demonize and/or sanction Russia.
As an extra bonus, arguably the last oligarch capable of influence in Moscow, Anatoly Chubais, is gone. Call it another momentous historical trickery: Western sanction hysteria de facto dismembered Russian oligarchy – Putin’s pet project since 2000. What that implies is the strengthening of the Russian state and the consolidation of Russian society.
The Russian Central Bank, unlike the Fed, does not practice QE and won’t export toxic inflation to the rest of the planet. The Russian Navy not only secures all Russian sea lines, but Russian nuclear-powered submarines are capable of popping up all over the planet unannounced.
Russia is far, far ahead already implementing the concept of “continental naval power”. December 2015, in the Syrian theater, was the strategic game-changer. The Black Sea-based submarine 4th division is the star of the show.
Russian naval fleets may now employ Kalibr missiles across a space comprehending Eastern Europe, West Asia and Central Asia. The Caspian Sea and the Black Sea, linked by the Don-Volga canal, offer a space of maneuver comparable to the Eastern Mediterranean and the Persian Gulf combined. 6,000 km-long. And you don’t even need to access warm waters.
That covers around 30 nations: the traditional Russian sphere of influence; historical borders of the Russian empire; and current political/energy rivalry spheres.
No wonder the Beltway is berserk.
Russia guarantees shipping across Asia, the Arctic and Europe, in tandem with the Eurasia-wide BRI railway network.
And last but not least, don’t mess with a Nuclear Bear.
Essentially, this is what hardcore power politics is all about. Medvedev was not bragging when he said the era of a single reserve currency is over. The advent of a resource-based global reserve currency means, in a nutshell, that 13% of the planet will not dominate the other 87% anymore.
It is a truism that during the last five hundred years reserve currency status usually accrues to the power with the largest and most powerful navy: Venice, then Portugal, Spain, France, the Netherlands, Great Britain, and the USA. There are periods of "overlap" when there is more than one reserve currency. Consider only that period in the late 18th century of the massive global on-and-off-and-on-again warfare between France and Britain, or the post-World War One period when the British Empire and the USA vied for the dominant position.
But now there's a problem, or rather two problems, and it's called the Kaliber missile, a deadly potential to missile-magnets (aircraft carriers); the missile is a potential game-changer for US naval supremacy (carrier based as it is), and in the final analysis, there's another, even more significant factor, one foreseen over a century ago by the great British geopolitician, Sir Halford Mackinder, who viewed the rise of airplanes, and even more, the railroad, with great trepidation, for the latter meant that the potential existed to knit together the vast Eurasian landmass in a huge trading block, one which sea power would be helpless to interdict or interfere with, and one which the dominant landmass within that vast Eurasian landmass - Russia - and the largest populations - China and India - could dominate if they played their cards correctly. The new "navy" in respect to the emergence of these powers as a tenuous but nevertheless very real bloc is space, for those railroads can be interdicted from space. But here too, you'll note, the USA seems to lag behind while Russia, India, China (and Japan) have launched mission after mission, and are planning more...
And if you're a bridge player, it looks as if, thus far, Mr. Putin has won the bid, and that the west is the dummy hand...
... See you on the flip side...
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