Russia Threatens To Abandon US Dollar And Start Dumping US Debt


The Obama administration and the hotheads in Congress are threatening to hit Russia with "economic sanctions" for moving troops into Crimea. Yes, those sanctions would sting a little bit, but what our politicians should be made aware of is the fact that Russian officials are promising "to respond" if economic sanctions are imposed on them. As you will read about below, one top Kremlin adviser is even suggesting that Russia could abandon the U.S. dollar and start dumping U.S. debt. In addition, he is also suggesting that if sanctions are imposed that Russian companies would not repay the debts that they owe U.S. banks. Needless to say, Russia could do far more economic damage to the United States than the United States could do to Russia. The U.S. financial system relies on the fact that the rest of the planet is going to use our currency to trade with one another and lend gigantic piles of it back to us at super low interest rates. If the rest of the world starts changing their behavior, we are going to be in a massive amount of trouble. Those that believe that the United States is "economically independent" are being quite delusional.

In order for U.S. economic sanctions against Russia to be effective, Europe would also have to get on board.

But that simply is not going to happen.

As I noted yesterday, Russia is the largest exporter of natural gas on the planet. And Russia is also Europe's largest supplier of energy.

There is no way that Europe could risk having Russia cut off the gas, especially considering the economic condition that Europe is currently in.

To get an idea of just how incredibly dependent the rest of Europe is on Russian natural gas, check out the chart in this article. A whole bunch of European nations get more than half their natural gas from Russia.

And according to the Telegraph, even the UK has already completely ruled out economic sanctions...

Europe would be pushed back into recession, Russia into financial meltdown. This is not the sort of self harm Europe is prepared to contemplate right now. Indeed, thanks to the indiscretion of a UK official, who was snapped going into Downing Street with his briefing documents on display for all the world to see, we know this to be the case. Trade and financial sanctions have already been ruled out.

So the U.S. can do whatever it wants, but Europe is not going to be any help. Perhaps Canada will stand with the U.S., but that will be about it.

On the flip side, the Russian Foreign Ministry is promising "to respond" if the United States does impose economic sanctions...

Russia said on Tuesday that it would retaliate if the United States imposed sanctions over Moscow's actions in Ukraine.

"We will have to respond," Foreign Ministry spokesman Alexander Lukashevich said in a statement. "As always in such situations, provoked by rash and irresponsible actions by Washington, we stress: this is not our choice."

So what would the response look like?

Lukashevich did not say, but top Kremlin adviser Sergei Glazyev is suggesting that Russia could abandon the U.S. dollar and refuse to pay back loans to U.S. banks...

"In the instance of sanctions being applied to stated institutions, we will have to declare the impossibility of returning those loans which were given to Russian institutions by U.S. banks," RIA quoted Glazyev as saying.

"We will have to move into other currencies, create our own settlement system."

He added: "We have excellent trade and economic relations with our partners in the east and south and we will find a way to reduce to nothing our financial dependence on the United States but even get out of the sanctions with a big profit to ourselves."

Glazyev also stated that Russia could start dumping U.S. debt and encourage other nations to start doing the same. The following comes from a Russian news source...

"We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner," he said. "We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market."

Clearly Russian officials understand the economic leverage that they potentially have. In fact, Glazyev seems fully convinced that Russia could cause "a crash for the financial system of the United States"...

"An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system."

On that last point Glazyev is perhaps overstating things.

On their own, the Russians could do a considerable amount of damage to the U.S. financial system, but I doubt that they could completely crash it.

However, if much of the rest of the world started following Russia's lead, then things could get very interesting.

Just yesterday, I wrote about how China has chosen to publicly stand in agreement with Russia on the Ukrainian crisis.

If China also decided to abandon the U.S. dollar and start dumping U.S. debt, it would be an absolute nightmare for the U.S. financial system.

And keep in mind that the Chinese were already starting to dump a bit of U.S. debt even before this latest crisis. In fact, China dumped nearly 50 billion dollars of U.S. debt in December alone.

The only way that the current bubble of debt-fueled false prosperity in the U.S. can continue is if the rest of the world continues to lend us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation.

If the rest of the world stops behaving in such an irrational manner, interest rates on U.S. government debt would rise dramatically and that would also mean that interest rates on virtually all other loans throughout our financial system would rise dramatically.

And if that happened, it would be a complete and utter nightmare for our economy.

Unfortunately, most Americans have no understanding of these things. They just assume that we are "the greatest economy in the world" and that nothing is ever going to threaten that.

Well, the truth is that we are rapidly approaching a "turning point", and after this bubble of false prosperity pops things will never be the same in the United States again.

Get a look at the future of America: The Beginning of the End.

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Comments

comments

  • Midwestmike

    “Needless to say, Russia could do far more economic damage to the United States than the United States could do to Russia."

    This is COMPLETE BS. Russia is a third world country with nuclear weapons. The only thing that separates them from abject poverty is their people don’t know any better. The Russian economy is the size of CALIFORNIA. As for Russia not paying it debts; its economy would crumble with in 90 days. Where are they going to get international financing from; the Chinese? Hardly. Whoever wrote this is a complete idiot- clearly a case of the tail wagging the dog.

    Want more proof - look at the beating the ruble is taking - do you actually think the average Russian is going to rush to hoard a plummeting currency? Jesus get real.

  • mackelby

    Russia and China are buying our debt so they can dump it, when time is right and it will do the most damage. That has been obama's job, to make the that time get here quicker. And he is doing a very good job I might add. You know they didn't buy our debt because it would be a good investment. The payback comes when they invade and take our national resources.

  • otoman

    Time to buy gold and silver. All jokes aside. Many countries are already circumventing the dollar and if it were not for the feds illegal interference by shorting the metals markets gold and silver would already be through the roof.

  • otoman

    Time to buy gold and silver! All jokes and puns aside.

    • mackelby

      And guns and ammo

    • otoman

      YES! Maybe worth even more than gold and silver when it gets down to the nitty gritty.

  • Trisha Holmeide

    Although it would be painful I think if I were Putin, or Japan, or China etc. I'd be doing the same thing. The US is NOT acting in good faith to get it's house in order to even pay the interest on it's loans. Of course, that's why Obama is spending our great, great grand children into oblivion so as to bring the US economy down to the level where it can be comfortably merged with Third World Nations in that great scam called "one World Order." If Putin moved to dump the dollar ahead of time it could alter the course of the history the progressives have in mind for us! Maybe people would begin to wake up and demand fiscal accountability and a balanced budget. Maybe we would be forced to wean off the welfare state as there wouldn't be anymore funds to dribble out to the poor. Maybe we'd have to step up and help one another instead of taking it for granted the government would do the job! Maybe this ain't such a bad idea after all!

  • ADRoberts

    A bluff. The ruble is in trouble. And if he starts dumping American debt, he will have to do so at a loss because THE WHOLE WORLD knows that our money is worthless. They will not buy it at face value. So when he DUMPS it, the ruble will fall even further. But if Obama WANTS to cave to Putin, he will do just that. And he will once again show the world how truly WIMPLY her really is.
    Where is Sarah Palin when you need her?

  • MilitaryVeteran

    Now isn't THIS special! The clueless Obama crowd would . . . . blame Bush. Meanwhile, we could trade food stamps and Obama phones or wheel barrels of $100 bills for . . . bread. Well, the states issued their own currency before the national government got around to it so we might be forced into that again. Obama promised . . . change. Damn Democrats!

    • cbarneym

      To Military Veteran,

      I urge you read the following and do verification research if you disagree with what is said. The undisputable and quite verifiable facts are simply that there is much to blame GW Bush for.

      President GW Bush, in a 10/7/02 Cincinnati speech, said: “If we know Saddam
      Hussein has dangerous weapons today - and we do...” but he didn't, and was
      proven 100% wrong. Moreover, GW Bush's Iraq war has caused major economic
      and foreign policy damage to American prestige.

      An 8/17/2005 Washington Post article "U.S. Policy on 'Axis of Evil' Suffers Spate of Setbacks said:

      "Tehran and Pyongyang have felt freer to flout American pressure, secure in the knowledge that the U.S. military is tied down in Iraq (2005), analysts said.

      "The situation in Iraq is sufficiently sober [that] I think this has given the Iranians a boost of confidence that they didn't have two years ago," said Geoffrey Kemp, a Reagan administration national security official who is now a scholar at the Nixon Center. "They're not scared of us as they once were."

      In pain, misery, and money the Iraq war has cost over 330,000 American and Iraqi lives and $4 trillion spent and obligated, according to the Brown University Report, "Costs of War" (http://costsofwar.org/). Moreover, the longest war in American history drags on in Afghanistan. A war which the Bush Administration did a fine job of winning until he threw it all away in the deserts of Iraq.

      A must reading for all honest Obama critics is a 10/24/05 American Conservative article, "Money for Nothing," which reports: "When the final page is written on America’s catastrophic imperial venture, one word will dominate the explanation of U.S. failure-corruption. Large-scale and pervasive corruption..." (http://www.theamericanconservative.com/articles/money-for-nothing/).

      Also, a 11/26/09 Forbes article, "The Cost of War," says: “Republicans have been characterized by two principal positions: They like starting wars and don't like paying for them. George W. Bush initiated two major wars in Iraq and Afghanistan, but adamantly refused to pay for either of them by cutting non-military spending or raising taxes… Bush and his party, which controlled Congress from 2001 to 2006, never asked for sacrifices from anyone except those in our nation's military and their families.”

      If Republicans want more American foreign policy adventures then they need to man-up and pay for them instead of borrowing from the Chinese.

    • MilitaryVeteran

      Normally, I don't respond to the Kool-Aid drinkers - but you have overdosed. Since you think everything is Bush's fault and the Republicans - who exactly voted for the Iraq intervention? When you realize the truth on that question, try to ween yourself off the Washington Post and start reaching beyond your usual left-wing blogs and authors. Try reading the foreign press too. The Baathists also managed to move considerable munitions to their Baathist brothers in Syria. Not all of the Syrian chemical inventory came directly from Russia. The unmitigated continual US foreign policy failures since 2008 make almost everything the Bush Administration did overseas look like outstanding successes that protected America AND earned new respect for our superpower status. Obama and his collection of incompetents like Holder, Hagel, Jarrett, Powers, Clinton and Kerry have seriously weakened the USA, domestically and overseas. And yet, the Kool-Aid drinkers continue to "bash Bush." My guess is that you are looking forward to voting for Hillary - the butcher of Benghazi - Clinton to continue the lies and corruption so entrenched by the fraud - Obama.

    • XavierFactor

      Very nice post there MilitaryVeteran!!!

      cbarneym is your poster child for the Low Information Voter, who loves to cherry pick quotes and twist them into his cretinous rants.
      Don't ask question(s) or expect any kind of answer(s) from ole Barney, he doesn't have the intellectual arsenal to carry on an intellectual/honest debate so he has diminished himself to a drive by poster

      Just for laughs here's his website: http://murrellmonitor.com/index.html

    • MilitaryVeteran

      XavierFactor - thanks for the insights on Barney. It is sad. Too many folks fall off their medical prescription regimes and end up believing Obama and his endless lies. When the crash catches up to them, not all recover.

    • ihavetopickastupidname

      "One way or the other, we are determined to deny Iraq the capacity to develop weapons of mass destruction and the missiles to deliver them. That is our bottom line." President Clinton, Feb. 4, 1998.

      "If Saddam rejects peace and we have to use force, our purpose is clear. We want to seriously diminish the threat posed by Iraq's weapons of mass destruction program." President Clinton, Feb. 17, 1998.

      "Iraq is a long way from [here], but what happens there matters a great deal here. For the risks that the leaders of a rogue state will use nuclear, chemical or biological weapons against us or our allies is the greatest security threat we face." Madeline Albright, Feb 18, 1998.

      "He will use those weapons of mass destruction again, as he has ten times since 1983." Sandy Berger, Clinton National Security Adviser, Feb, 18, 1998

      "We urge you, after consulting with Congress, and consistent with the U.S. Constitution and laws, to take necessary actions (including, if appropriate, air and missile strikes on suspect Iraqi sites) to respond effectively to the threat posed by Iraq's refusal to end its weapons of mass destruction programs." Letter to President Clinton, signed by Sens. Carl Levin, Tom Daschle, John Kerry, and others Oct. 9, 1998.

      "Saddam Hussein has been engaged in the development of weapons of mass destruction technology which is a threat to countries in the region and he has made a mockery of the weapons inspection process." Rep. Nancy Pelosi (D, CA), Dec. 16, 1998.

      "Hussein has ... chosen to spend his money on building weapons of mass destruction and palaces for his cronies."
      Madeline Albright, Clinton Secretary of State, Nov. 10, 1999.

      "There is no doubt that . Saddam Hussein has reinvigorated his weapons programs. Reports indicate that biological, chemical and nuclear programs continue apace and may be back to pre-Gulf War status. In addition, Saddam continues to redefine delivery systems and is doubtless using the cover of a licit missile program to develop longer-range missiles that will threaten the United States and our allies." Letter to President Bush, Signed by Sen. Bob Graham (D, FL,) and others, Dec, 5, 2001.

      "We begin with the common belief that Saddam Hussein is a tyrant and a threat to the peace and stability of the region. He has ignored the mandate of the United Nations and is building weapons of mass destruction and the means of delivering them." Sen. Carl Levin (D, MI), Sept. 19, 2002.

      "We know that he has stored secret supplies of biological and chemical weapons throughout his country." Al Gore, Sept. 23, 2002.

      "Iraq's search for weapons of mass destruction has proven impossible to deter and we should assume that it will continue for as long as Saddam is in power." Al Gore, Sept. 23, 2002.

      "We have known for many years that Saddam Hussein is seing and developing weapons of mass destruction." Sen. Ted Kennedy (D, MA), Sept. 27, 2002.

      "The last UN weapons inspectors left Iraq in October 1998. We are confident that Saddam Hussein retains some stockpiles of chemical and biological weapons, and that he has since embarked on a crash course to build up his chemical and biological warfare capabilities. Intelligence reports indicate that he is seeking nuclear weapons..." Sen. Robert Byrd (D, WV), Oct. 3, 2002.

      "I will be voting to give the President of the United States the authority to use force — if necessary — to disarm Saddam Hussein because I believe that a deadly arsenal of weapons of mass destruction in his hands is a real and grave threat to our security." Sen. John F. Kerry (D, MA), Oct. 9, 2002.

      "There is unmistakable evidence that Saddam Hussein is working aggressively to develop nuclear weapons and will likely have nuclear weapons within the next five years . We also should remember we have always underestimated the progress Saddam has made in development of weapons of mass destruction." Sen. Jay Rockerfeller (D, WV), Oct 10, 2002,

      "He has systematically violated, over the course of the past 11 years, every significant UN resolution that has demanded that he disarm and destroy his chemical and biological weapons, and any nuclear capacity. This he has refused to do." Rep. Henry Waxman (D, CA), Oct. 10, 2002.

      "In the four years since the inspectors left, intelligence reports show that Saddam Hussein has worked to rebuild his chemical and biological weapons stock, his missile delivery capability, and his nuclear program.
      He has also given aid, comfort, and sanctuary to terrorists, including al Qaeda members. It is clear, however, that if left unchecked, Saddam Hussein will continue to increase his capacity to wage biological and chemical warfare, and will keep trying to develop nuclear weapons." Sen. Hillary Clinton (D, NY), Oct 10, 2002

      "We are in possession of what I think to be compelling evidence that Saddam Hussein has, and has had for a number of years, a developing capacity for the production and storage of weapons of mass
      destruction. Without question, we need to disarm Saddam Hussein. He is a brutal, murderous dictator, leading an oppressive regime ... He presents a particularly grievous threat because he is so consistently prone to miscalculation. And now he has continued deceit and his consistent grasp for weapons of mass destruction ... So the threat of Saddam Hussein with weapons of mass destruction is real ..." Sen. John F. Kerry (D, MA), Jan. 23. 2003.

      But sometimes you have to see it yourself: http://www.youtube.com/watch?v=Cwqh4wQPoQk

  • jim_wright

    This situation is completely the fault of Obama and his administration. Yes we had national debt before Obama, however he has incurred more debt that all the presidents before him combined. He has spent his entire administration reducing the U.S. military and now he wants to rattle the saber. He is a fool and a complete armature.
    BTW, if we had a military base on foreign soil and U.S. citizens in harms way much like the situation in Crimea we would and have done exactly what Russia is doing now, through possible not under Obama.

  • http://www.facebook.com/rickaggen Richard B. Aggen

    Well Obama is definitely trying to destroy our beautiful country and this just helps his agenda.

  • patriotrick

    Here comes the Yuan. It's been reported that China and Russia have been talking about replacing the Dollar with the Yuan for some time now. Can you say SHTF!

  • C K Johnson

    Obama used the NSA on all of our old allies. They know Russia can cut off gas and oil. That leaves Obama and the U.S. against Russia. Very bad move from the man who thinks he can treat other NATIONS like he treats Legal Americans !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • elector

    The problem is not so much Russia but Obama, he has no clue what he is doing.
    We need to get a competent person in the White House and that even rules out Hillary.

  • wdcraftr

    Obama wants to destroy America. Here's his chance to attack the Dollar, the banks, the stock market, and I wouldn't be surprised if he and Putin were in cahoots on it.. A fast way to a one world currency, and a one world Govt.

  • Jack Laurie

    Putin is holding all the aces, we are so broke the USA will suffer the most from sanctions...thanks Odumbo, thanks Lurch Kerry, and special thanks to Lying Hills Clinton!!!!

  • jonodough

    game set match - putin. what an idiot we have for president. and kerry well...that goes without saying.

  • Montesquieu

    A default is only triggered if Hussein Obama's regime chooses not to pay interest on the debt. Interest payments on the US Government's debt are only about 10% of US government revenues.

    • Combat Veteran Seabee

      Point being made?

    • Guest

      Our debt is mole hill compared to other nations dumping the dollar mountain, When the other prevailing economies pick another world reserve currency, the U.S. will become the new third world.

    • ihavetopickastupidname

      Our debt is a mole hill compared to the mountain that is other nations dumping the dollar. When the other prevailing economies pick another world reserve currency, the U.S. will become the new third world.

    • Keith

      And as soon as interest rates climb to even 5% or 6% all revenue will go to paying the interest on the debt.

    • ihavetopickastupidname

      Debt, interest, interests rates, etc... A change from the dollar as the world reserve currency is what we are not prepared for right now.

    • Keith

      Yep, I've said for years now that the only thing keeping our currency, economy and standard of living afloat is the fact we still have reserve currency status. That isn't going to be the case for much longer. When we lose it, we truly will be in third world status.

  • John Patriot

    Maybe the dumping of the US Dollar and refusal to repay US loans is what obastard wants to defeat the US. China has certainly expressed the idea, and between Russia, China and the UN all working against the US and dangling carrots in front of the rest of the world, it may cause just what the communist progressives want to "fundamentally change the US" as obastard said from the beginning. Could this be an Agenda 21 power play?

  • http://chicagoboyz.net/ TMLutas

    Right at the end of winter is the perfect time for Europe to start a fight with Russia that disrupts their gas supplies. By this fall, I would expect the crisis to be patched over and for Russia to have a smaller share of the EU gas market.

    • Combat Veteran Seabee

      I'd like to see by the end of this week that this piece of mierda oblowhole has no more say in this world PERIOD. Culo needs to go NOW!

  • mike harris

    The first thing Obama did was to rebut the nuclear shield agreement the US had with Poland and the Ukraine. Since this betrayal everything has followed as Sarah Palin predicted. Obama IS tough on foreign affairs. Alas he is tough on our allies, and surrenders to our enemies. Liberals/socialists have got what they wanted and IT DESN'T WORK...

  • Noell Reed

    Obama is trying to prove he is an idiot....and most likely he will do that in spades. Putin will be glad to prove it to him.....

    • Combat Veteran Seabee

      He proved it on "DAY ONE!"