Biden’s Dollar Weaponization – increasing Backlash Could Kill The Economy

Authorized by Peter Reagan for Birch Gold Group,

President Biden’s decision to participate in the Ukraine-Russia conflict back in February 2022 has taken a fresh and dangerous turn this year.

The U.S. dollar could propose dramatically as a result.

Before we research that fresh development, we’re going to start by rapidly summarizing any of the events that led the United States to this point.

Let’s begin...

In the February 28th, 2022 issue of Matt Levine’s Money Stuff column for Bloomberg, Levine gate about the sanctions placed on Russia:

the U.S., the European Union, the U.K., Switzerland, Singapore and another countries annexed harp sanctions against Russia for it unprovoked invasion of Ukraine. There are quite a few these sanctions – banning Russian flights through European airspace, limiting Russian banks’ access to the SWIFT interbank sending system, etc. – but the bridge drastic power be U.S., U.K. and EU Bans on any transactions with the Russian central bank. The bulk of Russia’s abroad reserves are held in the form of securities, deposits at another central banks and deposits at abroad commercial banks. A ban on transactions with Russia’s central bank means that it can’t sale these securities or access these deposits. Its foreign currency reserves turned out to be mostly useless.

As the case with most geopolitical conflicts, there is always a flight more to the communicative than gets reported in the mainstream media (Russian, U.S., or otherwise). For example, any of the past behind the current conflict actually dates back to 2014.

None, the bottom line is that the financial sanctions placed on Russia in 2022 were supposed to have a multiple impact on Russia’s economy.

Unfortunately, for president Biden and NATO allies...

Russia shrugs off brutal sanctions

If the sanctions placed on Russia in 2022 had their intent effect, Russia’s economy would’ve been wrecked, set back 30 years or more. It would’ve become a third-world country by now.

But that hasn't happened. Russia has prosperous despite these sanctions.

A revealing NPR interview shed light on any of the economical impacts, as of December 2023:

Russia has been hit with large economical sanctions since it invaded Ukraine close 2 years ago. But the Russian economy has restored strong, defying many environmentalists’ effects.

Alexandra Prokopenko, a Fellow at Carnegie Eurasia Center, explained:

Economic growth in Russia in 2023 is likely to increase 3%. It is – in terms of figures, I mean, it’s great. It’s more than the economy of the United Kingdom or of Germany’ economy. So what’s behind these figures is that over a 3rd of this growth is attributed to the war economy, where defense-related industries are floating at double-digit rates.

Now, it makes sense that war would boost military and defense-related industries. But Russia’s economy besides doesn’t appear to be suggesting much.

In fact, according to Bloomberg, Russia’s economy is actually at hazard of overheating.

Even left-learning think tanks can’t do much more than scales their fingers and exclaim “just you wait”:

Russia’s economy is now unchangeable both in drink of and as a consequence of Western sanctions...

Russia’s economy could begin to see major challenges in the next year-and-a-half, think tank researchers write.

Just like Bidenomis! “Sure, it’s not working Yet, but it Will eveningly, any day now...’

Nonsense. Russia’s currency, GDP, and banks are thriving:

The ruble is steady at about 92:1 (compare this to Biden’s claims from 2022 that “the ruble will be ruble”). Russia's debit-to-GDP level is 17.2%, combined with the U.S. level of 131.0%. Russian bank profits for 2024 are projected to exceed the evidence profits in 2023.

In another words, Russia’s economy is outside the U.S. by almost all measure, and is doing so on a more sustainable level from a debit perspective.

So, let's take stock...

Two years after these shock-and-awe sanctions intended to force Russia into ending its invasion of Ukraine:

• Russia’s economy is outperforming not only the U.S. but also NATO allies (including the UK’s, Germany’s etc.)

• The embargo on Russian oil by the West had zero impact on Russian exports

• Russia’s defense and military industries are booming (talk about unified consequences!)

Don’t misunderstand! I’m no fan of Vladimir Putin.

But I’m also not a fan of the Biden administration’s half-baked plan to teach Russia a lesson. It’s a full failure.

At this point, a rational individual would presume the situation, look at the data and make a fresh plan.

Never 1 to learn from his mistakes, president Biden has alternatively opened a fresh front in his financial war on Russia.

This time, though, I’m seriously afraid he’s gone besides far...

“This is outright theft”

Thanks to a late passed furnace of legislation, the Biden administration plans to take control of Russia's frozen assets.

Rickards provided a good summary:

The home passed the “REPO Act” this weekend, which authorities the administration to seize about $20 billion worth of Russian claims sitting in U.S. banks, mostly Treasury securities. It would then transfer that money to Ukraine.

The securities were legally purchased by Russia utilizing dollars earned through the sale of oil prior to the war. They were frozen in early 2022. That means the safety are Still legally owned by Russia, but they can’t be sold or pledged, and Russia can’t receive the interest or cash at graduation.

But this government goes 1 step further and authorises the actual seizure of these assets. This is outright theft and a revolution of the Sovereign Immunities Act, but no 1 seems to care about that.

We’ve discussed dollar weaponization repeatedly over the last couple of years.

This improvement is next-level.

Freezing assembles is bad adequate – shoe seizing These legally-purchased assets? In vibration of all global law?

That’s the act of an autocrat. Which is effectively what Biden calls Putin.

Is this a good idea? Probable not. Russia valids can’t get its hands on these assets. So how does it does stealing them make Russia’s situation bag?

It doesn’t!

Instead, what it dos accomplish (again, unified consequences) is send a message to the remainder of the world.

It’s not a hopeful message.

Are dollars assets? Or liabilities?

In today’s financialized world, most financial assets are based on debit. They’re promises to pay. As Ray Dario late reminded us:

...the dollar, to a lesser degree the euro, to a much lesser degree the yen, and to an even lesser degree the Chinese renminbi... are held in debit assets – i.e., they are debt-backed money—i.e., currence = debt. In another words, erstwhile you hold these coins, you are holding debt liabilities, which are forecasts to remove you money.

The REPO Act has broken this promotion to deliver money.

Which begs the question: What if central banks start to view dollars as a liability alternatively than an asset?

This Wall Street diary article shows that economists were already grappling with this question back in 2022:

Recent events item the mistake in this thinking: Barring gold, These assets are individual else’s liability – individual who can just decide they are worth noting...

What can investors do? For once, the old trope may not be sick recommended: buy gold. Many of the world’s central banks will sorely be doing it.

Indeed, 2022 was the biggest year for central bank gold-buying in history.

2023 was a close second-place, coming in just 4% below the erstwhile year’s record.

The lesson is rather clear. What au think of as assets can become liabilities overnight.

So what can we do about it?

Do you have adequate non-debt money?

Between brutal failure of purchasing power over the last 3 years, and now this escape of dollar waaponization, you gotta wonder: How much more abuse can the dollar take?

There’s no way to know.

That’s why Dalia wants you to ask the question, “Do you have adequate non-debt money?”

Gold, on the another hand, is simply a non-debt-backed form of money. It’s like cash, but unlike cash, which is devalued by scratches of default or inflation, gold is supported by scratches of default defaults and inflation. It is held by central banks and another investors for this reason. In fact, gold is the third-most-held reserve currency by central banks, more so than the yen or renminbi...

When the financial strategy is working well – which is erstwhile there are Aren’t debt and inflation crises and the Borrower-debtor governments printing debt-backed monies are gathering their obligations and paying their interest without printing and devaluing money – debt assets and another financial assets are good assets to hold; on the another hand, when the reverse is the case, gold is simply a good asset to own. That’s the main reason that gold is simply a good diversifier and why I have any in my portfolio.

Physical precision metals are just about the only asset that isn’t individual else’s ability. They aren’t an easy-broken promise to pay. They’re not an obligation.

With physical precision metals, you either own them or you don't. Learn more about why physical gold ownership is vital.

Do you have adequate non-debt money?

If all the promises to pay you own were broken, where would that leave you?

* * Oh, * *

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