The French are not happy. They've agreed to provide Russia with two aircraft carriers and of course Washington has gone berserk trying to block this and the trouble for the French, of course, is employment and what happens to the profits of the companies involved in this and the workers?
And so Washington is meeting opposition from the business interests in Europe and it looks like so far in France Hollande is a bit more responsive to the French business interests than he is to Washington.
But in Germany, Merkel, so far, is more responsive to Washington than she is to the German business interests.
So how this plays out remains to be seen, but you can see how complex the picture is and you can see how Putin is trying to be very reasonable, very unthreatening, very reassuring, hoping that Europe will break away or one or two of the main companies like Germany or France will break away from the American grip and refuse to participate in Washington's scheme, in which case, Putin would come out the winner. It's a gamble because if he doesn't come out the winner on that he's already the loser at home because he's not supporting Russians. He's letting, essentially, right wing militias murder civilians who are protesting and that is costing him.
So that's the situation.
R.K.: Now there is also the discussion of Putin working to change from using the dollar to using the euro and Chinese currency to pay for energy.
PCR: Right. Yes.
R.K.: Can you talk about that?
PCR: Yes, let's talk about that because that's very important. Since WWII, the US dollar has been the world reserve currency. That means it performs a function that gold used to perform. It is the reserves of central banks and dollars then back the paper currencies of other countries the way that gold used to back them. When this was first set up, the dollars held by foreign and central banks were convertible into gold.
But when the French tried to do that, Nixon broke that connection. And he did what's called-- he took the dollar off the convertibility to gold that was the original backing under the Bretton Woods system. So the dollar no longer... a central foreign bank who held dollars could no longer convert them to gold, but the dollar remained the reserve and what that means is that any bill, anywhere in the world can be paid in dollars and the way the payment system is set up, all bills are paid in dollars, or most of them. So if Germany buys something from Japan, it doesn't pay in euros, it changes euros to dollars, it pays Japan in dollars. If Japan wants yen, it has to go back into the foreign exchange market and convert the dollars to yen.
So each country has a commission it has to pay in the currency transactions and the dollar remains the payment mechanism. So this means Washington can always pay its own bills by printing money. It can simply, if it can't pay its bills or has a huge deficit, it can just create dollars and pay them because they are seen as world reserves. They're like gold.
R.K.: And that's an advantage that only the US has because it has the currency that everybody exchanges.
PCR: That's right. That's the advantage and it's the basis of American power. Without that, the United States would be far, far less powerful. It's not a military based power. It's the financial hegemony that being the world reserve currency gives you.
Now, what's happened? In recent years people have seen that the United States has been creating dollars hand over fist, but not goods and services to match. So the dollar is being diluted and the holders of vast amounts of dollars around the world are saying, what are these dollars going to be worth? Look, they're printing a new trillion dollars every year, part of quantitative easing, they've been diluting our holdings already by four trillion dollars, shouldn't we think about doing something else?
So the BRICS, Brazil, Russia, India, China, South Africa, formed up and said we're going to work it out such that we do our trade with one another in our own currencies and already there have been bilateral agreements.
Australia and China now trade in their own currencies and China and Japan made a deal. Now, we may have queered that second deal there because of Japan kind of does what we want, but the deal was made. So this was already starting.
Now, when Washington starts threatening Russia with sanctions, real sanctions, they haven't had any real ones yet, these are make believe so far, but real ones would essentially exclude them from the payment system. And so Russia says, well, we don't need this. We don't even need to be in that payment system. In fact, I don't even know what we're doing in that payment system, Putin says, because it just gives Washington power over us. Why should we give them power over us when they're trying to do us harm? So, we're going to leave the system. And they did it in a dramatic way in that energy deal with China. It's the biggest energy deal in the history of the world and the dollar plays no role in it whatsoever.
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
5
4
3
