Burning the house down

for the definition of, and information about, <i>"petrodollars"</i>, see

<blockquote>The petrodollar system elevated the U.S. dollar to the world's reserve currency and, through this status, the United States enjoys persistent trade deficits and is a global economic hegemony. 
The petrodollar system also provides U.S. financial markets with a source of liquidity and foreign capital inflows through petrodollar "recycling."

<b>Benefits of the Petrodollar System</b>
Since the most sought-after commodity in the world—oil—is priced in U.S. dollars, the petrodollar helped elevated the greenback as the world's dominant currency. 
With its high status, the U.S. dollar enjoys what some have asserted to be the privilege of perpetually financing its current account deficit by issuing dollar-denominated assets at very low rates of interest as well as becoming a global economic hegemony. </blockquote>


Tucker Carlson


<blockquote> Well, it turns out one of the biggest stories of the decade dropped this morning, you may not even be aware of it, the Wall Street Journal reported that Saudi Arabia is considering accepting Chinese currency rather than U.S. dollars for its oil sales to China now. Why is that a big deal? Seems like some little financial story. Well, because it would spell the end of the petrodollar. The petrodollar is one of the keys to the United States' wealth.  

Saudi Arabia has traded oil exclusively in U.S. dollars for nearly half a century and that is one of the key reasons the United States has the highest living standard of any big country in the world, despite the fact that our manufacturing sector long ago collapsed. You may have wondered how that worked. Why are we still so rich? Well, this is how. Petrodollars allow our government, in short, to spend money that we don't have and that money pays for an awful lot of what we have—healthcare, retirements, the military. We could go on—everything, essentially. 

As economist Gal Luft put it in interview with The Wall Street Journal today, "The oil market and by extension, the entire global commodities market, is the insurance policy of the status of the dollar is the reserve currency. If that block is taken out of the wall, the wall will begin to collapse."

What's the wall? Well, it's the U.S. economy. Not a small story, maybe even a bigger story than the invasion of Ukraine. Weird that we're not talking about it. </blockquote>




<blockquote>[F]rom these moments forward something else, some other form of financial transaction process, is going to be needed for Russia and their allies to engage in commerce, banking and economic activity together. 
 Russia, China, Iran, Saudi Arabia, India, Brazil and other nations are now in a position of being forced to create another mechanism for trade and commerce.

The petro-dollar may factually be dropped as a part of this. The issue is not ‘if’ it will happen, the issues are how and when they will happen. Vladimir Putin was pushed into this position by the western financial response, and don’t think for a moment that China and Russia are unhappy about it.</blockquote>



Larry Johnson


<blockquote>The recent actions by Biden are likely to set in motion 
disruptions in the international financial system that could 
<b>end America’s status as the World’s reserve currency.</b>


Biden’s policy towards Russia has succeeded in solidifying ties between Russia and China that puts the United States at a clear disadvantage. 
The shaking in the financial markets is just beginning. 
This is likely to produce the worst of both worlds–global stagflation and inflation. 
American consumers are likely to pay a terrible price.</blockquote>

General background

These 2022-04-13 remarks by U.S. Treasury Secretary Janet Yellen illustrate the misguided priorities of much of the "elite", in particular, their willingness, even eagerness, to "burn the (financial) house down" 
to the end of punishing Russia.


Yellen shows she is aware of part of the problem, the effect on prices, in this very small part of her remarks (given after she waxed on at length about how bad she thought Russia's actions were):

"We are now seeing higher commodity prices that have added to global inflationary pressures and are posing threats to energy and food security, trade flows, and external balances across many countries."

For the U.S., add to that the threat to the status of the U.S. dollar as the world's reserve currency, and its role as the "petrodollar".


The Ukraine tail wagging the U.S. dog

Need I say more? 
But if you want to understand why I say that, and why it is significant,  read:
<blockquote>"Your fight is our fight." 
That's a very strange thing for an American lawmaker to say to a foreign military. 
Why would the Ukrainian government's fight in 2016 possibly be our fight? 
On what grounds is it our fight? 
What does that even mean? We don't know. 
And yet now it is demonstrably true. Ukraine's fight is our fight. 
Ukraine's war is our war.</blockquote>

And later in Carlson's essay: <blockquote>[I]n order to wage a moral boycott [of Russia-produced oil] 
we become more dependent on Saudi Arabia, governed by Sharia law; 
Iran, a rogue state; and 
Maduro's Venezuela 
because this is a moral statement we're making. 
This is a moral victory so feel good about it as you go bankrupt. 
That's the short term picture. 
The long term picture of war with Russia is even scarier than that. 
Thanks to Biden's policies, Russia and China now form a bloc against the United States. 
This was the nightmare scenario, now it's real. 
Just today, the Chinese foreign minister described Vladimir Putin as 
<I>China's "most important strategic partner."</I> </blockquote>

<hr />
For an excellent article on Russia -US conflict over Ukraine, 
from a very high level, you can hardly do better than:
Summer 2022:


Worst decisions ever: escalation upon escalation

(As developments occur, this post will be updated accordingly.
Current date: 2022-03-03)

First, let me give some quotations from Russia's leaders that need to be taken very, very seriously by the West:

2022-02-24: <blockquote>“No matter who <b>tries to stand in our way</b> 
or all the more so create threats for our country and our people, they must know that Russia will respond immediately, and 
<b>the consequences will be such as you have never seen in your entire history</b>”</blockquote>

2022-02-26: <blockquote>In comments on his verified page on Russian social network VK, Medvedev wrote: 
"We don't especially need diplomatic relations... It's time to 
<b>padlock the embassies and continue contacts looking at each other through binoculars and gun sights.</b>"
Moscow will continue its military operations in Ukraine until it had achieved goals defined by President Vladimir Putin as "demilitarisation and "denazification", he said.</blockquote> https://www.reuters.com/world/europe/russia-no-longer-needs-diplomatic-ties-with-west-ex-president-medvedev-2022-02-26/

2022-03-01: <blockquote>[D]on’t forget that in human history, 
<b>economic wars quite often turned into real ones,</b></blockquote> https://www.reuters.com/world/europe/top-russian-security-official-hits-back-french-threat-economic-war-against-2022-03-01/

<hr />

US reactions:

President Biden:
2022-03-01: <blockquote> <b>He [Putin] has no idea what’s coming.</b> </blockquote> https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/02/remarks-by-president-biden-in-state-of-the-union-address/

So here Biden tells Putin, and us, that an escalation is coming.
Have Biden and company thought ahead about how the Russians might respond with an escalation of their own to this U.S. escalation?
Where does this end?
What's the offramp?
Let me repeat the quote from Medvedev cited above: <blockquote><b>[E]conomic wars quite often turn into real ones </b></blockquote>

<hr />

Economic war being waged:

The initial, catastrophic, effect of the sanctions on the Russian economy: 
From that article: <blockquote>"Our strategy, to put it simply, is 
<b>to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine,"</b> 
a senior [U.S.] administration official said.</blockquote>

Essentially, the West took down Russian finances in one day. The situation is likely to become worse than in 1998 because now there is no positive end. All Russia's capital markets appear to be wiped out & they are unlikely to return with anything less than profound reforms.
[Back to the news article:]
A major constraint for Russia is its inability to use its foreign exchange reserves to underwrite the ruble, but Grafe suggested this could be overcome by 
<b>changing the ruble's reference currency to the Chinese yuan from the U.S. dollar. <b> </blockquote>

<b>Putin likens sanctions to declaration of war</b> 
Russian President Vladimir Putin on Saturday said the sanctions imposed against Russia since its invasion of Ukraine are “akin to a declaration of war" ...

<hr />
U.S. opinion pieces

2022-03-04 https://buchanan.org/blog/is-a-russia-nato-clash-over-ukraine-ahead-159149

2022-02-24 https://buchanan.org/blog/did-we-provoke-putins-war-in-ukraine-159120

<hr />

Tucker Carlson opinion pieces:




 2022-03-02: <blockquote>Virtually every lawmaker in the room last night [the night of President Biden s State of the Union address] from both parties arrived wearing some version of the Ukrainian flag. House Minority Leader Kevin McCarthy came with both a Ukrainian-themed pocket square and a Ukrainian flag lapel pin. That's about as Ukrainian as you can get. Even the president of Ukraine doesn't do that very often. 

What McCarthy conspicuously didn't do was don an American flag pin. No, not at all. And many others went without that, too, because within the context of last night, the American flag was literally irrelevant.
<i>JOE BIDEN: The ruble has already lost 30% of its value. Russia's stock market has lost 40% of its value, and trading remains suspended. 
The Russian economy is reeling and <b>Putin alone is the one to blame.</b> </i> </blockquote>

See also:

To be continued ...

For some very appropriate music to listen to while reading these references, or thinking about their subject, try listening to some of the music in this playlist of Mussorgsky's works:
Note especially the several outstanding performances of Mussorgsky's "Great Gate of Kiev", notably conducted by the great Russian conductor Valery Gergiev.