The Real Nuclear Option for Vladimir Putin

SWIFT sanctions on Russia mean Putin will have to survive without using dollars. Doing so may set in motion events far more explosive than his nuclear weapons.

David Ben Horin                

Vladimir Putin of Russia may have a more powerful option than nuclear weapons against Ukraine and the west.

Where are all the new drug plants being opened up right now?

In America.

Why not China?

America, Europe, and the rest of the world thought they had it made by buying cheaply manufactured Chinese goods. The Chinese thought they had it made producing everything for the prosperous nations to consume.

It was working for 20 years.

Then COVID-19 struck.

In days, we went from an abundance of medical supplies, machinery, and medicines to a massive shortage. There wasn’t enough to go around.

The American companies did what any nation would do; they took all the medical products they produced and shipped them to hospitals nationwide.

There was just one problem: All of their factories were in China. Everything they produced was in China.

The Chinese government did what any nation would do; it seized all the medical products inside their borders, regardless of who produced them, and used it all to take care of their own.

Desperation

For a while, the west was in a dire situation.

From the Chinese sanctions on the world, lessons were learned.

Lesson #1, in times of emergency, you have to rely on your people to bail you out. Every nation will do everything it can to protect itself.

To this day, throughout America, Europe, and the entire world, efforts are being made to ensure that life necessities are produced locally.

The Chinese make great umbrella hats, but for medicine, food, and anything used for life maintaining services, nations will pay a little more to make sure they have always-on access to it.

I live in the Jezreel Valley, the breadbasket of the Holy Land. Building booms are going on in Jerusalem and Tel Aviv, but they are a little muted here. It’s a national mission to make sure there is enough Land to feed the country.

Big and small nations alike know to make sure their first aid kits are not Made in Taiwan, Japan, or Mexico. They have to be available in-house.

The Russian Lesson

America and the west are cutting Russia off from all dollar-denominated transactions. This is a decisive move to get Putin out of Ukraine.

It might work.

It turns Russia into America during the early days of the pandemic. Russia is now suffering acute shortages of something it relied on another nation to provide. It must quickly find out how to produce it locally.

Like every other nation, Russia relies on the U.S. dollar as the world’s reserve currency.

They will have to figure out how to keep their economy from total collapse by using alternative money. There are nations, like India, which desperately need the fertilizer Russia exports to feed itself. They have to find a way to continue to conduct their business outside of the sanctions.

China cannot continue to operate without Russian oil. They don’t need to follow the sanctions if they don’t want to, and we know they won’t if it is too risky for their economy.

They will find a way to trade around the dollar for Russian oil.

After this is over, Russia will see a need to start building long-term financial solutions without the Dollar.

With its insatiable appetite for Taiwan, China could see itself next in the international hot seat.

They may work with Russia to find a defense against a global economic strategy that may be aimed at them in the near future.

If that happens, the dollar could drop. It could take enough of a shellacking that inflation will remain high and interest rates will start to rise.

Add to the Intangibles

For now, these are powerful currents pushing inflation up:

    1. The supply shortage hasn’t ebbed yet.

    2. Quantitative easing is still happening.

    3. The Russia-Ukraine war is keeping oil prices hovering at $100 per barrel

A new current might be the existential collapse of the dollar as the world’s hard currency.

In 1995, we laughed when Jeff Bezos predicted his new internet startup would replace retail.

In 2005, we thought it was funny when China boasted it could overtake America as the world’s strongest economy.

In 2022, we might laugh at Putin creating something to replace the dollar.

Stay tuned.


pic by ©jegas/123RF.COM

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