Monday 29 December 2014

American Economy Sailing Into Choppy Waters?

The 'Russia is going to take over Europe' rhetoric coming out of Washington was always over the top and i never really understood what sanctions would do because what usually happens is that it punishes the citizens while the leaders just carry on as before.
Madeline Albright was rightly berated for her 'We think it is a price worth paying' when she was asked her feelings about sanctions on Iraq resulting in the death of half a million children and now the Russian economy is tanking partly due to sanctions twinned with the drop in the price of a barrel of oil.
One thing is certain, Putin is not going to meekly lay down and let it happen and he has moved closer to China which is not by any means more than lukewarm to America.
The European Union was never keen on Russian sanctions and has been trying desperately to find some wiggle room ever since to placate the Americans and the Russians. While the US is pushing for new sanctions, a statement from the European Union for Foreign Affairs and Security Policy announces a normalisation of relations with Russia.
What it all means is that America has not only driven it's two largest rivals, Russia and China, closer together but is not on the best of terms with the Worlds largest trading block either.
The BRICS developing countries have set up rivals to the IMF and the World Bank but the killer would be the loss of the Dollar as the reserve currency.
Russia has dumped $100 billion of its $400 billion U.S. Treasury bonds and have an agreement with China, another country keen to see the dollar replaced, have agreed to settle half of their trade in rubles or yuan and China has been buying substantial amounts of gold.
With the loss of the reserve currency, American imports would become more expensive and the prices in the shops would leap and with America already in $17 trillion shaped debt hole, things would unravel sharply.
It was always hypocritical to point the finger at Russia while spending the last decade overthrowing regimes and killing millions in the process without censure but it seems a case of Russia saying if they are going to go down they will take America down with them.
With China lining up with Russia, the EU trying to stay on the sidelines and now the Saudi's refusing to help, and actually trying to bring down the American oil industry, it seems the American economy may be finding itself riding into a bit of a financial battering over the next few years unless it changes course as the World's powerhouses turn their backs on it.

3 comments:

Liber - Latin for "The Free One" said...
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Lucy said...

UNICEF reported it, was a massive story at the time. There was demonstrations and resignations and all sorts over it. How did you miss it??

Liber - Latin for "The Free One" said...
This comment has been removed by the author.