I read an article in Newsweek recently about how the Obama administration is waging financial war against certain Russian citizens to place pressure on Vladimir Putin to remove his troops from the Ukrainian border after his incursion into Crimea. What the Obama administration did was to create a financial Black List of Russian citizens -- the financial movers and shakers in the Russian economy. Being on the Black List means you can no longer conduct business using US Dollars, which is required in nearly 90 percent of foreign exchange transactions. Simply put, when foreign country ‘A’, wants to buy something from foreign country ‘B’, the common currency used between the two countries is the US Dollar – this is because the US Dollar is currently the world’s standard currency in which the value of all other countries currency is determined. Country ‘A’ converts their currency to dollars, and sends that cash to Country ‘B’ where they convert the dollars to their currency. The US Dollar has been the world standard since World War II as we were the only financial power house left at the end of the war, which is why the US Dollar is universally accepted anywhere on the globe. So in effect, being on the black list ties your hands in doing any financial transitions in a global economy. This is also why the US government, when they need more cash, just cranks up the printing presses knowing the dollars they print will be accepted worldwide. So here’s the danger in all of this. The US is no longer the only financial powerhouse in today’s global economy – and Mr. Putin is not a stupid man -- so what happens if he, and his black listed comrades, make agreements with say, China, and begin foreign transactions using the Chinese Yuan as the common currency for Russia’s foreign financial transactions? If other countries were to perceive the American economy as weak, like say we are 17 Trillion dollars in debt, they could easily follow Russia’s lead. If that happened, the US Dollar could lose its position as the world’s standard currency, and the dollars freshly printed at the US mints would be worth only what the new world’s standard currency determined. In the US, interest rates would shoot up overnight and inflation would take off like a rocket. It would make the 1970s look like a walk in the park.
I don’t mean to doom and gloom here, but the Obama Administration needs to know they are playing with fire with this Black List. Putin’s no dummy, and for every action we take against him, there will be an equal and opposite action by Putin. Pushing Russians on the black list to find alternate means to conduct foreign exchange transactions could easily backfire in America’s financial face.
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