KW: The U.S. is throwing its finacnial weight around all over the world imposing cruel economic sanctions on anyone not obeying its tyrantial rule especially in relation to Iran and Russia. As you might be aware, the United States has laid progressively stronger economic sanctions on Russia since 2014. As you might not be aware — because it runs counter to the mainstream narrative — this process begun under Obama has continued under Trump. “Washington imposed sweeping sanctions on some of Russia’s biggest companies and businessmen on April 6,” says the Reuters newswire, “striking at allies of President Vladimir Putin to punish Moscow for its alleged meddling in the 2016 U.S. presidential election and other so-called malign activities.” Now Russian lawmakers are considering legislation to strike back: Per Reuters, it “envisages jailing any individual or the representatives of any legal entity in Russia who refuses to supply services or do business with a Russian citizen citing U.S. or other foreign sanctions.” The punishment — up to four years in prison or a fine up to 600,000 rubles (just under $10,000).
“This puts global corporations between a rock and a hard place,” says our macroeconomic man Jim Rickards.
“If companies don’t comply with U.S. sanctions, they can have their assets frozen by the U.S. If companies do comply with U.S. sanctions, they can be thrown in jail by the Russians. Take your pick. “We should expect these financial wars with Russia, China, Iran, Syria, North Korea, Venezuela and perhaps Turkey to continue for years to come. The main victim is world trade and world growth. “With debt piling up and growth slowing down, a global sovereign debt and liquidity crisis is just a shot away.
For all we know, the first shot might be fired only days from now… as dueling summits get underway.
Perhaps you’ve already run across some of the build-up to the gathering of G-7 leaders in La Malbaie, Quebec, starting on Friday. The “Group of Seven” has been meeting every year since 1976. The United States, together with Canada, Great Britain, France, Germany, Italy and Japan, make up the biggest “advanced” economies in the world. (Russia was part of a “G-8” for a while, until it was kicked out in 2014.)
The hot topic at this year’s meeting is sure to be the tariffs Donald Trump imposed last Friday on steel and aluminum imported from the European Union, Canada and Mexico. France’s pugnacious finance minister Bruno Le Maire speaks for the six non-U.S. members when he says, “It is dangerous for growth, dangerous for the economic development of the world and dangerous for our jobs in the EU.”
Meanwhile, what you might call the “anti-G-7” gets underway Thursday in Qingdao, China.
It’s a no-Westerners-allowed club called the Shanghai Cooperation Organization. Its dominant members are Russia and China. Several of the “Stan” countries that used to belong to the Soviet Union are also members. Last year, archenemies India and Pakistan decided they had enough common ground to both join up. Iran has “observer” status, perhaps on its way to full membership.
Western media usually ignore the SCO’s annual meetings, figuring they’re meaningless photo ops. As a result, they miss significant news — as in 2014, when we took note of Russia and China accelerating their plans to settle trade with each other in yuan and rubles, bypassing the U.S. dollar. As we learned later that year, “All of these countries are clear about their desire to break free of U.S. dollar dominance.”
And China, in particular, is taking the long view.
Jim reminds us this week of a story about the diplomatic buildup to President Nixon’s famous visit to Beijing in 1972. National Security Adviser Henry Kissinger met secretly with Zhou Enlai, Mao Zedong’s right-hand man. As the story goes, Kissinger asked Zhou to assess the impact of the 1789 French Revolution. “It’s too early to tell,” Zhou supposedly said.
As it happens, Zhou might have misunderstood the question — thinking Kissinger was referring to protests, strikes and riots that ripped through France in 1968. Regardless, “the story is held out as an exemplar of how the Chinese take the long view and exhibit enormous patience,” says Jim, “while Americans seem like a puppy chasing a bouncing ball and inattentive to the bigger picture around them.”
With that in mind, the Axios website had a report recently about China’s massive “Belt and Road” project — a recreation of the ancient Silk Road on land, along with a new maritime trading belt.
We’ve mentioned “Belt and Road” here before, but probably not enough. It’s massive.
Beijing plans “to spend trillions of dollars on transportation and communications infrastructure over the next 30 years,” says Jim, “as they build connections from Shanghai to Spain and from Beijing to Belgium.”
That’s long-term thinking. In contrast, “Americans are transfixed by Stormy Daniels, Donald Trump Jr.’s divorce, a new royal wedding and other fluff,” Jim goes on.
“Perhaps the best example of this dichotomy is that China has tripled its gold reserves in the past 10 years while Americans exhibit almost no interest in gold. China knows that gold is the best way to preserve wealth when the Americans inevitably turn to inflation to solve their problem with nonsustainable national debt.
“When it comes to gold, the Chinese perspective is that it’s not too early to tell the U.S. is going broke.”