Friday, October 16, 2009

The Debts of the Lenders: Putin Says Russia Ready to Leave the Dollar

Before all the goldbugs come out consider this story in context.

Russian Prime Minister Vladimir Putin said that any such deal would be for BILATERAL DEALS only. Moreover, the Chinese will resist any persistent international abandonment of the dollar because of the way their political economy is tied to the US. China has run a persistent trade surplus against the US trade deficit that some critics (including me) have called a form of modern mercantilism. The commissars in charge (of both countries) consider the maintenance of public order to be paramount to their security. As such, there will probably be public downplay in the days to come of any international dollar abandonment.

Still, the fact that such words were issued during a public press conference indicate Russian-Chinese unhappiness over the deteriorating state of the US dollar. After all, a stronger yuan hurts their exporter dominated economy.

Indeed, it is probably a reaction to yesterday's accusations by US officials of Chinese "yuan manipulation." These diplomatic games are the new form of international brinksmanship - except instead of ICBMs, the "missiles" are actually formed of dollar rockets ready to be fired into the international atmosphere at the slightest hint of US provocation. In the latest such exchange of words, US officials stopped short of accusing the Chinese of currency manipulation and instead used the term, "undervalued." Apparently, they did not reckon on the magnitude of the Chinese response.

"Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.

He stressed that "there should be a balance here."
blog comments powered by Disqus

Blog Archive