Grandmaster Putin's Plan
Dec 27, 2014
Earlier this week, the Russian currency suffered a large-scale collapse, and the Central Bank raised interest rates from 10.5% to 17%. The news media has been quick to call this an economic crisis. The ruble has now stabilized at 52 rubles to the dollar, down from 80 last June.
This is the result of the US sanctions imposed on Russia after it dared to defend itself against the US-led political coup which overthrew the government in Ukraine last February. The intent of this coup was to place yet another NATO missile base on Russia's border. A similar act more than 50 years ago brought about the Cuban Missile Crisis, when the old Soviet Union attempted to place a missile base on the doorstep of the US. The US objected to that and was willing to fight a nuclear war to prevent this base from being established. But today, in the case of Ukraine, the US does not consider Russia's objection to be valid. Do I detect a bit of hypocrisy?
But Russian President Putin recently stated that Russia’s economic difficulty is caused only 25% by the sanctions. The major cause, he said, was the pre-existing inefficiency built into their economic model.
At first glance, this seems incredible and almost ludicrous. The term inefficiency, however, does not specify anything that the average person would notice. Do they have too many secretaries doing duplicate work? Do they print money on old presses? Do they yet ride on horseback to go to G20 meetings? Of course not.
What Putin means is that in the old economic model, Russia, like so many other countries, has been using the dollar in its payment system of international trade. In so doing, they have to pay the usual fees for every transaction, payable to the Federal Reserve in New York. It is the world tax on trade, which the Fed enjoys on account of the US dollar’s status as the world reserve currency.
But such use of the dollar is unnecessary and inefficient, Putin is saying. Why use the dollar when the older system (gold payments) will work just fine. There are no fees to be paid to New York when nations settle their trade imbalances by gold payments.
Furthermore, in bypassing the dollar, Russia and China are able to stop supporting the entity that has declared war against them. The US Congress virtually declared war on Russia two weeks ago. So why should Russia help their avowed enemies finance this war?
The Putin Plan is set forth in a very insightful article here:
Accusations of the West towards Putin are traditionally based on the fact that he worked in the KGB. And therefore he is a cruel and immoral person. Putin is blamed for everything. But nobody ever accused Putin of the lack of intelligence….
Putin’s real policies are not public. Therefore, Putin’s policy largely has always focused not so much on effect, but on efficiency.
Very few people understand what Putin is doing at the moment. And almost no one understands what he will do in the future.
No matter how strange it may seem, but right now, Putin is selling Russian oil and gas only for physical gold….
In total, the central banks of all countries of the world have purchased 93 tons of the precious metal in the third quarter of 2014. It was the 15th consecutive quarter of net purchases of gold by Central banks. Of the 93 tonnes of gold purchases by central banks around the world during this period, the staggering volume of purchases – of 55 tons – belongs to Russia.
The article goes on to show how the West has been propping up the US dollar by lowering the price of gold through its manipulations (short selling of paper gold). While this seems to strengthen the dollar by comparison to gold, the policy also serves to sell cheap gold to Russia, China, India, and any other country that is in the buying mood.
Hence, what Russia loses on the lowered price of oil (which they are selling), they gain on the lowered price of gold (which they are buying). The low price of oil is a short-term economic hardship, but the low price of gold is a long-term benefit.
The sanctions only apply to a limited number of people, banks, and corporations. Russia still does a lot of trade with other nations, payable in US dollars. But Putin immediately takes those dollars and converts them to gold, so that Russia does not help push up the value of the US dollar. Further, they get to do this without giving the appearance of "dumping the dollar," even though that is the practical effect of their strategy.
Are we witnessing the end of dollar era?
In this aspect, the solitaire of Russian-Chinese relations is extremely successful for Moscow and Beijing. Russia buys goods from China directly for gold at its current price. While China buys Russian energy resources for gold at its current price. At this Russian-Chinese festival of life there is a place for everything: Chinese goods, Russian energy resources, and gold – as a means of mutual payment. Only US dollar has no place at this festival of life. And this is not surprising. Because the US dollar is not a Chinese product, nor a Russian energy resource. It is only an intermediate financial instrument of settlement – and an unnecessary intermediary. And it is customary to exclude unnecessary intermediaries from the interaction of two independent business partners.
Putin is eliminating “unnecessary intermediaries” which are inefficient. This means the US dollar, as a world reserve currency, is steadily being undermined as nations start using the US dollar less and less in making payments for world trade.
After World War 2, the Bretton Woods Convention (1944) made the US dollar the world currency because it had more gold than any other Western country and could facilitate trade settlements in gold upon demand. In 1971, however, after a costly war in Vietnam, Nixon abandoned that system and “closed the gold window,” because it was already running out of gold.
In 2014, the article says, Putin opened up the gold window without Washington’s permission! Russia, China, India, and other smaller nations are now buying up gold at bargain prices, and the US is helpless to do anything about it. They cannot raise the price of gold without lowering the value of the US dollar. All that the Western oligarchs can do is to watch helplessly until the day when they default on their contracts and payments.
The article concludes:
If you explain to the Western public all the details of the looming economic disaster, the public will ask the supporters of a petrodollar world the most terrible questions, which will sound like this:
How long will the West be able to buy oil and gas from Russia in exchange for physical gold?
And what will happen to the US petrodollar after the West runs out of physical gold to pay for Russian oil, gas and uranium, as well as to pay for Chinese goods?
No one in the West today can answer these seemingly simple questions.
And this is called “Checkmate”, ladies and gentlemen. The game is over.
Well, not quite. No one has capitulated yet. The US is hoping to crash Russia’s economy, while Russia is hoping to survive until the US runs out of gold. That is the chess match being played out on the world stage. Putin is a grandmaster. Obama is a novice.
Recently, according to Bloomberg News, a Chinese official stated that China would help Russia if necessary.
A Chinese Commerce Ministry news official, who asked not to be named as part of the rules, said his department declined to comment on the Phoenix TV report, and a faxed question to the Chinese central bank went unanswered. President Xi Jinping last month called for China to adopt “big-country diplomacy” as he laid out goals for elevating his nation’s status as the world’s second-largest economy.
“Many Chinese people still view Russia as the big brother, and the two countries are strategically important to each other,” said Jin Canrong, Associate Dean of the School of International Studies at Renmin University in Beijing, referring to the Soviet Union’s backing of Communist China in its first years. “For the sake of national interests, China should deepen cooperation with Russia when such cooperation is in need.”
With China backing Russia “when such cooperation is in need,” it is difficult to see how the US could win this economic chess game. The only reason to continue the fight is because the Western oligarchs know that they are doomed, and they feel as if they have no choice but to put off that day as long as possible.
When that Day comes, it will mark the end of the war between Babylon and the Kings of the East. A new era will arrive, which many will think is the end of the world, but which in reality will be the fulfillment of Bible prophecy and the answer to our prayers for deliverance from Babylonian bondage.
Dr. Stephen Jones