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As The "Sanctions War" Heats Up, Will Putin Play His 'Gold Card'?

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Submitted by John Butler via Contra Corner blog,

The topic of ‘currency war’ has been bantered about in financial circles since at least the term was first used by Brazilian Finance Minister Guido Mantega in September 2010. Recently, the currency war has escalated, and a ‘sanctions war’ against Russia has broken out. History suggests that financial assets are highly unlikely to preserve investors’ real purchasing power in this inhospitable international environment, due in part to the associated currency crises, which will catalyse at least a partial international remonetisation of gold. Vladimir Putin, under pressure from economic sanctions, may calculate that now is the time to play his ‘gold card’.

A BRIEF HISTORY OF THE CURRENCY WAR

“We’re in the midst of an international currency war. This threatens us because it takes away our competitiveness.” Brazilian Finance Minister Mantega uttered these words in September 2010, about two years after the spectacular global financial crisis of late 2008. During and following the crisis, the euro declined by around 25% versus the dollar. The pound sterling declined by nearly 30%. And while the Brazilian real also declined initially, it subsequently regained these losses in less than a year, unlike either the euro or pound. Dramatic swings in currency values can have a material impact on relative rates of economic growth. And when global economic growth is weak, the temptation to devalue and take some global market share from competitors is strong. “The advanced countries are seeking to devalue their currencies,” claimed Mantega.[1]

The decline in the value of the euro in 2008-11 was of special importance because it exposed a key fault-line across the euro-area: That between the competitive exporters of the North, such as Germany, Poland and the Czech and Slovak Republics; and the less competitive importers of the South, such as Italy, Spain, Portugal and Greece. With the euro weaker, the exporters’ economies were booming. Yet the fallout from the financial crisis fell hardest on the least competitive euro members, threatening the solvency of their banks and, by extension, the sustainability of their governments’ finances.

Thus there emerged a ‘civil currency war’ in the euro-area, which is still being fought at the ECB in Frankfurt and in the national capitals. The South is facing default and multiple countries have considered withdrawing from the euro, threatening the entire project. The North remains reluctant to provide bail-outs without a substantial quid-pro-quo in the form of a meaningful restructuring of the chronically uncompetitive southern economies.

Although the crisis remains unresolved to this day, various compromises were reached in 2012 that have bought an unknown amount of time. Whether that time has been used wisely is highly debatable, and one or more rounds of bail-outs and possibly another acute crisis (or multiple crises) lies ahead.

A dramatic escalation in the global currency war took place in Japan in 2012, following the election of Prime Minister Shinzo Abe, who campaigned on a platform of proposed radical measures to get the Japanese economy moving again. Thus he wasted no time in deploying the most obvious weapon: currency devaluation. From October 2012 to February 2013, the yen devalued by some 25%.

While this did have the result of providing some short-term stimulus, the overall effect was smaller and shorter-lived than hoped. Thus the Bank of Japan took additional measures recently to weaken the yen further. As of this writing, the yen has fallen by a further 15%. And that’s not all: Abe is now promising to halt a planned increase in sales tax and has called a snap election as a de facto referendum on his radical economic policies. Further yen weakness following this announcement suggests that the financial markets expect that Abe will prevail and follow-through accordingly.

This large cumulative yen devaluation is an attack on Japan’s competitors in the global export markets, in particular those for technologically advanced manufactured goods. Germany, Poland, South Korea, Taiwan and Brazil are in this group and no doubt the weaker yen is one reason why growth in these countries has been slowing of late.

Germany and Poland, however, now find they are fighting a three-front currency war: Versus Japan for export market share; versus the US, EU and NATO over the issue of economic sanctions against Russia; and on the continuing front within the euro-area itself, where recently both countries dissented from a recent ECB quantitative easing (QE) initiative to purchase asset-backed securities.[2] How Germany, Poland and other countries caught in the crossfire of the currency and sanctions wars react will in turn have an impact on their trading partners, and so on. The associated negative consequences for global financial markets could be substantial.

 

RUSSIA, NATO AND THE ‘SANCTIONS WAR’

In recent years, there has been a series of increasingly serious confrontations between US allies and Russia, beginning with the Georgian war of 2008, continuing with the Syrian crisis of 2013 and then, most recently, in Ukraine. While each of these crises has been serious in its own way, not until now have they had an overt international economic dimension. This is because the Ukraine crisis has unleashed a ‘sanctions war’ that has escalated to the point of doing real economic damage not only to Russia, but to Germany and Poland, two of Russia’s largest trading partners.

So far, the Russian economy has held up reasonably well, but recent developments suggest that a deep recession is on the way. Lower prices for oil—Russia is a huge exporter—will hit the Russian economy hard. Moreover, with the Russian currency plunging by over 30% in recent months, consumer price inflation is going to rise sharply.

So what is Russia to do? Putin is rumoured to be preparing a major programme to reduce corruption and improve economic efficiency, but even if this is successful, it is going to take time, and it can’t be expected to fully offset the effect of sanctions. Unless they are lifted soon, Russia is facing a period of economic misery.[3]

For the US and NATO, Russian economic misery is precisely what the sanctions war is all about: Cause enough pain, so the thinking goes, and Putin will allow Ukraine to crush the rebellion in the eastern part of the country and possibly re-annex the Crimea. While I am not an expert in these matters, it strikes me as highly unlikely that Putin will give in under the pressure. He is popular in Russia, not only because, up to now, he has overseen a prolonged period of strong economic growth but also because he is regarded by Russians as a strong leader standing up for Russia’s national interests. Ordinary Russians support their ethnic bretheren in eastern Ukraine and Crimea. They would be horrified if Russia allowed Ukraine to crush the rebels. Also, because of the sanctions, Russians will blame the US and NATO for the coming economic downturn, not Putin.

If I’m right that Putin stands his ground in Ukraine and remains highly popular notwithstanding the inevitable recession, then what does this imply for the currency wars generally? First, it implies that Germany, Poland, Slovakia and most other Russian trading partners are going to face a sharp economic deterioration as well. In all cases, this is going to have some political effects. In those countries with weak governments and unpopular leaders, the opposition may support ending the sanctions as an expedient way of gaining power. Indeed, in Slovakia the government has already voiced opposition to further sanctions.[4]

Second, it implies that, rather than just sit back and take the pain, Russia is going to seek to reduce its economic dependence on the West. This is already in evidence, with Putin having signed major deals in the energy and defense industries with China and India, among other countries. Stronger Russian ties with the other BRICS, or other countries for that matter, may be of some concern to the US, but in most cases there isn’t much the US can do about it.

One crucial aspect of Russia’s dependence on the West is the global use of the US dollar as the primary international transaction and reserve currency. It is thus no surprise that the recent Russian energy deal with China—involving the construction of a large gas pipeline between the two countries—is to be financed and transacted in the Chinese yuan rather than the dollar.

Not only Russia, but the BRICS in general have regularly expressed their dissatisfaction with the dollar-centric global monetary conventions, including the Bretton-Woods legacy institutions of the IMF and the World Bank.[5] Hence the BRICS have set about building their own parallel institutions and have signed a number of bilateral currency-swap deals with each other and non-BRICS trading partners in order to reduce dollar dependence. While all these initiatives nudge the BRICS and, by implication, the global economy generally, away from the dollar, the process is slow and, absent an international monetary crisis, is likely to take years.

For Russia, however, the need to shore up the economy and the currency is exigent. It cannot wait for the gradual evolution of the international monetary system to reduce the impact of sanctions. So what else might Russia do in the near-term?

 

A GOLDEN ROUBLE?

One intriguing possibility is one which Russia has, in fact, contemplated before: Backing the currency with Russia’s gold reserves.[6] In the late 1980s, as the Soviet Union was breaking up, the rouble was in free-fall and inflation was soaring. Russia had essentially zero access to global capital markets and relied on oil exports for hard currency with which to trade with other nations. In 1989, Premier Gorbachev invited two prominent US economists to Russia, where they met with senior economic policy officials and recommended precisely this as the best way to stabilise the rouble. One of the two was former Fed governor Wayne Angell; the other, Jude Wanniski of ‘supply-side’ economic fame. In 1998, Mr Wanniski wrote that he “became alarmed about the financial collapse in Russia,” and decided to “write a piece on how to fix Russia right away, before it was in complete chaos.” In the Wall Street Journal editorial that followed, Mr Wanniski explained the longer history of the gold-backed rouble idea:

In September 1989, the Soviet government of Mikhail Gorbachev invited me to Moscow for nine days to discuss my unorthodox views on how the U.S.S.R. could make the conversion to a market economy. I’d been arguing that the process had to begin by fixing the ruble price of gold at a credible rate of exchange, which I believed then would be a relatively easy thing to do. I still believe that.

Last week, the former U.S. vice-presidential candidate for the Republican Party, Jack Kemp, wrote a letter to President Bill Clinton. In it he urged him to ask Mr. Yeltsin and his prime-minister nominee, Viktor Chernomyrdin, to consider the gold solution as the quickest and easiest way to end the financial crisis without more suffering by the Russian people.

But gold is preferable in this situation because the Russian government could announce that it will defend the ruble in terms of gold at a rate of 2,000 rubles per ounce and because it has control of the ruble but not the foreign currencies of a currency board. That is, Russia need not have gold ingots backing every last ruble in circulation in order to keep the gold-ruble price stable. It can do so by managing the supply of ruble liquidity, which the government can do easily by buying and selling ruble interest-bearing bonds to Russian banks. It should also make an unlimited amount of the gold-ruble bonds available to ordinary people.

This is how Alexander Hamilton solved the financial crisis that faced the administration of George Washington in 1791. America’s first Treasury Secretary fixed the dollar to gold and promised creditors they would be paid all they were owed at par, with interest. In 1947, West German Finance Minister Ludwig Erhard ended a similar financial crisis by pegging the Deutsche mark to gold. At these times, neither the U.S. nor the German government had any gold. The gold promise worked because their own people understood that their governments were not insolvent, but simply faced a short-term cash crisis. In the same way, the Russian state today has small liabilities, perhaps $200 billion, compared to the assets it possesses, which easily amount to $10 trillion. The state, after all, owns almost everything in 11 time zones, which it acquired in the 1917 revolution. All of these assets can be used to back up the exchange rate by converting them at the ruble price of gold.

On hearing that their government promises to pay ruble debt at a 2,000-to-one gold price — which implies a dollar/gold rate of 7 to 1 at the moment — the Russian people would have to decide if the promise was credible. Would they rather have a gold-ruble bond paying interest at a hard rate of 7 to 1, or a ruble note paying no interest at a collapsing rate of 17 to 1? The question suggests the people would rush to convert ruble notes into ruble bonds.

As it is, the Russian people are transacting among themselves using $40 billion in U.S. currency, while the value of the ruble money supply implodes toward zero. A government gold/ruble peg would quickly bring the people to their banks with dollars, asking for the now more valuable rubles. In short order, the government would have enough dollars to pay Western banks the interest they are owed. As the Russian government creates new ruble liquidity to meet increased demand, the problems with insolvency at Russian banks also are resolved. And as domestic commerce now would flow through ruble tax gates instead of dollar barter, Mr. Yeltsin would be able to pay all back wages in tax rubles instead of fiat money. By fixing to gold instead of a currency-board basket, Russia would be able to collect a bonanza in seigniorage.

If President Clinton wished to follow through on his promise to help President Yeltsin, he could ask his Treasury department to buy $3 billion to $4 billion of the gold-ruble bonds from its Exchange Stabilization Fund. If this happened tomorrow, Russia could meet its dollar obligations this week. If there were any further doubts among Russians about the credibility of a gold ruble, they would dissolve upon seeing the U.S. government actually buying their sovereign ruble debt.

The Russian government would soon be able to hasten an economic expansion through supply-side tax reforms. But first things first. A ruble as good as gold is what Dr. Angell ordered in 1989 and it is what the doctor orders now.[7]

 

The situation back in 1989 or 1998 was, thus, similar to if even more serious than that faced by Russia today. But if the sanctions war escalates? Things could get worse. Is Mr Putin or his senior advisers aware of what was contemplated above? That gold could provide a workable solution to stabilise the currency and economy? A distinct possibility. How likely is it that they will make this move?

Well, let’s consider the international context. Were Russia to back the rouble with gold today, this would be a far more credible policy than it could ever have been back in 1989 or 1998, when Russia’s government was less stable and less popular, and Russia’s economy was less well-integrated with those of China, Germany and other major economies. Moreover, in recent years Russia has amassed a huge amount of gold reserves.[8] Indeed, at current market prices, Russia’s gold reserves would back a whopping 27% of the narrow rouble money supply! That is a high ratio, far in excess of any other major country and also in excess of the US Fed’s original stipulated gold coverage minimum. Moreover, Russia is a large net exporter, notwithstanding the sanctions, so Russia’s gold reserves, by implication, are likely to continue to grow, rather than decline.

This credibility is also reinforced by the Russian economy’s relatively low debt. Without a large debt to service, there is little temptation or need to inflate the currency. Indeed, Russian interest rates are currently around 10%, implying a generous relative return on rouble cash balances. Imagine the rouble were to be convertible into gold, AND rouble interest rates remained at 10%. This implies a nearly risk-free arbitrage of 10% between the rouble and gold. You can bet than a large number of international investors would quickly sell some gold, dollars, or other currencies, and acquire some roubles, pocketing the hefty interest rate differential. That would support the rouble, possibly leading to a large re-appreciation vis-à-vis the dollar and other currencies left unbacked by gold. Rouble interest rates could then decline, perhaps to quite low levels, where an equilibrium would eventually be reached. It could have worked in 1989, or 1998. It is far more likely to work today.

 

COULD A GOLDEN ROUBLE CATALYSE A GLOBAL REMONETISATION OF GOLD?

There is another aspect to consider, however, which is the possible impact this policy would have on the dollar and the international monetary system. Recall that, as the primary global reserve currency, the dollar circulates in vast quantities abroad, where it forms the bulk of the monetary reserves of central banks. This is in part what allows the US government and economy generally to finance themselves at such low interest rates. But other factors equal, if the dollar suddenly faces competition from a credible, gold-backed currency, it is likely that, at a minimum, central banks are likely to diversify at least some of their dollar reserves into interest-bearing, gold-backed roubles. Countries importing oil from Russia would have an additional incentive to do so as they would be able to pay for Russian oil imports in roubles and avoid sanctions. Speculators (or investors) anticipating an eventual internationalisation of the rouble would front-run these developments, pocketing a nice return over time.

The implied upward pressure on US interest rates would be perhaps small initially, but even a small rise in US interest rates would spell trouble for a US economy that is so highly leveraged to low rates. Growth would slow. The Fed could try to offset this by engaging in renewed QE, but that could add fuel to the fire, resulting in aggressive selling of dollars in the foreign exchange markets. In an extreme but hardly impossible scenario, the dollar could lose reserve status entirely, something that would be devastating for the US economy. While a sharply weaker dollar would help US competitiveness and exports over time, it would crush the dollar’s effective international purchasing power (eg for oil and other resources) and result in soaring consumer price inflation. The combined negative impact of higher interest rates on growth and rising consumer prices on inflation would make the stagflationary 1970s look like a picnic.

As I argue in my book, THE GOLDEN REVOLUTION, a loss of reserve status for the dollar would have vast repercussions for the international monetary system.[9] While a gold-backed rouble could challenge the dollar to a certain extent, it is unrealistic to think that an economy the size of Russia’s could back the dominant global reserve currency. No, as the dollar’s share declines, most probably multiple alternative currencies begin to serve as reserves. This is where things get interesting, however. Other factors equal, as a currency is used as a reserve, it strengthens that currency. That might be unwelcome in some economies heavily geared toward exports.

Thus dethroning the dollar does not end the currency wars but rather could escalate them further instead as one country after another tried to offset dollar weakness by weakening their own currencies. This sort of ‘race to the bottom’ was seen in the 1920s and 1930s, culminating in US President Roosevelt’s executive decision to devalue the dollar by some 60% in 1934. In that instance, however, the dollar remained backed by gold and by what was by far the largest global economy at that time.

Not so today. The global economy has become increasingly multipolar, with both the euro-area and China roughly as large as the US. Moreover, the US has a huge accumulated and external debt, implying a growing risk of debasement and devaluation in future. As it stands today, only 2.3% of the narrow US money supply is backed by gold. Thus the US is simply no longer in a position to be a ‘monetary hegemon’, providing the global reserve currency.

But as all large economies have their own debt or other financial issues with which to deal, no major currency is in a position to replace the dollar as the pre-eminent reserve. This implies that the global monetary system is highly unstable. The dollar is hardly the only currency at risk of debasement and devaluation. Game theory implies that a race to the bottom is distinct possibility and it is unclear whether the dollar would lead or follow in that race.

As I further argue in my book, this combination of economic multipolarity and the instability of the current global monetary equilibrium is highly likely to result in at least a partial if not full remonetisation of gold, with an associated, large rise in price. Gold is the ideal way for countries to settle their trade imbalances in a world in which trust in currency stability is lacking. Accumulating reserves that can be summarily devalued by trading partners in a currency war is not a rational policy. Yet something must function as a reserve asset if trade is to take place at all. Gold provides that ‘something’ as supply is stable and it cannot be arbitrarily devalued. Backing currencies by gold would thus greatly increase trust and, thereby, facilitate international trade.

Those familiar with the 1870s will note that there are now strong parallels with that important decade. Following German unification and the US recovery from the Civil War, both of these economies were catching up rapidly with Britain. Japan had begun to industrialise. Under these multipolar conditions arose spontaneously, absent formal diplomacy, the classical gold standard system that would underpin decades of arguably the fastest sustained global economic growth ever experienced in history.[10]

 

SO, WILL PUTIN PLAY THE ‘GOLD CARD’?

Let’s now return to Russia and leave aside a biased western perspective for the moment. Putin has arguably accomplished more for Russia than has any other contemporary leader of a major country. Yes, he may be something of an autocrat, but please show me one major developed country that has never been ruled by an autocrat. (The USA began its life under George III and borrowed the bulk of its legal code and political culture from the UK.) Under Putin’s leadership, Russia has maintained its territorial integrity, something that had been left in question following the collapse of the Soviet Union, and Russia retains a formidable military capable of defending its vast frontiers (although not capable of policing the world). The economy has grown rapidly and, while still resource-dependent, has begun to diversify in various ways. (Keep in mind the young USA was regarded by Europeans as a largely resource-dependent economy.) Russia has built strong economic and political ties not only with the BRICS but also many smaller economies in Eurasia and elsewhere around the world. Russia has only a small accumulated national debt, implying that this will not be a drag on future growth, as is likely to be the case in the US, EU and Japan. Russia also has an advantageous tax system, with a top 13% rate of income tax. Yes, Russia remains an economically unequal society, but we know what has happened to inequality throughout the developed economies in recent decades, not just following the 2008 global financial crisis.

Given these achievements, Putin is not a leader to be taken lightly and we should pay attention when he says it it his desire to end the ‘dictatorship of the dollar’, as he did just this week. [11] Perhaps he will indeed play the gold card he has hidden up his sleeve and thus kill two birds with one stone: shore up the rouble and Russian economy on the one hand; dethrone the dollar on the other. A period of international monetary and associated economic chaos might ensue, but with Russia suffering already under unwelcome sanctions and thus with relatively less to lose, Putin might calculate that now is the time to make his move. He may have already achieved his place in the Russian history books but imagine how he will be regarded in world history books if he sets in motion that which culminates ultimately in the return to some form of global gold standard.

 

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Thu, 11/20/2014 - 18:13 | 5471303 knukles
knukles's picture

What would you do if somebody in which you had no respect kept poking you in the eye with a sharp stick to the cheers of a bunch of his idiot wimp buddies who depended upon you for basic necessities?

Thu, 11/20/2014 - 18:14 | 5471313 tenpanhandle
tenpanhandle's picture

Why, I'd drain all the physical outta the Comex.

Thu, 11/20/2014 - 18:18 | 5471327 SHEEPFUKKER
SHEEPFUKKER's picture

<-------------- He who has the gold makes the rules

<-------------- He who has the printing press makes the rules

Thu, 11/20/2014 - 18:22 | 5471348 SWRichmond
SWRichmond's picture

Thus dethroning the dollar does not end the currency wars but rather could escalate them further instead as one country after another tried to offset dollar weakness by weakening their own currencies.

Remarkably important point that not too many talk about.  The dethroning of the USD is the opening salvo in the hot currency war.

Thu, 11/20/2014 - 18:25 | 5471355 Beam Me Up Scotty
Beam Me Up Scotty's picture

Why use the gold card, when he could buy up all the physical silver on the cheap?  How much silver is there in an Iphone?  In a Tomahawk missile?

 

Off topic, why are we still calling them Tomahawk missiles???  Isn't that rayciss?

Thu, 11/20/2014 - 18:40 | 5471388 Latina Lover
Latina Lover's picture

Putin could buy thousands of gold contracts via proxies on the COMEX, and demand delivery. When the banksters renege, he could refuse cash settlement and expose them as the frauds they really are. Buying silver contracts would also be an excellent way to ring their bell.

Thu, 11/20/2014 - 18:40 | 5471399 johngaltfla
johngaltfla's picture

It is oh so much more than just a "gold" card. He could demand payment for all trade with Russia in:

Gold

Rubles

or

Yuan

and destroy the Petrofiatbullcrapdollar overnight. The Euro and Pound Sterling would not fare to well either.

Personally, I say go for it. Let's start raping the central bankers at their own game.

Thu, 11/20/2014 - 18:46 | 5471413 Latina Lover
Latina Lover's picture

I like this idea, but it may temp the USSA to yell that we are under attack and launch a pre emptive first strike against Russia. Given the likes of Nuland/Nudelman and crew, anything utterly evil is possible.

Thu, 11/20/2014 - 18:58 | 5471469 OW My Balls
OW My Balls's picture

<== Putin's Gold Card

<== Obama's Race Card

Thu, 11/20/2014 - 19:21 | 5471547 cnmcdee
cnmcdee's picture

More like OW My Wallet.

Thu, 11/20/2014 - 19:33 | 5471589 OW My Balls
OW My Balls's picture

The FSA don't need no stinkin' wallets

Thu, 11/20/2014 - 20:03 | 5471671 Bangalore Equit...
Bangalore Equity Trader's picture

Listen Zero's.

All of these educated opinions about Putin and Russia. How about "Confessions of an Economic Hit Man, the saga continues"?

Thu, 11/20/2014 - 20:58 | 5471814 Ass Burger
Ass Burger's picture

Listen. 

 

Apostrophes are for possessives.

 

/grammarlesson

Thu, 11/20/2014 - 21:03 | 5471833 Bangalore Equit...
Bangalore Equity Trader's picture

Listen.

You think that after all of these years that I do not posses you and your's? Think Zero's, think.

Thu, 11/20/2014 - 23:57 | 5472528 Trucker Glock
Trucker Glock's picture

Apostrophes can be used for pluralization.  But, Zero's is not correct.

Fri, 11/21/2014 - 07:39 | 5472928 Bangalore Equit...
Bangalore Equity Trader's picture

Listen.

Are you saying that you don't like my English's?

Im from the "FAR" away land of Bangalore, Im working diligently on improving my English's or Englishes, Englishis.

Please stay tuned and help me while I help you.

As always, from Bangalore.

Fri, 11/21/2014 - 02:49 | 5472841 JustUsChickensHere
JustUsChickensHere's picture

Funny, I recently thought about that in relation to the current mess....  but I was thinking that the Hit Man had visited the USA .... not Russia.

Thu, 11/20/2014 - 19:57 | 5471657 topshelfstuff
topshelfstuff's picture

other cards played just before last weks meeting

DUTCH INVESTIGATOR finds MH17 "SHOT DOWN FROM AIR" BACKS AIR CONTROLLER'S DATA -

https://www.youtube.com/watch?v=AoYepruOYj4

Published on Nov 13, 2014

Was this a "FALSE FLAG?"
“The data clearly shows that at the moment of the crash and after it there were planes moving north of the Boeing course. Most likely, they were military, because the spots are very close to each other. The conclusion is that there were either one or two aircraft there,” In late October, the chief investigator with the Dutch National Prosecutors' Office, Fred Westerbeke, told Der Spiegel magazine that his team is open to the theory that another plane shot down the Malaysian airliner. Several days after the MH17 crash, the Russian Defense Ministry released evidence that it detected a Ukrainian fighter jet near the Boeing at the time of the catastrophe. Kiev denied deploying any jets on that day, but it had been routinely using aviation to deliver airstrikes at rebel positions.

MH17 was shot down by Mig 29

https://www.youtube.com/watch?v=0lXJmKoPJjw

Published on Nov 15, 2014

Note also that the Su-25 can be armed with air-to-air R-60 missiles with a range of up to 5km-12km, but as 21WIRE has discovered, the Su-25 is not the only combat aircraft the Ukrainian Air Force has in its possession. On June 4, 2014, Janes Defense reported that Kiev have recently returned to service two other higher performance fighters, including the Su-27 ‘Flanker’ and the MiG-29 ‘Fulcrum’ fighters.

Thu, 11/20/2014 - 20:45 | 5471774 TeamDepends
TeamDepends's picture

Similarly, is Barrack Hussein Obama a False Fag?

Sat, 11/22/2014 - 00:46 | 5476081 PT
PT's picture

False Fag?

Thu, 11/20/2014 - 19:13 | 5471505 logicalman
logicalman's picture

The Cuban Missile Crisis came to an end without all-out nuclear war partly by fluke and partly because level heads prevailed.

Given the number (is it > 0?) of level heads in US politics, maybe old Putin is one of the few level headed guys in power.

We really don't want to be relying on the fluke part.

I'm not a fan of any form of government and I'm not a big fan of Putin, but that's how it looks to me, FWIW.

Fri, 11/21/2014 - 01:28 | 5472744 TheReplacement
TheReplacement's picture

Yeah, sadly, Putin is our best hope.  I can taste the blood when contrasting that reality with growing up during the cold war where we were taught the Ruskies were evil incarnate.

Fri, 11/21/2014 - 04:17 | 5472910 Haus-Targaryen
Haus-Targaryen's picture

I try explaining this to people I know and care about -- they still live in the 60s, with the bunker in their back yard half dug.  

Putin is many nation's best hope -- we'll se what ultimately happens.  The Evil of the Bilderbergers and the bankers that back them up are horrible.  I can only imagine he would be better. 

Thu, 11/20/2014 - 19:52 | 5471642 Whalley World
Whalley World's picture

Who's to say Putin is not just playing the game.  He uses the same Illuminati handshakes as they all do.  Couldjust be two teams run by the same central banks. I hope I am wrong, I kinda like Putin, no kneepads for him.

Fri, 11/21/2014 - 00:57 | 5472688 daveO
daveO's picture

No, they want him dead. He even left G20 early. He knows it, too.

Thu, 11/20/2014 - 18:43 | 5471401 knukles
knukles's picture

Ah.... already happened for all intents and purposes when the Hunt Brothers tried to amass a massive (corner the market) on the exchanges (CBT, CME and COMEX ? was two of the three) back in the 70's.  The exchanges just forced liquidation of the positions.  Life went on.

Thu, 11/20/2014 - 20:10 | 5471693 deflator
deflator's picture

 Timing is everything right? Could there be a possibility that the Hunt brothers timing was off? 

 Clearly based on longer timeline history, fiat has a limited shelf life--timing the expiration date can be tricky. 40-50 years, even most people alive today have a view that is predicated on the past 150 years of parabolic growth that is an anomoly in contrast to the rest of human civilization.

Fri, 11/21/2014 - 00:42 | 5472648 Tall Tom
Tall Tom's picture

No. The timing was right. The US Dollar was nearing collapse.

 

But Volcker had acted in September, 1979, to allow Interest Rates to float. They soared to 15%. There was no way that people in the USA could afford to borrw. It did attract foreign capital. And since that rate exceeded that of Inflation substantially the liquidity in the PM Markets dried up and flowed to the Bond Market.

 

This allowed the ever frowing US Government annual deficits to be financed through borrowing Foreign Capitol rather than by printing.

 

The subsequent sell off of PMs, added in with the 100% contract option requirement, smashed the PMs in January, 1980.

 

However this time we do not have the same luxury. A 15% Ten Year Bond will create Government insolvency.

 

Jim "Mr. Gold" Sinclair was put in charge of disbursement of the Hunt Brothers' Physical Silver and the price was set for $20 Silver to avoid any more financial shocks.

Fri, 11/21/2014 - 00:49 | 5472667 conscious being
conscious being's picture

The point is, price discovery will not occur via COMEX. They will just crush the broker in a controlled demolition like MFG and PFG taking all the long for delivery orders into never-happened-land or they'll rewrite the rules like they did for the Hunts.

I'm not saying the whole house of cards won't come crashing down. It will, just not via a Comex collapse imo.

Thu, 11/20/2014 - 21:43 | 5471997 BigJim
BigJim's picture

 Ah.... already happened for all intents and purposes when the Hunt Brothers tried to amass a massive (corner the market) on the exchanges (CBT, CME and COMEX ? was two of the three) back in the 70's.  The exchanges just forced liquidation of the positions.  Life went on.

The Hunts were fucked because they bought on margin.

Putin don't need no stinkin' margin.

Even if the CRIMEX just settled in cash it would still wreak havoc.

Fri, 11/21/2014 - 00:46 | 5472661 Tall Tom
Tall Tom's picture

COMEX made the requirement of 100% margin and called for the cover. Nobody had that kind of Liquidity...Not even the Hunt Brothers.

 

With Capital flowing to the Money Markets as the Ten Year soared to 15% as of Volcker's September decision the PM Market was smashed.

 

The USA does not have that same luxury this time as a 15% Interest Rate would create Government insolvency.

Fri, 11/21/2014 - 00:56 | 5472685 conscious being
conscious being's picture

Well said TT.  Now, we've moved on to smash and grab robberies from Ukraine, Lybia, Germany, others? to manage the lack of supply at arbitary prices.

Thu, 11/20/2014 - 18:52 | 5471443 yogibear
yogibear's picture

"Putin could buy thousands of gold contracts via proxies on the COMEX, and demand delivery. "

 

That's an excellent nightmare for the Federal Reserve.

Thu, 11/20/2014 - 18:54 | 5471452 Killer the Buzzard
Killer the Buzzard's picture

That would be fun to see, but the COMEX would just cash settle.

Thu, 11/20/2014 - 19:07 | 5471482 knukles
knukles's picture

Yep.  I haven't looked at the delivery manual for a long time, but if I remember correctly, they can cash settle or I think at one point could even give you shares of GLD or some such nonsense.... ie another piece of paper.  The locals and members will not be impinged by "outsiders".

 

Actually, if they wanted physical, best bet would to be purchases of physical delivery via LMBA and like cash markets

Which also begs the problem of demanding payment in gold.
Take receipts?  LMBA good delivery warehouse receipts?
Would want the big heavy real shiny bars, no?
That might be a problem all around.
Kind of an Armageddon, Book of Revelations ending, but, if they piss him off enough.  And he has the support of his peoples.  Not like a divided country behind him.  Most of them seem to feel (right or wrong doesn't matter here) that the West is the Aggressor and they must protect themselves, no?

Thu, 11/20/2014 - 19:13 | 5471511 0b1knob
0b1knob's picture

"Putin could buy thousands of gold contracts via proxies on the COMEX, and demand delivery. "

The Hunt brothers tried the same thing only with silver contracts.   They changed to rules retroactively and bankrupted them.

Thu, 11/20/2014 - 21:43 | 5472006 BigJim
BigJim's picture

The Hunt Bros' Achilles heal was that they bought on margin. Putin wouldn't need to.

Fri, 11/21/2014 - 01:07 | 5472702 conscious being
conscious being's picture

There's more than one way to negate the market BJ. Read up on M F Global and the honerable Jon Corzine.

In the end the rigged casino will fail. Right now, they are forcing Russia to dump $s, which they're happy to do as $-utility declines, by buying gold at special on sale pricing.

Thu, 11/20/2014 - 22:55 | 5472290 raeb
raeb's picture

Forget the Comex.  If Russia wants gold they can go directly to the mines or buy them in friendly countries and at damn low prices now.  If the criminals on Wall Street and Fed had a brain, we would be doing the same thing.

Fri, 11/21/2014 - 00:00 | 5472536 Anusocracy
Anusocracy's picture

Apparently for the US it's easier to steal another country's gold.

Fri, 11/21/2014 - 00:10 | 5472566 trulz4lulz
trulz4lulz's picture

But mining is work and we dont really do that much in merika anymore. Work that is.

Fri, 11/21/2014 - 01:38 | 5472762 Libertarian777
Libertarian777's picture

he can't. Comex wil just change the rules and force cash settlement.

E.g. MF Global..segregated customers money cannot be touched... uhhnn. yes it can.

MF Global ... segregated customers physical precious metals cannot be touched... uhhnnn yes they can.

ABN Amro... we are charging for physical segregated storage... uhhnnn... here's cash settlement.

 

 

 

Thu, 11/20/2014 - 18:48 | 5471421 reset71
reset71's picture

Racist against the people that engineered the missile that is. They went to all the trouble to invent a technological precission killing machine, and then somebody went off and gave the Injuns all the credit.

A cruise missile could kill at least eight guys with a tomahawk.

Thu, 11/20/2014 - 19:07 | 5471492 knukles
knukles's picture

oh my....

Thu, 11/20/2014 - 21:46 | 5472013 BigJim
BigJim's picture

 Off topic, why are we still calling them Tomahawk missiles???  Isn't that rayciss?

It is rayciss, which is why I call them Native American Peoples Person missiles.

And you should too.

Fri, 11/21/2014 - 01:57 | 5472783 Tall Tom
Tall Tom's picture

Good point. The Washington Redskins iz ray cyst.

 

But the Tomahawk Missile is not?

 

Hmmmm....

 

That is a nice point to cause the confused state in the Liberal's head. It is kind of like that Star Trek Episode on that Planet where Harry Mudd had the robots. The androids were going to steal the Enterprise and take care of Humanity because they thought that Humanity could not take care of themselves.

 

You know...typical liberals them fuckin' androids...

 

And Kirk and crew defeated them by giving them Logical inconsistencies. Hell the liberals feed themselves with so many logical inconsistencies that all you have to do is point them out.

 

Now that was fucking funny.

Fri, 11/21/2014 - 02:46 | 5472835 Tall Tom
Tall Tom's picture

Here it is...This is what the Liberals promise you...a life in a Guilded Cage with all of your desires fulfilled.

 

Listen to Norman's explanation about the reason that Kirk, crew, and Harry Mudd are going to reamin imprisoned on that planet.

 

This is such a well written and classic episode of Star Trek that really get down to the brass tacks...

 

http://youtu.be/RziFDGk8hAw

Thu, 11/20/2014 - 18:55 | 5471446 Anasteus
Anasteus's picture

There is a typo in the second claim. The correct wording is

"He who has the printing press fakes the rules"

Thu, 11/20/2014 - 22:28 | 5472204 blindman
blindman's picture

he who has, has what he has,
the rules always arbitrary.
...
anyway poems.

Thu, 11/20/2014 - 18:19 | 5471332 RafterManFMJ
RafterManFMJ's picture

I think what will really send shockwaves thru America's teetering hegemony won't be Russia and China joining up, but rather when they are joined by Saudi Arabia and Germany.

Fri, 11/21/2014 - 01:57 | 5472789 gallistic
gallistic's picture

You are right, but maybe it would send more devastating shockwaves if Brazil India and South Africa joined China and Russia against US Hegemony.

 

Oh wait...

Thu, 11/20/2014 - 18:29 | 5471364 fauxhammer
fauxhammer's picture

Well...Vladdy's gonna admit he owned some folks

Thu, 11/20/2014 - 18:18 | 5471330 Renewable Life
Renewable Life's picture

Let's just hope Vlad is who he says he is, because if so......the "Golden Rouble" will indeed emerge!!!

And with Russia having a small population, massive land mass, and low debt, coupled with untold and yet discovered natural wealth, it would be instant lights out for the dollar charade!!

Fri, 11/21/2014 - 06:52 | 5472998 Urban Redneck
Urban Redneck's picture

Even if a gold backed currency is what the Russians wanted, it would be a long way off.  The BRICS bank needs to be FULLY  up and running beforehand, and thus buy-in from the BICS nations needs to obtained beforehand... since IMF by-laws prohibit gold backed currencies.  

(If you think you have headaches trying to withdraw cash from your local bank, trying cashing an SDR deposit with the IMF after you have just told them you are closing your account.)

Thu, 11/20/2014 - 18:44 | 5471406 Beowulf55
Beowulf55's picture

What would you do if somebody in which you had no respect kept poking you in the eye with a sharp stick to the cheers of a bunch of his idiot wimp buddies who depended upon you for basic necessities?

Probably kick'm in the crotch with a  big brick of gold then make'em pay'ya in gold to keep from freezing......or at least that's what I would do while giggling insanely.

Thu, 11/20/2014 - 18:44 | 5471411 Kamath
Kamath's picture

BTW, HOW THE FUCK is this "an honest and transparent" investigation of MH 17?!?!?!? A secret pact exists that allows Netherlands, Belgium, Australia and Ukraine to withhold information from the MH 17 investigation!!!

International scandal! >:(
http://rt.com/news/207243-netherlands-mh17-investigation-documents/

Thu, 11/20/2014 - 18:55 | 5471432 Latina Lover
Latina Lover's picture

MH17 was a failed false flag.  The stupid Ukies shot the plane down in Ukie territory, instead of Russia. Remember during the early hours of the MH17 crash, when Chris Cuomo was parroting his script and did not receive his updated talking points?

 

https://www.youtube.com/watch?v=ee0KCIGjcxw

Thu, 11/20/2014 - 22:02 | 5472073 BigJim
BigJim's picture

That video is fucking priceless.

Fri, 11/21/2014 - 01:16 | 5472723 sonoftx
sonoftx's picture

Thanks LL. amazing that we have sunk so far that someone with that little of logic and ability to carry on a conversation is allowed on television. Kind of scary actually that at least 30% of Americans probably gobbled up his incoherent ramblings as some sort of fact.

Thu, 11/20/2014 - 18:56 | 5471433 Latina Lover
Latina Lover's picture

BTW, Chris Cuomo is the son of Mario Cuomo.  He was hired CNN after a rigorous, thorough and unbiased process, as a payoff to said governor.

Thu, 11/20/2014 - 19:11 | 5471504 knukles
knukles's picture

STOP IT!
Chris Cuomo is as qualified as Chelsea Clinton to be paid $600,000 a year as a part time feel good spokesperson for something or other.

Thu, 11/20/2014 - 21:33 | 5471964 Squiddly Diddly
Squiddly Diddly's picture

Why don't I feel so good about it?

Fri, 11/21/2014 - 03:14 | 5472863 StychoKiller
StychoKiller's picture

Judging from yer avatar, I'd say it was Hydroencephaly. :>D

Fri, 11/21/2014 - 05:47 | 5472962 zerocash
zerocash's picture

The Dutch can get a large chunk of it's gold back (130 tonnes) while Germany is still waiting for her gold and only got a few tonnes back.

http://marketupdate.nl/en/dutch-central-bank-repatriates-130-tonnes-gold...

Thu, 11/20/2014 - 18:13 | 5471312 km4
km4's picture

Russia Invades Ukraine. Again. And Again. And Yet Again … Using Saddam’s WMD! 

http://www.boilingfrogspost.com/2014/11/20/russia-invades-ukraine-again-...

The burden of proof is on the accusers, and the world is still waiting !

Thu, 11/20/2014 - 18:17 | 5471323 HowdyDoody
HowdyDoody's picture

We are still waiting for the US satellite pictures 'proving' Putin shot down MH17. Show us what ya' Barry Boy.

Thu, 11/20/2014 - 18:31 | 5471368 HamRove
HamRove's picture

He will show you NOTHING and you will LIKE IT!

Thu, 11/20/2014 - 18:43 | 5471403 Latina Lover
Latina Lover's picture

There is no proof of Russia shooting down MH17 because if it existed, the whorish Main Stream Media would scream it 24/7.   For all we know, the disappeared MH370 could be MH17, filled with dead bodies. Do we have any real proof of who was on MH17?  Given the magnitude of the 9/11 false flag, would you really discount anything?

Fri, 11/21/2014 - 00:30 | 5472623 trulz4lulz
trulz4lulz's picture

Vlad will call the bluff with a straight or better,  barry will lay his hand down with a mighty; go fish.

Thu, 11/20/2014 - 18:32 | 5471369 Winston Churchill
Winston Churchill's picture

It takes time to fabricate the 'right' evidence.

After the birth certificate fiasco, give the brother a little time.

Thu, 11/20/2014 - 18:24 | 5471351 booboo
booboo's picture

and Putin turned Obama into a newt.........well.... he got better.

Thu, 11/20/2014 - 18:17 | 5471321 Peter Pan
Peter Pan's picture

The only possible hurdle for Putin in introducing a gold backed rouble will be that he will need to consider his BRIC and other allies because if such a move damages them, then he may lose their support. If they follow him, then not only does he win, but the world may enter a new period of economic stability.

Thu, 11/20/2014 - 18:24 | 5471350 Renewable Life
Renewable Life's picture

Im not sure about China, but the rest would be falling over themselves to get on board!!!

The Indians, are you serious, they might just adopt the Rouble and drop their joke ass currency upon the announcement!! Those people fucking love gold, I mean worship it!!!

Thu, 11/20/2014 - 18:45 | 5471416 Winston Churchill
Winston Churchill's picture

And that is why he hasn't moved faster.

They know they have to do it soon though.They could never have hoped to have such

a clown as POTUS.Thats a window of opportunity that cannot be ignored.

This EO will accellerate their need to go even more as Obozo will   get impeached with

his next move after illegal immigration.He will not stop at that.

Then there Lagardes mystical forecast for 2014, and the G20 ultimatum fast running out.

We live in interesting times.

Thu, 11/20/2014 - 22:38 | 5472237 Dinero D. Profit
Dinero D. Profit's picture

 

Goldmongers have wicked, shifty eyes, and laugh in a cold and calculating manner.  They pinch little children.

Thu, 11/20/2014 - 18:21 | 5471340 SilverIsMoney
SilverIsMoney's picture

The better question is, WHAT ARE YOU WAITING FOR VLAD!? FUCKING FINISH THEM ALREADY!

Thu, 11/20/2014 - 20:30 | 5471738 messymerry
messymerry's picture

I ate a huge bowl of beans for lunch and now I'm Putin.  The arse of the great man himself says, "It's all about timing.  Ve vill ride the monkeys hammering ze gold until they hammer no more.  When the price goes up, I will fart golden roubles out my arse, and my good friends and neighbors, the Chinese will fart golden yuan out of theirs." 

Everything is as it should be...

;-D

Fri, 11/21/2014 - 02:45 | 5472836 Kirk2NCC1701
Kirk2NCC1701's picture

The Antonov Aircraft Co. is still in Kiev.  It has the world's largest Transport Planes:  The Antonov 124 and 225, with a payload of 150 and 250 tons, respectively.  The most payload from the West is the C5A Galaxy at 135 tons.

The 225 can take that 250 tons internally or externally, i.e. it can carry a SpaceShuttle with tons and tons of extra cargo.  Bitchez, Amerikanski.  You can see why the US MIC wants Kiev:  to deny Russia the 125 and the 225.

Thu, 11/20/2014 - 18:26 | 5471354 Womb Service
Womb Service's picture

How can you have an interest bearing Gold bond? Interest racks up faster than Gold can be mined. Wouldn't there simply be an implied return as Gold slowly increases in purchasing power over time.

Thu, 11/20/2014 - 18:27 | 5471363 css1971
css1971's picture

It largely forces a low reserve ratio, you move gold from one part of the economy to another.

Fri, 11/21/2014 - 00:38 | 5472641 MsCreant
MsCreant's picture

Not-so-fractional reserve currency.

Thu, 11/20/2014 - 18:27 | 5471358 css1971
css1971's picture

There is another effect if Russia gilded the Rouble... Saudi.

The Saudis would be left accepting depreciating paper in return for oil, knowing full well that Russia was vacuuming up all the gold from western Europe. Would they continue to hold out? Demand for gold in Europe would also rocket. Demands for gold repatriation would go through the roof. I'm pretty sure this would force a gilded Euro as well.

hmm, that's one of those checkmate sorts of moves... I've been waiting for the Saudis to drop the dollar, but Russia is equally credible and could force them to.

Thu, 11/20/2014 - 18:49 | 5471429 Winston Churchill
Winston Churchill's picture

The Saudis do love their gold.

Thu, 11/20/2014 - 18:53 | 5471441 Latina Lover
Latina Lover's picture

And most of it is missing, having been stored in London.

Thu, 11/20/2014 - 20:11 | 5471696 Aaron Hillel
Aaron Hillel's picture

What the goat-herders love (apart from pre-pubescent boys) is irrelevant.

They will do exactly what TelAviv through Washington will tell them to do, and like it, otherwise it would suffice of one task force and a MAU to teach them the True Democracy(tm).

The chosenites tolerate the house of Sa`ud for many reasons, not the least being their absolute and utter corruptibility and greed , and of course for the saintly wahhabite face they present to the arab street.

That being said, if they see the hegemon is failing, they will immediately change sides, as arabs always do, and beg Putin and the fraternal comrades from chinese politburo for protection from Iran.

Though its not for tomorrow yet, Im afraid, the hegemon still rules the seas.

 

Thu, 11/20/2014 - 20:21 | 5471728 cornflakesdisease
cornflakesdisease's picture

Saudi would be liberated very quickly . . .

Thu, 11/20/2014 - 18:31 | 5471366 johny2
johny2's picture

Phoneydollar. USD backed by Iphone produced in China

Thu, 11/20/2014 - 18:46 | 5471418 knukles
knukles's picture

At least it'd be iEdible

Thu, 11/20/2014 - 18:55 | 5471453 johny2
johny2's picture

Isandwich with fresh new iphone, mayonaise, lettice, tomatoes and onions will be a treat. Once the world decides that entrusting one country to be its judge, policeman and consumer of produced goods has run its course. And it seems too much consuming has left the judge side bit unhinged. 

Thu, 11/20/2014 - 18:58 | 5471454 johny2
johny2's picture

double deleted.

Thu, 11/20/2014 - 21:22 | 5471898 Dinero D. Profit
Dinero D. Profit's picture

 

 

Let me mention Einstein again. 

 

                      Einstein again.

 

 

Thu, 11/20/2014 - 18:34 | 5471373 Madcow
Madcow's picture

the USA can simply pass an exectitve order forbidding the world - especially Asia - from thinking of gold as money - 

SHAZAM! problem solved. 

 

 

Thu, 11/20/2014 - 23:04 | 5472328 Dinero D. Profit
Dinero D. Profit's picture

 

Once we get competitive with the Chinese, when an hour’s worth of hard labor earns a dime, then we’ll get our gold back.

Fri, 11/21/2014 - 02:52 | 5472837 Kirk2NCC1701
Kirk2NCC1701's picture

The US can and WILL front-run Russia and China, by going hitting the Reset button first and going to the SDR -- along with its G7 bum-chums -- as posted by Yours Truly a number of times and most recently posted yesterday...

Wed, 11/19/2014 - 20:04 | 5467840   Kirk2NCC1701    

IF the West/US had competent leadership in Federal politics and Banking, they'd just hit the Reset button now and roll out the SDR as the Reserve Currency of the G7 (US, Japan, Germany, France, UK, Italy, Canada - ranked in descending GDP).

Notwithstanding their fiat Debt (both Domestic and to each other), they COULD finish their Synchronized Diving with a Full Reset:  "Make the rest of the G20 accept their SDR, or eat dirt".  China and Russia alone can NOT counter the SDR, but the rest of the G20 might.  A quick release of the BRIICS_CNY or BRIICS_SDR (in 2015) could win the race, but the Yanks and their Banksters are not slow nor dumb enough to let that happen.

I therefore solemnly predict: It will be a foot-race to the Finish Line, as to who can front-run whom (the G7 or the BRIICS) with a new Pan-National Currency.  Who's gonna finish first:  The "G7_SDR" or the "BRIIC CNY"?  Looking at GDP data and brinksmanship, I'm betting on the "G7_SDR": Facts are facts, and math is math.

 

Thu, 11/20/2014 - 18:40 | 5471396 Jethro
Jethro's picture

Its way too early for him to use this move yet.  If he really has this kind of leverage, he'll use it when the US and EU are painted into a corner with no options left.  In Okie parlance, "He'll give us enough rope to hang ourselves with."

Thu, 11/20/2014 - 18:54 | 5471455 Joebloinvestor
Joebloinvestor's picture

Seems Putin rarely does anything he isn't sure of the results.

Thu, 11/20/2014 - 18:42 | 5471405 kchrisc
kchrisc's picture

I don't think that Putin will go with a gold backed Ruble, as that will constrain his ability to "print," if needed. No, I believe that Putin will announce that going forward from some date, all gas and oil purchases, outside the Russia-China block, will be required to be paid for in gold.

He knows that there is not much available gold left in the Zionist west, and that the price has been artificially manipulated down. He would also like more gold for the future.

Putin knows that if he announces a "gold only" policy it would be like setting off an economic neutron bomb in the economies of the Zionist west, especially Europe--they'll still be standing, but lifeless.

The worldwide scramble for gold will also in turn cause the Zionist banksters to lose control of the gold price and reveal the true inflationary nature of their "printing," theft, and manipulations. As a result, the Zionist west economies will be turned upside down pretty quick like.

An American, not US subject.

 

 

Thu, 11/20/2014 - 18:59 | 5471426 knukles
knukles's picture

Bingo!
Freeze to death in the dark or pay in Gold or Rubles

Vioila! 
All your problems belong to youse!

Thu, 11/20/2014 - 18:52 | 5471438 reset71
reset71's picture

Me thinks me can't read this because now me have nightmares. 

 

Thu, 11/20/2014 - 19:13 | 5471512 22winmag
22winmag's picture

Why the hell not? I can't imagine such a policy would not put upward pressure on the price of all that newly acquired gold which is ridiculously supressed to begin with.

Thu, 11/20/2014 - 18:49 | 5471431 Beowulf55
Beowulf55's picture

Come on Putin, make Christmas come early..................

Thu, 11/20/2014 - 18:55 | 5471456 Stumpy4516
Stumpy4516's picture

Please correct this thought if I am wrong.  The US has declared that if you use or conduct business in the dollar, that business has to be in compliance with the latest rulings and decrees of the US govt or you (or your govt) has commited an offense against the US and the US can and will then use it's might (under threat of violence) to extract hefty fines and penalties (even though the transactions do not involve a US corp and did not occur in the US).

If that is the case then the US can force Russia to eat all US dollars and bonds by simply putting a complete sanction on Russia that states no commerce can be conducted with Russia with the dollar and then use the SWIFT system to enforce it on most countries.  This alone should justify Russia refusing to accept any payments in dollars and require all trade be conducted in the currancies of the two countries.  Further, since the EU countries are going along with sanctions and could take simular actions against Russia then Russia should just require payments for gas be in gold.

But, don't expect Putin to act like a general fighting a war.  He sells gas to WUkaine (Russia enemy) at a nice discount as profit edges out country even for him.  He has to place the elite of Russia before the long term good.

I do not think it is time for a gold backed currency to be announced.  There are other, safer, actions to take.

Fri, 11/21/2014 - 00:00 | 5472433 The Blank Stare
The Blank Stare's picture

I long for the days of shotgun armed horse carriages and strong boxes. Fuck this global economy bullshit. This system was created to make stealing legal.

Can't have any more of those United Fruit Company thefts in this McTwitter age

Thu, 11/20/2014 - 18:55 | 5471459 takeaction
takeaction's picture

PUTIN....PLEASE DO IT....

Thu, 11/20/2014 - 18:57 | 5471467 DOGGONE
DOGGONE's picture

See bio

Thu, 11/20/2014 - 18:59 | 5471471 WTFUD
WTFUD's picture

Bullshit and Long-winded Article.

West is BROKE playing BUY NOW NEVER PAY BACK CHARADE and a RICH in Resources country with little debt and whose only fault is to have participated in the GIANT PONZI.

If you were any half decent NON BANANA REPUBLIC you would do business with Russia all day and tell USSA/EUUU to shove their worthless $/Euro right up their fucking arse.

Thu, 11/20/2014 - 19:12 | 5471507 Fuku Ben
Fuku Ben's picture

Harvey called by end of December 2014

We'll soon find out if he's right

Thu, 11/20/2014 - 19:17 | 5471521 Son of Captain Nemo
Son of Captain Nemo's picture

No time like the present V.

Get all over that thing!

Great article

Thx

Thu, 11/20/2014 - 20:07 | 5471679 Beowulf55
Beowulf55's picture

DO IT, DO IT NOW! COME ON......

https://www.youtube.com/watch?v=a6P40wLThbc

Thu, 11/20/2014 - 19:18 | 5471531 Herodotus
Herodotus's picture

Why bother with the COMEX.  Putin could buy the silver directly from the miners.  "Put in" orders for their entire production.

Thu, 11/20/2014 - 19:23 | 5471544 medium giraffe
medium giraffe's picture

Wasn't it GS that underwrote Yukos Oil for Putin when he stole the company out from underneath Mikhail Khodorkovsky?  What about GS' involvement with the Russian direct investment fund?  What a nice little cozy relationship.

Isn't Obama still relying on a deal to buy Russian military helicopters so the US can pull out of the Mid East?  Doesn't seem to have been affected by sanctions.

How much of this east vs. west Kabuki bullshit are we expected to believe?!

It's just like the friggin' bay of pigs - there was a hotline from the WH directly to the Kremlin. Was neeeeeeeeever gonna happen.

Thu, 11/20/2014 - 19:36 | 5471593 Consuelo
Consuelo's picture

You may have a point sir Giraffe, but to carry on a scripted charade for this long - really...?   That would mean all the probing, thrust & parrying by TU-95's and NATO F-16's over international waters, etc., is all part of a script?   Could be I guess, but that would be one hell of a project making sure everyone remembers their lines...

Thu, 11/20/2014 - 19:45 | 5471618 knukles
knukles's picture

That's been going on forever.  It only makes the news when the plebes must be exposed to the Fear Porn in order to gin up the national patriotic spirit.
You know.
When your popularity rating slides, just start a war and more people love you.
gasp

Thu, 11/20/2014 - 21:15 | 5471873 drdolittle
drdolittle's picture

War is the health of the state, frauleins (dont know german for bitchez)

Thu, 11/20/2014 - 20:41 | 5471705 medium giraffe
medium giraffe's picture

The cat and mouse military games have been going on for decades, but it's just a lot of dick waving really, no need of any particular script.  Go and make a nuisance of yourself, but don't touch any buttons. Pretty straightforward remit.

The false paradigm is really to be found in the greasy backroom deals.  You can get away with all sorts under the guise of overt antagonism.  Just ask Henry Ford or JP Morgan.  The only real difference is that discretion seems to have given way to ever greater lust - the real ties are becoming more exposed, the overt action an ever more obvious smokescreen. 

With greater greed comes greater collusion by way of necessity.  Big speeches and tough stances keep voters and allies happy, keep real rivals wary, obfuscate and misdirect, but greed and ambition won't allow the foregoing of a lucrative relationship.

Time and time again we find the same faces surrounding figures at opposite ends, what other conclusion can possibly be drawn? Coincidence?

Thu, 11/20/2014 - 21:48 | 5472025 bid the soldier...
bid the soldiers shoot's picture

 psst  Mr Giraffe.

Your aplomb is unzipped and your flappability is showing.

The cat and mouse military games have been going on for decades, but it's just a lot of dick waving really,.

Going back to the end of the Korean War/Death of Stalin, a few differences can be between then and now.

1) since the 50's, never has the American economy (and the the global economy, the symbiotic host it lives off of) been in worse shape.

2) since the 50's, never have we has a weaker, less capable president, more in the thrall of his advisors.

3) since the 50's, never have we had a better equipt miliary, anxious to out tech the Russians.

4) since the 50's, never has the planet had less proven and/or unproven reserves of crude oil. IMHO.

5) never since 1812, has Moscow had such an array of weapons of mass detruction aimed at it, closer than ever, though Iran and North Korea are purported to be their targets.

6) never in my lifetime have I heard American Propaganda, nee the American media, falsely vilify and libel a nation as I have heard since Edward Snowden first appeared in Moscow.

I could go on, giraffe, but I'll give you a break.

Thu, 11/20/2014 - 23:04 | 5472319 logicalman
logicalman's picture

you seem to be unable to grasp the concept that America is not exceptional.

The American population, however, does seem to be exceptional in so many ways.

Intolerance - Ignorance - Obesity - Child Poverty - Corruption .........

There are some exceptional people and some of them are Americans.

Fri, 11/21/2014 - 01:02 | 5472428 medium giraffe
medium giraffe's picture

You miss my point. I was pointing out that the thrust and parry of fighter jets, naval stand offs, special unit cross border incursions between Russia and the West has been going on for decades.

Never has Moscow had so many weapons of mass destruction pointed at it? So? What difference does 10 vs. 50 ICBMs really have?

It's been that way for a long time.  Similar to Seoul in many ways - eveyone was flapping about NK having nukes - people in Seoul didn't give a shit, they've been in RT range for decades.  It's hard to get much deader than dead.

You're all concerned about the fragility of America? Well, I'm not American, and most of us on this side of the fence secretly think that it wouldn't be such a bad thing if America did implode.  No great loss, and a lot more geopolitical stability, fewer drones, less bombs.

I'll admit, Battlestar Galactica was quite good, but I can take or leave all the rest of the crap.

And as for oil? Who cares - the technology exists now, and has existed for some time, to forgo the need for crude. Go and have a read about the real reason the diesel engine was invented. It's because of America that we still use oil. We're all getting 50 - 80 mpg out of our vehicles, you morons are still running about in 5 mpg Hummers.

So yeah, we'd be fine in the rest of the world - our empires have been up and down like a fiddlers elbow since grass was invented.  We'll get over it.  The Russians don't need to fight America, just outlive it.  And they know it too. 

And please stop pissing your pants about some ensuing conflict or other.  You're starting to feel a little heat and you don't like it? Now you know how most of the middle-east feels when they see the stars and stripes. 

When you've been beating the shit out of each other forever, you get pretty blase about that sort of thing after the first few centuries.  Sure, the Scots still moan at the English for shit that happened in the 1200's, but we all hate each other in an affectionate sort of way.  Don't worry about President Ballbag calling people horrible names either, in England we once switched leaders when the new King shoved a red hot poker up the old King's ass. 

That's just life on this planet, newbie.  You've made your bed, now you get to lie in it.

Fri, 11/21/2014 - 01:17 | 5472722 bid the soldier...
bid the soldiers shoot's picture

 

You know, Mr G., that a bona fide Devil's Advocate doesn't leave a calling card every time he appears on the scene.  Occasionally it's up to the acute debater to figure it out for himself.

thrust and parry of fighter jets, naval stand offs, special unit cross border incursions between Russia and the West.

I love the thrust and parry of the jets. (Ah, the last scene of 'Hamlet')  So much so, I would advise Putin and Russia  --  swimming in jet fighter fuel  --  to send up hundreds of jets every day to bankrupt NATO and its interceptors of it's jet fuel.  Ha Ha.

Never has Moscow had so many weapons of mass destruction pointed at it? So? What difference does 10 vs. 50 ICBMs really have?

Here, Sir, you injure me. Although I didn't make it clear enough.  It's not the number of Patriots aimed at the Russia.  

It's the proximity of those Patriots.  You know the difference and I'm sure you'll credit my account for that.

Seoul....North Korea

Check the record.  I have said on these pages millions of times that North Korea is China's Israel.  It has no untoward plans for Seoul  --  I'm pretty sure China does a lot of business there.

You're all concerned about the fragility of America? 

Not me, G.  America is as fragile as a 19 year old Cro-Magnon, but not as bright.

And as for oil? Who cares 

We agree again.  There's just one tiny exception to your remark.  The Military.

 

For some reason, they just are not as sanguine as you are about technology producing a new fuel to replace crude oil that will drive their tanks and supersonic jets.

They're just a bunch of 'nervous nellies'.

We'd be fine in the rest of the world - our empires have been up and down like a fiddler's elbow 

A good 'Devil's Advocate" knows when to finish his argument and sit down.  And I am nothing if not a good 'Devil's Advocate.'

I do have a few more jokes up my sleeve, but I'll save them for our next encounter.

 



Fri, 11/21/2014 - 01:53 | 5472753 medium giraffe
medium giraffe's picture

Well, I'm no master debater, just some gobshite on a blog full of loons.  Appreciate the eloquence and good grace (though you wouldn't guess it). I take your points re. proximity & NK. Till next time Mr Devil's Avocado.

Jets, fuel, bombs, missiles, what a piece of work is a man, eh?

Fri, 11/21/2014 - 03:58 | 5472898 bid the soldier...
bid the soldiers shoot's picture

 

I'm not taking the last word.   Keats can have it.

'Beauty is truthtruth beauty,—that is all ye know on earth, and all ye need to know.' 

Thu, 11/20/2014 - 19:22 | 5471554 F0ster
F0ster's picture

if Russia backs the rouble with gold. What do you think TPTB would do to the price of gold?

 

 

Thu, 11/20/2014 - 23:05 | 5472338 logicalman
logicalman's picture

If Russia AND China were to back their currencies with gold THEY would become TPTB

Not saying that's a good thing, but then I think the whole TPTB thing is a bad idea.

Thu, 11/20/2014 - 19:29 | 5471574 Lea
Lea's picture

All your gold are belong to Putin.

Thu, 11/20/2014 - 19:31 | 5471578 Consuelo
Consuelo's picture

You have to know that this exact scenario has already been played out and planned for in the Wolfowitz room, no...?   A Russian out-money-maneovering a moneychanger...?  They will have no part of it.   Or so they think.

Thu, 11/20/2014 - 19:41 | 5471609 withglee
withglee's picture

"That is, Russia need not have gold ingots backing every last ruble in circulation in order to keep the gold-ruble price stable. It can do so by managing the supply of ruble liquidity, which the government can do easily by buying and selling ruble interest-bearing bonds to Russian banks. It should also make an unlimited amount of the gold-ruble bonds available to ordinary people."

And with this nonsense, just what does "backed by gold" mean exactly???

Thu, 11/20/2014 - 19:46 | 5471626 knukles
knukles's picture

Bunches of pieces of paper that say that all the gold supposed to be in the empty vault is really in there, from The Don't Worry Be Happy Gold Depository and Trust Me Company

Fri, 11/21/2014 - 03:34 | 5472878 Tall Tom
Tall Tom's picture

Like the Crimex?

 

I wonder if I'd should trust Putin over the likes of Jeffery Christian. There is not that much difference after all.

 

If Putin were clever then he'd demand that the Crimex stand and deliver. That exposes the fraud and adds to the erosion of trust and confidence in the West's Financial structure. That is the Achilles Heel.

 

Backing his fiat with Gold does not do anything. Fiat is Fiat. Gold is Gold. Putin needs to destroy the West's Economy and he will have won the war without firing a shot.

Thu, 11/20/2014 - 19:50 | 5471623 withglee
withglee's picture

This is how Alexander Hamilton solved the financial crisis that faced the administration of George Washington in 1791. America’s first Treasury Secretary fixed the dollar to gold and promised creditors they would be paid all they were owed at par, with interest. In 1947, West German Finance Minister Ludwig Erhard ended a similar financial crisis by pegging the Deutsche mark to gold. At these times, neither the U.S. nor the German government had any gold.

And the instant before Nixon abondoned the gold standard it actually took twice as many dollars to buy gold than the government said it did (according to their peg of $35 an ounce). Actually, the instant after that it also took twice as many dollars ($70) to buy an ounce of gold. The government just quit lying and welching on their trading deals (ever so briefly ... soon to be meeting their trading promises through inflation ... really quiet lying). France caused it. They demanded the guaranteed payment in ounces of gold.

The pegs are rubber bands.


Thu, 11/20/2014 - 19:46 | 5471624 nah
nah's picture

Putin and gold sounds nice

.

to good to be true

Thu, 11/20/2014 - 19:59 | 5471663 SuperVinci
SuperVinci's picture

"which will catalyse at least a partial international remonetisation of gold."

 

No. No matter how often you say it, gold is NOT being remonetized. It's being demonitized- a process that's been going on for decades.

Fri, 11/21/2014 - 05:39 | 5472954 Panic Mode
Panic Mode's picture

The west (US and Europe) is trying to demonitized, the east (BRICS) will monitize it once they cannot get hold of anymore.

Thu, 11/20/2014 - 20:08 | 5471687 sam i am
sam i am's picture

How to survive in time of a social and economic collapse. Based on the experience of living in Argentina in December 2001. How to behave. How to be prepared. Hint: the best currency is a bag of cheap gold rings and canned meat.  Read here why: http://urbex.ru/mat-s22.htm

In Russian. To translate use https://translate.yandex.com/  

 This translator is intuitive and thus is much better in building stylistically correct sentences than Google service. Enjoy..

Thu, 11/20/2014 - 20:14 | 5471698 lasvegaspersona
lasvegaspersona's picture

Here is a FAR more workable solution. If carried out would cripple the dollar and likely lead to WW3 pronto. It is so obvious that Putin has to know and therefore will not do anything now. He will wait for someone else or let the dollar decay at it's own rate.

Putin could restructure the ruble and put gold on the balance sheet marked to market. He would then announce the need to expand the currency and announce that Russia was able and willing to buy physical gold in the hundreds of tons...promptly.

This would send the price of gold soaring because there isn't that much gold for sale. It would likely lead to front running of gold purchases of gold and before you know it the gold he already has is multiples more valuable. The dollar price of gold would soar. This would also cause the ECB balance sheet to soar. The only currency that would collapse is the dollar (I assume the Yen will be gone by then). This would happen because when people see that the dollar is worth only 1/50,000 of an ounce of gold it would be rejected.

The ECB has had this option for years. The structure of the euro's balance sheet also has gold marked to market. the ECB however is not inclined to destroy the dollar at least not out in the open for all to see.

The fact is that today's gold market is a sham. There is barely enough AT CURRENT PRICES to satisfy the market for small savers. No giant such as a central bank or sovereign wealth fund can currently do a large (several billion dollar buy, there just isn't that much gold again AT CURRENT PRICES.

I really don't believe Russia or anyone else wants the animosity of the USA and in fact of the whole dollar world. This would destroy the dollar and the current illusion of dollar wealth. Gold is still the preferred wealth asset and will once again be the preferred central bank asset. The dollar is long in the tooth however and I think most interest parties are will for it to die a 'natural' death.

If you don't think this plan is feasible, try buying just a couple of billions of dollars worth of gold...it can't be done (again AT CURRENT PRICES).

Thu, 11/20/2014 - 20:42 | 5471764 withglee
withglee's picture

The fact is that today's gold market is a sham. There is barely enough AT CURRENT PRICES to satisfy the market for small savers. No giant such as a central bank or sovereign wealth fund can currently do a large (several billion dollar buy, there just isn't that much gold again AT CURRENT PRICES.

At today's prices, an ounce is about 1 months work at minimum wage. Thus, absolutely anyone with a month's worth of savings is using up more than their fair share of gold (1oz per human on earth).And since they're being paid weekly in arrears, absolutely anyone who works is automatically saving (i.e. tying up equivalent gold) 1/2 week of labor on average.

"isn't that much gold again AT CURRENT PRICES": And if current prices go up we're talking about several several billion dollar buys to get the same stuff. The tide raises all boats.

Backing any medium of exchange with gold or any other commodity is a non-starter ... period! It's absolutely nonsensical.

Thu, 11/20/2014 - 21:26 | 5471918 lasvegaspersona
lasvegaspersona's picture

I guess time will tell

Thu, 11/20/2014 - 22:27 | 5472201 Clowns on Acid
Clowns on Acid's picture

Faulty logic, obvious know nothing. 

The Central bank of the gold backed currency does have to manage the currency in circulation. Your "tying up" oz of gold because of saving is not tying up anything. Golds is being used as collateral that the buyer of currency can use at anytime to covert to physical gold. That collateral (gold) is not on a fixed basis vis a vis the currency. Raising interest rates on the currency makes the currency more attractive than gold (at existing currency exchange rates to gold) if the Country issuing the currency has a fiscally responsible Gov't and Balance sheet.

It's pretty straightforward. Your argument of "tying up" anything is sophomoric. You have little understanding of basic Exchange rate mechanics.     

Fri, 11/21/2014 - 09:38 | 5473225 withglee
withglee's picture

Golds is being used as collateral that the buyer of currency can use at anytime to covert to physical gold.

And this differs from fractional reserve banking how???

And this mitigates bank runs how???

And this is better than fiat how???

The amount of gold available for use as collateral is nowhere near enough to back all in-process trading promises and bank held (i.e. non-physical gold) savings. Thus, the counter-parties can never be made whole by obtaining payment in collateral (i.e. gold). Only the first claimants will receive gold until it is exhausted. The rest will receive promises ... which is just what money is anyway.

Further, to be useful in giving integrity to the medium of exchange (MOE), supply and demand for the stuff must "always" be in perfect balance. How is that to be accomplished? Anything but perfect balance will affect existing in-process trades and savings. Too much supply and in-process trades and savings are worth less. Too little and they're worth more. And bouncing up and down just adds complexity and uncertainty to any trading or savings commitment. The only safe position under a gold backed MOE is to hoard physical gold ... which of course destroys its ability to serve a medium of exchange in any way.

And to be useful in giving integrity to the MOE, the value of gold must never change over time and space. How is that to be accomplished? A new find like 1849 or sunken Spanish treasure increases supply over demand. Environment constraints forcing less efficient recovery reduces new supply. Population growth may increase faster than gold supply causing an imbalance. Deficiency of gold supply will unnecessarily constrain (suffocate) trade ... traders perfectly willing to effect a trade won't be able to beyond simple on-the-spot barter. Barter with money would be constricted because of lack of gold to back the money needed.

Now we have a business cycle controlled by the managers of the medium of exchange (the money printers and interest rate manipulators). With gold backed money we will have the business cycle controlled by holders of gold (the cases of which historical examples abound).

 

Thu, 11/20/2014 - 20:16 | 5471710 Monty Burns
Monty Burns's picture

Poland a leading high-tech exporter?

News to me.

Thu, 11/20/2014 - 20:18 | 5471717 lasvegaspersona
lasvegaspersona's picture

addendum

The buyer of gold, even if at high prices would not be damaging it's currency. Sure it would put more rubles (or euros or yen) on the world stage but the central bank would hold more gold, that would then be at the higher price.

This is probably why so many central banks are acquiring gold now. The party that does the first big public buying will be the one who gets the last cheap physical gold.

Thu, 11/20/2014 - 20:45 | 5471773 Howardsiow
Howardsiow's picture

Unlikely... I suspect if he backs the ruble with gold there could be a rush of people swapping their ruble for ALL his gold reserves

Thu, 11/20/2014 - 21:29 | 5471951 lasvegaspersona
lasvegaspersona's picture

and THAT is exactly why the classic gold standard fails...always...

Actually if he prices it too high he'll get hyperinflation...too low and they buy it up...the solution is using a market price and NOT redeeming your currency for gold...you just use it to defend the currency in the Forex markets...as long as gold is available in your currency it can work.

If you are the printer you will decide how much to print and the market will determine the value of your currency.

Thu, 11/20/2014 - 22:37 | 5472234 ebear
ebear's picture

Exactly.  No different that the USA in 71.   I'm surprised people don't see this.   To me, Russia accumulating gold looks more like insurance than an attempt to back their currency.  Gold is fungible and can be traded for dollars.  In a crisis, gold goes up, thus more dollars.   If you have external debt denominated in dollars AND you have gold,  then you have insurance against a currency crisis in which the ruble collapses (even further than it has already).

Seems to me Russia's primary goal is to rebuild its internal economy.  Ironically, sanctions assist them in achieving this.  By limiting imports, sanctions create a market for Russian produce and manufactures.  They may not be first rate, but will do until the quality improves, after which they'ill be able to hold their own internationally once sanctions eventually come off.  Meanwhile, they are self sufficient in energy, and while lower oil prices may cause temporary pain, they are not going to cause domestic shortages.  On the contrary, lower energy costs will assist the internal rebuilding effort.

Add to this Chinese investment and technology transfer in exchange for energy support and you have a winning combination, at least in the longer run, which both governments appear to be focused on.

This arrangement clearly threatens western economic dominance, hence all the dirty tricks, but that in itself tells you something.  When you have to resort to those kind of tactics, it means you're scrapping bottom as far as realistic options for continued dominance are concerned.   The Russian and Chinese strategy under these circumstances is to a) not be drawn in by provocations, b) patiently rebuild and expand their economic base c) offer yourself as an equal partner and source of investment to those nations looking for stable trade outside the dollar nexus.

Interesting times.

Thu, 11/20/2014 - 22:55 | 5472289 anachronism
anachronism's picture

The problem, you see, is that there are not a lot of rubles in the currency reserves of central banks; and there is not much in the way of rubles held in private accounts outside Russia either. International transactions were denominated in dollars.

In order to get rubles for gold, you would first have to sell something to Russians in exchange for rubles. The value of what you are selling to these Russians would have to be a fair reflection of what Gold and the ruble is worth. So, it ends up in a wash and the sanctions are defeated.

Now India is having a hell of a time trying to limit the amount of gold being smuggles INTO India. So, there could be some stimulus for crooks in Russia to try to smuggle gold out of Russia. That doesn't seem to be likely to me, however.

Thu, 11/20/2014 - 20:54 | 5471797 yrbmegr
yrbmegr's picture

I guess that was worth exactly what it cost me.

Thu, 11/20/2014 - 21:40 | 5471993 DOGGONE
DOGGONE's picture

Putin will tell my bio ... look & see.

Thu, 11/20/2014 - 22:16 | 5472147 acomfort
acomfort's picture

The Fed has not been audited for years if ever.  There may be no US gold in their vault however; there could be more than we think because

Iraq did have about 36 tonnes when the US attacked.  Now gone.

Libya had about 144 tones of gold when we attacked.  Now gone.

The Ukraine had 36 tonnes before the new government installed itself.  Now gone.

My best guess this is all this gold is now in the Fed's vault, but who knows, it may all be in the hands of some new billionaire.  

 

Thu, 11/20/2014 - 22:40 | 5472242 anachronism
anachronism's picture

Valued at current market price of almost $1,200 per ounce of gold, Russian gold mines currently create between $13 and $14 Billion of gold every year. Net out the cost of extraction and minting, and Russian gold reserves increases every year in value around $9 Billion every year. At current interest rates for Russian bonds, this would finance about $80 Billion of new sovereign debt each year. If I read the article correctly, and if the writer's information is correct, Russia is carrying about $200 Billion in sovereign debt against a GDP of around $1 Trillion. Clearly, Russia is not a poor country. And Russia could very easily tie its ruble to a gold exchange instead of a dollar exchange. Even if the spot price of oil drops to $70 and the price for natural gas stays at $385 (the discounted price agreed upon with Ukraine), Russia would still have a positive balance of trade.

The challenge for Russia is to "TRAP" the cash generated by this positive trade balance within Russia. For years now, much of this positive balance of trade is being monetized outside its borders and is not being transferred back into Russia. The US-controlled global banking system can keep these surpluses from being remitted back to Russia. So, if Russia can get its customers to pay them in gold -and better still, pay their bills in either gold or rubles directly into accounts at the Russian Central bank-  it can lick these sanctions quite handily.

Putin is a man driven by a desire to see his country become pre-eminent among the nations of the world. If he can hold enough of the oligarchs in line long enough, Russia could transform itself into a balanced economy of consumers and producers with an equitable distribution of prosperity throughout the population. But for how long can the Russian people accept the pain now in return for the gain later? 

Throughout Russia, I expect that there are men and women my age and older, who are telling their children and grandchildren how they had to make sacrifices so that Mother Russia could be great, and so Russia could ultimately "bury" the West in its own stew of hedonism and materialism. Russia's ability to grow out of the current sanctions depends upon the willingness of the Russian people to put up with these sacrifices for years to come.

The hedonist mindset in America does not expect the Russians to put up with the effects of these sanctions for very long. Time will tell which is right.

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