Grandmaster Putin's Golden Trap
By Dmitry Kalinichenko
December 07, 2014 "ICH"
- "Investcafe"
-
Accusations of the West towards Putin
traditionally are 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
lack of intelligence.
Any
accusations against this man only emphasize
his ability for quick analytical thinking
and making clear and balanced political and
economic decisions.
Often Western media compares this ability with
the ability of a grandmaster, conducting a
public chess simul. Recent developments in US
economy and the West in general allow us to
conclude that in this part of the assessment of
Putin's personality Western media is absolutely
right.
Despite numerous success reports in the style of
Fox News and CNN, today, Western economy, led by
the United States is in Putin's trap, the way
out of which no one in the West can see or find.
And the more the West is trying to escape from
this trap, the more stuck it becomes.
What is the truly tragic predicament of the West
and the United States, in which they find
themselves? And why all the Western media and
leading Western economists are silent about
this, as a well guarded military secret? Let's
try to understand the essence of
current economic events, in the context of the
economy, setting aside the factors of morality,
ethics and geopolitics.
After realizing its failure in Ukraine, the
West, led by the US set out to destroy Russian
economy by lowering oil prices, and
accordingly gas prices as the main budget
sources of export revenue in Russia and the main
sources of replenishment of Russian gold
reserves.
It should be noted that the main failure of
the West in Ukraine is not military or
political. But in the actual refusal of Putin to
fund the Western project of Ukraine at the
expense of the budget of Russian Federation.
What makes this Western project not viable in
the near and inevitable future.
Last time under president Reagan, such actions
of the West's lowering of oil prices led to
'success' and the collapse of USSR. But history
does not repeat itself all the time. This time
things are different for the West. Putin's
response to the West resembles both chess and
judo, when the strength used by the enemy is
used against him, but with minimal costs to the
strength and resources of the defender. 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.
Putin is not shouting about it all over the
world. And of course, he still accepts US
dollars as an intermediate means of payment.
But he immediately exchanges all these
dollars obtained from the sale of oil and gas
for physical gold!
To understand this, it is enough to look at the
dynamics of growth of gold reserves of Russia
and to compare this data with foreign exchange
earnings of the RF coming from the sale of oil
and gas over the same period.
Moreover, in the third quarter the purchases by
Russia of physical gold are at an all-time high,
record levels. In the third quarter of this
year, Russia had purchased an incredible amount
of gold in the amount of 55 tons. It's
more than all the central banks of all countries
of the world combined (according to
official data)!
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.
Not so long ago, British scientists have
successfully come to the same conclusion, as was
published in the Conclusion of the U.S.
Geological survey a few years ago. Namely:
Europe will not be able to survive without
energy supply from Russia. Translated from
English to any other language in the world it
means: "The world will not be able to
survive if oil and gas from Russia is subtracted
from the global balance of energy supply".
Thus, the Western world, built on the hegemony
of the petrodollar, is in a catastrophic
situation. In which it cannot survive without
oil and gas supplies from Russia. And Russia is
now ready to sell its oil and gas to the West
only in exchange for physical gold! The
twist of Putin's game is that the mechanism for
the sale of Russian energy to the West only for
gold now works regardless of whether the West
agrees to pay for Russian oil and gas with its
artificially cheap gold, or not.
Because Russia, having a regular flow of dollars
from the sale of oil and gas, in any case, will
be able to convert them to gold with current
gold prices, depressed by all means by the West.
That is, at the price of gold, which had been
artificially and meticulously lowered by the
Fed and ESF many times, against artificially
inflated purchasing power of the dollar through
market manipulation.
Interesting fact: the suppression of gold prices
by the special department of US Government - ESF
(Exchange Stabilization Fund) - with the aim of
stabilizing the dollar has been made into a
law in the United States.
In the financial world it is accepted as a given
that gold is an antidollar.
- In
1971, US President Richard Nixon
closed the 'gold window',
ending the free exchange of dollars for
gold, guaranteed by the US in 1944 at
Bretton Woods.
- In
2014, Russian President Vladimir
Putin has reopened the 'gold window',
without asking Washington's permission.
Right now the West spends much of its efforts
and resources to suppress the prices of gold and
oil. Thereby, on the one hand to distort the
existing economic reality in favor of the US
dollar and on the other hand, to destroy the
Russian economy, refusing to play the role of
obedient vassal of the West.
Today assets such as gold and oil look
proportionally weakened and excessively
undervalued against the US dollar. It is a
consequence of the enormous economic effort on
the part of the West.
And now Putin sells Russian energy resources in
exchange for these US dollars, artificially
propped by the efforts of the West. With which
he immediately buys gold, artificially devalued
against the U.S. dollar by the efforts of the
West itself!
There is another interesting element in Putin's
game. It's Russian uranium. Every sixth
light bulb in the USA depends on its
supply. Which Russia sells to the US too, for
dollars.
Thus, in exchange for Russian oil, gas and
uranium, the West pays Russia with dollars,
purchasing power of which is artificially
inflated against oil and gold by the efforts of
the West. But Putin uses these dollars only to
withdraw physical gold from the West in
exchange, for the price denominated in US
dollars, artificially lowered by the same West.
This truly brilliant economic
combination by Putin puts the West led by the
United States in a position of a snake,
aggressively and diligently devouring its own
tail.
The idea of this economic golden trap for the
West, probably originated not from Putin
himself. Most likely it was the idea of Putin's
Advisor for Economic Affairs - doctor
Sergey Glazyev. Otherwise why seemingly not
involved in business bureaucrat Glazyev, along
with many Russian businessmen, was personally
included by Washington on the sanction list?
The idea of an economist, doctor Glazyev was
brilliantly executed by Putin, with full
endorsement from his Chinese colleague - XI
Jinping.
Especially interesting in this context looks the
November statement of the first Deputy Chairman
of Central Bank of Russia Ksenia Yudaeva, which
stressed that the CBR can use the gold from its
reserves to pay for imports, if need be. It is
obvious that in terms of sanctions by the
Western world, this statement is addressed to
the BRICS countries, and first of all China. For
China, Russia's willingness to pay for goods
with Western gold is very convenient. And here's
why:
China recently announced that it will cease
to increase its gold and currency reserves
denominated in US dollars. Considering the
growing trade deficit between the US and China
(the current difference is five times in favor
of China), then this statement translated from
the financial language reads: "China
stops selling their goods for dollars".
The world's media chose not to notice this
grandest in the recent monetary history event .
The issue is not that China literally refuses to
sell its goods for US dollars. China, of course,
will continue to accept US dollars as an
intermediate means of payment for its goods.
But, having taken dollars, China will
immediately get rid of them and replace with
something else in the structure of its gold and
currency reserves. Otherwise the statement made
by the monetary authorities of China loses its
meaning: "We are stopping the increase of our
gold and currency reserves, denominated in US
dollars." That is, China will no longer
buy United States Treasury bonds for dollars
earned from trade with any countries,
as they did this before.
Thus, China will replace all the dollars that it
will receive for its goods not only from the US
but from all over the world with something else
not to increase their gold
currency reserves, denominated in US dollars.
And here is an interesting question: what will
China replace all the trade dollars with? What
currency or an asset? Analysis of the current
monetary policy of China shows that most likely
the dollars coming from trade, or a substantial
chunk of them, China will quietly replace and de
facto is already replacing with Gold.
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.
It should be noted separately that the global
market for physical gold is extremely small
relative to the world market for physical oil
supplies. And especially the world market for
physical gold is microscopic compared to the
entirety of world markets for physical delivery
of oil, gas, uranium and goods.
Emphasis on the phrase "physical gold" is made
because in exchange for its physical, not
'paper' energy resources, Russia is now
withdrawing gold from the West, but only in its
physical, not paper form. So does China, by
acquiring from the West
the artificially devalued physical gold as a
payment for physical delivery of real products
to the West.
The West's hopes that Russia and China will
accept as payment for their energy resources and
goods "shitcoin" or so-called "paper gold" of
various kinds also did not materialize. Russia
and China are only interested in gold and only
physical metal as a final means of payment.
For reference: the turnover of the market of
paper gold, only of gold futures, is estimated
at $360 billion per month. But physical delivery
of gold is only for $280 million a month. Which
makes the ratio of trade of paper gold versus
physical gold: 1000 to 1.
Using the mechanism of active withdrawal from
the market of one artificially lowered by the
West financial asset (gold) in exchange for
another artificially inflated by the West
financial asset (USD), Putin has thereby started
the countdown to the end of the world hegemony
of petrodollar. Thus, Putin has put the West in
a deadlock of the absence of any positive
economic prospects.
The West can spend as much of its efforts and
resources to artificially increase the
purchasing power of the dollar, lower oil prices
and artificially lower the purchasing power of
gold. The problem of the West is that the stocks
of physical gold in possession of the West are
not unlimited. Therefore, the more the West
devalues oil and gold against the US dollar, the
faster it loses devaluing Gold from its not
infinite reserves.
In this brilliantly played by Putin economic
combination the physical gold is rapidly flowing
to Russia, China, Brazil, Kazakhstan and India,
the BRICS countries, from the reserves of the
West. At the current rate of reduction of
reserves of physical gold, the West simply does
not have the time to do anything against Putin's
Russia until the collapse of the entire
Western petrodollar world. In chess the
situation in which Putin has put the West, led
by the US, is called "time trouble".
The Western world has never faced such economic
events and phenomena that are happening right
now. USSR rapidly sold gold during the fall of
oil prices. Russia rapidly buys gold during the
fall in oil prices. Thus, Russia poses a real
threat to the American model of petrodollar
world domination.
The main principle of world petrodollar model
is allowing Western countries led by the United
States to live at the expense of the labor and
resources of other countries and peoples based
on the role of the US currency, dominant in
the global monetary system (GMS) . The role of
the US dollar in the GMS is that it is the
ultimate means of payment. This means that the
national currency of the United States in the
structure of the GMS is the ultimate asset
accumulator, to exchange which to any other
asset does not make sense.
What the BRICS countries, led by Russia and
China, are doing now is actually changing the
role and status of the US dollar in the global
monetary system. From the ultimate means of
payment and asset accumulation, the national
currency of the USA, by the joint actions of
Moscow and Beijing is turned into only an
intermediate means of payment. Intended only to
exchange this interim payment for another
and the ulimate financial asset - gold. Thus,
the US dollar actually loses its role as the
ultimate means of payment and asset
accumulation, yielding both of those roles to
another recognized, denationalized and
depoliticized monetary asset - gold.
Traditionally, the West has used two methods to
eliminate the threat to the hegemony of
petrodollar model in the world and the
consequent excessive privileges for the West.
One of these methods - colored revolutions. The
second method, which is usually applied by the
West, if the first fails - military aggression
and bombing.
But in Russia's case both of these methods
are either impossible or unacceptable for the
West.
Because, firstly, the population of Russia,
unlike people in many other countries, does not
wish to exchange their freedom and the future of
their children for Western kielbasa. This is
evident from the record ratings of Putin,
regularly published by the leading Western
rating agencies. Personal friendship of
Washington protégé Navalny with Senator McCain
played for him and Washington a very negative
role. Having learned this fact from the media,
98% of the Russian population now perceive
Navalny only as a vassal of Washington and a
traitor of Russia's national interests.
Therefore Western professionals, who have not
yet lost their mind, cannot dream about any
color revolution in Russia.
As for the second traditional Western way of
direct military aggression, Russia is certainly
not Yugoslavia, not Iraq or Libya. In any
non-nuclear military operation against Russia,
on the territory of Russia, the West led by the
US is doomed to defeat. And the generals in the
Pentagon exercising real leadership of NATO
forces are aware of this. Similarly hopeless is
a nuclear war against Russia, including the
concept of so-called "preventive disarming
nuclear strike". NATO is simply not technically
able to strike a blow that would completely
disarm the nuclear potential of Russia in all
its many manifestations. A massive nuclear
retaliatory strike on the enemy or a pool of
enemies would be inevitable. And its total
capacity will be enough for survivors to envy
the dead. That is, an exchange of nuclear
strikes with a country like Russia is not a
solution to the looming problem of the collapse
of a petrodollar world. It is in the best case,
a final chord and the last point in the history
of its existence. In the worst case - a nuclear
winter and the demise of all life on the planet,
except for the bacteria mutated from radiation.
The Western economic establishment can see and
understand the essence of the situation. Leading
Western economists are certainly aware of the
severity of the predicament and hopelessness of
the situation the Western world finds itself
in, in Putin's economic gold trap. After all,
since the Bretton Woods agreements, we all know
the Golden rule: "Who has more gold sets
the rules." But everyone in the West is
silent about it. Silent because no one knows now
how to get out of this situation.
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.
Translated by Kristina
Rus
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