Monday, November 01, 2004
Russia, Iran Gold Dinar, and the US Dollar
Friday, October 29, Dan Norcini in From Russia With Love wrote about shades of late 1979 early 1980 only in reverse.
Mover Mike
Militarily back then the Soviet Union was a formidable foe with an impressive arsenal. Its Achilles heel, however, was its economy which was completely dependent on rising commodity prices such as oil, gold, platinum, palladium, etc. to attract foreign capital. Booming commodity prices allowed the Soviet Union the luxury of funding its military sector and made it possible for the inefficiencies of communism to somehow be ignored. The Soviet Union, however, was deeply in debt and thus in a vulnerable position with its economy susceptible to falling commodity prices.How do you confront the US which has the most powerful military the world has ever seen.
By systematically raising short term interest rates and forcing the U.S. economy into a slowdown, Volcker managed to bring down the price of commodities across the board starving the Soviet Union of much needed revenue. The result was that they were forced to the peace table and the rest is history.
Today it is the U.S. that has the unenviable position of being the chief "beggar" nation among the industrialized powers. We have no savings pool and are hopelessly addicted to foreign inflows of capital. Rising commodity prices have fattened Russia's reserve position as they reap the benefits of rising oil prices and now it is their currency which is in demand while the dollar is being spurned.The one advantage we have currently, we pay for our oil and imports in US Dollars.
Those from the East and Middle East realize that the method for challenging U.S. hegemony is to attack the dollar. That is the rationale behind the development of the gold dinar...in Iran. ...Russia under Putin has close ties with Iran.
Mover Mike
