The most stunning move by the US and its allies was cutting off the Russian central bank’s access to most of its $630 billion of foreign reserves. Without access, one wonders if these funds are really “its” reserves at all? What is ownership without access? …
Money and banks are now politicized. So property rights are gone, and the world can no longer share the same banking system:
In a blunt opinion piece in the Wall Street Journal titled “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock,” reporter Jon Sindreu had this to say about how central banks everywhere must now view their reserves: …
Barring gold, these assets are someone else’s liability — someone who can just decide they are worth nothing. Last year, the IMF suspended Taliban-controlled Afghanistan’s access to funds and SDR. …
Sindreu’s piece argues that this move substantially increases the risk that the US dollar loses its privileged status as the global reserve currency and, at a minimum, likely ensures a polarization of the global economy into at least two camps — the West in one and Russia/China/Iran/Saudi Arabia plus other targeted or aligned countries in the other.
If $20-30 trillion or more of global GDP spurns the preexisting reserve currency, is it still the reserve currency? If reserves can be negated overnight, are they even reserves? How many other countries must hedge against the possibility of similar sanctions? Should we add India to the list?
The Biden administration is weighing whether to impose sanctions against India over its stockpile of and reliance on Russian military equipment as part of the wide-ranging consequences the West is seeking to impose on Moscow over its invasion of Ukraine. …
Seizing the money of your political opponents is the latest trend: the Taliban, Canadian truckers, then Russian oligarchs — who’s next?
Another eyebrow-raising development is the US Department of Justice’s establishment of the ominously-named Task Force KleptoCapture, which has the stated intent of seizing (not freezing) the assets of Russian oligarchs. Here’s how the New York Times describes it:
The creation of the task force reflects the harsh scrutiny cast on Russian oligarchs, many of whom built their fortunes because of their ties to Mr. Putin. Even though they may not be directly involved in Russia’s invasion of Ukraine, they enable Mr. Putin by helping him conceal his own assets and remain in power.
Russia’s oligarchs have invested their fortunes in assets around the world, and their ties to Mr. Putin have helped them gain influence and connections in the worlds of fine art, real estate, Wall Street and Silicon Valley.
We are the first to admit that “Russian oligarch” is a less sympathetic faction than “Canadian trucker,” and perpetrating a war on another sovereign nation is way more serious than honking horns in downtown Ottawa, but many of the same questions we raised about the consequences of Justin Trudeau’s impulses seem apropos here. Who gets to define oligarch? What qualifies as enabling? Do the accused have any recourse?
If assets in the West are subject to swift confiscation without due process for even indirectly enabling a currently unpopular-with-us national political leader — no matter how justified that unpopularity might be — what sane foreign asset owner wouldn’t at least consider liquidating assets now and onshoring what wealth they can preserve? Have we thought through the dominos that fall by fundamentally rewriting property laws? …
Crypto will not be tolerated:
We’ve long argued that a crackdown on cryptocurrencies is imminent. Will the US use the Russian invasion of Ukraine as a pretext for doing so? It sure seems like it:
The task force will target people and companies that are trying to evade anti-money laundering laws, hide their identities from financial institutions and use cryptocurrencies to evade sanctions and launder money. The Justice Department said that it would use civil and criminal asset forfeiture to seize assets belonging to people subject to sanctions. …
The ruling class are drunk on perceived power — like Putin was before the reaction to his invasion brought him crashing down to earth. They haven’t thought through the consequences:
Recent statements by US political leaders don’t inspire much confidence in our ability to navigate this crisis without substantial further economic and political escalation. In a single 24-hour period, House Speaker Nancy Pelosi called for a ban on Russian oil imports while simultaneously stating her opposition to the development of US oil to replace them.
Meanwhile, Republican Senator Lindsey Graham went on live television and flippantly called for the assassination of the President of Russia.
Is it easier for Vladimir Putin to kill Lindsey Graham, or for Lindsey Graham to kill Vladimir Putin? Don’t start the political assassination game or we’ll all lose because everything becomes a hyper-security state.
All the world’s money sits in bank accounts (except for a trivial amount in physical cash). We receive and spend money by moving money between bank accounts. This money only means anything while the banking network says you can use it. It’s all just numbers in computers — their computers.
The ruling class controls the banking network, and therefore controls all money. Lately it has taken to freezing or confiscating money of political opponents.
It’s pretty obvious where this leads. You can only exist economically if you do not raise the ire of the ruling class. Or if you can use gold or crypto somehow.
Klaus Schwab: “You will own nothing and you will be happy.” Is this what he meant?
Russia and China have been building up their gold reserves quite quickly for over a decade now, obviously in anticipation of the suborning of the Western banking system to political whims.