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To understand any conflict, we have to understand the background events leading up to it. I find it amazing how the news media ignores all the background and the reasons for the present conflict in Ukraine. To say that Russia invaded Ukraine and then start the narrative at that point totally ignores how the West has poked Russia in the eye repeatedly and has threatened their security. We have to go back at least as far as the US-led coup in Ukraine in 2014, followed by the new puppet government’s intention to join NATO.
I recall the old cartoon where a boy was explaining his black eye to his father. He said, “Joe started it when he hit me back.” That is precisely how politics works today. No matter what we do, it is always the other guy’s fault.
The US sanctions on Russia included stealing $300 billion of their funds that were in European banks. This was the biggest heist in history. They then suspended all payments in rubles, hoping that Russia would “default” and thereby ruin its economy. But Russia did not default.
A big problem for the West is that Europe is very dependent upon Russian oil and gas to run its economy. So in spite of the sanctions, the Europeans continued to purchase Russian oil and gas. But the question then was how to pay for it. Until recently, Europe paid for the gas in euros. But sanctions dictated that Russia could not use those euros to purchase European goods. So euros were largely worthless to Russia.
Russia then announced that they would no longer accept those worthless euros as payment for Russian gas. They demanded to be paid in their own currency—the ruble (or rouble). Every country has that right. The deadline was April 1st. The western media made the laughable claim that “Putin is trying to avoid the sanctions.” Well of course! There are moves and countermoves in this economic war.
What really alarms the US government is the fact that the petro-dollar is collapsing. If oil and gas are allowed to be sold in currencies other than the US dollar, then the US dollar itself is on the road toward collapse.
The fact is, that is already happening. The petro-dollar arrangement was made in 1973-1974 when Saudi Arabia agreed to accept payments exclusively in US dollars in exchange for a military security agreement with the US. That arrangement came to an end last year on August 24, 2021 when the Saudis entered into a new security arrangement with Russia. This came just 9 days after Biden’s debacle in Afghanistan, which showed the world that the US had lost the ability to protect its vassal states.
The recent sanctions on Russia said, “We won’t buy your oil and gas. We will find other sources of energy.” Really? Europe would be hurt far more if Russia cut off their supply of oil and gas. Russia had every right to do this, but they have restrained themselves. In fact, they have not hit back in any meaningful way. All they demand is that payment be made in rubles.
Most of Europe has complied with the Russian demand. Only Poland and Bulgaria are now refusing to comply. So now they have been cut off from Russian gas supplies.
Russian energy giant Gazprom says it has halted gas exports to Poland and Bulgaria over the countries' refusal to pay for supplies in roubles.
The firm said services will not be restored until payments are made in the Russian currency.
It comes after Russian President Vladimir Putin ordered "unfriendly" countries to pay for gas in roubles.
Poland confirmed supplies had stopped, but Bulgaria said it was still unclear whether supplies had been halted.
Countries pay in advance for their gas, but as they have gone to pay for future supplies, Russia has stood firm on its demand made last month that new purchases need to be paid in roubles.
The threat, in which Mr Putin said "existing contracts will be stopped", has been seen as an attempt boost the rouble, which has been hit by Western sanctions.
Nathan Piper, head of oil and gas research at Investec, told the BBC the halting of supplies to Poland and Bulgaria was the "start of Russia exerting economic pressure on Europe," and a move which could "escalate" with other EU nations.
The media spins this as if Russia is not playing fair. Nathan Piper says, it is the “start of Russia exerting economic pressure on Europe.” Really? What about Europe’s economic pressure on Russia? Who really started this economic war? What a stupid statement!
The bottom line is that Russia is a major supplier of oil and gas in the world today. By demanding payments in rubles, it is fast replacing the petro-dollar with the petro-ruble. This is the result of the US sanctions and is a natural consequence of US actions. If Poland and Bulgaria refuse to purchase Russian gas, that is their right. But then they have no right to complain about gas shortages.
In fact, it is probable that Russia will soon demand payment in rubles for its oil, food, and other things that Europe purchases from them. The Russian ruble will then be a major competitor to the US dollar worldwide. The sanctions have released the genie and the US will not be able to get it back into the bottle.
Some of us can see this clearly. I read lesser-known economists who do not spout mainstream views. They have been warning of the dollar’s collapse—and a recession—for months. Yesterday, the official figures showed that the US economy “unexpectedly” shrank 1.4 percent, when everyone was expecting it to expand 1 percent.
This was “unexpected” only to those who believe the politicians whose job is to assure everyone that all is well with the economy. The official figures are “adjusted for inflation,” which in turn is a manipulated figure to make things look better. In March the official inflation figure was 7.8 percent, which is high, but the actual figure is at least double. Official figures do not include food or energy costs, both of which are skyrocketing and make a big difference in the average budget.
The Federal Reserve Board is in a terrible dilemma. The huge amount of new money being created has diluted the value of all the “old” money, making it more expensive to buy things. That is why the rate of inflation is so high right now. That is why the Fed has raised interest rates and is planning to raise rates another 10 times. This is done to slow down the economy.
But at the same time, the economy is already slowing down. We are entering into a recession just as the Fed is raising interest rates. This is highly unusual. In essence, we have “stagflation,” a combination of inflation and a stagnant economy. We have the worst of both worlds, caused by the government creating huge amounts of money which is now destroying the US economy.
We need to know these things in order to prepare properly. More important, we need to realize that the government figures are manipulated and the politicians are liars. If we simply believe what they say (with the compliance of the media), we will be caught off guard.