Rickards: We’re Our Own Worst Enemy

U.S. Shoots Itself in Foot [The Daily Reckoning] April 24, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Rickards: We’re Our Own Worst Enemy - We’re our own worst enemy… - Russia’s been preparing for sanctions since 2009… - The reason the dollar isn’t collapsing… [Has World War III Just Begun?]( [Click here for more...]( NATO sends tanks to Ukraine… Russia prepares for a winter offensive… Is the beginning of World War III? [Click Here To Find Out]( Portsmouth, New Hampshire [Jim Rickards] JIM RICKARDS Dear Reader, It’s a fact of life that in any group of students, some are likely to be smarter and quicker than others while some just can’t keep up. It’s unfortunate that Treasury Secretary Janet Yellen has turned out to be the slow kid in the class when it comes to economic sanctions and financial warfare. Almost 10 years ago, I sat in a secure conference room at the Pentagon and explained to a group of U.S. national security officials from the military, CIA, Treasury and other agencies that the overuse of the U.S. dollar in financial warfare would eventually drive countries away from using dollars in international transactions for fear that they could become the next target of U.S. displeasure. Some took note, some ignored the warning and one Treasury official slammed the table and said, “The dollar has been the global reserve currency, it is the global reserve currency now and it always will be the global reserve currency!” I told him I felt like I was in Whitehall in London in 1913 listening to John Bull say the same thing about sterling. Sterling would begin to be pushed aside by the dollar just one year later with the start of World War I. We’re Our Own Worst Enemy More recently, I taught a seminar at the U.S. Army War College on financial warfare in which I explained that U.S. financial sanctions would not have a material impact on Russia, that Russia would not change its behavior in Ukraine based on the sanctions and that the U.S. would suffer more from its own sanctions than Russia because adversaries and neutral countries would create alternative payment platforms that did not use dollars. I encountered skepticism from the class (that’s OK; the purpose of a seminar is to engender competing views). I've said to the military and intelligence community, "I don't think other countries can destroy the dollar, but we can do it ourselves. We are our own worst enemy." We, of course, meaning the United States. We’re destroying the dollar with the sanctions (and through other misguided policies). The U.S. is doing more to destroy the dollar than our enemies. Events of the past year have proved my forecast in every respect. Many others have pointed out the same weaknesses in the weaponization of the dollar. It seems the only parties who didn’t see the danger to the dollar were the Wall Street cheerleaders and top U.S. government officials. [BREAKING: Elon Musk Bets Big On One Crypto.]( [Click Here For The Details]( Russia Has Been Preparing for This Russia saw all this coming, and has been preparing accordingly. In 2009. Russia's gold reserves were about 600 tons. By the time the sanctions were imposed in 2022, Russia's gold reserves were close to 3,000 tons. They had spent that 13-year period acquiring 2,400 metric tons of gold. If you think that's easy, it isn’t. It's not easy at all to acquire anywhere near that amount of gold. But they were like Steady Eddie, The Little Engine That Could. They bought 10 to 30 tons per month like clockwork, about 250 tons a year, sometimes more, sometimes less, but over 13 years they got to that 3,000-ton level. They're very transparent about it. But they were anticipating financial warfare from the U.S. and its allies. So when the sanctions were imposed, Russia's total reserves were approximately $600 billion, but almost 25% of that, about $150 billion, was in gold. And I’m talking about actual gold bullion held in safe storage in Russia, not gold futures contracts or ETFs because they're just as easy to freeze as any other asset. That was not a complete answer to the sanctions they were facing, but it was a very substantial move in the direction of insulating themselves from being kicked out of the dollar system. Well, all I can say is that I warned the Pentagon about this in 2009 when I conducted financial war games. I also wrote about it in my book Currency Wars, which came out in 2011. Now it’s all playing out before our eyes. China, of course, has been doing the same thing as Russia to escape dollar dominance. [Over 62 And Collect Social Security? Take Action Immediately!]( [Click here for more...]( If you’re over the age of 62 and currently collect Social Security, you need to prepare now. Because Biden has given our country the worst inflation in decades – and many warn things will only get worse from here. Worse yet, the Social Security check you receive now may not keep pace with inflation… Which is why, if you don’t act now, you could fall behind in the months ahead. Is your retirement at immediate risk? [Click Here And Find Out]( Could the Russian Economy Outperform the U.S. Economy This Year? Incidentally, Russia's growth should be higher than the United States this year, believe it or not. Russia's estimated by the IMF to grow slightly less than 3%. And the U.S.? We're probably already in recession, so we won't get anywhere near 3%. Meanwhile, Russian oil exports are higher than ever. Russia's buying high-tech goods from China, including some military hardware and other manufactured goods. China's buying Russian oil and natural gas, in addition to agricultural output and weapons. That’s a big two-way trade, and the dollar isn’t being used. Russia's paying yuan, and China's paying rubles. Now, the failure of U.S. dollar-based sanctions has become too obvious to ignore. The failure is so obvious that even Janet Yellen admits that sanctions are not working. She recently said, “There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar. Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative.” One could say that realizing the dangers ten years too late is still better late than never. Why the Dollar Hasn’t Tanked — Yet The issue is whether it’s already too late to undo the damage. Once new trading currencies and new payment channels are put in place (which is happening quickly), there’s little incentive to go back to a dollar system where the U.S. can threaten your economy. I should add that there are reasons why the dollar is strong today that have nothing to do with what I’ve been discussing. It has to do with the banking crisis (that’s far from over, by the way). There’s high demand for dollar-denominated collateral, particularly short-term Treasury bills. That'll break at some point, but not yet. And so, the dollar is being propped up by the demand for dollar-denominated collateral, even though it's under attack from all sides based on these new payment currency alternatives that are rapidly emerging. Yellen is once again putting her incompetence on full display. She’s a textbook neo-Keynesian with little understanding of monetary policy, fiscal policy, or the international monetary system. I’ve consistently said that the greatest threat to the dollar comes not from abroad but from the U.S. Treasury because they take confidence in the dollar for granted. We’re doing this to ourselves. Yellen is proving my point. Regards, Jim Rickards for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) P.S. I’ve been warning that [the world is about to experience its biggest crisis since World War II.]( It has nothing to do with inflation, a dollar collapse, a stock market crash or anything like that. It’s much bigger, and the consequences would be far more devastating. What is it? As the UN warns [“famines of biblical proportions”]( are coming… and it’s going to impact all of us. That shouldn’t come as a shock. Right now, we’re experiencing… - A war between Russia and Ukraine, the world’s first- and fifth-largest wheat exporters, which could cut off over 30% of the world’s wheat supply - “The worst drought in decades,” which experts say could substantially lower food production globally – by as much as 53% in some areas - A shortage in fertilizer, which has sent prices to never-before-seen levels. As a result, many farmers are opting not to plant this year because the costs are too high. All of this is creating a perfect storm that could result in a famine the likes of which hasn’t been seen in centuries. Which is why I’m sounding the alarm today for every American to stock up on food and other essentials now. [click here for more...]( [Click here now to find out how to survive the coming famine.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Jim Rickards] G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. 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