Saturday, March 26, 2022

The Importance ot the Ukraine

 In 1812, a Frenchman decided to conquer Russia. He started with 500,000 men, lost time, men, and matériel crossing the Ukraine, and returned to France in 1813 with just 10,000 men. After which, the British made short work of him.

In 1914, the Germans planned to be in Paris before the French could mobilise, but they figured they had better secure their eastern front, and so attacked the Ukraine, and the attack on Paris failed, as did their war effort.

In 1941, a German fellow with a red beard tried to conquer Russia the USSR, again losing men and time and matériel in the Ukraine, failed, and could not stop the Americans coming from the west (the Americans were only coming because it looked like the USSR would be taking Paris if they did not).

So, starting in 2014, NATO figured they'd start from the eastern Ukraine. Maybe. In 2021, Russia said NATO in the Ukraine would be a red line, and NATO said that would be the decision of NATO, and Russia would have no say in the matter. So in 2022, Russia moved to de-NATO the Ukraine. NATO, joined by the rest of the EU plus always neutral Switzerland plus Japan, South Korea, and Taiwan declared sanctions on Russia, declared that all Russian assets were confiscated, all Russian US$ and € were confiscated, the entire Russian economy would collapse, and with it the Russian war effort to de-NATO the Ukraine. So Russia demanded payment in rubles and the PRC demanded payment in ¥. Previously, Saddam said Iraq would demand payment in € and the US destroyed Iraq and hanged Saddam. Then Gaddafi demanded payment in € so the US/UK/France destroyed Libya and had Gaddafi killed in an unspeakable fashion. 

Sadly, Russia do not seem to be Iraq or Libya. It looks like Europe can pay in rubles or freeze in the dark. And Saudi seem happy to let the PRC pay in ¥ (or RenMinBi to use the new and improved replacement for PRC¥).

People say the US$ is the world's Reserve currency, which, according to Adam Smith (not the 18th century Adam Smith, the 20th century Wall Street gossip columnist), is not right. The world has several reserve currencies, i.e., the currencies major International Banks must keep in reserve. These are currently the US$, the  €, the UK£, the Japanese ¥, and the Swiss CHF. In Breton Woods, the US$ was declared the world's Key Currency. In 1900, the Great Powers were the UK and France, with Germany trying to become a Great Power, and the US a power in the Western Hemisphere, a Hemisphere most overlooked. So the Great Currencies were the UK£ and the French ₣. By 1944, the UK£ and the French ₣ were collapsing, and the US$ was worth about 0.88 gm of 24K gold (the exact amount was in Troy ounces, a measure with which few are familiar, but it was about 0.88 gm of pure gold). So the US$ became the Key currency, the only currency good for just about all International trade, because it was liquid and the same as gold, so perfect as the Key currency. Until 1971, when President Nixon said the US$ was only worth the paper it was printed on. There was some inflation, as much as 20% a year, but the US$ remained the Key Currency for lack of any alternative: not enough gold, and no other currency that could bear the weight of supporting all international commerce. Having the Key currency gave the US huge economic strength.

The Europeans tried to replace the US$ with the €, which did become a sub-key currency, but only in the Euro zone. There was no currency that could challenge the US$. The banks refused to elevate the RenMinBi to the status of a reserve currency, so it was not really a threat. Until the Russian sanctions, and now it is.

The US, joined by all its allies, tried to destroy Russia. So far, not much luck. But they do seem to have taken careful aim and managed one well-placed shot: 

 in their own foot.

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