Alarming: Putin Could Soon Bring The U.S. Economy To Its Knees With One Simple Action

L. Todd Wood — September 22, 2014

The de-dollarization of the world economy continues to proceed as countries around the world sign swap agreements to trade in their own currencies and remove the US dollar from transactions with their non-U.S. trading partners.

It is no secret that Russian President Vladimir Putin would love to further this process and damage the United States economically as much as possible by minimizing the use of the dollar globally, and undermining its status as a global reserve currency.  The Western sanctions on Russia are starting to bite as the Ruble approaches forty to the dollar.

Unfortunately for Russia, it cannot harm U.S. interests on its own.  She does not have the economic strength and is playing this hand from a position of weakness.  However, there is a way the Kremlin could seriously harm the United States. Combined efforts by the BRIC developing economies would have a devastating impact on the value and influence of the dollar.

China is also keen on reducing USD hegemony in the global economy. India and Brazil are as well, although to a lesser extent than China and Russia. If these four nations teamed up to sell U.S. treasuries and remove the dollar from their foreign transactions, we could see the bottom fall out of the dollar’s valuation. The Federal Reserve would also most likely lose control of the bond market. So you would have a dual shock to the American economy–significantly higher interest rates and a weak currency.  We also would have trouble finding buyers for our bonds to support our ravenous spending habits if the BRICs refused to participate in U.S. treasury auctions.

This scenario is almost certainly being planned and implemented by Moscow already, with the latest indications being that they’re shifting their assets out of the greenback and into hard commodities like gold.  In a recent commentary on its website, Birch Gold Group, a national dealer of precious metals, noted that “Besides retaliating with more sanctions against the E.U. and the U.S., the Russians have been one of the world’s biggest buyers of gold this year. Over the past six months, according to the World Gold Council, Russia has added 54 metric tons to its gold reserves; Russians now have the 6th largest gold reserves, higher than both Switzerland’s and China’s.”

Perhaps the Russians know something we don’t?

With the recent Western sanctions targeting the life blood of the Russian economy, the main state-owned hydrocarbon producers, the Russians have been looking East.  Russia recently signed a multi-year natural gas deal with China to lock in a long term customer, albeit just above cost.  Moscow is also very aware of Western Europe’s efforts to diversify away from Russian gas supplies.

The point is that cooperation with the historically belligerent neighbors is already underway.  In the same commentary, Birch Gold observed that “Russia is also unloading U.S. dollars and euros and increasing its Chinese yuan reserves – which could hurt the dollar in the long run. China and Russia have recently agreed on a draft document to exchange currencies. Their central banks will swap currencies to stimulate further development of direct trade between the countries.”

The wildcard in the BRIC adverse scenario is the actions of India and Brazil.  Relations with India soured significantly last year after the U.S. arrested an Indian diplomat for alleged visa fraud. Since the election of Modi earlier in 2014, the United States has been keen to repair relations and have warmed up to the new Indian leader.  Perhaps the Obama administration realizes America needs more friends in the world, not less.  Relations with Brazil and the United States are also at an all-time low. This comes after the news that the NSA was spying on the Brazilian president. Efforts by the Obama administration to repair this relationship have so far been fruitless.

So it seems the United States finds itself in a situation where all of the BRIC countries are at odds with the United States’ policy agenda. Therefore, the potential for these countries to unite and coordinate their efforts to harm the United States economically is substantial.  This bodes ill for the status of the USD and influence of the United States in the long run.  In other words, a perfect storm.

If this “perfect storm” were indeed to strike the U.S. Dollar, will your savings be protected? Don’t wait to find out. Safeguard your nest egg today with gold – the one currency that has stood the test of time. To learn how to get started, and how you can even move your IRA or 401(k) to physical precious metals, request a free information kit from Birch Gold Group – there is no cost and no obligation to you. All you need to do is enter your details at www.birchgold.com.

Iran Ends Oil Transactions In U.S. Dollars

Iranian oil workers work at Tehran's oil refinery, Iran, Saturday, Nov. 17, 2007. Iran's president said Saturday that the Organization of Petroleum Exporting Countries is "under heavy economic and political pressures" and that the oil prices are below its real value, state-run-news agency reported. Mahmoud Ahmadinejad made his remarks prior to his trip to Bahrain and Saudi Arabia where he is due to attend the OPEC summit. (AP Photo/Vahid Salemi)  AP PHOTO/VAHID SALEMI

By CBSNEWSAPApril 30, 2008

Iran, OPEC's second-largest producer, has completely stopped conducting oil transactions in U.S. dollars, a top Oil Ministry official said Wednesday, a concerted attempt to reduce reliance on Washington at a time of tension over Tehran's nuclear program and suspected involvement in Iraq.

Iran has dramatically reduced dependence on the dollar over the past year in the face of increasing U.S. pressure on its financial system and the fall in the value of the American currency.

Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned producers because it has contributed to rising crude prices and eroded the value of their dollar reserves.

"The dollar has totally been removed from Iran's oil transactions," Oil Ministry official Hojjatollah Ghanimifard told state-run television Wednesday. "We have agreed with all of our crude oil customers to do our transactions in non-dollar currencies."

Iranian President Mahmoud Ahmadinejad called the depreciating dollar a "worthless piece of paper" at a rare summit last year in Saudi Arabia attended by state leaders from the Organization of Petroleum Exporting Countries.

Iran put pressure on other OPEC countries at the meeting to price oil in a basket of currencies, but it has not been able to generate support from fellow members — many of whom, including Saudi Arabia, are staunch U.S. allies.

Iran has a tense relationship with the U.S., which has accused Tehran of using its nuclear program as a cover for weapons development and providing support to Shiite militants in Iraq that are killing American troops. Iran has denied the allegations.

Iranian oil officials have said previously that they were shifting oil sales out of the dollar into other currencies, but Ghanimifard indicated Wednesday that all of Iran's oil transactions were now conducted in either euros or yen.

"In Europe, Iran's oil is sold in euros, but both euros and yen are paid for Iranian crude in Asia," said Ghanimifard.

Iran's central bank has also been reducing its foreign reserves denominated in U.S. dollars, motivated by the falling value of the greenback and U.S. attempts to make it difficult for Iran to conduct dollar transactions.

U.S. banks are prohibited from conducting business directly with Iran, and many European banks have curbed their dealings with the country over the past year under pressure from Washington.

However, the U.S. has been wary of targeting Iran's oil industry directly, apparently worried that such a move could drive up crude prices that are already at record levels.

Iranian analysts say Tehran can withstand U.S. pressure as long as it can continue its oil and gas sales, which constitute most of the country's US$80 billion in