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America’s aggressive use of sanctions endangers the dollar’s reign

235 points by prostoalex 7y ago

sschueller 7y ago
For the rest of the world this is a good thing. Why would the United States be the one to decide if Germany is allowed to build a pipeline to Russia or not? Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that?
- manny182 7y ago
  if Germany won ww2 they might have sanctioned the united states, just saying.
- klyrs 7y ago
  > Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that? I'd be okay with any number of countries using sanctions to "punish" the US for any number of things. It's their right as sovereign nations. The irony here is that it's a double edged sword. But what I'd really prefer would be a more direct say over who my country is sanctioning and why.
- philwelch 7y ago
  Is the US building a pipeline to Mexico? Is Mexico a corrupt, authoritarian dictatorship that routinely interferes in Western politics? If my aunt had balls, would she be my uncle?
  - wavefunction 7y ago
    The US and Canada already possess pipelines to Mexico. https://theodora.com/pipelines/mexico_pipelines.html https://theodora.com/pipelines/mexico_pipelines.html
    - philwelch 7y ago
      Does Mexico use those pipelines to project power into North America? If anything it would be the reverse as the US is a net exporter, but in reality it’s not quite comparable.
      - sremani 7y ago
        Rule#1 : Relationship between two countries is almost always Asymmetric.
  - smallstepforman 7y ago
    Have you been reading too much propaganda lately? How does it feel to know that you’ve been influenced by paid influencers? Most intelligent people aren’t influenced by the MSM drivel.
- wavefunction 7y ago
  US opposition to a pipeline to Russia is confined to a small group of people who are strangely very friendly to Russia on all other matters. There is no widespread or popular opposition to Germany building a pipeline to Russia in the United States. This doesn't really treat with the dollar-denominated world economy but I wanted to point this out to differentiate the current irrational foreign policy of the US government from the subject at hand.
  - Spooky23 7y ago
    It isn’t in the US or NATO interest for Germany to be dependent on Russian oil. Current US policy, to the extent that we have policy today, is a whole other matter.
    - augstein 7y ago
      It’s about Russian natural gas, not oil. About 25% of Germany’s primary energy are produced from gas, of which about 40% come from Russia (down from about 50% in 1995).[1] The US sanctions against the Nord Stream project are seen by a number of Germans as a rather clumsy attempt to push the sale of their expensive liquified natural gas, which to a high degree is produced by hydraulic fracking.[2] 1) https://translate.googleusercontent.com/translate_c?tl=en&u=https://www.welt.de/politik/ausland/article179177142/Trump-im-Faktencheck-Wie-abhaengig-ist-Deutschland-wirklich-von-russischem-Gas.html https://translate.googleusercontent.com/translate_c?tl=en&u=... 2) https://translate.googleusercontent.com/translate_c?tl=en&u=https://m.tagesspiegel.de/wirtschaft/tanker-anladestellen-fuer-den-import-von-gas-streit-um-den-bau-von-fluessiggas-terminals-in-deutschland/25361240.html https://translate.googleusercontent.com/translate_c?tl=en&u=...
      - mattrp 7y ago
        Talk about clumsy, I seem to remember Russia turning off the gas back in the 90s and everyone was surprised at just how easily nato’s entire infrastructure could be held ransom by the flick of a switch. The issue basically boils down to the survivability of US/NATO operations. And the Germans ambivalence - what with Gerard Schroeder essentially doing a crony deal for nordstream directly underscores that Germans know what we really care about is military survivability. Pretty much every foreign policy decision the US has made since the gas debacle has been to find alternatives to Russian oil. Admitting Georgia to NATO, supporting Ukraine, heck even Iraq and afghanistan have undertones of finding gas alternatives for Germany. The realist in me agrees, it kind of stinks that America seems a bit selfish. But I might remind you that Germany didn’t really like it when the gas did get shut off. I seem to recall their response was, hey America, do something! In the end, Most of what we have done hasn’t worked and then you have Germans themselves supporting nordstream which essentially undermines the entire strategy altogether. I wouldn’t be surprised if the US cedes Germany and leaves in the next decade. Now... what’s going to hurt the dollar more? A few sanctions now or departure from the European continent altogether? Ps also consider the source - the economist - they’ve never met a sanction or a trade barrier they could like so keep that in mind....
- jariel 7y ago
  "Why would the United States be the one to decide if Germany is allowed to build a pipeline to Russia or not?" Because America provides defence for Germany, and Russia has 1000 nuclear warheads pointed at Germany, the US and others, and they are an antagonising state, actively trying to disrupt the governments in Lithuania, Estonia, Latvia, Ukraine, etc. All these issues are quite fundamentally related, so it matters. That said, I don't think a pipeline will matter that much. The premise of the article is problematic because there are almost no alternatives for the USD outside the Euro, and possibly the Pound for a few things. The RMB can't effectively be a global currency until it becomes transparent, which means the CCP would have to give up control, which they won't do. There is really nothing on the horizon - no digital/fintech/blockchain anything that will change the playing field. If anything - as 5B people on planet earth go from $1/day to $20/day and come into the global economy, the USD will have even greater seigneuriage power.
  - gsich 7y ago
    >Because America provides defence for Germany, and Russia has 1000 nuclear warheads pointed at Germany, the US and others, and they are an antagonising state, actively trying to disrupt the governments in Lithuania, Estonia, Latvia, Ukraine, etc. Those have been there for a long time, even before the "disruption". Besides France has nukes too, so not much win there.
  - taurath 7y ago
    What is this protection that the US provides other than ensuring the US would be drawn into a war between the EU and Russia? France has enough nukes to provide MAD protection.
    - rayiner 7y ago
      We had 200,000 US soldiers in Germany until reunification, and still have 40,0000. Germany saves money maintaining a significantly smaller military force. The benefit to Germany is such that US presidents use the idea of moving US troops to, say, Poland as a prod to encourage the German government to spend more on defense: https://www.euractiv.com/section/defence-and-security/news/washington-needles-germany-with-threat-of-us-troops-relocation-to-poland/ https://www.euractiv.com/section/defence-and-security/news/w... In response to Trump’s threats to pull out of NATO, Germany’s reaction was not “oh, good, those useless Americans will leave.” It was: https://www.dw.com/en/merkel-vows-to-hit-2-nato-spending-target-by-early-2030s/a-51432189 https://www.dw.com/en/merkel-vows-to-hit-2-nato-spending-tar... > Chancellor Angela Merkel on Wednesday underscored her commitment to NATO, pledging to raise Germany's defense spending to the alliance's 2% target "by the early 2030s." > "The preservation of NATO is in our own interest, more than during the Cold War," Merkel said while addressing lawmakers in German parliament. > "At the moment, Europe is unable to defend itself," she added, urging the bloc to stay together.
- headcanon 7y ago
  The United States' main geopolitical imperative is to maintain global hegemony. Part of this is ensuring regional powers are either allied (in the case of NATO countries or Saudi Arabia) or contained (in the case of Russia and Iran). It is a fundamental rule of Geopolitics that every country assert itself to the best of its abilities with the strengths they have. One of Russia's biggest strengths is natural resources. It is advantageous to them to have Western Europe dependent on its oil and natural gas supplies. George Friedman explains in this book [1] that Russia may attempt to assert itself to a greater extent in the next few decades, possibly going so far as to annex a Baltic country or two. Today this would be inconceivable, but if Russia has the off switch for Germany's economy, NATO's response is drastically weakened. Whatever scenario may come to pass, European reliance on Russian natural resources disrupts the US's containment strategy which it needs in order to maintain its dominant position in the region. So yes, it will say something if it feels like that is under threat. Not saying this is a good or bad thing. Depends on your perspective and what country you live in. [1] https://www.amazon.com/Next-100-Years-Forecast-Century/dp/0767923057 https://www.amazon.com/Next-100-Years-Forecast-Century/dp/07...
  - igravious 7y ago
    > Russia may attempt to assert itself to a greater extent in the next few decades, possibly going so far as to annex a Baltic country or two. This is in the book that forecasts that Japan will attack the US in 2050 except that it'll be all space-borne battlestars and lasers and hypersonic weapons. Among other preposterous scenarios. Riiiight. > It is advantageous to them to have Western Europe dependent on its oil and natural gas supplies. Loaded language. Don't you think Western Europe has thought of this? And hey, if Russia turns off the tap they turn off their revenue stream. Besides, Europe, like the US, keeps strategic fossil fuel reserves. > The United States' main geopolitical imperative is to maintain global hegemony. > Not saying this is a good or bad thing. Depends on your perspective and what country you live in. Seems to me that if the US keeps sanctioning foes and allies alike every country bar the US will consider this a bad thing.
    - hopia 7y ago
      It's really not so far-fetched to think Russia would annex a Baltic state sometime in the future. They've shown they have the capability and political will to annex similarly prepared countries' territories. It all boils down to what they believe NATO's response would be.
- elfexec 7y ago
  > Why would the United States be the one to decide if Germany is allowed to build a pipeline to Russia or not? Because the US is the sole guarantor of German sovereignty. It's why the US has tens of thousands of troops in germany. It's why US decides if and how much oil/gas Japan or South Korea gets from Russia. It's why the US decides if the Dutch get to sell ASML semiconductor equipment to China. It's why the US dictates whether Canada arrests a chinese executive. Pax Americana. Protection doesn't come cheap. It certainly isn't free. > Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that? Of course not, but germany is in no position to dictate anything to the US. That's the point. If germany had tens of thousands of troops stationed in the US and provided safety to the US and mexico was germany's enemy, then germany would prevent the US from doing business with mexico. I'm not saying it's right or moral. It's just basic geopolitics. If you depend on another nation for your safety and host tens of thousands of their troops in your country, you are really not a sovereign nation and hence don't have the luxury of making all the decisions on your own.
  - Jedi72 7y ago
    It's more like gangsters providing "protection" to local businesses. When it comes to the US, you have no choice in the matter.
  - pinkfoot 7y ago
    > Because the US is the sole guarantor of German sovereignty. Sole? So the German armed forces are for what exactly?
    - pnw_hazor 7y ago
      "Along with the reliability woes of air force jetliners, only about a third of Germany’s 128 Eurofighter jets are combat ready and just a quarter of its 130 army helicopters are operational, mainly because of shortages of spare parts. Only one of six submarines and fewer than half of 244 Leopard tanks are working, according to a recent report to Parliament." https://www.latimes.com/world/la-fg-germany-armed-forces-20190213-story.html https://www.latimes.com/world/la-fg-germany-armed-forces-201...
- OrgNet 7y ago
  Is it the beginning of the great/bad crash of 2020? That would be the only way that Trump would loose the 2020 election...
- dehrmann 7y ago
  At first glance, but it's probably better for Europe to be grudgingly aligned with the top power that it's generally aligned with than to be a more independent 3rd or 4th power. It's the same reason the UK is better off in the EU, even if they don't like it.
- tus88 7y ago
  Germany aggressively uses EU money to bludgeon mainly Eastern European states info accepting policies made in Brussels. Germany has done a lot worse as well obviously.
- bluecalm 7y ago
  I live in Poland and I am ok with US bullying others around because it increases stability even if we all have to pay for it. The problem with that pipeline is that Russia will get a way to cut off Ukraine and Poland without cutting Western Europe (their biggest customers). This increases chances of them invading rest of the Ukraine or maybe even Poland in the future. Without big bully to prevent countries doing deals that decrease stability in other countries we have no recourse. Sadly it's too late for that particular project to be stopped. Previous administration missed it or didn't intervene on purpose. It doesn't make any sense to put sanctions on Russia because of their land grab in Ukraine while allowing them to build a pipeline that destabilizes the region even further.
  - La1n 7y ago
    >Without big bully to prevent countries doing deals that decrease stability in other countries we have no recourse. The problem here is that many do argue right now that the US is doing this themselves and is a large factor in lots of instability in say the middle East.
  - AsyncAwait 7y ago
    As someone from a country neighboring Poland, I am very familiar with this reactionary mindset and find it disgusting. (Poland seems to be in a very reactionary period right now in general.) - Yes, we were part of the USSR, which was responsible for many crimes, but that doesn't mean we now need to be unsophisticated U.S. bootlickers incapable of looking at each individual situation and evaluating it on its own merits. For example, it is easy to see how the U.S. would not tolerate the sort of of military exercises done near the borders of Iran off the coast of Mexico. But somehow when U.S. does it, it's fine. Same with the recent airliner disaster, which took Iran 3 days to admit to, longer than it should have, but the smug coverage from U.S. media completely omits any discussion of the U.S. taking 7 years(!) to admit to a similar disaster. Hard to argue the Iraq War was any good, same for Libya, or the sponsoring of fundamentalists in Syria, in fact the American relationship with gulf monarchies, or even Israel, is hardly based on any moral principles. The record in Latin America is too long to even get into etc. etc.
    - 7y ago
- Mirioron 7y ago
  >Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that? On the other hand, imagine that you're Canada and the US decides to build a pipeline to China/North Korea. Would you want Germany to back you up against the US? Because that's what's happening with Nord Stream 2. The US got into the whole thing quite late. Other European countries, such as Poland, Denmark, Estonia and others, were already against the pipeline, but Germany pushed it through anyway. Germany and Russia cooperated on dividing up Europe before.
- deleted 7y ago
  [deleted]
IfOnlyYouKnew 7y ago
It also endangers the basic principle of a rules-based, open world. If you think that's a good idea, imagine what happens to an economy when civil law and contracts are not enforced, even without any threat of violence. To pick just one example: if you're trying to get a loan to build a factory or buy a house, it's good for you that there are laws and trusted courts that would cause you a whole lot of pain if you failed to repay. It's no different in international politics, only that treaties between states are backed not by some external force, but by each country having a strong interest in remaining within that system that outweighs any short-term benefits from skirting its responsibility. I guess some of this is mildly counter-intuitive. But really there is game theory far more complex than this regularly understood on primary school schoolyards.
- philwelch 7y ago
  There's no such thing as a rules-based, open world. International relations is a state of anarchy and perpetual conflict that only fleetingly resembles peace during those periods where there's a global hegemon that can enforce those "rules". Within a country, those courts are the hegemon. "Each country having a strong interest in remaining within that system that outweighs any short-term benefits from skirting its responsibility" was the theory prior to 1914 as to why the Great War would never actually happen.
  - corporate_shi11 7y ago
    Exactly. Rules must always be enforced by some higher authority. Because the highest functional units of governance are nations, this means that there will always have to be some "most powerful" nation enforcing order.
  - zozbot234 7y ago
    > There's no such thing as a rules-based, open world. You're living in one right now. Anarchy need not be synonymous with chaos, especially if disputes and conflicts are relatively unimportant (due to easy defense making 'rights' self-enforcing). The point of courts is then to arbitrate disputes in a publicly-visible way, enforcement is relatively less important.
mark_l_watson 7y ago
James Rikard (author of Currency Wars) in his newest book Aftermath predicts that the dollar's reserve currency run may soon be over, and special drawing rights (SDR) reserve currency might only be 1/3 dollars. I think he is probably correct on this prediction but maybe not on another prediction: currencies like China's and Russia's might soon be 20% backed by gold. He makes the point that there is no need for 100% backing from gold since a smaller percentage would still prevent a country from printing new currency out of thin air. I think the dollar has a lot of inertia so it might reign for a long while longer as reserve currency, but then I also think about how much debt we have. Our treasury can not account for $21 trillion (ref: Catherine Austin Fitts http://solari.com http://solari.com) and the amount of consumer, educational, real estate, etc. of debt worries me, but: I expect a slow burn of our economy, not falling off of a cliff, economically speaking. We can adjust to a decade long slow downward economic trajectory, people are resilient.
- thaumasiotes 7y ago
  > currencies like China's and Russia's might soon be 20% backed by gold. He makes the point that there is no need for 100% backing from gold since a smaller percentage would still prevent a country from printing new currency out of thin air. What is the conceptual difference between a currency that is 100% backed by gold and one that is 20% backed by gold? Or rather, what is the difference between a currency that is 20% backed by gold, and another currency that is (a) 100% backed by gold; and (b) worth five times as much as the first currency?
  - abacadaba 7y ago
    as compared to dollars, of course. (alt s/dollars/bitcoin/)
    - thaumasiotes 7y ago
      I don't understand this. Can you expand on it?
      - 7y ago
aazaa 7y ago
The lack of any viable alternative has kept the dollar in its current dominant position. That alternative won't exactly announce itself so that US policymakers can rationally decide to change course about the weaponization of money. It will instead, sneak up on the country in the form of weird little experiments that don't seem worth the time and effort to track or regulate. By the time one of them becomes the obvious marketplace disruptor, the die will have been cast.
- LatteLazy 7y ago
  Isn't the answer the euro? Stable, inflation proof, light or no sanctions. As brexit proceeds and more financial services move to mainland Europe, you won't even have to worry about the brits messing with it... I seem to remember the EU agreeing to setup a psudo bank to deal direct with Iran so they can bypass restrictions on trade? Edit: here it is! https://www.google.com/amp/s/amp.dw.com/en/eu-mechanism-for-trade-with-iran-now-operational/a-49407662 https://www.google.com/amp/s/amp.dw.com/en/eu-mechanism-for-...
  - aazaa 7y ago
    Every country sponsoring a currency approaching the reach of the dollar will begin to experience the same political forces as the US. Weaponization of the currency in the service of foreign and domestic policies is viewed as a cheap alternative to war. And so the pressure to weaponize will sooner or later become irresistible.
    - deleted 7y ago
      [deleted]
  - ApolloFortyNine 7y ago
    Didn't the whole Greece debt situation show why that could be a problem? One country's debt crisis caused the euro to tank 30% in a very short time. It ended up rebounding, but pretty much forced the EU to handle the situation (write off debt and provide low interest loans for the rest) or risk the whole thing exploding. It seems like your betting on 5-10 countries not failing, when with most currencies you just have to deal with 1. Which is probably why it's not currently the reserve currency, one would assume.
hogFeast 7y ago
As a point of fact, it isn't true that the dominant currency imposing costs is new...that has always happened. Britain did it in order to secure continued use of the £, and the US has done it before now. It is a normal extension of foreign policy (because finance is not separate from politics, as the Rusal example shows). It isn't some kind of authoritarian aberration either. The point is that the US has most to lose from a system of free trade so is the one who shoulders most of the burden for securing it. You don't secure something by sitting back and letting people ride all over it. And yes, some people who don't want to play by those rules will grouse. But the system will always lean towards one dominant currency, it is just easier that way (the UK losing control was was unexpected and took nearly six decades to play out after the point of obvious decline). The world is awash in dollars, no need to worry (if anything, the issue is that some are too reliant on too much dollar funding...not that the world is moving away). It is kind of unfortunate that the Economist keeps getting worse. The election of Mango Man and Brexit has truly addled the minds of some generally smart people (or made clear that their smartness wasn't actual intelligence but an ability to just parrot whatever they were told was "right").
- SlowRobotAhead 7y ago
  > It is kind of unfortunate that the Economist keeps getting worse. The election of Mango Man and Brexit has truly addled the minds of some generally smart people (or made clear that their smartness wasn't actual intelligence but an ability to just parrot whatever they were told was "right"). Sad to agree. It really is eye opening to see how many of “the smart people” get is so damn wrong over and over because of narrative or hope or just some weird political blindness.
- pyuser583 7y ago
  I've subscribed to the Economist for the past five years (or so). It's sad to see their decline. About 90% is still good, especially when they focus of international news. But they're willing to publish lower quality articles when defending their official liberal position. Sadly, the occasional low-quality article is seeping into other areas.
  - 7y ago
1996 7y ago
I guess this is good for bitcoin! Good enough liquidity, can't be blocked, many tumblers, cheap transactions - maybe it will become a preferred way for international settlements, replacing gold?
geggam 7y ago
Given the amount of global debt does it really matter ? https://www.cnn.com/2020/01/13/economy/global-debt-record/index.html https://www.cnn.com/2020/01/13/economy/global-debt-record/in... Its like the world is playing musical chairs and at some point the music will stop and not everyone will have a seat
- DeonPenny 7y ago
  Thats not how global debt works.
  - Supermancho 7y ago
    I'm pretty sure it does. The more debt increases against a property, the more valuation is boosted since the price of the unique property is bundled with the debt. This is how nations have been looking at debt for some time. Yeah, you can make a margin call on the US (directly or via a partner), but what are you going to replace that resource pipeline with?
itsumoiru 7y ago
I just read a related article the other day, claiming the same thing, but with a different analysis: https://mises.org/wire/world-looks-abandon-dollar-us-sanctions-tighten-their-grip https://mises.org/wire/world-looks-abandon-dollar-us-sanctio...
- qroshan 7y ago
  Ha Ha mises.org. What a joke! An institution which has been wrong about everything for the past 100 years is predicting a dollar cash? What a surprise!
FpUser 7y ago
No s.. Sherlock. It is starting to look more like a tantrum.
qaq 7y ago
In reality it does not although would be nice if there were good alternatives.
tjenkinsqs 7y ago
I prefer sanctions a thousand times over war. Don't we have enough of the endless wars (Afghanistan, Iraq, Libya, Syria, etc. from the last 2 administrations?
- senderista 7y ago
  Sanctions kill innocent people too, especially children and the elderly.
- UncleSlacky 7y ago
  Sanctions can be just as deadly as warfare, though, and they almost exclusively affect civilians, and don't get nearly as much media attention as warfare. From https://caitlinjohnstone.com/2019/06/23/starvation-sanctions-are-worse-than-overt-warfare/ https://caitlinjohnstone.com/2019/06/23/starvation-sanctions... "Starvation sanctions kill people. Tens of thousands of Venezuelans have reportedly already died as a result of this administration’s relentless assault on their economy; those human beings are no less dead than they would have been if the US had killed them by dropping cluster bombs on Caracas. Yet these deaths have received virtually no mainstream media coverage, and Americans, while they strongly oppose attacking Iran militarily, have had very little to say about Trump’s attacks on the nation’s economy. The economy which people use to feed their children, to care for their elderly and their sick. I’m titling this essay “Starvation Sanctions Are Worse Than Overt Warfare”, and I mean it. I am not saying that starvation sanctions are more destructive or deadly than overt military force in and of themselves; what I am saying is that the overall effect is worse, because there’s no public accountability for them and because they deliberately target civilians. If the US were to launch a barrage of Tomahawk missiles into an Iranian suburb with the goal of killing civilians, there’d be international outrage and the cohesion of the US-centralized power alliance would take a major hit. Virtually everyone would recognize this as an unforgivable war crime. Yet America will be able to kill the same number of civilians with the same deliberate intention of inflicting deadly force, and it would suffer essentially no consequences at all. There’s no public or international pressure holding that form of violence at bay, because it’s invisible and poorly understood."
  - cavisne 7y ago
ilaksh 7y ago
Ever since I saw Ray Dalio's video about the economy and long term debt cycle I have been really worried. The thing that scares me more is that we don't hear any politicians talking about this stuff. In particular presidential candidates. The only one that seems to actually understand technology and the economy (Yang) is proposing an increase in entitlements, although hopefully the VAT can improve revenue somewhat. I know he knows who Ray Dalio is since he mentioned his name. I think there needs to be a plan for an international system that is not dominated by one country like the US dollar and is technologically sophisticated. Some kind of multi-government backed cryptocurrency, possibly paired with a decentralized resource tracking system. I feel like there are a bunch of people who think there is no problem and a bunch on the other side who think the situation is dire. My guess is that there is a real situation that we have to plan for and it seems like a very bad idea to put off that planning.
tehjoker 7y ago
This is an interesting article, but exposes the Economist's bias and lack of an honest historical accounting. While the it is new, interesting, and important that the world is becoming more skeptical of the dollar, it is kind of laughable that the only reference to Iraq and sanctions is the ones that were in the news recently. Iraq and many other countries have been subject to crippling US sanctions many times in the past. In the 1990s, sanctions were issued by the Clinton administration that were so severe that hospitals were scrubbing the floors with gasoline (https://theintercept.com/2018/03/21/us-war-iraq-legacy-of-blood/ https://theintercept.com/2018/03/21/us-war-iraq-legacy-of-bl...). https://reliefweb.int/report/iraq/iraq-study-baghdad-hospitals-highlights-critical-needs https://reliefweb.int/report/iraq/iraq-study-baghdad-hospita... "In June, 1991, Medicine For Peace medical teams began working in Baghdad pediatric hospitals. The following is a description of what they found: "The hospital was in darkness. Ventilators, incubators, dialysis machines were not functioning and any patients dependent on these support systems had died. We made ward rounds with Iraqi physicians, many trained in the US and Great Britain, who were despondent and demoralized. No x-rays, lab tests, or possibility of surgery. Worse of all, intravenous fluids and supplemental feedings for the scores of malnourished children were in short supply, the pharmacy had exhausted its store of antibiotics for treatable infections, and there was not one vial of morphine to relieve the pain of children suffering with tumors on the cancer ward." Outside of the US, economic sanctions of this magnitude are often regarded as war crimes. They are routinely deployed against the populations of official US enemies and have been for some time under the theory that if we make life as bad as possible for the people, maybe they'll overthrow the regime. Hint: It usually doesn't work and the regime uses the sanctions to (correctly) characterize itself as under attack by foreign enemies. In the modern instance, the case for sanctions in Iraq can only be described as barbarous bullying. The Iraqi government voted to remove US troops in response to an unprovoked assasination on an Iranian top general on their soil while performing what is claimed to be a diplomatic peace mission (another war crime). In response, the US employs sanctions to bully the Iraqis into acquiescing to an unending occupation that they have judged does not serve their interests. Yanis Varoufakis, the Greek Finance Minister (paraphrased, talking about austerity in Greece) said that where they used to use tanks, they now use banks. In the case of Iraq, sadly, tanks, banks, and aerial bombing have all been used in various combinations at various times.
yalogin 7y ago
Yep that wall has broken down. There are already long term implications to Trump craziness. What ever he is doing is extremely short sighted and plays right into China's hands, the one thing he is railing against.
williesleg 7y ago
The Economist is Fake News. If they're so smart, why are they all so poor?
flyGuyOnTheSly 7y ago
If you were getting a paywall like me, just delete all your economist.com cookies and block all javascript.
- distant_hat 7y ago
  Oftentimes, just pressing the 'reader' button in Firefox works.
  - flyGuyOnTheSly 7y ago
    Interesting, I will try that the next time, thank you!
ballarak 7y ago
There's the possibility that the USG believes the dollar's primacy is going to come to an end in the relatively near future. There are other factors at play that could weaken the dollar's status that matter more than sanctions, including: (1) The geopolitical shift away from a unipolar world, with the rise of states such as China. (2) The upcoming end of the petrodollar, as nations shift to renewable energy. If you believe the reign of the dollar will come to an end anyways, you might as well use its power while you have it and throw sanctions around to weaken your rivals.
- erikpukinskis 7y ago
  This possibility comes along with the rise of a new political brand for the Republicans: “We do whatever we have to to get ours”. In the early stages under GW Bush/Rumsfeld this was the lighter “We do whatever we have to to advance American interests throughout the world” but under Trump/Murdoch it is now “advance the interests of those who are loyal to me”. That will play well in an economic crisis. I don’t think the brandmakers for liberalism in America are prepared for that fight. Right now the brand on the left is something like “we can and should demand a better wage and better benefits from Daddy!” but that falls flat in a crisis. That all said, we’re not in that crisis yet. So perhaps it’s fine to focus on the present, where we certainly have the money to increase workers benefits.
vinceguidry 7y ago
The dollar is still reigning? News to me.
viburnum 7y ago
The dollar’s exceptional liquidity makes it more valuable, which is good for people who have dollars, but it’s bad for people whose costs are in dollars (American exporters). The dollar’s strength since the earlier 1980s (the first major flight to liquidity during the era of free movement of capital) has been terrible for American industry. It’s like Dutch disease, but instead of a commodity like oil causing unbalanced trade, it’s the dollar itself.
Animats 7y ago
Whether China's yuan should be freely convertible to other currencies is something the PRC has struggled with for years. A freely convertible yuan would increase China's influence on the world financial system, but it would also increase the influence of the world financial system on China. And it would require much easing, if not elimination, of China's exchange controls. A decade ago, a freely convertible yuan was seen as likely. But China has backed off from that. Xi Jinping's "China 2025" is about autarky - reducing China's dependency on the rest of the world. So, the yuan as a world currency isn't really happening yet. Euros, though...
- redis_mlc 7y ago
  Euros are, literally, a joke. A currency without an army is nothing. You can pretend whatever exchange rate you want between the Euro and the USD, but the USD is the real currency.
  - HenryBemis 7y ago
    Yes because USA Vs the world will have USA as a winner (if this is what you imply) which is 5yo thinking. EU although it still going through some growing pains, appears to be far more mature than today's USA, which is burning bridges and building walls (I mean figuratively). If/as the planet continues to decrease its dependency to USD then the might will decrease further with it. USA has the No1 debt on this planet. I don't see any other countries of that size going bust and needing to print new money every other year because they cannot afford to run their states. I am using this childish and realistic example so you include that in your thought process. As for the army, EU is in the process of considering/designing an EU army, since the "US hegemony" seems to be in deep .... with USA's latest leadership. And thank you for speeding up this process.
  - tpxl 7y ago
    >A currency without an army is nothing. The Swiss beg to differ.
    - deleted 7y ago
      [deleted]
m0zg 7y ago
It's not about whether dollar sucks in absolute terms. It's about whether it sucks less than other currencies. It's tied to the largest economy in the world, and the strongest military in the world (importantly, including the strongest navy as well), by quite a margin, and as such, it's not going anywhere. You don't need to run faster than the bear, you just need to run faster than the other guy.
fallingfrog 7y ago
Sanctions are the modern equivalent of siege warfare- using starvation as a weapon. I’m not sure why it’s looked upon as being a kinder, gentler approach than dropping bombs on civilians. It’s still violence. People still die.
mmmuhd 7y ago
I read a paper on the implementation of oil trade based on an independent crypto currency backed by Oil exporting countries, the author laid all out and how the US will never allow that to happen, sorry I lost the page source.
LockAndLol 7y ago
This is behind a paywall. Does anybody have the full article? The first few paragraphs say nothing more than the title. Edit: https://archive.md/gbAv6 https://archive.md/gbAv6 ------------- Maybe this will finally push towards crypto-currencies. Bitcoin doesn't seem to be a candidate though. 10 minutes for a transaction is too slow.

235 points by prostoalex 7y ago

For the rest of the world this is a good thing. Why would the United States be the one to decide if Germany is allowed to build a pipeline to Russia or not? Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that?

manny182 7y ago
if Germany won ww2 they might have sanctioned the united states, just saying.
klyrs 7y ago
> Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that? I'd be okay with any number of countries using sanctions to "punish" the US for any number of things. It's their right as sovereign nations. The irony here is that it's a double edged sword. But what I'd really prefer would be a more direct say over who my country is sanctioning and why.
philwelch 7y ago
Is the US building a pipeline to Mexico? Is Mexico a corrupt, authoritarian dictatorship that routinely interferes in Western politics? If my aunt had balls, would she be my uncle?
- wavefunction 7y ago
  The US and Canada already possess pipelines to Mexico. https://theodora.com/pipelines/mexico_pipelines.html https://theodora.com/pipelines/mexico_pipelines.html
  - philwelch 7y ago
    Does Mexico use those pipelines to project power into North America? If anything it would be the reverse as the US is a net exporter, but in reality it’s not quite comparable.
    - sremani 7y ago
      Rule#1 : Relationship between two countries is almost always Asymmetric.
- smallstepforman 7y ago
  Have you been reading too much propaganda lately? How does it feel to know that you’ve been influenced by paid influencers? Most intelligent people aren’t influenced by the MSM drivel.
wavefunction 7y ago
US opposition to a pipeline to Russia is confined to a small group of people who are strangely very friendly to Russia on all other matters. There is no widespread or popular opposition to Germany building a pipeline to Russia in the United States. This doesn't really treat with the dollar-denominated world economy but I wanted to point this out to differentiate the current irrational foreign policy of the US government from the subject at hand.
- Spooky23 7y ago
  It isn’t in the US or NATO interest for Germany to be dependent on Russian oil. Current US policy, to the extent that we have policy today, is a whole other matter.
  - augstein 7y ago
    It’s about Russian natural gas, not oil. About 25% of Germany’s primary energy are produced from gas, of which about 40% come from Russia (down from about 50% in 1995).[1] The US sanctions against the Nord Stream project are seen by a number of Germans as a rather clumsy attempt to push the sale of their expensive liquified natural gas, which to a high degree is produced by hydraulic fracking.[2] 1) https://translate.googleusercontent.com/translate_c?tl=en&u=https://www.welt.de/politik/ausland/article179177142/Trump-im-Faktencheck-Wie-abhaengig-ist-Deutschland-wirklich-von-russischem-Gas.html https://translate.googleusercontent.com/translate_c?tl=en&u=... 2) https://translate.googleusercontent.com/translate_c?tl=en&u=https://m.tagesspiegel.de/wirtschaft/tanker-anladestellen-fuer-den-import-von-gas-streit-um-den-bau-von-fluessiggas-terminals-in-deutschland/25361240.html https://translate.googleusercontent.com/translate_c?tl=en&u=...
    - mattrp 7y ago
      Talk about clumsy, I seem to remember Russia turning off the gas back in the 90s and everyone was surprised at just how easily nato’s entire infrastructure could be held ransom by the flick of a switch. The issue basically boils down to the survivability of US/NATO operations. And the Germans ambivalence - what with Gerard Schroeder essentially doing a crony deal for nordstream directly underscores that Germans know what we really care about is military survivability. Pretty much every foreign policy decision the US has made since the gas debacle has been to find alternatives to Russian oil. Admitting Georgia to NATO, supporting Ukraine, heck even Iraq and afghanistan have undertones of finding gas alternatives for Germany. The realist in me agrees, it kind of stinks that America seems a bit selfish. But I might remind you that Germany didn’t really like it when the gas did get shut off. I seem to recall their response was, hey America, do something! In the end, Most of what we have done hasn’t worked and then you have Germans themselves supporting nordstream which essentially undermines the entire strategy altogether. I wouldn’t be surprised if the US cedes Germany and leaves in the next decade. Now... what’s going to hurt the dollar more? A few sanctions now or departure from the European continent altogether? Ps also consider the source - the economist - they’ve never met a sanction or a trade barrier they could like so keep that in mind....
jariel 7y ago
"Why would the United States be the one to decide if Germany is allowed to build a pipeline to Russia or not?" Because America provides defence for Germany, and Russia has 1000 nuclear warheads pointed at Germany, the US and others, and they are an antagonising state, actively trying to disrupt the governments in Lithuania, Estonia, Latvia, Ukraine, etc. All these issues are quite fundamentally related, so it matters. That said, I don't think a pipeline will matter that much. The premise of the article is problematic because there are almost no alternatives for the USD outside the Euro, and possibly the Pound for a few things. The RMB can't effectively be a global currency until it becomes transparent, which means the CCP would have to give up control, which they won't do. There is really nothing on the horizon - no digital/fintech/blockchain anything that will change the playing field. If anything - as 5B people on planet earth go from $1/day to $20/day and come into the global economy, the USD will have even greater seigneuriage power.
- gsich 7y ago
  >Because America provides defence for Germany, and Russia has 1000 nuclear warheads pointed at Germany, the US and others, and they are an antagonising state, actively trying to disrupt the governments in Lithuania, Estonia, Latvia, Ukraine, etc. Those have been there for a long time, even before the "disruption". Besides France has nukes too, so not much win there.
- taurath 7y ago
  What is this protection that the US provides other than ensuring the US would be drawn into a war between the EU and Russia? France has enough nukes to provide MAD protection.
  - rayiner 7y ago
    We had 200,000 US soldiers in Germany until reunification, and still have 40,0000. Germany saves money maintaining a significantly smaller military force. The benefit to Germany is such that US presidents use the idea of moving US troops to, say, Poland as a prod to encourage the German government to spend more on defense: https://www.euractiv.com/section/defence-and-security/news/washington-needles-germany-with-threat-of-us-troops-relocation-to-poland/ https://www.euractiv.com/section/defence-and-security/news/w... In response to Trump’s threats to pull out of NATO, Germany’s reaction was not “oh, good, those useless Americans will leave.” It was: https://www.dw.com/en/merkel-vows-to-hit-2-nato-spending-target-by-early-2030s/a-51432189 https://www.dw.com/en/merkel-vows-to-hit-2-nato-spending-tar... > Chancellor Angela Merkel on Wednesday underscored her commitment to NATO, pledging to raise Germany's defense spending to the alliance's 2% target "by the early 2030s." > "The preservation of NATO is in our own interest, more than during the Cold War," Merkel said while addressing lawmakers in German parliament. > "At the moment, Europe is unable to defend itself," she added, urging the bloc to stay together.
headcanon 7y ago
The United States' main geopolitical imperative is to maintain global hegemony. Part of this is ensuring regional powers are either allied (in the case of NATO countries or Saudi Arabia) or contained (in the case of Russia and Iran). It is a fundamental rule of Geopolitics that every country assert itself to the best of its abilities with the strengths they have. One of Russia's biggest strengths is natural resources. It is advantageous to them to have Western Europe dependent on its oil and natural gas supplies. George Friedman explains in this book [1] that Russia may attempt to assert itself to a greater extent in the next few decades, possibly going so far as to annex a Baltic country or two. Today this would be inconceivable, but if Russia has the off switch for Germany's economy, NATO's response is drastically weakened. Whatever scenario may come to pass, European reliance on Russian natural resources disrupts the US's containment strategy which it needs in order to maintain its dominant position in the region. So yes, it will say something if it feels like that is under threat. Not saying this is a good or bad thing. Depends on your perspective and what country you live in. [1] https://www.amazon.com/Next-100-Years-Forecast-Century/dp/0767923057 https://www.amazon.com/Next-100-Years-Forecast-Century/dp/07...
- igravious 7y ago
  > Russia may attempt to assert itself to a greater extent in the next few decades, possibly going so far as to annex a Baltic country or two. This is in the book that forecasts that Japan will attack the US in 2050 except that it'll be all space-borne battlestars and lasers and hypersonic weapons. Among other preposterous scenarios. Riiiight. > It is advantageous to them to have Western Europe dependent on its oil and natural gas supplies. Loaded language. Don't you think Western Europe has thought of this? And hey, if Russia turns off the tap they turn off their revenue stream. Besides, Europe, like the US, keeps strategic fossil fuel reserves. > The United States' main geopolitical imperative is to maintain global hegemony. > Not saying this is a good or bad thing. Depends on your perspective and what country you live in. Seems to me that if the US keeps sanctioning foes and allies alike every country bar the US will consider this a bad thing.
  - hopia 7y ago
    It's really not so far-fetched to think Russia would annex a Baltic state sometime in the future. They've shown they have the capability and political will to annex similarly prepared countries' territories. It all boils down to what they believe NATO's response would be.
elfexec 7y ago
> Why would the United States be the one to decide if Germany is allowed to build a pipeline to Russia or not? Because the US is the sole guarantor of German sovereignty. It's why the US has tens of thousands of troops in germany. It's why US decides if and how much oil/gas Japan or South Korea gets from Russia. It's why the US decides if the Dutch get to sell ASML semiconductor equipment to China. It's why the US dictates whether Canada arrests a chinese executive. Pax Americana. Protection doesn't come cheap. It certainly isn't free. > Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that? Of course not, but germany is in no position to dictate anything to the US. That's the point. If germany had tens of thousands of troops stationed in the US and provided safety to the US and mexico was germany's enemy, then germany would prevent the US from doing business with mexico. I'm not saying it's right or moral. It's just basic geopolitics. If you depend on another nation for your safety and host tens of thousands of their troops in your country, you are really not a sovereign nation and hence don't have the luxury of making all the decisions on your own.
- Jedi72 7y ago
  It's more like gangsters providing "protection" to local businesses. When it comes to the US, you have no choice in the matter.
- pinkfoot 7y ago
  > Because the US is the sole guarantor of German sovereignty. Sole? So the German armed forces are for what exactly?
  - pnw_hazor 7y ago
    "Along with the reliability woes of air force jetliners, only about a third of Germany’s 128 Eurofighter jets are combat ready and just a quarter of its 130 army helicopters are operational, mainly because of shortages of spare parts. Only one of six submarines and fewer than half of 244 Leopard tanks are working, according to a recent report to Parliament." https://www.latimes.com/world/la-fg-germany-armed-forces-20190213-story.html https://www.latimes.com/world/la-fg-germany-armed-forces-201...
OrgNet 7y ago
Is it the beginning of the great/bad crash of 2020? That would be the only way that Trump would loose the 2020 election...
dehrmann 7y ago
At first glance, but it's probably better for Europe to be grudgingly aligned with the top power that it's generally aligned with than to be a more independent 3rd or 4th power. It's the same reason the UK is better off in the EU, even if they don't like it.
tus88 7y ago
Germany aggressively uses EU money to bludgeon mainly Eastern European states info accepting policies made in Brussels. Germany has done a lot worse as well obviously.
bluecalm 7y ago
I live in Poland and I am ok with US bullying others around because it increases stability even if we all have to pay for it. The problem with that pipeline is that Russia will get a way to cut off Ukraine and Poland without cutting Western Europe (their biggest customers). This increases chances of them invading rest of the Ukraine or maybe even Poland in the future. Without big bully to prevent countries doing deals that decrease stability in other countries we have no recourse. Sadly it's too late for that particular project to be stopped. Previous administration missed it or didn't intervene on purpose. It doesn't make any sense to put sanctions on Russia because of their land grab in Ukraine while allowing them to build a pipeline that destabilizes the region even further.
- La1n 7y ago
  >Without big bully to prevent countries doing deals that decrease stability in other countries we have no recourse. The problem here is that many do argue right now that the US is doing this themselves and is a large factor in lots of instability in say the middle East.
- AsyncAwait 7y ago
  As someone from a country neighboring Poland, I am very familiar with this reactionary mindset and find it disgusting. (Poland seems to be in a very reactionary period right now in general.) - Yes, we were part of the USSR, which was responsible for many crimes, but that doesn't mean we now need to be unsophisticated U.S. bootlickers incapable of looking at each individual situation and evaluating it on its own merits. For example, it is easy to see how the U.S. would not tolerate the sort of of military exercises done near the borders of Iran off the coast of Mexico. But somehow when U.S. does it, it's fine. Same with the recent airliner disaster, which took Iran 3 days to admit to, longer than it should have, but the smug coverage from U.S. media completely omits any discussion of the U.S. taking 7 years(!) to admit to a similar disaster. Hard to argue the Iraq War was any good, same for Libya, or the sponsoring of fundamentalists in Syria, in fact the American relationship with gulf monarchies, or even Israel, is hardly based on any moral principles. The record in Latin America is too long to even get into etc. etc.
  - 7y ago
Mirioron 7y ago
>Image if it was Germany that used sanctions to prevent the US from building a pipeline to Mexico. Would you be ok with that? On the other hand, imagine that you're Canada and the US decides to build a pipeline to China/North Korea. Would you want Germany to back you up against the US? Because that's what's happening with Nord Stream 2. The US got into the whole thing quite late. Other European countries, such as Poland, Denmark, Estonia and others, were already against the pipeline, but Germany pushed it through anyway. Germany and Russia cooperated on dividing up Europe before.
deleted 7y ago
[deleted]

IfOnlyYouKnew 7y ago

It also endangers the basic principle of a rules-based, open world. If you think that's a good idea, imagine what happens to an economy when civil law and contracts are not enforced, even without any threat of violence. To pick just one example: if you're trying to get a loan to build a factory or buy a house, it's good for you that there are laws and trusted courts that would cause you a whole lot of pain if you failed to repay. It's no different in international politics, only that treaties between states are backed not by some external force, but by each country having a strong interest in remaining within that system that outweighs any short-term benefits from skirting its responsibility. I guess some of this is mildly counter-intuitive. But really there is game theory far more complex than this regularly understood on primary school schoolyards.

philwelch 7y ago
There's no such thing as a rules-based, open world. International relations is a state of anarchy and perpetual conflict that only fleetingly resembles peace during those periods where there's a global hegemon that can enforce those "rules". Within a country, those courts are the hegemon. "Each country having a strong interest in remaining within that system that outweighs any short-term benefits from skirting its responsibility" was the theory prior to 1914 as to why the Great War would never actually happen.
- corporate_shi11 7y ago
  Exactly. Rules must always be enforced by some higher authority. Because the highest functional units of governance are nations, this means that there will always have to be some "most powerful" nation enforcing order.
- zozbot234 7y ago
  > There's no such thing as a rules-based, open world. You're living in one right now. Anarchy need not be synonymous with chaos, especially if disputes and conflicts are relatively unimportant (due to easy defense making 'rights' self-enforcing). The point of courts is then to arbitrate disputes in a publicly-visible way, enforcement is relatively less important.

mark_l_watson 7y ago

James Rikard (author of Currency Wars) in his newest book Aftermath predicts that the dollar's reserve currency run may soon be over, and special drawing rights (SDR) reserve currency might only be 1/3 dollars. I think he is probably correct on this prediction but maybe not on another prediction: currencies like China's and Russia's might soon be 20% backed by gold. He makes the point that there is no need for 100% backing from gold since a smaller percentage would still prevent a country from printing new currency out of thin air. I think the dollar has a lot of inertia so it might reign for a long while longer as reserve currency, but then I also think about how much debt we have. Our treasury can not account for $21 trillion (ref: Catherine Austin Fitts http://solari.com http://solari.com) and the amount of consumer, educational, real estate, etc. of debt worries me, but: I expect a slow burn of our economy, not falling off of a cliff, economically speaking. We can adjust to a decade long slow downward economic trajectory, people are resilient.

thaumasiotes 7y ago
> currencies like China's and Russia's might soon be 20% backed by gold. He makes the point that there is no need for 100% backing from gold since a smaller percentage would still prevent a country from printing new currency out of thin air. What is the conceptual difference between a currency that is 100% backed by gold and one that is 20% backed by gold? Or rather, what is the difference between a currency that is 20% backed by gold, and another currency that is (a) 100% backed by gold; and (b) worth five times as much as the first currency?
- abacadaba 7y ago
  as compared to dollars, of course. (alt s/dollars/bitcoin/)
  - thaumasiotes 7y ago
    I don't understand this. Can you expand on it?
    - 7y ago

aazaa 7y ago

The lack of any viable alternative has kept the dollar in its current dominant position. That alternative won't exactly announce itself so that US policymakers can rationally decide to change course about the weaponization of money. It will instead, sneak up on the country in the form of weird little experiments that don't seem worth the time and effort to track or regulate. By the time one of them becomes the obvious marketplace disruptor, the die will have been cast.

LatteLazy 7y ago
Isn't the answer the euro? Stable, inflation proof, light or no sanctions. As brexit proceeds and more financial services move to mainland Europe, you won't even have to worry about the brits messing with it... I seem to remember the EU agreeing to setup a psudo bank to deal direct with Iran so they can bypass restrictions on trade? Edit: here it is! https://www.google.com/amp/s/amp.dw.com/en/eu-mechanism-for-trade-with-iran-now-operational/a-49407662 https://www.google.com/amp/s/amp.dw.com/en/eu-mechanism-for-...
- aazaa 7y ago
  Every country sponsoring a currency approaching the reach of the dollar will begin to experience the same political forces as the US. Weaponization of the currency in the service of foreign and domestic policies is viewed as a cheap alternative to war. And so the pressure to weaponize will sooner or later become irresistible.
  - deleted 7y ago
    [deleted]
- ApolloFortyNine 7y ago
  Didn't the whole Greece debt situation show why that could be a problem? One country's debt crisis caused the euro to tank 30% in a very short time. It ended up rebounding, but pretty much forced the EU to handle the situation (write off debt and provide low interest loans for the rest) or risk the whole thing exploding. It seems like your betting on 5-10 countries not failing, when with most currencies you just have to deal with 1. Which is probably why it's not currently the reserve currency, one would assume.

hogFeast 7y ago

As a point of fact, it isn't true that the dominant currency imposing costs is new...that has always happened. Britain did it in order to secure continued use of the £, and the US has done it before now. It is a normal extension of foreign policy (because finance is not separate from politics, as the Rusal example shows). It isn't some kind of authoritarian aberration either. The point is that the US has most to lose from a system of free trade so is the one who shoulders most of the burden for securing it. You don't secure something by sitting back and letting people ride all over it. And yes, some people who don't want to play by those rules will grouse. But the system will always lean towards one dominant currency, it is just easier that way (the UK losing control was was unexpected and took nearly six decades to play out after the point of obvious decline). The world is awash in dollars, no need to worry (if anything, the issue is that some are too reliant on too much dollar funding...not that the world is moving away). It is kind of unfortunate that the Economist keeps getting worse. The election of Mango Man and Brexit has truly addled the minds of some generally smart people (or made clear that their smartness wasn't actual intelligence but an ability to just parrot whatever they were told was "right").

SlowRobotAhead 7y ago
> It is kind of unfortunate that the Economist keeps getting worse. The election of Mango Man and Brexit has truly addled the minds of some generally smart people (or made clear that their smartness wasn't actual intelligence but an ability to just parrot whatever they were told was "right"). Sad to agree. It really is eye opening to see how many of “the smart people” get is so damn wrong over and over because of narrative or hope or just some weird political blindness.
pyuser583 7y ago
I've subscribed to the Economist for the past five years (or so). It's sad to see their decline. About 90% is still good, especially when they focus of international news. But they're willing to publish lower quality articles when defending their official liberal position. Sadly, the occasional low-quality article is seeping into other areas.
- 7y ago

1996 7y ago

I guess this is good for bitcoin! Good enough liquidity, can't be blocked, many tumblers, cheap transactions - maybe it will become a preferred way for international settlements, replacing gold?

geggam 7y ago

Given the amount of global debt does it really matter ? https://www.cnn.com/2020/01/13/economy/global-debt-record/index.html https://www.cnn.com/2020/01/13/economy/global-debt-record/in... Its like the world is playing musical chairs and at some point the music will stop and not everyone will have a seat

DeonPenny 7y ago
Thats not how global debt works.
- Supermancho 7y ago
  I'm pretty sure it does. The more debt increases against a property, the more valuation is boosted since the price of the unique property is bundled with the debt. This is how nations have been looking at debt for some time. Yeah, you can make a margin call on the US (directly or via a partner), but what are you going to replace that resource pipeline with?

itsumoiru 7y ago

I just read a related article the other day, claiming the same thing, but with a different analysis: https://mises.org/wire/world-looks-abandon-dollar-us-sanctions-tighten-their-grip https://mises.org/wire/world-looks-abandon-dollar-us-sanctio...

qroshan 7y ago
Ha Ha mises.org. What a joke! An institution which has been wrong about everything for the past 100 years is predicting a dollar cash? What a surprise!

FpUser 7y ago

No s.. Sherlock. It is starting to look more like a tantrum.

qaq 7y ago

In reality it does not although would be nice if there were good alternatives.

tjenkinsqs 7y ago

I prefer sanctions a thousand times over war. Don't we have enough of the endless wars (Afghanistan, Iraq, Libya, Syria, etc. from the last 2 administrations?

senderista 7y ago
Sanctions kill innocent people too, especially children and the elderly.
UncleSlacky 7y ago
Sanctions can be just as deadly as warfare, though, and they almost exclusively affect civilians, and don't get nearly as much media attention as warfare. From https://caitlinjohnstone.com/2019/06/23/starvation-sanctions-are-worse-than-overt-warfare/ https://caitlinjohnstone.com/2019/06/23/starvation-sanctions... "Starvation sanctions kill people. Tens of thousands of Venezuelans have reportedly already died as a result of this administration’s relentless assault on their economy; those human beings are no less dead than they would have been if the US had killed them by dropping cluster bombs on Caracas. Yet these deaths have received virtually no mainstream media coverage, and Americans, while they strongly oppose attacking Iran militarily, have had very little to say about Trump’s attacks on the nation’s economy. The economy which people use to feed their children, to care for their elderly and their sick. I’m titling this essay “Starvation Sanctions Are Worse Than Overt Warfare”, and I mean it. I am not saying that starvation sanctions are more destructive or deadly than overt military force in and of themselves; what I am saying is that the overall effect is worse, because there’s no public accountability for them and because they deliberately target civilians. If the US were to launch a barrage of Tomahawk missiles into an Iranian suburb with the goal of killing civilians, there’d be international outrage and the cohesion of the US-centralized power alliance would take a major hit. Virtually everyone would recognize this as an unforgivable war crime. Yet America will be able to kill the same number of civilians with the same deliberate intention of inflicting deadly force, and it would suffer essentially no consequences at all. There’s no public or international pressure holding that form of violence at bay, because it’s invisible and poorly understood."
- cavisne 7y ago

ilaksh 7y ago

Ever since I saw Ray Dalio's video about the economy and long term debt cycle I have been really worried. The thing that scares me more is that we don't hear any politicians talking about this stuff. In particular presidential candidates. The only one that seems to actually understand technology and the economy (Yang) is proposing an increase in entitlements, although hopefully the VAT can improve revenue somewhat. I know he knows who Ray Dalio is since he mentioned his name. I think there needs to be a plan for an international system that is not dominated by one country like the US dollar and is technologically sophisticated. Some kind of multi-government backed cryptocurrency, possibly paired with a decentralized resource tracking system. I feel like there are a bunch of people who think there is no problem and a bunch on the other side who think the situation is dire. My guess is that there is a real situation that we have to plan for and it seems like a very bad idea to put off that planning.

tehjoker 7y ago

This is an interesting article, but exposes the Economist's bias and lack of an honest historical accounting. While the it is new, interesting, and important that the world is becoming more skeptical of the dollar, it is kind of laughable that the only reference to Iraq and sanctions is the ones that were in the news recently. Iraq and many other countries have been subject to crippling US sanctions many times in the past. In the 1990s, sanctions were issued by the Clinton administration that were so severe that hospitals were scrubbing the floors with gasoline (https://theintercept.com/2018/03/21/us-war-iraq-legacy-of-blood/ https://theintercept.com/2018/03/21/us-war-iraq-legacy-of-bl...). https://reliefweb.int/report/iraq/iraq-study-baghdad-hospitals-highlights-critical-needs https://reliefweb.int/report/iraq/iraq-study-baghdad-hospita... "In June, 1991, Medicine For Peace medical teams began working in Baghdad pediatric hospitals. The following is a description of what they found: "The hospital was in darkness. Ventilators, incubators, dialysis machines were not functioning and any patients dependent on these support systems had died. We made ward rounds with Iraqi physicians, many trained in the US and Great Britain, who were despondent and demoralized. No x-rays, lab tests, or possibility of surgery. Worse of all, intravenous fluids and supplemental feedings for the scores of malnourished children were in short supply, the pharmacy had exhausted its store of antibiotics for treatable infections, and there was not one vial of morphine to relieve the pain of children suffering with tumors on the cancer ward." Outside of the US, economic sanctions of this magnitude are often regarded as war crimes. They are routinely deployed against the populations of official US enemies and have been for some time under the theory that if we make life as bad as possible for the people, maybe they'll overthrow the regime. Hint: It usually doesn't work and the regime uses the sanctions to (correctly) characterize itself as under attack by foreign enemies. In the modern instance, the case for sanctions in Iraq can only be described as barbarous bullying. The Iraqi government voted to remove US troops in response to an unprovoked assasination on an Iranian top general on their soil while performing what is claimed to be a diplomatic peace mission (another war crime). In response, the US employs sanctions to bully the Iraqis into acquiescing to an unending occupation that they have judged does not serve their interests. Yanis Varoufakis, the Greek Finance Minister (paraphrased, talking about austerity in Greece) said that where they used to use tanks, they now use banks. In the case of Iraq, sadly, tanks, banks, and aerial bombing have all been used in various combinations at various times.

yalogin 7y ago

Yep that wall has broken down. There are already long term implications to Trump craziness. What ever he is doing is extremely short sighted and plays right into China's hands, the one thing he is railing against.

williesleg 7y ago

The Economist is Fake News. If they're so smart, why are they all so poor?

flyGuyOnTheSly 7y ago

If you were getting a paywall like me, just delete all your economist.com cookies and block all javascript.

distant_hat 7y ago
Oftentimes, just pressing the 'reader' button in Firefox works.
- flyGuyOnTheSly 7y ago
  Interesting, I will try that the next time, thank you!

ballarak 7y ago

There's the possibility that the USG believes the dollar's primacy is going to come to an end in the relatively near future. There are other factors at play that could weaken the dollar's status that matter more than sanctions, including: (1) The geopolitical shift away from a unipolar world, with the rise of states such as China. (2) The upcoming end of the petrodollar, as nations shift to renewable energy. If you believe the reign of the dollar will come to an end anyways, you might as well use its power while you have it and throw sanctions around to weaken your rivals.

erikpukinskis 7y ago
This possibility comes along with the rise of a new political brand for the Republicans: “We do whatever we have to to get ours”. In the early stages under GW Bush/Rumsfeld this was the lighter “We do whatever we have to to advance American interests throughout the world” but under Trump/Murdoch it is now “advance the interests of those who are loyal to me”. That will play well in an economic crisis. I don’t think the brandmakers for liberalism in America are prepared for that fight. Right now the brand on the left is something like “we can and should demand a better wage and better benefits from Daddy!” but that falls flat in a crisis. That all said, we’re not in that crisis yet. So perhaps it’s fine to focus on the present, where we certainly have the money to increase workers benefits.

vinceguidry 7y ago

The dollar is still reigning? News to me.

viburnum 7y ago

The dollar’s exceptional liquidity makes it more valuable, which is good for people who have dollars, but it’s bad for people whose costs are in dollars (American exporters). The dollar’s strength since the earlier 1980s (the first major flight to liquidity during the era of free movement of capital) has been terrible for American industry. It’s like Dutch disease, but instead of a commodity like oil causing unbalanced trade, it’s the dollar itself.

Animats 7y ago

Whether China's yuan should be freely convertible to other currencies is something the PRC has struggled with for years. A freely convertible yuan would increase China's influence on the world financial system, but it would also increase the influence of the world financial system on China. And it would require much easing, if not elimination, of China's exchange controls. A decade ago, a freely convertible yuan was seen as likely. But China has backed off from that. Xi Jinping's "China 2025" is about autarky - reducing China's dependency on the rest of the world. So, the yuan as a world currency isn't really happening yet. Euros, though...

redis_mlc 7y ago
Euros are, literally, a joke. A currency without an army is nothing. You can pretend whatever exchange rate you want between the Euro and the USD, but the USD is the real currency.
- HenryBemis 7y ago
  Yes because USA Vs the world will have USA as a winner (if this is what you imply) which is 5yo thinking. EU although it still going through some growing pains, appears to be far more mature than today's USA, which is burning bridges and building walls (I mean figuratively). If/as the planet continues to decrease its dependency to USD then the might will decrease further with it. USA has the No1 debt on this planet. I don't see any other countries of that size going bust and needing to print new money every other year because they cannot afford to run their states. I am using this childish and realistic example so you include that in your thought process. As for the army, EU is in the process of considering/designing an EU army, since the "US hegemony" seems to be in deep .... with USA's latest leadership. And thank you for speeding up this process.
- tpxl 7y ago
  >A currency without an army is nothing. The Swiss beg to differ.
  - deleted 7y ago
    [deleted]

m0zg 7y ago

It's not about whether dollar sucks in absolute terms. It's about whether it sucks less than other currencies. It's tied to the largest economy in the world, and the strongest military in the world (importantly, including the strongest navy as well), by quite a margin, and as such, it's not going anywhere. You don't need to run faster than the bear, you just need to run faster than the other guy.

fallingfrog 7y ago

Sanctions are the modern equivalent of siege warfare- using starvation as a weapon. I’m not sure why it’s looked upon as being a kinder, gentler approach than dropping bombs on civilians. It’s still violence. People still die.

mmmuhd 7y ago

I read a paper on the implementation of oil trade based on an independent crypto currency backed by Oil exporting countries, the author laid all out and how the US will never allow that to happen, sorry I lost the page source.

LockAndLol 7y ago

This is behind a paywall. Does anybody have the full article? The first few paragraphs say nothing more than the title. Edit: https://archive.md/gbAv6 https://archive.md/gbAv6 ------------- Maybe this will finally push towards crypto-currencies. Bitcoin doesn't seem to be a candidate though. 10 minutes for a transaction is too slow.