In the past, the U.S. has needed to wage wars to avoid the collapse of its economy. However a war will not help if the market collapses.
The U.S. profited nicely during World War II by selling weapons to all of the other countries in the world, including to the Soviet Union exclusively in exchange for gold. And not one bomb ever fell on U.S. territory.
The situation is completely different now. After sewing chaos and instability throughout the world, the U.S. has received a strike in retaliation. The thing that Americans feared most has come to pass: Russia and China’s united war against the dollar.
Pressure on China increased sharply after May 9, when Washington was not pleased by the friendly conversations Chinese leader Xi Jinping had in Moscow. This caused a commotion in Hong Kong, but it was quickly suppressed. With maneuvers in the East China Sea and accidents at chemical plants, the Chinese decided they would no longer tolerate the situation, and so they pulled the trigger in the first economic world war. Really though, they had been preparing to do this for quite some time.
First, China devalued the yuan, which caused the collapse of the Shanghai Exchange Composite Index by 7.6 percent. Next, China began to interfere heavily in the exchange market by using its reserves. Within a short period of time, Beijing had sold a fantastic number of American bonds, and this has affected the profitability of those bonds.
In just two weeks, China sold more than $100 billion in bonds, and Aug. 24 has already been deemed Black Monday. One of America’s oldest stock indexes, the Dow Jones industrial average, fell more than 200 points over four days.
At the close of the exchange on Tuesday, Aug. 25, the Dow was in the red zone again, having set a record low. For the first time in its 119-year history, the Dow fell rapidly by 1,089 points to 15,370, an all-time low in the history of the index. The previous record low was recorded in 2008 and amounted to 777 base points.
As of Aug. 19, the traditionally synchronized movement of U.S. stocks and bond yields had been destroyed. This way of life had persisted for almost 30 years, but in one day, everything changed.
Russia and China have been getting rid of U.S. bonds for two years, but they’ve been doing it slowly. The results of a study by the U.S. Department of the Treasury and Federal Reserve System show that since December 2013, the volume of treasury bonds held by Russia has decreased from $149.9 billion to $86 billion. Since early 2015, China has sold $107 billion in treasury bonds. That was how it began, and now, the entire year will be defined by the last two weeks.
Large quantities of American stock make China’s economy dependent on the U.S. because falling prices would hurt China as well. But everyone understands this, so they have been gradually getting rid of the stock in order to minimize loses.
As of the end of June 2015, the amount of U.S. treasury stock on balance at the People’s Bank of China is estimated at $1,271 trillion. However by forfeiting stock, China has also lost influence in the United States. Nevertheless, China made the decision to deal this blow.
If stocks are sold quickly, their value decreases for others, but not for the seller. Because of this, China has decided to stop chasing the financial wind blowing out of Washington and instead to create its own wind. After taking this step, there is no stopping it. According to experts, if sales continue at this same pace, it will allow the PBOC to carry out an intervention for another 18 weeks.
It is still unclear whether or not the U.S. economy will survive such a blow. More than likely it will not. The U.S. financial system has never experienced such a hit before. Therefore, it is obvious that a military conflict is overdue. Specialists are of the opinion that with every percent that the market falls, the amount of infusion that would be necessary grows by roughly $200 billion.
In the 10 days after August 19, losses in the U.S. economy’s capitalization already began to exceed $1.6 trillion, and the entire operation is practically out of control. The exchange rate for the dollar against the euro has fallen 1.5 percent so that the rate is now $1.22 for every euro. Oil prices have increased, as has the Russian ruble, which gained five rubles on the dollar.
In this situation, the U.S. would do well to focus more attention on its internal problems, and curb its external presence. Obama is practically useless. He is demanding the immediate adoption of a proposed budget and another increase for the threshold of public debt. However, this only adds to the distrust felt toward the United States.
Within the United States, there is growing distrust of both Democrats and Republicans, and there has been a sudden increase in ratings for the notorious Donald Trump. I would not be surprised if Trump were to become the next U.S. president, although that would be completely outrageous and would destroy the entire U.S. political system. However, the U.S. has not succeeded in waging a small victorious war to save Democratic ratings in the elections, and Ukraine is not a place where Americans could win.
Poroshenko was invited to Berlin for a reason. He was invited so that he would cease his military rhetoric, for in Moscow, they have made it clear that there will not be a third Minsk deal, but there will be a capitulation. Furthermore, Moscow, as the underwriter of the Minsk agreement, which became a United Nations document thanks to Russia, now has the right to a peacekeeping operation if force is used in Kiev, similar to what it did in Georgia in 2008.
No one will give money to Kiev any longer, or to anyone. It’s a crisis. Russia and China would be able to give money, but not under this government, or under the conditions of real federalization whereby regions receive real independence and even their own armed forces. Because of this, there have been discussions about the adoption of a new constitution, only the current Supreme Council is clearly not capable of this.
However, there will not be a world war with tanks and cannons. Black Monday, Aug. 25, 2015, has already become the economic equivalent of Pearl Harbor and will likely go down in history as the beginning of the first economic world war.
And if the U.S. loses this economic world war to Russia and China, Ukraine will still have Donbass. I have often seen such writing on the walls of houses in Kiev. Apparently, the writers have wanted to give it a negative meaning and present a threat.
But time is the best judge, and sometimes meanings change. Now, it will be a deliverance.