Michael Hudson Talks with the Saker About the Russian Counter-Sanction of Paying for Its Gas With Roubles

Yves here. Both economists and political commentators have taken keen interest in Putin’s announcement that Russia will accept payment by “unfriendly countries” for its gas only in roubles. As we discussed, there are stronger and weaker forms of how Russia can require these payments be made, and Putin called for his banking and finance operatives to work out the details over the next week.

Some countries like Germany and Italy said no, even though there are possible implementation paths that would not be disruptive. We’ll see soon how demanding the Russian demands actually are pretty soon.

In the meantime, at a minimum, Russia having been badly burned by the West using its banking system to purloin freeze $300 billion of Russia’s foreign exchange reserves, is keen to reduce its exposure to more shenanigans.

Michael Hudson reviews some of the broader implications in a Q&A with the Saker.

Originally published at Vineyard of the Saker

Following Putin’s announcement about selling gas for Rubles only to hostile nations, I decided to reach out to Michael Hudson and ask him (my level, primitive) questions.  Here is our full email exchange:

Andrei: Russia has declared that she will only sell gas to “hostile countries” for Rubles.  Which means that to non-hostile countries she will continue to sell in Dollars/Euros.  Can these hostile countries still purchase gas from Russia but via third countries?

Michael Hudson:  There seem to be two ways for hostile countries to buy Russian gas. One seems to be to use Russian banks that are not banned from SWIFT. The other way would indeed seem to be to go through what looks to develop as a formal or informal third-country bank or exchange. India and China would seem to be the best positioned for this role.  U.S. diplomats will be pressing India to impose its own sanctions on Russia, and there is a strong pro-U.S. constituency there. But even Modi sees the obvious superior benefits of benefiting from India’s geopolitical position with Russia and China’s Belt and Road Initiative relative to whatever the U.S. has to

Back in the 1960s the West dealt with the Soviet Union using barter deals. Arranging this barter became a big banking business. Barter is the typical “final stage” of the deterioration of a credit economy into a money economy that breaks down.  Over the medium term, a new international financial organization needs to be created as an alternative to the dollarized IMF to handle such intra-bloc transactions in today’s new multipolarizing world.

Andrei: These hostile nations would pay extra for that service, but they would not have to get Rubles.  Is that even possible?

Michael Hudson: Presumably Russia would not absorb the added bank costs of avoiding U.S. sanctions. It would simply add them on to the price, after setting the price at which it hopes to end up with – preferably at the original “old” ruble/euro or ruble/dollar exchange rate, not the post-attack depreciated rate.

Andrei: Question: Do you believe that the EU will agree to pay Roubles or will they take the total loss of 40% of their energy?

Michael Hudson: They will pay – or be voted out of office. If they WERE to cut their energy imports from Russia, the distress-price of gas would soar and there would be drastic shortages disrupting the economy. Energy is productivity and GDP. For Russia, of course, this is an opportunity to make the break now instead of later – and leave NATO to take the blame for the interruption of supply. So if I were Russia, I would not be in a hurry to help solve the foreign-payment problem. The same goes for non-oil raw materials, from neon to palladium to titanium, nickel and aluminum.

Andrei: So far, this applies only to natural gas.  Do you believe that Russia will extend this to petroleum, wheat and fertilizers and, if yes, what will the effect from this be for the world economy?

Michael Hudson: All Russian exports are affected by these currency controls, because all bank transfers are sanctioned in the way discussed above.  Russia has no use for dollars or euros, because these can be grabbed. It needs to have complete control over whatever monetary assets it receives, now that past norms of international law and financial policy no longer apply.

Andrei:  Russia has A LOT of natural resources and a lot of technologies/commodities.  If she is successful in her efforts to become paid in Rubles, could it be that the Ruble, which would then be a natural resources/ commodities backed currency, could become a major “refuge” currency.

Michael Hudson: I’m not sure what a “refuge” currency is, but the ruble will become a self-standing currency. If its balance of trade and payment improves, the problem may be to keep it from rising. If that happens, the question will be whether a rising ruble would oblige buyers of Russian exports to pay more in their own currency. A new multilateral financial system is in the process of being structured as we’re having this discussion. Will there be speculation? Forward selling? Short squeezes and Soros-type raids? Who will be the participants and under what rules …?

Andrei:  How hard a hit would this Russian decision potentially have on the dollar?  And MBS negotiating with the PRC for oil sales in Renminbi.   Do you think that China and Russia will bring down the Petrodollar and will we see a commodities-backed Ruble and a commodities-backed Yuan replacing the Dollar?

Michael Hudson: The petrodollar will remain between the United States and its allies. But alongside it, there will be the Saudi-yuan and India-yuan arrangements for trade in oil, minerals, industrial products and probably international investment. Trade in these products will be able to occur in a number of currencies, probably on a number of exchanges. It is not clear whether some formal or informal arbitrage may develop between these areas. That is part of what is to be designed.  To oversee and regulate the resulting financial and trade arrangements, an alternative to the IMF is needed. The U.S. will not join any organization in which it does not have veto power, so we will see a division of the world into different trading and monetary areas.  The result is not so much a conflict as two quite different operating philosophies as the non-U.S. world develops its alternative to financialized neoliberalism.

Andrei:  The US has basically stolen Russian gold and foreign currency.  The Russians claim that the US has shot itself in the foot and that this will ruin the reputation of the dollar, do you agree with that?

Michael Hudson: Absolutely: Iran after the Shah was overthrown, Afghanistan’s foreign reserves earlier this year, Venezuela’s gold held in the Bank of England, and now Russia. Even timid Germany has asked that airplanes begin flying its gold held in the New York Fed back to Germany!

Andrei: do you think that Russia will retaliate against the US/UK/EU and nationalize/seize their assets in Russia or even in countries friendly to Russia (China?)?

Michael Hudson: Russia is very careful to do everything according to international law – which, of course, has a wide variety of precedents and excuses, and whose courts tend to be dominated by U.S. judges backing U.S. versions of what is legal under whatever it announces to be the “rules-based order of the day” instead of the “rule of law” along UN lines.  To the extent that NATO investors abandon their assets in Russia, these may be sold – perhaps at a distress discount – to buyers who promise to maintain the business. Russia might impose severe fines for abandonment, as when landlords abandon buildings causing local expenditures on cleanup costs. Abandonment causes a “public nuisance.”

This would be a cause for immediate confiscation of current taxes, rent payments and salaries or payments for current supplies (including electricity and fuel) are not paid. Think what would happen if the gas bill were not paid and pipes froze and flooded a property. There is an entire world of penalties that could be applied.

International law provides for some recovery of assets wrongly confiscated – as the U.S. confiscations of Russian-owned reserves and personal property would seem to be. At this point Russia really has nothing to lose. It looks like there is not going to be much Russian-European cross investment for quite some time. Russia finally has given up on its hopes to “turn West” after 1991. It was a dream that turned into a nightmare, and President Putin and Lavrov have expressed their disgust with Europe acting in so uncivilized a matter. So for Russia – and increasingly other countries – NATO Europe and North America are the new barbarians at the gate. Russia is turning

That of course is precisely the aim of U.S. policy – to lock Europe into its own dollarized neoliberal order, blocking any mutual prosperity achieved by trade and investment with Russia or, behind it, with China.  It looks like today’s sanctions are permanent for the next few years. So of course Russia needs to keep formerly NATO-owned enterprises operating. Let the NATO investors recover compensation from what the United States has grabbed. (Hint: the U.S. may simply begin to grab China’s or Latin American or near Eastern reserves to pay NATO investors who have lost in Russia. That is the model of using Afghan money to pay victims of Saudi Arabia’s 9/11 attack two decades ago.)

Andrei:  finally, what question, if any, did I forget to ask and what would you reply to it?

Michael Hudson: Your questions are about specific problems and solutions. But the overall resolution needs to be system-wide, not patchwork. These specific problems cannot really be solved without a far-reaching institutional restructuring of the international financial system, world trade, a world court, and a UN without US veto power.  And such an institutional reformation requires an economic doctrine to provide its basic principles. A New International Economic Order will be constructed on non-neoliberal principles – along the lines of what used to be called socialism, when that was what people expected industrial capitalism to be evolving into.

Andrei: thank you so much for your time and expertise!!

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  1. Where the Milk and Honey Ebb

    Given that Germany and Italy and others have said no to buying in Rubles, I wonder what the end-game is.

    It seems as if our great leaders are going to inflict real pain on us, massunemployment and starvation. Things that we haven’t felt for quite some time and what according to Mao has made us weak. They will blame the pain on Russia and of course we will be called upon to go to war with Russia to get our food and jobs back. In Swedish media they call the new gas prices and every price gouging – the “putin gas price” etc.

    1. Pat

      The end game is Russia making a whole lot of countries realize what a sham the US is. Right now in the spring, it is easy for Germany to say no. Three months from now the same people saying no will panic as it becomes increasingly obvious that not only is the US fuel more expensive, unlike Russia they will not be able to deliver. And while that may be the big commodity, there will be ever increasing shortages and inflation that is going to undermine any support for these policies. The cute little white girl will no longer move people and politicians are going to know that not having enough heat will do them in.

      IMNO It is going to take too long, but Europe will back away from the sanctions and will be belligerent about the NATO expansion because it will cost too much and unlike America, their citizens will not be ignored. Russia is going to win.

    2. NN Cassandra

      Frankly, this whole affair is quite bizarre. When West seized Russia USD/EUR assets, introduced sanctions and banned Russia from using USD/EUR and then added carve out to allow themselves to send the now useless USD/EUR to Russia for oil/gas or whatever EU wants… I mean isn’t it absolutely obvious that what this amount to is trying to get resources from Russia for free?

      So when Western leaders came up with this clever scheme, did they work on the assumption that the sanctions will be leaky (that ruble didn’t crash would suggest there are ways for Russia to move the money around and use it)? Did they expect Putin to give them gas free of charge for the next couple of years till they find other suppliers? Or are they bunch of idiots who have absolutely no idea of what they are doing?

      Because when I see yet another politician talk about how West is currently financing Putin’s war, it really looks like they think they have the upper hand there.

      1. The Rev Kev

        That Gonzalo Lira has dropped a very long video called “Why The Western Elites Are Foolish and Amoral” which unfortunately makes a lot of sense. He is basically saying that to advance through the system, you have to be intelligent, work hard but most important of all, you have to comply. Those who rebel or question the system are pushed to the side and will not be allowed to advance. In the end, this gives you people like Psaki or Blinken or Ursula von der Leyen who will refuse to go against the consensus, no matter how bad a decision they have made.

        https://www.youtube.com/watch?v=cDOa9PW3lnU (1:44:10 mins)

        1. Pate

          Yes. Chomsky said something similar about likely the most important aspect of system maintenance: the gatekeepers and agenda-setters who are “stunningly successful” (Thomas E Patterson, Harvard) at controlling the way we think:

          “… the press has a job: its job is to keep people from understanding the world, and to keep them indoctrinated … and the point is, if you want to be a “responsible” journalist, you have to understand what’s important, and what’s important is things that work for the cause – U.S. corporate power, that’s the cause. And you will not stay in the press very long unless you’ve internalized and come to understand these values virtually intuitively – because there’s a whole elaborate process of filtering and selection in the institutions to eliminate people who don’t understand them and to help advance people who do … And of course, it’s also part of the way the propaganda system keeps everyone else from understanding the elementary realities, too.”

        2. flora

          The “consensus” never seems to think beyond “step 1.”

          I’m not asking for a Talleyrand or a Bismark or even a George Kennan or Kissinger. Just a little independent foresight and common sense in our “deciders” would do. But these people have never gained judgement, they’ve only gained approval from the “right people.”

          1. David in Santa Cruz

            I think that there is something quite important being said here. The American Ivy’s appear to have coddled a generation of entitled elites who believe themselves to be exempt from conflicts of interest and the law of contracts — the U.S. banking and finance sector being a prime example.

            Blinken is the son of a founding director of Warburg Pincus who was educated at elite private schools in NYC and Paris (stepdad suffered horribly in the Holocaust) before being earmarked for “great things” as a Harvard undergrad. He worked with Daddy as a Dukakis fundraiser, buying a sinecure as an advisor to Presidents ever since — mainly in service of America abetting the murder of Arabs in Iraq, Libya, Gaza, and Syria on behalf of Zionist irredentism. He appears to have a complete lack understanding of the civil war between Russia and “Ukraine” and seems to be warped by the 20th century conflagration between Nazism and Bolshevism that has very little relevance to the continued existence of NATO — except to the extent that he, and partners Lloyd Austin and John Thain have personally profited through WestExec and Pine Island Capital Partners.

            We are badly served by this generation of country-club brown-nosers.

            1. chris

              Absolutely agree with you there. What our elites showcase, more than a practical example of the Peter Principle, is that if you comply you will be rewarded financially. You will also be insulated from the negative consequences of any decisions you supported. Only in very rare circumstances will you ever be ostracized to the point where you cannot recover.

              This is the main reason why there is such rage at people like Louis CK, Rogan, Trump, Sanders, Gabbard, Petersen, Mike Rowe, etc. These are people who all engage in wrong thinking and create audiences who question compliance. They are also people who seem to be able to resist cancelation via official channels. That they exist and prosper is something that cannot be tolerated by the overlords of our regime.

              Which means I think it’s reasonable to expect that as the failure of our Russia related policies becomes clear we will experience a crackdown on social liberty and reality based information the likes of which would make Stalin blush. These elites can only maintain their status if the system is under their control. To the extent that the system is observed to not be under their control, it’s only a matter of time until their positions become worse. As such, this is an existential crisis for people like the Bidens, the Clintons, the Bloombergs, the Obamas, the Pelosis, the Heinzs, the Romneys, etc etc. They will fight to the death over it.

              I expect to find my country become unrecognizable in short order due to all this.

              1. Vodkatom

                I hope you’re wrong on crackdown conclusion. But I like the lens you put forth for understanding the establishment rage at “wrong thinkers” like Sanders, et al. This clarifies for me the whole episode in the last election when all the establishment democratic candidates dropped out en mass to support Biden against Sanders. I understood why the “party” was against Sanders, but was disturbed(?) by how all the individual politicians just rolled over so easily and in the exact same way.

            2. rob

              Blinken is also a member of the council on foreign relations,
              One of the “clubs” of which the establishment, has used to groom “groupthink”..

        3. Left in Wisconsin

          This is also my experience of American policy elites: book-smart, very (very) hardworking, but almost entirely drawn from a narrow slice of the population and, most importantly, always willing and able to rationalize, compromise, compartmentalize, look the other way, and otherwise keep the focus on getting ahead within the system (which basically requires/demands selling out) rather than consider what might be best for the system.

        4. JBird4049

          >>>In the end, this gives you people like Psaki or Blinken or Ursula von der Leyen who will refuse to go against the consensus, no matter how bad a decision they have made.

          Remember the question, if someone else jumps off the cliff, would you do so as well? I guess they would follow the lemmings off the cliff?

          1. ambrit

            I see it as more like that these Credentialled Cretins consider themselves as those who organize and facilitate the flood of lemmings “doing the cliff experience.”
            Something like a neo-liberal therapist; “I observe your pain.”

        5. drumlin woodchuckles

          ” Those who rebel or question the system are pushed to the side and not be allowed to advance” . . . might be very good recruits into or even co-founders of an emerging Oppositional Defiant BetterCulture. Perhaps they can become the leaner tougher meaner hippies we need
          ( or need to be ) for today’s leaner tougher meaner times of today.

      2. lance ringquist

        under free trade whats mine is mine, whats yours is mine. any country that was foolish enough to believe they were special and not subject to smash and grab, were fools.

        nafta billy clinton made this quite clear.

        clearly this is fascism,

        “bill clinton did this,
        NATO bombed Yugoslavia for 78 days following accusations that Milošević was ethnically cleansing Albanians in Kosovo.
        The late Milošević was quietly and de facto cleared of all charges by the Hague Tribunal in 2016, but by the time the truth came out, Yugoslavia was long gone, broken into seven, more manageable and exploitable, countries. One of those profiteers, Albright’s financial management company, was involved in the privatization of Kosovo’s telecommunications company. From Wikipedia, one can learn that she too likely profits well from her war mongering, along with other untouchables”

        bill clinton did this to the mexicans,
        “There’s no other option for us. It’s either certain death in our villages where we can’t survive, largely due to NAFTA, or maybe dying on the road.”

        “a bill clinton mouth piece,
        In a March 28 New York Times article, Thomas Friedman wrote:
        “For globalization to work, America can’t be afraid to act like the almighty superpower that it is… The hidden hand of the market will never work without a hidden fist. McDonald’s cannot flourish without McDonnell Douglas, the designer of the F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies is called the United States Army, Air Force, Navy and Marine Corps.”
        As NATO troops entered Kosovo, the same newspaper announced Kosovo’s new currency will be the U.S. dollar or German mark, currencies of the two countries most responsible for Yugoslavia’s break-up. And after months of being told that Slobodan Milosevic was the problem, we heard Washington Balkans expert, Daniel Serwer, explain:
        “It’s not a single person that’s at issue, there’s a regime in place in Belgrade that is incompatible with the kind of economy that the World Bank… has to insist on…”

        ” Bill Clinton elaborated:
        “If we’re going to have a strong economic relationship that includes our ability to sell around the world Europe has got to be the key; that’s what this Kosovo thing is all about… It’s globalism versus tribalism.”
        “Tribalism” was the word used by 19th century free trade liberals to describe nationalism. And this war was all about threatening any nation which might have ideas of independence.”

        “Globalization undermines both democracy and national sovereignty, the only guarantors of human rights. Unfortunately for Messrs. Clinton, Chretien et al, that message was not lost on millions around the world watching NATO bombs pulverize Yugoslavia.”

        “Globalism is the creation of a set of property rights that, precisely because they span multiple sovereignties, cannot be touched by one government without inviting conflict with another.

        Organizing property and production across borders—whether through free trade, protections for foreign investment, currency unions or other devices—does more than limit the power of governments. It also serves, “to dissolve the small, discrete collective of mutual identification—which means a country.”

        offshore tax havens are a direct result of free trade: the pathology of free trade is being exposed

        Today’s global rich are increasingly stateless, detaching their money from nation states and conventional representations of ownership to hide and preserve it. A global oligarchy is growing — and it does not bode well for everyone else and the planet.

        free trade enables the plundering of the wealth of nations, especially hurting the world’s most poor and vulnerable populations. It allows wealthy individuals and corporations to dodge and evade their tax responsibilities, shifting obligations onto those with fewer resources. It empowers criminals, deadbeats, and kleptocrats

        in 1983 there were only 15 billionaires in the u.s.a., under nafta billy clintons free trade, billionaires have ballooned into more than 615, and under free trade, this is happening globally

        1. Joe Renter

          I would give you a standing ovation on that post. A great summary of how we got to the shi*show we have now.

            1. drumlin woodchuckles

              I wonder whether another suitable nickname for President Slicky Bill might be ” President Jeffrey Epstein’s friend” . . . or just simply ” Jeffrey Epstein’s friend”. Just to be used from time to time to remind people that Jeffrey Epstein was a perfect expression of everything Bill Clinton stands for.

        2. Charles 2

          Milošević was not cleared of all charges by The Hague tribunal. The procedure was stopped because of his death.

          1. lance ringquist

            really NC should do a piece on this so that if any pro nafta/nato types show up, we can just point to the facts.

            he was vindicated after he died.




            “In addition, as I noted here, the former head of security in the Yugoslav army, General Geza Farkas (an ethnic Hungarian), testified that all Yugoslav soldiers in Kosovo had been handed a document explaining international humanitarian law, and that they were ordered to disobey any orders which violated it. Farkas also said that Milosevic ordered no paramilitary groups should be permitted to operate anywhere in Kosovo.

            When Milosevic died, his accusers claimed he had “cheated justice”. But in fact, as the ICTY has now confirmed, the injustice was done to Milosevic.

            While he had to defend himself against politically-motivated charges at The Hague, the US and its allies launched their brutal, illegal assault on Iraq, a war which has led to the death of up to one million people. Last year a report from Body Count revealed that at least 1.3 million people had lost their lives as a result of the US-led ‘war on terror’ in Iraq, Afghanistan and Pakistan.
            Read also:
            Albanians (USA) are threatening Serbia with war

            Those sorts of figures help us get Kosovo into some kind of perspective. Even if we do hold Milosevic and the Yugoslav government responsible for some of the deaths there in 1999, (in a war which the West had clearly desired and provoked) far, far, greater death and destruction has been caused by the countries who were the keenest to see the President of Yugoslavia in the dock. As John Pilger noted in 2008, the bombing of Yugoslavia was the “perfect precursor to the bloodbaths in Afghanistan and Iraq.”

            Since then we’ve also had the NATO destruction of Libya, the country which had the highest living standards in the whole of Africa and the backing of violent ‘rebels’ to try and achieve ‘regime change’ in Syria.

            You don’t have to be Sherlock Holmes to see a pattern here.”

        3. Rod

          great, succinct, comment
          i can’t say why, but i’m thinking this is not tht good–
          “to dissolve the small, discrete collective of mutual identification—which means a country.”

    3. Acacia

      Given that Germany and Italy and others have said no to buying in Rubles, I wonder what the end-game is.

      As Michael Hudson suggests, they will climb down and pay in roubles — or be voted out of office when the cost of living for their constituents goes through the roof. And right now, I’d bet on the latter, unless the “solution” is to print tonnes of money to pay oil companies to keep prices down.

      Of course our great leaders will try to blame shift, pin it all on Putin, but at the end of the day they will get hammered at the polls. And after that they will still blame shift, whine about deplorables, Russian stooges, fluoridation in our precious social media fluids, etc.

      1. Where the Milk and Honey Ebb

        “be voted out of office”
        Who would fill the void? The only person in Germany voicing anything similar to opposition to the war is Sarah Wagenknecht. Everybody else give standing ovation to radical increase of defence budget and procurement of flying dustbins… F-35 I meant, and standing ovations to Zelensky.
        Bur not even Wagenknecht talks about what wall-climbing lunacy the current policy is. Even if she would the Die Linke leadership is 100% dedicated to symbol politics. When the presented their presidential candidates they told members and everybody that would listen that their candidate wasn’t about winning the presidency bur bringing up the topic of poverty through this voluntering pro. The neoliberal “the are no alternatives” is more or less implemented in Germany. And mind you they have the most to lose.

        1. flora

          The neoliberals are technocrats, among other things. They believe in technocratic govt instead of political govt – political govt where politics is about asking what the important govt and public questions are right now (not what they were yesterday) and trying to find solutions. The technocrats work to create fixed (think AI ) solutions to yesterday’s questions and lock them in place, imo. New questions, new problems rising from their yesterday solutions, are given the “There is no alternative” dogmatic response. They’ve built a structure of solutions to a 1980’s problem that’s no longer fit for service in 2020, but “There is no alternative”… according to them. My 2 cents.

          1. Where the Milk and Honey Ebb

            Only partly true. Neoliberals are rabid ideologues whose aim is to weaken the state’s influence on business, ensuring that no wealth is redistributed from owners to employees and that the state is protecting owners from employees and their demands for living wage and social welfare state.

            They are technocrats in the sense that they have infected their cancer into the legislative and policy bone marrow. In this respect they have been highly efficient. So efficient that it will take decades to untangle the chaos. In the West we have the same problem as the former Soviet Union states had vs. capitalism. Almost nobody in the ex-Soviet states understood how to work in the capitalism. Nowadays, we have a corresponding brain rot. Nobody in the West is able to build up a privatized railway to make sure the trains arrive and leave on time, as they used to do in Sweden and Germany before the neoliberal deconstruction. Where would you find people that are capable of thinking, acting and implementing functions and systems, such as public transport, as public goods and for the public good?

            Btw, in Russia the trains arrive and leave on time every time of the year and everywhere in the country.

          2. drumlin woodchuckles

            We the powerless will have to try to speak truth to eachother and learn truth from eachother, and do our best with the zero-power we have to craft our own solutions to our own problems of today.

            Only a minority of Americans would ever want to be identified with such an effort. But a minority could still be millions. Maybe just enough millions to create the Oppositional Defiant CounterCulture needed to force our own solutions into existence for our own problems. Perhaps success in that project could give us enough diffuse networked non-assassinatable power that we could undermine and tear down and destroy the current system-of-systems from below.

        2. Michael Hudson

          Well, as you may have heard, Sarah’s husband just quite as head of Die Linke, getting exasperated.
          On the other hand, the Christian-Democrat Frankfurter Algemeine Zeitung editor interviewed us together over lunch a few years ago in Berlin hoping to popular her and my views. So the change, if it occurs, will probably have to emerge from a palace revolt in a mainline party.
          Then there’s the right wing …
          Things really don’t look too good for Germany

          1. Where the Milk and Honey Ebb

            How often are you being interviewed in German media or consulted by people with power, influence of agenda-setting over power? I really hope more than I am aware of.

          2. Skip Intro

            The AfD and right would be the natural beneficiaries of electoral revolt, with Die Linke unable to escape DDR taint and the Greens as coopted and loyal to NATO as anyone. I wonder if they mind throwing the Ukrainian neonazis under the bus. Can we expect much solidarity from serious nationalists?

  2. LawnDart

    More good news! For our weapons makers (USA #1 in the world for sales), and sort-of good news for gas and oil industry (if you like roller-coasters). The Yankee dollar is starting to look like that “interesting fellow,” a polite way of describing a creep, that your gut tells you to avoid.

    Considering that the world’s a global market, and Russia is blessed with a number of critical resources which they are becoming more selective with whom they share, what are some of the near or shorter-term scenarios that us slobs of Main Street USA might face in the coming months? I don’t see any mention of this, almost anywhere (except Snyder, and he’s nuts) and I totally get it– seeing how fluid things are, that crystal ball might seem to be a ball-and-chain for a bad call, but I’d still like to see someone offer some informed speculation.

    And if the Saker considers himself primative when it comes to these matters, he should get outside and look up– he might catch sight of me swinging from branch to branch in the trees.

  3. dftbs

    The West has a lot of money, but no capital. This pile of money which is largely concentrated in a few hands represents a tremendous amount of consumptive power within the current political structures that govern the West. The Russians have made the first of many moves that shrink the pool of consumption products and commodities for all that money. Their move is more “inflationary” than previous events like “supply chain disruptions” because they have determined the risk premium for transacting in Western money is not some haircut, but infinite. We’ll probably see more explicit or implicit moves like this from other non-Western nations.

    In a sane system this would be remedied by making America great again- increasing domestic productivity, turning that money into capital. We are not a sane place. Western Capitalist spent the better part of last century waging an economic and political war on Western labor, it was so vile we didn’t even bury the corpse. In the process they went from industrial capitalists to the Rentier parasites Prof. Hudson so often decries. This class and its system view any marginal empowerment of labor as threatening as a PLA landing in LA. Just remember their reaction to harmless Sen. Sanders.

    Instead of sanity we will nuke the corpse of labor the same way we did last time. Jay Powell is about to go full Volcker. They will crush the “economy” and drive people to work for slave wages. This concentrated pool of consumptive power will have one thing left to buy, our sons, our daughters and ourselves. Of course there will be a shiny veneer. People will debase themselves under the illusion of empowerment, you’ll have digital pimps like only fans. The opiate of the masses will be a multi-racial superhero movie. Americans won’t be crucified on a cross of gold, but in a cruel twist to WJB one of unplayable debt.

    Or hopefully as Americans, or some other tag we’ve yet to discover, we join that new international system modeled along the “lines of what used to be called socialism”. I think they still call it that In Beijing.

    1. Pate

      Now that’s what I’m talking about. Nothing better than a little spot-on clinical analysis in poetic form. Ps. “don’t f the bs”? Mum was a great puzzle solver but I didn’t git the gene.

    2. Jerermy Grimm

      This post and Michael Hudson’s post at the end of last month: “America Defeats Germany …”, which I missed while I was offline for a while, have helped me reach a deeper understanding of the political and economic situations encompassed under and within the rubric of the War in Ukraine. I had thought the u.s. government and political leadership demonstrated remarkable stupidity by their actions. Michael Hudson’s posts reminded me that the u.s. government and political leadership was selected not for its brilliance but for its ability to act in the interests of the Elite. This compelled me to re-examine my characterization of the Elite. Though composed of individuals I have long regarded the Elite as consisting of unhuman constructs acting to accomplish unhuman goals — however — I had remained fixed in thinking of Elite goals in human terms. The u.s. Elite have become a Neoliberal Elite, a new type of creatures with an increasingly limited sense of time, dangerously coupled with a growing lack of regard for the welfare of Humankind as evidenced in the wars of the previous century. The u.s. Elite is not stupid and it is not unaware of its best interests. The u.s. Elite measures its best interests using a yardstick of months and quarters extending little longer than a year and weighs risks using an unhuman scale. The u.s. Elite is not troubled by concern for the risks of triggering a nuclear war, because it has little concern for the welfare of Humankind and the risk of nuclear war weighs differently when measured using its unhuman balance scale.

    3. Timothy Dutra, MD, PhD

      Powerful rhetoric, “dftbs”. Like a pie full of “truthie” hitting me in the face. “but in a cruel twist to WJB of unplayable debt” is still ringing in my ears. Unplayable and unpayable.. Unlike William Jennings Bryan, Michael Hudson evolves and grows wiser. My only criticism to the wishful conclusion, Mr or Ms “dftbs”, in your closing paragraph, is that you may be (unfortunately) too optimistic.

    4. super extra

      Jay Powell is about to go full Volcker. They will crush the “economy” and drive people to work for slave wages.

      I’m not sure the Volcker put is replicable in current conditions, but I am going more off a feeling than any concrete understanding of the fundamentals. I think my feelings can mostly be summarized by, once the squeeze starts, it won’t just be the power of labor that will drop, but also the imaginary gains of the last few decades as financialization took over everything.

      1. dftbs

        I think you’re right in that the present situation is very different from the one Volcker found himself in 40 years ago. At that point there was some blood left in American labor to offer up as a sacrifice. Volcker could use rate shock to destroy wages and that particular avenue of inflationary pressure. Powell only has a corpse of American labor which to drain. Wage pressures aren’t contributing to current inflation; but inflation is an ever greater phenomenon.

        Powell is a vampire and so he will try to draw blood. I don’t have a personal or professional opinion of how high he will take rates, 20% seems impossible under the present debt burden. But Powell has the benefit of sovereign debt monetization, something that was unthinkable in Volcker’s day. I agree that this will destroy a large amount of nominal gains from the last decade, these gains are already being eaten up by inflation. The advantage that Powell has is that even in a high rate environment, the Fed now has the tools to increase market liquidity and preserve the value of assets held by those institutions that can access Fed liquidity. You and I can’t access Fed liquidity or deposit at IORB or RRP, Chase, Goldman and Blackrock can. Perhaps that is the plan, first they came for labor, now for the petit bourgeoise. They will destroy nominal wealth and leave it even more concentrated.

        My contention is that this “wealth” is consumptive not productive, and with the West shutting itself off from the rest of the world, the only thing left for this “wealth” to consume are the people now trapped in the West. Of course we don’t know we are prisoners just yet.

        1. super extra

          The advantage that Powell has is that even in a high rate environment, the Fed now has the tools to increase market liquidity and preserve the value of assets held by those institutions that can access Fed liquidity. You and I can’t access Fed liquidity or deposit at IORB or RRP, Chase, Goldman and Blackrock can. Perhaps that is the plan, first they came for labor, now for the petit bourgeoise. They will destroy nominal wealth and leave it even more concentrated.

          Yes, I think this is the most likely outcome.

          Regarding your final point, mighty depressing next decade in the US with that combining with the only other well-functioning machine in our society, the propaganda hate ray turning on a new scapegoat/distraction. Oh, and successive waves of Covid and Long Covid.

    5. lance ringquist

      obama prevented another new deal, and bailed out nafta billy clintons disastrous policies and here we are.


      Brüning attempted to restore economic equilibrium by a balanced
      budget, high interest rates and remaining on the gold standard — no
      emergency deficit spending. And the economy continued to slide……..

    6. tindrum

      30 years of outsourcing can not be reversed in 6 months. The US and the EU have major problems if China decides to restrict exports.

    7. Jeremy Grimm

      The u.s. Elite appears to be removing the underpinnings of u.s. hegemony sacrificing its broad long-term interests to realize isolated short-term advantage while the costs and risks to the Populace are largely ignored.

    8. Henry Moon Pie

      I have a possible silver lining for that cloud. If the Russians send their natgas to India and China who use it to eliminate the use of coal, that will help our carbon situation significantly.

      On top of that, if the U. S. and EU head into the Mother of All Depressions, that will significantly cut the carbon footprints of the (by far) biggest abusers, the North Americans, and the second-worst, the western Europeans.

      With melting poles and the emissions of war, all that may be too little, too late.

    9. drumlin woodchuckles

      I would like to see us give up on making America “great”. I would like to see us make America okay. Okay for Americans to live in.

      I am an American Okayness Ordinarian. Okay is good enough and good enough is okay.

      MAOKA. Make America O K Again.

      The material procedural side of that would involve defecting America from all the Free Trade Agreements and America running off the Corporate Globalonial Plantation. The International Free Trade Conspiracy World Order would of course try putting a wannabe-Autakarmerica under a combination of the kind of sanctions and blockade America current puts Cuba under and is extending to Russia.

      We would have to expect this and be prepared for it. The entire Free Trade Conspiracy world would go to war against America in order to re-colonize it and force it back onto the Corporate Globalonial Plantation.

      Anyone running to Make America Free Again should tell the truth about that to those citizens whose votes he/she seeks. A vote for Autakarmerican Okayness is a vote to accept decades of aggressive war by an evil and hateful Free Trade World against a freedom-seeking middle-power-aspirational America in order to prevent it from repairing itself.

  4. Susan the other

    This is a timely confluence of international finance. Could it be coincidental? They have been working on CBDCs for a year or so now. My impression is that the central bank, our Fed to be precise, is going to eliminate commercial banking for private individuals and deal directly with every citizen. That sounds to me like a complete removal of the foundation for “private banking” using public money. Which also sounds like a good “alternative to financialized neoliberalism.” Don’t these two go hand in hand? And just the surprising realization that the FBI is actually aggressively prosecuting financial misconduct is mind-boggling. It seems like, for the last almost 30 years, we have been ransacked because our weaknesses were, in fact, our contradictory system. And now we will close it down and begin a new one. I’m sure “commercial banking” will remain viable for business and industry but under clearer guidelines. Why we tried to deny the reality of our situation and force financialized neoliberalism (rapidly inflating austerity?) on ourselves and the world is hard to explain. But denial will make you do the exact opposite of what is rational. Maybe we thought the world would fall apart. But here we are. It finally took the Russians to point out that the emperor has no clothes. Who else? The nexus of all this fog, for me, is that both western central banks and the new Eurasian-bloc countries – both groups – are working on an international currency exchange which is a network of CBDC. Which (currencies) are based on the value of the resources of their respective countries. Back to basics. Money with a digital pedigree will be much easier to control. But it is all so confusing right now we are not sure what to think. I’d think that a digital rouble is just as reliable as a digital dollar.

    1. digi_owl

      What is funny is that central banks exist in large part to clean up after the private banks.

      After all, their core reason to exist is to lend to private banks as needed when the private banks run out of money. This by being able to conjure money from thin air as needed. And somehow a central bank is more trustworthy with this power than a national government.

      All in all the banking industry, and how we are told to think about it, is deeply stuck in a commodity money mentality.

  5. Robin Kash

    I wonder if the fate of the dollar (aka petro dollar) hangs on Saudi alignment and preferment. Saudi-Russia relations have picked up. Poor relations with Turkey on both counts are part of it. The Saudis aren’t speaking to Biden.
    The pair account for about a quarter of worldwide oil production. Should the Saudis go with Russia-China and their new payment system wouldn’t the dollar be toast?

  6. dday

    One of the main architects of the US response is Daleep Singh. This recent article in the New Yorker gives some background on how the sanctions came together.


    Singh was also featured on the first segment of “60 Minutes” last Sunday.


    We seem to be in unchartered waters in terms of sanctions this comprehensive.

    1. Dftbs

      From the New Yorker: “the western sanction on the Russian central bank came together in a matter of hours.” They seem to think this was an instance of efficient resolve as opposed to dimwitted impulse. Daleep Singh did the geopolitical equivalent of drinking a gallon of milk, because milk does a body good.

      It’s even funnier they think they caught the Russians off guard. “The leaks, the rumors that we hear, suggest that the worst-case scenario that Russian policymakers expected was a switching off of swift.” The Russians didn’t imagine the West would seize the CB reserves and violate sovereign immunity because the repercussions of this would be more harmful to the West than to Russia. Sighn is taking credit for being the guy that destroyed the “full faith and credit”. If only Alexander Hamilton was around to invite the guy to Weehawken.

    2. Foy

      Daleep Singh, ex trader, aha so thats who the scapegoat is going to be when they belatedly realise that the USD has lost much of its reserve currency privileges and US Treasury Bonds are no longer a risk free asset in foreigners eyes due to the sanctions, and the Global South are abandoning them with ever greater speed, and the US economy is tanking along with that abandonment, and the US can’t get critical materials for its economy anymore and the IMF doesn’t have the leverage it once did and the old monetary system is goneski. Good to know.

    3. The Rev Kev

      It’s a remarkable story and thanks for bringing it up but I do wonder. In all that planning that he did on how to crush Russia, did Daleep Singh ever take the time to ask himself how Russia could do the same to the west? What his Russian counterpart would be thinking? Or would that require empathy?

      1. RobertC

        I’ve asserted that Chinese and Russian military and academic analysts used data-intensive Artificial intelligence applications running on high performance computers to develop possible courses of action in response to planned and developing “What-If” situations. An AI economic modelling application may include the Input–output model (and its extension Consistency Analysis). There are likely more sophisticated applications in this and other fields of national security interest.

        I’ll note there is strong Russian (Soviet), Chinese, UK and Indian presence in economic modelling (eg, Elsevier Economic Modelling journal) and its special issues, eg Elsevier Special Issue.

        Mr Singh’s publications appear to be limited to policy think tanks and Congressional testimony. They do not seem to incorporate formal methods. A sample is Assessing the Use of Sanctions in Addressing National Security and Foreign Policy Challenges

        We began pursuing this objective by first writing down a set of guiding principles that remain instructive today.

        Restricting [Russia’s 2014 access to] foreign capital proved even more potent than we anticipated.

        BTW it’s worth reading his May 15, 2019 testimony on its own merit to understand Singh’s and Biden’s failures today and eight years ago.

  7. Edmund Bellord

    Can someone help me with how to parse the Saker. I find it very difficult to take seriously given all the hyperbolic language and every second word being some variation of Nazi. What strategies to people have to parse the information on offer?

    1. Yves Smith Post author

      Not sure why you are having trouble parsing this. I have yet to have anyone make this complaint.

      And as for tone, please tell me how this is more extreme than the fawning praise of Zelensky, or the relentless demonization of Putin?

      1. Don Joe

        It certainly isn’t more extreme but I doubt fighting fire with fire is a sensible approach in this case.
        Even though it is hard to reach any audience these days by keeping the tone down, I’d like to see media sites, especially the ones trying to counter mainstream media, make the effort.

        1. Yves Smith Post author

          1. In Lambert’s and my experience of moderating nearly 2 million comments (here and in Lambert’s prior life), ton policing is nearly a sign of bad faith (not your remark but the original one)

          2. The reason that is evident in this instance is the place to complain is to the Saker, not us. Complaining here is tantamount to trying to discredit him.

  8. Steven

    Foreign Policy as Day Trading

    It should come as no surprise that US and Western policymakers approach foreign affairs with the same short-term perspective that governs day-traders. After all, most of them hail from the ranks of Wall Street. My guess is they are intellectually incapable of playing the long game like the leaders of China and Russia. The West is playing – with stunning incompetence – the last card it has left, its “exorbitant privilege” of furnishing the global economy with its money. If possession of Soddy’s “Discovery, Natural Energy and Diligence—the Three Ingredients of Wealth” governs the outcome of that long game, my money is on China and Russia.

    1. Polar Socialist

      I gather we can already include India with China and Russia, the way “The West” is trying to win them over by bullying and throwing tantrums.

      1. Steven

        I’ll go along with that. India has a lot of brainpower that can supply the discovery and diligence if given half a chance. Finance capitalism is a one-trick pony. The Chinese and Russians have already demonstrated they are more than capable of playing the game in their spare time.

        1. tindrum

          these countries together can manage developments such as aircraft and semiconductors that are prohibitively expensive for any single country.

    2. drumlin woodchuckles

      Many years ago I read Frederick Soddy’s ” Wealth, Virtual Wealth and Debt: the Solution of the Economic Paradox”. I still have it buried somewhere deep in my bookpiles. I dimly remember concepts such as discovery, natural energy and diligence ( diligence of intelligent management of groups of peoples’ focused effort, among other things) from that book. Is ” Discovery, Natural Energy and Diligence–the Three Ingredients of Wealth” a separate paper that he also wrote and published?

      Here’s a very bare-bones skeletal page about that book.

      He was a scientist. The little blurb I linked to just above notes that Soddy discovered the element Protoactinium. I wonder if that earned him one of his two Nobel Prizes. As a genuine reality-based scientist, he wondered what a genuine reality-based economic theory might look like if a genuine reality-based scientist tried to develop it without any contamination or pollution from economists. Since no one else was developing such a theory, he decided to do it himself.

      If his theory and observations are really as reality-based as I want to believe, then I have to wonder whether they could be followed and applied by reality-based individuals and/or groups of individuals at whatever social size and scale could agree among themselves to follow and apply them. If so, then the only thing stopping reality-based people from applying reality-based bio-physiconomics in their own lives and/or social groupings would be active interference from the various Upper Class Occupation Regimes those individuals and/or social groupings are ruled by . . . . and the fantasy-based economics by which the various UCORs propagandize and indoctrinate their rule to their victims and subjects.

      1. steven

        There are links on the page to which you supplied the link where you can download the complete last edition of Wealth, Virtual Wealth and Debt in just about any format you want. ” Discovery, Natural Energy and Diligence–the Three Ingredients of Wealth” is in the book, Chapter III, The Basis of National Economics.

  9. eg

    I get the impression that the “sanctioners” were operating under the illusion that “money” and “assets” (the paper kind) have any meaning absent underlying real resources. This is when those living in “spreadsheet world” get a rude awakening that their map does NOT represent the territory.

    They also seem to have missed the point that cutting off trade in said real resources impacts both sides of said trade.

    Not terribly clever, this lot …

  10. steven

    The real tragedy in all this is the combination of a US neoconservative/imperialist foreign policy and years of foot-dragging acquiescence from European heads of state in recognizing Russia’s legitimate security concerns may have let slip the dogs of war. Any future settlement, if indeed one is even possible given the dangerous rhetoric of President Biden, is bound to be portrayed by political opportunists in the US and elsewhere as selling out or caving in to the threat of force.

    The US needs to free its foreign policy establishment from the likes of Victoria Nuland and the neoconservatives/imperialists who continue to embroil this country in conflicts having nothing to do with its long-term interests.

    P.S. A marketing suggestion for Dr. Hudson… The US is so brainwashed about socialism being a dirty word, how about something like ‘capitalism with benefits’ instead?

    1. drumlin woodchuckles

      Or also how about ” ordered capitalism under law” also, from time to time? Or also ” New Deal capitalism” from time to time?

  11. juliania

    Bravo, all of you, and thank you — even to the tone setters. For some reason, I have been chortling all the way through comments.

    Bless you; I guess I needed that.

Comments are closed.