A bad prophet Biden

A bad prophet Biden


Economic observer Alexander Kireevsky — about how the fighting in the middle East will affect the economies of Russia and the United States

Not long ago Vice-President USA Joe Biden predicted the collapse of the Russian economy associated with the dramatic escalation of tensions in the middle East. However, on closer examination it appears that his prophecy can come true is exactly the opposite.

Of course, this statement is more politics than sound economic sense.

Strictly speaking, Washington is now a pretty straightforward game: they are looking for external enemies to explain the internal problems. Technically, the us economy feels a little better than the European, but actually forced US to solve some very serious structural problems.

If you believe Biden, the calculation of the Americans is: a big war in Syria will force Russia to sharply increase its military spending. Given the budget deficit, which is big enough according to their calculations, this will lead to more budget deficit and consequently for the problems in our economy. But the fact is that while our cost of military operation in Syria are well within the budget of the Ministry of defence. But even if they will increase in 2-3 times in comparison with the current, we can easily withstand this load. Our military-industrial complex will receive additional orders, it will create new jobs, will start the process of import substitution.

But as in the case of a military escalation in Syria will feel the us economy is a big question. As a rule, instability in the region leads to an increase in oil prices. What this means for Russia is clear. As for the Americans — the forecast is mixed.

If the price of oil will rise, inflationary pressures in the us economy will rise. That means Americans will have quicker to raise interest rates to suppress inflation and prevent its development. This has a negative impact on the American economy, which is teetering today on the brink of recession. It warned the American financial experts. Goldman Sachs, one of the most influential American investment banks, found that the probability of a recession in the next three years is above 60%.

Therefore a Big War in the middle East could have negative consequences for the American economy.

They have a huge budget deficit, the huge spending on health care, on pensions and social benefits, which they don’t know how to Fund it. In the prevailing low interest rates, a shortage of American pension Fund and Medicare is growing.

What to do? The idea is that these funds are also growing, they need to raise interest rates, but increasing the interest rate, they provoke a recession. It’s a stalemate.

But there is another important aspect: the declining strength of the dollar. Keeping in mind all the problems that is, the United States needs to attract foreign capital into their country in order to Finance the current account. How to Finance it? It is necessary to arrange riots everywhere. Indeed, in troubled times, the demand for the dollar tends to rise. And the money goes to America. But for now, us bonds fall much in price, lost confidence in the dollar as a kind of hegemony. The world sees that it is possible not to obey America: the BRICS safely conduct their policies. They do not fight with US openly, they conduct their policy to work with America, not to its detriment, and on equal terms.

Americans don’t like it. They’re used in any transactions, they are always a little bit “more equal”. And the main profit take.

So now the US is again looking for a reason to start a big conflict to solve their problems in the economy, as always do, traditionally. Politicians in Washington probably think that they come up with something new, and people are more or less familiar with the history of the economy, and political history, their actions are clearly visible.

In the 1970s, the years of West Germany, France and Japan was America serious competition in economic terms.

By the time the American economy greatly weakened because of the war in Vietnam, where she spent a lot of money, too, getting involved there because of political goals in order to keep the region under control, to avoid there as they said then, “the spread of the Communist plague”. In the 1960s, they became involved in the war to show the same Vietnam, “who’s the boss”. Something like they are doing now with Syria.

Then, in the 1970s, Washington has solved this problem by abandoning the gold standard, that is, exchange dollars for gold, as envisaged by the Bretton woods system. Instead, it was introduced the so-called monetary system of floating exchange rates. Then the dollar fell against other major currencies by 30-40%.

Thus, they solved their problems. And now they can do something similar. To start a war in Syria, said: “We have spent from the budget a lot of money. To exit the crisis, we need to devalue the dollar. Thus we can solve all economic problems”. It is possible that the US is ready for the devaluation of the dollar, explaining that the international fight against terrorism. Just now, the Western Germany and Japan and the BRICS countries.

The author is an economic commentator VGTRK, author and host of “geo-Economics”

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