The sanctions are tearing the global economy apart

by Prof. Dr Eberhard Hamer*

(2 May 2022) Ukrainian President Selenski demanded of the Western allies that the sanctions imposed on Russia be tightened and “maintained for at least 15 years”. US sanctions against Iran have lasted longer, also against Venezuela and others.

The sanctions imposed by the USA and its European satellites against Russia are not only import and export stops, but also exclusion from the SWIFT payment system and seizure and confiscation not only of Russian state assets all over the world, but also of Russian private citizens assets – in the same way that England and the USA seized all German assets during the last world war.

If you look at the arms deliveries from the NATO countries to Ukraine and the billions paid for the armament and warfare of Ukraine, and if you listen to the usual one-sided war reporting – more war propaganda – of our media every day, you know that militarily a national war has started, although economically another world war has long since begun.

Through the sanctions, military aid to Ukraine and the seizure of Russian assets, the USA and its NATO allies have long since become a party to the war, although they always deny this. The fiercest economic war ever to break out is not far away from direct military action.

Russia used to supply the world with almost a quarter of the important raw materials: palladium 44%, diamonds 28%, gas 17%, platinum 14%, oil 12%, gold 10%, nickel 6%, aluminium 6%.

Europe is particularly dependent on Russia for almost 50% of its energy.

If these raw material imports are suddenly no longer available to the world – being blocked – this will mean drastic short-term and long-term changes in economic relations, production conditions and the world’s supply. This will range from price increases to shortages of raw materials, changes in production up to shortages, will have a global impact in any case, given Russia’s importance concerning raw materials, and will also affect the sanctions supporters themselves.

The sanctions against Russia were also a stop sign against globalisation. Until now, one could rely on the fact that in global competition, production could be carried out at the cheapest location and that this production was available everywhere in the world. The US sanctions are tearing the globalised world into two blocks: the USA and its NATO satellites on the one side and the Russia-China group on the other.

A Russian zone that no longer trades with the West must inevitably orient itself towards China, will make its raw materials available to China and thus strengthen the USA’s main competitor, something the USA always wanted to prevent. If, according to American predictions, the next world war rages in the Pacific, the USA would no longer have to deal with China alone, but China, just like the USA has NATO, would also have powerful allies. So driving Russia into China’s arms could be harmful to the US itself in the long run.

At this point, the financial sanctions imposed by the USA – Russia’s expulsion from the SWIFT system – are already beginning to divide the world currency system. China and Russia have founded their own payment system, CIPS, as a counter-settlement agreement, which settles in yuan and has already been opted in by more than 20 of the world’s central banks.

If Russia settles only via CIPS and China more and more via CIPS and thus more and more in yuan, the dollar’s global weight (70%) is on the retreat, the gold-backed CIPS settlement system is likely to become more and more important in view of the economic strength of the Chinese, and the fiat money system SWIFT may never recover from its pre-sanction significance.

After all, the CIPS clearing system is backed by the two largest gold holdings in the world. Assuming that the USA no longer has its 8000 tonnes of “book gold” in real terms,¹ the CIPS system is therefore the only gold-backed clearing system, while SWIFT is based on book values artificially created and massively increased by the FED – i.e. with no intrinsic value.

Historically, the world has always switched to the safer currency and will increasingly do so now after the enforced start of sanctions. But if the dollar loses its credibility in the world and is rejected because states prefer to seek a gold-backed safer payment system than a fiat “air” currency, the dollar empire – which was based on the fact that only the US could create unlimited means of payment, to finance economic and military power with it and to dominate the world – will also collapse. The expulsion of Russia from the SWIFT agreement could therefore become the suicide of the dollar empire.

The Americans are also committing the same error by boycotting Russia’s oil. Until now, the American oil companies have had an oil monopoly with the Arabs, tolerated by Russia, and a gas market equally dominated by them with Russia’s acquiescence. A sudden or medium-term exclusion of Russian oil and gas has – as expected – already led to a doubling of energy prices and will cause these prices to rise further, driving the whole world into additional costs and loss of prosperity.

In the long run, however, the world and also the European US colonies will not allow themselves to be told that they should buy more than twice as expensive American energy, while on the world market a quarter of the production capacity is undercut by Russian oil and gas and Gazprom has even remained a supplier with permanently cheap gas and oil to Europe despite the war.

But if the sanctions system against Russia demanded by the USA collapses with high prices for oil and gas in Europe, if the dirty fracked gas from the USA can no longer be sold, the production companies there and the US banks involved in this production system with many billions of dollars will collapse.

The USA has proven through the sanctions that economic relations such as the supply from Russia can suddenly be cut off, i.e. they are uncertain. Futurology² therefore already assumes that the long-term supply of raw materials to European industry and the economy can be secured less and less from the West, but only from the East – from Russia – and that economic cooperation with Russia represents a survival strategy for the competitiveness of the European economy and industry.

If this eastern alternative were to remain closed in the face of a dwindling western alternative, this would lead to a drastic loss of competitiveness, to export losses and to a decline in prosperity in Europe. Opening up to the East is therefore a problem of survival for Europe in the long term and will become all the more difficult the more Russia has meanwhile turned to China and tied its available raw materials there.

But one thing will remain in the long term: the hatred against Russia fomented by the NATO press is already so great that Russian artists, scientists and economists and even people with pro-Russian statements are dismissed, boycotted and persecuted (Schröder). Such hatred lasts for a long time, as in particular we as Germans know, who still have to collectively atone for world hatred generated 80 years ago against Hitler and Germany.

Not only Putin, but also the NATO states have thus changed the world, divided it, reduced it and blocked it not only economically, but also and mentally.

The times before the Ukraine war are not coming back any day soon.

Source: https://www.goldseiten.de/artikel/534692--Die Sanktionen-reissen-die globale-Wirtschaft-auseinander.html%2016, 16 April 2022. © Prof. Dr Eberhard Hamer, Mittelstandsinstitut Niedersachsen e.V.
Reprinted with kind permission of the author.

(Translation “Swiss Standpoint”)

* Eberhard Hamer (born 1932) is a German economist. After studying economics, theology and law, he obtained his doctorate and worked as a lawyer in a company. Hamer later received a call to the University of Applied Sciences in Bielefeld, where he taught as a professor of economic and financial policy until his retirement in 1994. In the 1970s, he founded the privately run Mittelstandsinstitut Niedersachsen in Hanover and published numerous essays and over 20 books on the subject of small and medium-sized enterprises.

1 Including the gold of the Federal Republic of Germany of about 1,200 tonnes. Since even members of parliament were not allowed to see or count this gold, it is assumed that the FED has long since pawned or sold these foreign assets – including our German gold.

2 Cf. Mittelstandsinstitut Niedersachsen “Visions 2050”, Hanover 2016