Russia’s Likely Default and How that Would Impact You

In retaliation for Russia’s invasion of Ukraine, the world put sanctions on Russia as punishment. I’m not saying that Russia shouldn’t be dealt with but our response to the war is going to have far greater implications than what we are being told and we may not be able to recover from it.

What we are doing now is telling Russia that they can’t have their money back that they are holding in federal reserves. $1 trillion dollars of it. There are two key critical points that I need to make here:

  1. What will the sanctions do to Russia and what will their response to them be? There is a good chance that Russia is going to default. They have the money to pay their obligations, but they aren’t allowed to access it. That is $1 trillion dollars sitting in US banks that we are basically holding hostage. I am not trying to make a case here trying to convince you that we should or shouldn’t have taken this action against Russia, but you aren’t being told about the consequences that are likely coming from this decision by most in the media. This isn’t going to come without consequences. Most likely we are going to see Russia begin to dump U.S. treasuries, which means that more dollars will be added to the market. What happens if you add more of something to the market? The value of that declines. That means we are going to see even more inflation and the impact of that could be felt for years.
  2. What does this action mean for the US? Any trust that Russia has had in the US dollar and our reserves is going to evaporate quickly. Why would they continue to trust us if we are now freezing their money? It wouldn’t make sense for them to continue to hold US dollars. But the rest of the world is also watching. Saudi Arabia, China and Iran are all watching our response to this Russian invasion. They are going to view our actions and think that maybe the U.S. will freeze our reserves someday as well and that we don’t know if we can continue to trust them with our money. They start dumping US dollars and that adds even more fuel to the inflation fire and eventually hyperinflation.

I’m not defending any of these countries but we need the truth about the long term implications of this war. These actions are not just going to effect Russia but will effect the US, especially if any of these countries start dumping the dollar, and there’s a good chance they will begin to starting this year. I just explained Russia but Saudi Arabia is also considering a deal with China that will allow them to slowly transition away from the Petrodollar and start trading some oil with the Chinese Yuan. That adds even more fuel to the inflation fire.

There’s a few good chance that within the next few years we could be in hyperinflation. The Fed is out of options to get the already out of control inflation under control. They can’t raise interest rates much, which I will be explaining why probably on Friday. The out of control spending is causing countries to lose faith in the dollar. And then on top of all of that we now have us freezing Russian money in US banks forcing the world to distrust us even less.

I know someone is going to take something I said here out of context so I want to clarify one more time. I am not saying that we should or shouldn’t have put sanctions on Russia. There is no easy option and anyone who says that they know exactly what we should do to get the situation under control is lying. But we need out elected officials and the media to be honest about the consequences of putting those sanctions on Russia and they aren’t. And you need to know what is very likely coming down the road so that you can prepare for it.

On Monday I explained what the petrodollar is and what it would mean if Saudi Arabia approves the deal with China. Check out that article here:

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