I was
reflecting today on the build up to the Second World War. That munitions war
was preceded by a money war --- currency battles and trade battles. I don’t
know if I can remember anytime during my lifetime when there seemed to be so
much tension between the major economies as there seems to be now.
Trump
campaigned on rhetoric about pegging down China for its unfair trade practices.
He has done nothing about that since being elected, probably in hopes that
China would fulfill their undertaking to pressure North Korea into ceasing its
nuclear weapons program. China has not delivered, and now there is no reason
for Trump to not tighten the screws on China. The USA will block Chinese banks
and companies trading with North Korea from the dollar exchange system.
Sixty-two percent of international currency transfers are in dollars. The
dollar is how oil is bought. The dollar is how most big trades occur.
Trump has
also now imposed trade sanctions on Russia. Companies that assist the Russian
arctic oil industry will be blacklisted on the international dollar bank
transfer network. Of course, Europe, which is dependent on Russian petroleum,
is miffed. Trump’s actions are a threat to European investors in Russia’s oil
industry. What a way to drive Germany and Russia into each other’s arms.
Russia will
retaliate. It doesn’t have the economic clout to do it with trade embargos, but
it can do it with cyber-attacks. Russia has a army of several thousand hackers
for such purposes. If you are in the USA and your bank’s ATMs all go down, or
the power goes off over a wide area, or the CME loses its computer network, we’ll
have to wonder.
Trump has
also put Canada, Mexico and South Korea on notice that the USA doesn’t consider
itself obligated by its trade deals. I would not be surprised to see various
nations co-operate to set up a bank transfer process that does not depend on or
even accept dollars. If that happens, the dollar will likely tank.
One has to
wonder what the big war of the 21st century will be. In my opinion,
the Seven Years War was the first of the world wars. This eighteenth century
war was followed by the nineteenth century Napoleonic Wars. Then came the
twentieth century with its major wars. Of course, the centuries prior to the
1700s each had their big wars. I expect
that this century will see some kind of major shooting conflict. Maybe it’s
shaping up now. I don’t think Trump will be president when it happens. It would
be hard to impeach him now, but after the mid-term elections, if the Democrats
make big gains, there may be enough votes to send Trump out on the Richard M.
Nixon Memorial Skids. This won’t abate world tensions. It will be too late for
that.
