Yesterday, I talked about the potential dangers of enacting fiscal and monetary policies that anger creditors. The Chinese government have made it transparently clear that they are unhappy with America’s current monetary policy. Given that America’s economy is very much dependent on China’s manufacturing output, there is a potential for quite a mess.
While Russia is not a manufacturing powerhouse like China, it nonetheless has to hold dollars to access international markets, especially commodities markets such as oil, and precious metals. So it is no surprise that everyone’s favourite post-Soviet despot has made public his feelings on America’s monetary policy:
They are living beyond their means and shifting a part of the weight of their problems to the world economy. They are living like parasites off the global economy and their monopoly of the dollar. If [in America] there is a systemic malfunction, this will affect everyone. Countries like Russia and China hold a significant part of their reserves in American securities. There should be other reserve currencies.
Will Putin act on those words?
We shall see.