How NATO Is Crashing the World Economy and Banking System
In an article appearing in this week’s issue of Executive Intelligence Review, EIR economic editor Paul Gallagher describes the disruption to the world economy produced by western sanctions against Russia. “Led by London, Wall Street and Washington, NATO is bringing the world economy down willfully and deliberately, although with ‘unintentional’ and disastrous consequences”, Gallagher wrote.
The de facto banning of exports by the world’s No. 1 raw materials exporter punishes first and foremost those who need the products. That goes for oil as well as for gas, coal and a dozen important metals which suddenly became scarce on the world market. At the same time, the prices of non-Russian commodities have skyrocketed, driven by “hundreds, perhaps thousands of major commodity producers, trading corporations and banks receiving margin calls because their hedged short positions must be closed out at very great loss.”
“Short” positions are financial bets on a declining price. Most traders bet on borrowed money based on collateral. As losses approach, creditors demand to get their money back. “This happened in fact: Three large losers whose predicaments became publicized were Peabody Coal, the biggest North American coal company, China Construction Bank, one of the four biggest state commercial banks in China, and Tsingshan Holding Group metals trading company, which faced a gargantuan $8 billion-plus margin call. Tsingshan Holding, the world’s largest producer of nickel and stainless steel, still faces bankruptcy, and JPMorgan Chase is apparently its largest and most exposed counterparty in financial risk products.
“These examples sufficiently indicate what has happened to hundreds, perhaps thousands of large and medium-sized companies involved in production, trading and hedging of metals, petrochemicals, and strategic materials substantially produced in Russia.
Moreover, western producers that are supposed to compensate for the cut-off Russian exports are unable to do so due to a lack of investments in new capacities under the “Great Reset” policies. As a result, the OPEC countries have difficulty increasing production, and so do U.S. shale producers and West Virginia coal companies, that suffer from a lack of financing.
While commodities are made scarce on the one side, more money is needed to finance their trade at higher prices, so that a liquidity squeeze is created. The repo market expert Zoltan Poszar reports that the interbank lending market is starting to seize up as it did in mid-September 2019, requiring emergency liquidity of hundreds of billions from the Fed.
Financial sanctions and the downgrading of the Russian debt by rating agencies are also backfiring on western financial institutions. In addition to major banks, losses are spreading to the largest wealth management firms, with BlackRock reportedly losing $17 billion and PIMCO set to lose $2.5 billion from Russian “defaults”.