The EU’s Schachtian Economics Set to Backfire

By freezing assets associated with Russia’s central bank under their jurisdiction, EU countries, along with the UK, the U.S. and Canada, left Moscow in charge of only about one third of its $630 billion worth of reserves, through domestic gold and Chinese yuan. While this gives Russia a certain maneuvering room, such sanctions undeniably amount to an act of war.

At the same time, the EU has accelerated the transition to a full-fledged Schachtian economy, based on central bank financing of unproductive debt and a massive decline of living standards of the population. That is seen most clearly in the shift announced by the German government: an increase of over 200% in military spending (more than what Hjalmar Schacht did in 1933-34!), investments in regasification plants for importing expensive LNG, and the massive expansion of so-called renewable energies. The result will be a drastic drop in productivity and more inflation.

However, the situation can easily get out of control. Just as with its energy policy, the EU financial warfare against Russia can – and will – backfire. French and Italian banks are each exposed to €25 billion of investments in Russia, with Austrian banks at €17 billion. Keep in mind that a bank asset is at the same time a liability on the other side of the balance sheet. Therefore, by disconnecting Russian banks from the SWIFT system of international payments, a chain-reaction of defaults will be set off. In addition, it will jeopardize trade between EU countries and Russia, which amounted to over €174 billion in 2020.

With financial sanctions against Russia, “global stability is heavily jeopardized, only to ensure the solvency of out-of-control public debts and direct financing of exploding deficits”, according to financial analyst Mauro Bottarelli. “In other words, either war or another 2011 to the third power, combined with a 2008 to the nth power.”

And how will Moscow react to the punitive measures? What if they stop gas or wheat supplies to Europe? What if they take strong, asymmetrical actions to any “interference” into their military operation in Ukraine, as they have warned they will? Removing the financial cancer devouring the global economy with “LaRouche’s Four Laws“ will also remove a major potential cause of World War III (cf. the first item above)

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