• This follows up Friday’s Rude about gallium and germanium.
• The USG is indignant the Chinese government won’t sell its stuff.
• This is why weaponizing the dollar and stealing Russian assets was such a bad idea.

Happy Monday!

On Saturday, I was sitting in Fabrizio’s café drinking my Lavazza and flicking through my Twitter feed.

It was bright, sunny, and serene, as I waited for Pam and Micah to meet me for breakfast and a stroll through the weekend markets.

Inevitably, Karine-Jean Pierre came up on my feed, moaning about China.

KJP is the White House Press Secretary. Oddly enough, she has the same passing acquaintance with the English language as her boss does. Now that I think about it, that’s almost certainly why they hired her.

She couldn’t muster up a straight denial of Hunter’s Colombian marching powder showing up in the White House.

But boy, she was happy to lay into the Chinese!

Let’s jump right into it.

The Hypocrisy

I can’t stand America’s hypocrisy.

When Americans seize assets and refuse to sell goods to other countries and sanction them, it’s punishment by a valid leader of the free world. (And when the UK mindlessly follows them, it’s worse. But more on that later.)

But when other countries want to sanction the United States and not sell them stuff, it’s economic warfare.

This is a huge reason why the Global South wants to break away from the United States and the Washington Consensus to join the BRICS community.

The Global South is literally praying on their hands and knees that BRICS come up with something cogent and sustainable so they can get out of the palm of Western hands.

And there was always a danger this situation would arise.

I Told Them So

From an earlier Rude titled “What Sanctions Accomplish”:

Those Countries That Can Will Fight Back

Sure, the US can push around Iraq, Iran, and many South American countries. But Russia is another kettle of fish altogether.

After 30 years of suffering at the hands of US sanctions, or worse, US academics, Russia has had enough.

Russia’s National Wealth Fund is its sovereign wealth fund. A sovereign wealth fund is a state-owned investment fund that invests in tangible and financial assets such as stocks, bonds, real estate, and precious metals, or alternative investments such as private equity funds or hedge funds.

The National Wealth Fund will cut its share of dollar assets to zero from 35%. The $186 billion fund will then keep most of its assets in euros, yuan, and gold.

To be perfectly frank, this will not crash the dollar. The fund is one of the smaller sovereign wealth funds on the planet.

If you count the funds or the countries, Russia has the 10th largest stash of national wealth in an SWF. For instance, Norway’s SWF, the Government Pension Fund, has over $1.1 trillion in its coffers. That’s about 10x what Russia has.

But it’s still a blow struck in the name of freedom. You read that right; Russia is fighting US dollar oppression.

But this was just the start.

Watching this video in which Putin bragged about how sanctions made the Russians use their brains is insightful.

And if you doubt Putin’s word - I don’t blame you for that - that sanctions helped Russia become the world’s number one wheat exporter, have a look at this chart from Progressive Farmer:

Russia never built helicopter and marine engines before. It does now. And while it doesn’t dominate the world stage, watch this video (with the captions on) to see Putin brag about how the ruble is now more stable because they’re not just an oil and gas country anymore.

These sanctions aren’t fit for purpose. No sanctions are.

I wrote that back in June 2021.

“But We’re Better Pirates!” Cries the UK!

I voted out for Brexit. I still think it was the right move.

And though you’ll see panicking Remoaners all over Twitter, the EU has done absolutely nothing for me to think being a Brexiteer was the wrong way to go.

You may or may not know of Nigel Farage. He’s the UK‘s biggest populist, and probably the most important politician in the United Kingdom since Margaret Thatcher. 

If it were not for him, Britain would still be in the EU. There’s no doubt about it.

Recently, Coutts, a fancy private bank in the UK owned by Natwest, which is just the new name for the disgraced Royal Bank of Scotland, which was bailed out by Her Majesty‘s government back in 2008, decided to close Farage’s accounts.

Without bank accounts, you’re pretty much a non-person in any country in the world.

But this is the greatest example of this piracy gone mad.

You would’ve read newspaper articles a couple years ago, saying things like, “London is ready to surpass Zurich for private banking services.” The UK was seen as an equal to Switzerland before this whole mess began, and I was very happy for England. I thought it was a great thing and it just partially justified for me that Brexit wouldn’t hurt London as a financial center.

But you know what hurts financial centers?

Seizing assets!

The UK has gone just as crazy as the United States in seizing Russian assets.

And now they have gone about seizing and closing the accounts of UK citizens. Apparently Nigel Farage is only one of these victims.

Get this: a woman named Alexandra Tolstoy, descendant of Leo, who was married to a Russian oligarch, has had her bank account shut down.

She is not a politically exposed person. She owns a business. Yes, her former husband is Russian, but he’s lived in Monaco for many years and hasn’t even sent her child support.

Now her bank decided to shut her account down. It’s demagoguery gone mad.

I didn’t think London would lose its place as the world’s largest financial center in my lifetime.

But if this behavior continues, within the next ten years London will be a financial backwater.

Wrap Up

By the time you read this, I’ll be on the plane to New York City. I’ll be there for two weeks teaching.

In the meantime, I hope the U.S. and UK come to their senses and get a new playbook.

This plan has backfired completely.

Have a great week ahead!