Russia's headlong plunge into the global economy, with some notable exceptions, has become a subject for consternation. . . Hopefully though today's story [action against Belarus's non-payment] will drive home the point that if you want to understand where the New Russia is headed, follow the money, not ideology or Kremlinology.

A key issue, perhaps.

Should access to the fruits of the global economy be unconditional?

For example, should states be allowed to commit genocide, ethnic cleansing, war crimes and crimes against humanity (R2P)? Moreover, from a debate in the Financial Times:

"I think it would help if countries with open capital markets (such as the US and UK) were to put in place some principles and procedures. . . To put the point bluntly, I would not want to see some of these governments (the Russian or Chinese, for example) buying a big media company."

Earlier comments in Russiablog suggest Russia is keen to help draw up a new global financial architecture. However there are few mechanisms to enable this.

Imagine if Belarus could actually pay it's Gazprom gas debt of $490,000,000 in Belarusian Rubles?
The government could simply print the required amount and instantly take care of the problem.

Although President Lukashenko runs a tight, conservative and responsible monetary policy thar Ronald Reagan whould like, this option is not for Belarus.

Only one country on the planet can print it's own currency and instantly erase it's debts. And that is the US. Although it does really erase the debts but simply transform them into future inflation, you know, for our gandkids, I guess for for democracy...

Anyway...

Whenever Mexico, Canada, Saudi Arabia, or even Russia send one barrel of oil to the United States, the US pays for such product by simply printing. And this is called hegemony. Hypotheticly, what if the US had to pay in Euro? or Ruble? think about it... Anyway, it's a convenient way of taxing other nations when you pay with your own currency. Peak oil is real, and it's been rising energy prices but it hasn't greatly hurt the US because the US decided to simply debase it's currency.

Belarus can't print the US dollar, it must work for them. And it's why the productivity index is skewed. A SR software engineer in the United States will earn $100,000 per year while a better SR software engineer in Belarus may earn $15,000 per year. Even if the Belarusian engineer out performs the US engineer, it's the US engineer that is considered to be more productive. It's the US engineer who simply relies on his government to print for his salary.

If the US had to pay (salaries, oil, imports from China) with anything other than it's own currency, the US would instantly be the world's least productive nation. At that stage, Belarus would be more competitive than the US for many reasons not just related to energy prices.

So long as Russia wants payment in US dollars, so long as peasants in the forest of Russia, Belarus, China or India covet the US dollars along with centrals banks and world wide millionaires who prefer the dollar, then only America can pay it's gas and oil debts with fake value, and print it's received subsidies that would make Lenin proud. To this, it's all countries with the exception of the US that have embraced capitalism. If the US actually paid for her services and product imports the US standard of living would be lower than the poorest in Russia.

Eventually, it is my belief that Belarus and Russia and other former Soviet countries will be acknowledged for their competitiveness that will be reflected in monetary performance.

It's why Chavez is so emotional, it's why Putin wants the Russian Ruble to be a hard currency. When morons like the Kind of Saudi Arabia start to run from the dollar, when the millionaires in China start saving in basket of currencies rather than the US dollar, and when peasants all over the world realize that the dollar is nothing more than a great Ponzi scheme, then countries like Belarus will easily afford paying market value for energy.

The only country in the world that does not pay even a fraction of market value for energy is the US.
When Belarus needs to pay $100 per 1000 cm of gas, it's the United States that pays nearly ZERO because she prints and exports these cost to others.

Hegemony is very important and it allows countries like the US a free ride at the expense of others. It's why a software engineer in Belarus earning $15,000 is more expensive than a software engineer in the US earning $100,000. The US engineer is actually ZERO cost, not $100,000. This engineer spends his fait currency on cheap Chinese products, drives his imported SUV guzzling imported energy, to his Mc Mansion made by illegal immigrants and all of it was paid by currency printed by excess poor monetary policy.

Somehow I just don't think the dollar will fool everyone forever.

Why is the dollar considered so valuable? After so much manufacturing base is leaving the US, so many jobs leaving, no more serous energy reserves, and debt that some say is over $70,000,000,000, and entitlements that will add another $150,000,000,000 to US debt and you realize what a sweet con job America has put together.

Hopefully we can all keep it a secret, wink wink, and the US can keep buying with it's vaporware currency. But eventually, Russia and Belarus will start trading without the US dollar and in such away to continue their respective conservative polices towards the Belarusian Ruble and the Russian Ruble. It just kind of looks to me like the whole damn world is abiding by capitalist principals, except the US where it really looks more and more like communism where you pay for goods and services with a currency that is headed nose down, full throttle into the ground.

really Luther, the world's LEAST productive nation? Not even more productive than the new petro-socialist worker's paradise in Venezuela?

You make some good points, but your tendency to turn a point about the shift in the world economy, or American complacency in general, into an extended anti-American rant with all the usual leftist talking points thrown in kind of turns Americans off.

Luther: "So long as Russia wants payment in US dollars..."

Russia already said they don't want US dollars.

If I remember correctly, a new commodity exchange is being established in Petrograd, it will start trading in the first half of 2008, and all commodities Russia exports will be traded in rubles.

The reason for this, as I see it, is that US dollars are rapidly turning into worthless paper and Russia (as well as China, Venezuela, Iran, Norway, etc.) do not want to be stuck with it.

It's not looking good for the US and that's exactly why the US must have the missile shield and the ability to launch a first nuclear strike without the fear of retaliation.

Hello Captain America,

I'm just a software architect and developer with some entrepreneur activities, I'm not an economist. Once I learned about peak oil years ago and realized that energy is everything, then I tend to look at both politics and globalization in terms of energy and see what I believe is reality.

I could be wrong, but my opinions have been pretty darn accurate.

Anyway... To say again what I said in my previous post, the world consumes about 88 million brls of oil per DAY. The US takes 26% of that. And many people will harp that America only has 5% of the world population and that it's not fair that she consumes 26% of the world's energy, but that is not so important.

What is really startling is that when America consumes that 26%, she pays for all oil imports with a currency she prints. To that, US energy imports are simply FREE. There is no other word, it's a FREE RIDE, and that isn't capitalism. And sure, the US also produces some oil, but, when China for example, makes it's economy white hot, to manufacture things for America, China pays much of her energy imports with US dollars... So much of US imported goods come into the US and are again paid with this vaporware worthless currency - the $.

It's a great game, a fantastic con job America has... and it kind of reminds me of kiting checks, buy HEY, the stock market is high, Iraq is going just dandy, 18% of US children are below poverty level, and bridges are falling apart...

Anyway... I think the Belarusian / Russian energy issues has a lot more behind it... I'm concerned about after Lukashenko leaves. Will Belarus become part of the EU? Will Belarus then place missile defense systems in Vitebsk (you know? to watch Iran, and I role my eyes )... It's quite difficult because there are many state enterprises that are energy inefficient in Belarus, and they should be closed down, however, at that moment, you would have one large portion of the population ready to march with EU and US NGO money. So the very transition to a more market economy will create big chaos. And, Belarus never had the tools that the US had to build it's market economy such as Black Slavery from the past or today's dollar hegemony. They actualy need to work for a living, unlike the US that just turns on the printing presses...

We will see what happens, but as Bernanke assumes the entire world wants US assets (US dollars) and as he adds more liquidity, eventually this Ponzi scheme will flood too much... US hegemony was not planned, it was an accident, like so many other things. It's both the US fed and the peasants around the world that demand this US dollar, assuming it's gold or something, and the US fed just plays along, and for this reason the US economy APPEARS to be efficient when in fact, if you start denominating efficinacy in Energy, it's not and may in fact be the worst in terms of efficiency.

But again, it's the US that doesn't pay for it's energy with tangible products or services.

So who knows.... time will tell. But the relationship between Belarus and Russia is a lot more complicated than just about energy... And to that, both must work together with other nations to accelerate the decoupling of the US dollar from the global economy. And Peak Oil is doing just that.

So Captain America, I'm not anti-American, I'm just worried that this con job will not go on forever. If the US applied some Ron Paul concepts guess what? Blue collar jobs would still be in America... mom and pop shops would be all over main street, and our society would be very energy efficient... Maybe because I am pushing for American energy independency by using insult, maybe that makes me a leftist commie... who knows... maybe since I was a republican and question US debt and the fairy tales in Iraq, maybe that makes me unpatriotic... but, an America that worried about it's own bridges and handled Katrina issues and could just find one gram of wmd in Iraq, or heck, at least find Bin Laden, if America was that, then dollar hegemony wouldn't be an issue, and Belarus would not have this transitional problems... So Captain America, go down to Wal-Mart and buy so more Chinese imports, be a patriot, and give cause for why we need to take more loans out from every corner of the earth.

America, the symbol of capitalism is now 60 + trillion in debt, and who loans us money for our GAS? China, a communist nation. Sorry, but this makes be laugh so hard it hurts.

Hello Mezuzu,

Yes, you are right, Russia wants to stop using the dollar (and really make the Ruble convertible, a hard currency - and energy will do this)... But, I read someplace that Gazprom got paid a few days ago in US $. This makes me burn up when both governments have an anti-dollar policy. Or maybe Belarus is just shedding it's dollars... now Gazprom can take those dollars and bring them to America and buy up some major company (hypothetically)... I'm sure those in the US will accept the $ and then take said dollars and buy more imports...

What most countries are doing is not dumping the dollar, they have begun to accept less dollars and they are spending whatever dollars they have on assets across the world. Like musical chairs.... with the last one holding the dollar will be short changed...

China for example does not want to just dump the dollar or that actual event would cost them big time... But China is going all over the world buying anything and everything using those dollars... Evidently, many in the African nations still think the dollar is golden, to this, China is buying many African assets related to energy...

But, China did negotiate with Saudi Arabia where their trade will be in their mutual currencies, not the dollar or the Euro. Iran now sells oil to Japan only in Yen. And Kuwait converts all new dollar payments to a basket of currencies now...

As far as the missile shield, well, think Bush on an aircraft carrier telling us mission accomplished. Missile defense will flop like everything else.

Russia is said to be keen to help draw up a new global financial architecture. There is support elsewhere for change because finance is one of the few mechanisms available to introduce and enforce political rules globally; moreover a recent audit of the key UN economic agency (the IMF) suggests the UN has long failed to act even-handedly in its global responsibilities.

But what should be the aim of a new architecture? For example, should it discourage states from committing genocide, ethnic cleansing, war crimes and crimes against humanity (R2P)? Luther may be right to suggest that, although governments agreed at the UN to prevent these attrocities, their people don't share the view. Luther would instead like to see changes to the financial architecture that protect blue collar employment all over the world. However there are few official forums for discussing this.

IJ,

Yes, a new global financial model is the answer.

But think about this. The US and EU have demanded that Russia create market prices for GAS and OIL products inside of Russia before entry to the WTO. And, I believe this is reasonable and Russia has negotiated time for such a transition.

But again, there are about 87 million brls of oil produced world wide. 26% is used by the US. That comes out to about 23 million brl of oil used by the US daily. Since the US produces about 5 million brls of that 23 million, then the US is importing about 18 million brls per day.

That 18 million brls of oil the US imports is being paid with US dollars. And the US FED under Ben Bernanke is essentially paying for that 18 million brl of daily imports with additional dollar liquidity - INFLATION. No work product or services are traded. Basically the FED uses this as a way of exporting US inflation. America pays for it's oil imports by speeding up it's printing presses... back to hegemony, back to a tax of other nations. Normally when supply can't meet demand, prices rise and demand backs off... But since the US pays with non tangle currency, demand destruction has not been substantial, to that, it's why price swings have been so dramatic.

In other words, it's the US that wants Russia to charge it's people market price, when the US DOESN'T pay market price when it attempts to print it's way out of trouble..

Belarus and Ukraine is another issue. But, if the US actually paid it's 18 million brl of daily imports with some tangible product, this would lower the price globally on energy products, or we would see more goods in the global market... Either way, America get the free ride.

Like the US "TOLD" Russia, if you charge below market price to Russia's people and Russian allies like Belarus, then the rest of the world is subsidizing them, so the US says... and as usual, the US gets it's subsidy because of the dollar's standing as a reserve currency.

"Do as I say, not as I do"... that's America's message.

Therefore, I still believe in NAM for Belarus and all other nations, but I believe NAM should be delayed for the next generation in favor of a temporary force against US dollar hegemony. Temporarily, oil producers must align, and countries like Belarus and certainly the Eastern part of Ukraine and any other non-pro America parts of the world must align to make the dollar what it is - a fait currency that's been abused and over printed, not some holly grail. The dollar today is the currency of yesteryear's Weimar Republic.

Luther,

But what should be the aim of a new architecture? There are few official forums for discussing this.

Wikipedia says of the non-aligned movement (NAM):

Countries with a strategic and political position of neutrality (‘non-alignment’) towards major powers, specifically the USA and former USSR. The movement emerged in the 1960s during the Cold War between East and West 1949–89. Although originally used by poorer states, the non-aligned position was later adopted by oil-producing nations. Its 113 members hold more than half the world's population and 85% of oil resources, but only 7% of global GDP (1995). . . The Non-Aligned Movement has struggled to find relevance since the end of the Cold War.

The G20 is probably a wieldier and more representative forum, but has been reluctant to investigate the dangers of a national currency determining the global financial order.

A non-political currency, administered globally, may satisfy many. The audit report on the IMF this year was a wake-up call.

Another forum is certainly required.

Hello IJ,

Sometimes I wonder why we all post... for me, I have so much on my plate with my work and business... yet you make quite a few good points that makes me want to respond.

There is no silver bullet for a world wide financial model, NAM doesn't address this completely.

Sure avoiding alignments with any major power is best. But I still believe a temporary alignment with Russia is the best. Temporary like about 50 years. and, I believe Russia would squelch too much strength of such alignment as the short term gains would hurt long term gains, this is what the US should have done 30-40 years ago, but it was too profitable...

But remember the dollar rules only by accident. Because so many peasants and even educated people have given the dollar a defacto value equivalent to gold, this WAVE or TREND has given great benefit to the US in the form of subsidy while weakening other nations.

The US is subsidized, it's not more productive or more efficient... A recent news article in Business Week clearly shows how messed up US accounting is when it comes to the numbers of globalization (offshoring for example, energy imports, dollar as global reserve).

Anyway... my lesson and the reason I post is because as I got older I realized how stupid adults are and how ignorant our peers are. It's why we can't find one gram of wmd or why the "US lost Russia" (I'm sarcastic with this, but many Americans really believe the US lost Russia like we lost some chunk of property). And to this, anything of great dominance in the world today is here by a Darwinian accident. Chances are, the dollar will crash by some unplanned event. The world will become more economically flat by yet another accident. And following to the theme of this article, countries like Belarus will be able to pay for her gas when the US stops being subsidized.