Unravelling the Mystery of War (1)
Too many elements of the Ukrainian war do not make sense. Why Russia makes its movement west so slowly? Why there are no fast and decisive strikes, other for them or against them? What are the true plans of the US and UK? Does the US want to undermine Russia? I met with the Sweden-based Professor Z [RZ], a man of vast learning and deep understanding to ask him these questions.
Israël Shamir: Professor Z, you consider that the Ukrainian war makes sense only if we presume that is the war of the US against Europe for the US dollar. The US beats Russia on its head with Ukraine and bleeds EU. The UK tries to bleed both the US and EU. Why do they do it? What is their purpose?
Prof RZ: The most important issue is the fate of the American dollar. Specifically, it’s about its supremacy in the economic world.
That supremacy alone generates an income of up to a trillion dollars a year for the US. And it’s not just about the money. The US military might is tightly related to dollar supreme position. The trillion dollars of seigniorage the US extracts from the world is largely spent on maintaining the US military complex.
There’s no way the USA would let the dollar slip to the second or third position among world currencies. If this occurs, most of the dollars stored abroad (and there are more than 7 trillion of them) will rush back to USA shores like a tsunami. Inflation would skyrocket, and the standard of living would drop like a stone. The resulting political storm could easily tear the country apart. So, the US would rather see the world go down than tolerate the dollar’s demise. This is especially true under the Trump administration.
Now the question is – who threatens the dollar? The usual answer is China, as it’s the only country with a large enough economy to surpass the American one. This is true, but in international trade, the Chinese yuan is only in fourth position with less than 5% of all payments. As a share of global foreign exchange reserves, yuan accounts for only 2%, while the US dollar accounts for 58%, almost 30 times more! That makes yuan a potential, but not immediate, threat to the dollar. However, in Chinese cross-border trade, yuan has recently surpassed the dollar in terms of trade volume. So the Chinese threat to the dollar is indeed growing.
But the euro accounts for 20% of world foreign currency reserves. This one-fifth of all reserves could instead be dollar-denominated. Thus, the euro “stole” one quarter of the dollar’s position, ten times more than yuan. This is important because world currency reserves grow as fast or faster as the world’s economy, demanding more reserve currency every year. Issuing this currency and sending it abroad for storage as investment or in exchange for foreign-produced commodities is essentially……. well, a money printing operation. Nothing can be as profitable as that. Therefore, the euro is currently the biggest threat to the dollar. And thus, objectively, the EU is the US’s main enemy.
IS: But before the euro emerged, other European currencies played its role, such as the D-mark, French franc, and others. They also served as world reserves.
RZ: That’s true, but consolidating these currencies (and today, 20 countries have replaced their currency with the euro, and at least 6 more are expected to do so eventually) made the euro much stronger and more desirable for value storage than any of these prior currencies. A possible exception was the D-mark, but the German economy was too small to compete seriously with the US.
IS: Does this necessarily make EU enemy of the USA? Could they just be friendly competitors, united by common political and military goals?
RZ: They could, and indeed they have been. In the past, the EU and USA enjoyed a cooperative relationship. In December 1999, when the euro was launched, the EU had strong support from the USA. Bill Clinton was president, and the US was running a budget surplus, benefiting from EU growth. The New Transatlantic Agenda, promising closer cooperation, was signed in Madrid in 1995. NATO was expanding, and for that the USA needed EU support.
Initially, the euro didn’t seem like a serious challenger to the dollar. It launched at $1.17, but soon fell below parity, rising slowly over several years. However, things changed as EU grew faster than the USA, and in 2007 the EU economy surpassed the US in nominal terms for the first time. Then the EU population was nearly 500 million, compared to about 300 million in the USA. The subprime mortgage crisis hit the US economy, enhancing the EU’s economic pre-eminence. On July 18, 2008, the euro reached $1.60.
The US bankers will never forget or forgive that day. The feeling of superiority prompted European leaders to discuss replacing the dollar with Special Drawing Rights (SDR), composed of 44% dollar, 34% euro, and other currencies. Dominique Strauss-Kahn, IMF director and potential French presidential candidate, was a key proponent.
IS: The infamous DSK…….
RZ: Yes, the one. In May 2011, he was arrested in New York over sexual assault allegations. He resigned from the IMF, and criminal charges were dropped. Am sure, no connection. But the idea of replacing the dollar with SDR died, along with Strauss-Kahn’s presidential aspirations.
The dollar survived, but Americans took note: the EU wasn’t a friend. European elites seemed to be waiting for the US to stumble, craving control over international finances. Since then, US policy appears aimed at containing or even destroying the EU to prevent it from reaching supremacy.
This policy shift took time. Initially, when US and EU economies were similar in size, there was talk of a free trade zone. Discussions on the Transatlantic Trade and Investment Partnership (TTIP) began in 2013, with the first draft leaked in 2014. Meanwhile, the US economy recovered and grew faster than the EU’s.
Then came Brexit. Interestingly, it was initiated by the governing Conservative Party, whose official position was Remain. The referendum was consultative, with no formal obligation to implement its outcome. In June 2016, 52% voted to leave the EU, splitting the country. England and Wales, save London, were largely for Brexit while Scotland and Northern Ireland voted Remain. In such a situation, if the British elite was serious about wanting to stay in the EU, they had plenty of opportunities to do so.
Remember when the UK government didn’t want to surrender Augusto Pinochet to the eagerly waiting Spanish justice system? The latter had all legal reasons to expect his speedy extradition, but this never occurred. However, with Brexit it was different.
Despite opportunities to stay in the EU and public opinion shifting towards Remain, Brexit was pursued stubbornly. The UK left the EU after 47 years of membership, ending two generations of British European identity.
IS: Does this necessarily make the EU an enemy of the USA? Could they just be friendly competitors, united by common political and military goals?
RZ: They could, and they have been. When Brexit occurred, the EU became significantly weaker. The EU lost 80 million people. More importantly, its economy shrank by 17%, once again becoming significantly smaller than that of the USA. The euro dropped to previous levels against the dollar. The TTIP negotiations stalled, and when Trump came to power in 2016, they effectively died. TTIP was conceived as a marriage of equals, but the USA was bigger once again.
IS: Since then, the gap between the EU and USA economies has only grown. Does it mean that the USA has finally won and that the EU is no longer an enemy?
RZ: It’s not that easy. On the surface, nominal USA GDP has doubled since 2008, while that of the EU has increased by only 30%. However, according to purchasing power parity (PPP), the two economies are still roughly equal in size. So, the EU threat to the USA is still there.
And then there is one more thing that seriously bothers me.
IS: What’s that?
RZ: Electricity. In general, electricity consumption is considered a good proxy for a country’s productive GDP. In the USA, these two parameters closely followed each other before 2008. But since then, US electricity production per capita has declined by 8%. How does this square with the declared doubling of GDP over the same time? Or with the fact that today there are many electricity-consuming areas that didn’t exist (or were in their infancy) back then? This includes electric vehicles, heat pumps, cryptocurrency mining, and power-gobbling AI, to name just a few.
Besides, production facilities in 2008 did not encompass millions of solar panels installed on people’s houses and in solar farms, and the huge offshore windmills have not been built yet. So how could total electricity production stagnate and per capita decrease if GDP really doubled? Those calculations didn’t even include 11 million or so illegal immigrants to the US who also consume electricity.
Let’s look closer at that USA economic growth. We are told today that half of all business investment in the past 15 years went to productivity-enhancing tools such as software and information processing equipment. Other important growth areas included construction of data centers and production facilities for electric vehicle batteries and silicon microchips. And none of those consumed additional electricity? This beggars belief. The only plausible explanation seems to be that American deindustrialization, which started around 2008, continues to this day. By the way, Trump’s first presidency didn’t modify the downward trend.
Let’s see how the situation goes in Europe. There was also a decline in electricity production per capita there, albeit a more modest one – about 3%. A closer look gives however a more nuanced picture. In Germany, the driving force of the European economy, electricity production per capita decreased by a staggering 34% since 2008. So the modest decline is due to growth in less developed EU countries.
Perhaps the German decline was because the country decommissioned its nuclear power plants and now imports electricity from abroad? But electricity consumption per capita has also decreased dramatically—by 19%.
In neighbouring France, the second biggest EU economy, consumption per capita decreased by over 20%, while production remained flat. Even in Poland electricity production per capita decreased by 3% since 2008. Such a Central European economic tiger!
At the same time, in Russia electricity production per capita has increased by 35-40%, while in China – by a whole 135%, with no sign of saturation in its growth curve.
Therefore, while US policy has managed to stall and even contract the real EU economy, the contraction in the US is even bigger. At the same time, the second most important competitor of the USA, China, is steaming ahead. While China declares no intention to challenge the dollar, in geopolitics, it is not the intention but the capability that matters. If China were in a position to crash the US dollar and thus the US economy, it wouldn’t need to do so to gain global superiority. A simple threat of such an action would make the US docile.
This situation seems to have led to some serious soul-searching among the US elite as they look for a solution to this crisis. Otherwise, the US will find itself in a death economic spiral, having to incur more and more debt (nearly three trillion USD for 2024) just to keep the economy afloat while projecting fake optimism to the outside world.
IS: Do you think they have found such a solution? By the way, why didn’t you name Russia among America’s biggest enemies? The US public often calls it a number one foe.
RZ: I think this is misleading. The animosity between the USA and Russia seems to be exaggerated. The two superpowers have a long history of joining forces against a common enemy. They did so both formally during WWII and informally during the Suez Crisis of 1956. That joint action broke the back of the French and British empires. The USA and Russia still act together, even though this may not be so visible.
IS: Who is their common enemy now?
RZ: The EU, the UK, and China.
IS: I understand why the EU, but why is the UK an American enemy?
RZ: Because it has never truly ceased to be one since the American Revolution. The British grip on American politics is still very strong. Over the years, Americans have reacted by dismantling, together with the Russians, the British Empire and gradually freeing themselves from that suffocating British “friendship.” They know very well that as long as the British monarchy is alive and well, the threat to the US will always be there. So they tacitly do all they can to weaken the UK monarchy.
By the way, how can a monarchy be a democracy at the same time? This makes sense only in Star Wars movies…….
Anyway, before Brexit, Americans seemed to have promised the British a very lucrative deal—they should quit the EU, and in return, the USA would sign a free trade agreement with them. The UK envisioned how it would play a role similar to Hong Kong in relation to the European Union, reaping benefits from both sides of the Atlantic. However, when it came to concrete negotiations after Brexit, Americans presented demands that the British simply could not accept.
IS: What kind of demands?
RZ: For instance, the entire agriculture sector, which is the main source of export revenue for the UK, would fall under American law that permits GMO. In practice, that would preclude its export to the EU and essentially wipe agriculture out as a major British industry. Without a deal signed with the US, and with ties to the EU getting weaker every day, the UK is now hanging on in quiet desperation. Due to Pink Floyd, we know this to be the English way. So sad……. Could be a great country.
Without a deal with a major partner—either the EU, USA, Russia, or China—the UK is doomed. This is why they do everything to make the USA’s life difficult on the international arena. The British goal is to induce the US to come back to the negotiation table.
IS: What are their negotiation aces?
RZ: There are many. One is the Ukrainian war. The UK has jeopardized all attempts at settlement. Another negotiation argument is British control over the Baltic states, informally known as Tribaltics, as well as the regional monarchies of Sweden and Denmark. Throw in The Netherlands if you want. The UK pushes them to initiate a war with Russia, knowing very well that this is not in American interest.
They also try to play a role in internal politics. Remember the Russian dossier on Trump? It was compiled by Christopher Steele, a former (if they ever retire) MI6 officer. Imagine if Steele had been a former KGB agent instead. Russia would have been blamed and sanctioned as if there were no tomorrow. But the British got away with that. Or did they? A war between the former metropolis and colony is often invisible.
Oh no, let me correct myself. The British have been quite vocal about their plans for regime change in the USA. The English director Alex Garland created a 2024 movie called Civil War that baffled many US critics. It’s stunning. Remember that Bones, the former pirate in Treasure Island by Stevenson, received a “black spot,” which was a pirate verdict of judgment? It looks like Civil War is a black spot delivered by English pirates of the City of London to what they might consider Irish gangsters of the White House, DC.
The protagonists in the movie are British journalists. Technically, they are American nationals, but they work for the London-based Reuters news agency. The link between British journalists and secret services is well documented. These presumably British agents drive across the USA to “interview” the controversial president holed up in the White House. At one point, the group stops at a gas station and asks armed rednecks occupying the station to fill half of their vehicle’s gas tank, offering $300. For that amount, says a redneck dismissively, you can choose—cheese or ham. This is more than a subtle hint that 300 USD buys nothing more than a sandwich.
“300 Canadian dollars,” says affirmatively a female journalist, and the rednecks bow in respect.
To add injury to that insult, when the “journalists” reach DC, they join rebels who protect them with their bodies from flying bullets. That makes it clear to even stupid watchers that the “journalists” are on the side of rebels. Then the “journalists” enter the White House first. The gang of rebels who follow them (!) executes the US president, who resembles Donald Trump more than a little.
With movies like that, you don’t need a formal war declaration—on the US dollar, US presidency, and the USA as a country.
IS: You mentioned Russia as a potential major partner of the UK. But don’t the British hate the Russians?
RZ: I read your column about that topic. It is well-crafted and thoroughly argued, but I would cut the British some slack in that matter. The nation is self-absorbed, and I doubt they are capable of truly hating—or loving—any other nation for what they are. Do they like Germans? French? Irish, for God’s sake? Their attitude is determined by the current political situation and British interests, which, as Lord Palmerston said, are eternal and perpetual.
Remember the 20th century. In the beginning of it, the Russian and British empires were deadlocked in a Great Game. So Russians were sold to British public as perpetual enemies. But in 1914, the two countries became allies in WWI. That turned Russians into perpetual friends of the British. The Russian Revolution of 1917 made the Russians perpetual enemies again. However, in 1941, they became perpetual friends once more. But not for long—the Cold War returned them to the status of perpetual enemies. That frequent change of heart has inspired George Orwell to write the Nineteen Eighty-Four book. Its “War is Peace” slogan foresaw the declaration of “Humanitarian bombing” by NATO’s Chief Press Officer Jamie Shea in 2002 during the Kosovo war. Truly, if God Almighty will decide to punish us, it will be not as much for our sins as for our hypocrisy.
That Kosovo war has not truly ended, and some say that any long-lasting peace in Europe will include returning Kosovo to Serbia.
IS: But now the Ukrainian war has made the relationship between the UK and Russia the worst ever, hasn’t it?
RZ: Well, yes, but less so because of what Russia did to Ukraine than because of what the USA did to the UK. In the beginning of the war, the USA reluctantly agreed that Russia could take over Ukraine. They moved their embassy from Kiev to Lvov and then to the Polish side of the border, encouraging all Western embassies to do the same. Strikingly, when Russians took (abortively) Antonov airport in Hostomel near Kiev on the morning of the invasion, CNN team was practically embedded with their special forces. Matthew Chance interviewed the Russian commander and filmed the firefight with Ukrainians without interference. Whose side was the US that day, you think?
But then the UK decided to interfere and disrupt the American plan for a rapid Russian victory. They quickly took initiative and provided Ukrainians with two billion dollars’ worth of military equipment while “strongly advising” them not to sign any peace treaty with Putin. The war dragged on. Reluctantly, Americans had to pretend that supplying military equipment to Ukraine was also their goal. To lead the process and prevent it from getting out of hand, they created the Ramstein meetings. Rhetoric aside, American support for Ukraine has always been meagre and much below actual needs. Now, as everybody knows, Americans have abandoned even the rhetorical goal of Ukrainian victory. They are trying to convince Ukrainians to accept territorial losses, which they have always said would be a Russian victory.
IS: Why is the US doing this?
RZ: Definitely not because of their love of Russia! But because such a course of action serves their objectives. It damages and weakens the EU, especially Germany, whose postwar prosperity has been built on cheap Russian resources. Moreover, the USA fears a Russian defeat, as it would most certainly lead to significant internal turmoil and even a breakup of the country.
Besides the risk of nuclear weapons ending up in the wrong hands, if this happens the EU would no longer have a strong counterbalance on the Eurasian continent. Except for China, of course, but it is too far away from Europe. Thus, Europeans would no longer need Americans to protect them. Or pay for that protection. The EU would expand enormously, absorbing Ukraine, Belarus, Moldova, Georgia, and Armenia. Curiously, the latter two countries have been moved since 1990 by political geographers from Asia—where they had belonged to for nearly three centuries—to Europe. This move allows the EU to claim them as part of Europe.
The western part of Russia may also join the EU. On the second thought, this is unlikely, as then Russian would become one of the official EU languages. The ruling elite in some Eastern European countries that are trying (largely unsuccessfully) to assimilate their Russian-speaking minority would not stomach it.
But overall, the European Union could gain up to 100 million people and 2-3 trillion in annual GDP, which would make its economy again bigger than that of the USA.
It’s a nightmarish scenario for the Americans, and they will never let it materialize.
Read the second part of the article
yogaesoteric
January 31, 2025
