RIPPLING GLOBAL ECONOMIC CRISIS

RUSSIANS ARE CUTTING BACK on personal spending and trading rubles for dollars as the collapse of world oil prices cripples an economy that just months ago soared on the strength of record prices for its petroleum exports.

Even vodka sales are down.

Economists are especially worried by the mounting flight of capital and increased dollarization of the economy—something that last happened a decade ago when the government defaulted on its foreign debts.

"Some of my friends have converted all their savings into dollars, leaving just 500 rubles to pay the phone bill in their account," said an administrative assistant at a bank, who asked that only her first name, Olga, be used because she was not authorized to speak to the press.

"I've been telling my friends for months to buy dollars while they were cheap, but some of them just wouldn't listen," she said.

A recent World Bank report documented the extent to which the decline of oil prices from a high near $150 a barrel to about $50 is wreaking havoc on the Russian government's budget and depleting its foreign-currency reserves.

This is a wicked turn of events just weeks after we have been on the edge of our minds fretting the absolute collapse of the dollar, and after a snarky Vladimir Putin tried to threaten the West with strong words and stronger acts of aggression against its own former satellites. So it seems that national confidence is always resides on a floating scale. At least the Russians still possess a fiscal reserve, despite the relative spoilage of their currency, which is something the United States can't boast as we continue to roll up debt.

Wonder what bad news Putin will have for Hugo Chavez in the near future, as the Russians rush to stop the bleeding while the Venezuelan regime suffers from the same impact of oil prices on its own ego-driven economy?

Read it all.

CHINA’S NUCLEAR OPTION AGAINST THE DOLLAR

There are rumors, this is Washington, after all, that the Chinese government has initiated a campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation. Iran has already done this, and Saudi Arabia has threatened to do this, although my source in the US State Department has told me that the Saudis have already begun swapping in their dollars for Euros.

Two officials at leading Communist Party bodies have given interviews in recent days warning that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress to redress the US-China trade imbalance.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels. It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US. "Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, a Chinese official, reportedly has suggested in bold terms that Beijing had the power to set off a dollar collapse if it choose to do so. "China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

The US Senate has drafted a bill backed by the Senate Finance Committee which calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The yuan has appreciated 9% against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9 billion in June.

Henry Paulson, the US Treasury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation." Paulson, a China expert from his days as head of Goldman Sachs, has opted for a softer form of diplomacy, but appeared to win few concessions from Beijing on a unscheduled trip to China last week aimed at calming the waters.

So I guess it's time to stop buying Chinese.

AMERICA'S LIMP LEADERSHIP

Does the average Joe seeking clues to what ails his country really have a clean shot at figuring out why its leadership appears to be deaf, dumb, and blind in ignoring those rather obvious factors poised to take us down, but I'll take a shot. In short, I think there are several things hamstringing the United States government in responding to these Islamic thugs in our midst:

1) Saudi money. The Saudis for decades have had a program where any retiring pol who says good things about Saudi Arabia gets nice big fat consulting contract.

2) The Saudis have over a half-trillion dollars invested in U.S. securities which in effect they use as blackmail against us. Imagine the chaos if the Saudis pulled that half-trillion out in one day, and the Saudi also hold billions in oil revenue dollars which they threaten to convert to Euros, which would further damage the dollar.

3) Other Muslim governments like UAE, Kuwait, et cetera, have a extensive number of lobbyists to help pursue what they want from Congress. Remember those trade deals to sell our ports to the Persian gulf state of Dubai a year or so ago? Or Bill Clinton's 10-year $100 million consulting contract with the kingdom of Dubai. Folks the Muslims are busy buying every crooked politician they can find.

4) Lastly, pols from both parties are simply undereducated, or miseducated, and thus ignorant of the threat that Islam poses to the West. Their staffs seem equally ignorant, and unfortunately, rely on CAIR for information of these things!