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Tit for tat “sanctions” so far.  We bar a dozen or so high level Russians from entering the U.S., Russia retaliates with the same.  Canada puts their 2 cents (Canadian) in and bars another dozen or so Russians and Russia does the same to Canada.  Like I said, so far it’s been tit for tat.

But wait, have you heard that Russia is setting up their own “payments” system?   They are obviously doing this so their businesses are not disrupted, money and goods will still flow.  It might be a pretty good bet that “dollars” will not even enter this equation once they get it up and running.  Will this be a disaster to the dollar?  No, probably not but as I’ve mentioned before it does serve as an example for others who might get this “bright idea.”

Russian companies are also making plans to redirect their sales of metals eastward and away from the U.S. if sanctions begin to bite.  The most important being metals of platinum and palladium for their catalytic properties.  Looking into this just a little deeper you will find that Russia is the largest producer of palladium…which they may not be accepting dollars or “American Express” for shortly.

But here is where the tit for tat starts to get really foolish.  The G-8 (G-7 +Russia) meeting scheduled for June seems to be in the process of being cancelled.  Cancelled because the meeting was scheduled …yes you guessed it…in Sochi, Russia.  To top this off, President Obama is lobbying not only for a cancellation of this meeting but “kicking” Russia out altogether.  Really?  All because a small portion of a traditionally Russian nation “democratically voted” to be re annexed with its motherland?  This seems to me like “schoolyard stuff.”  No, better yet, this is like our president sneering and saying, “We’re not going to let Ivanoff play in any of our reindeer games!”

I’m sorry to say but if we are taking this position, the Chinese may have a little bit to say about it.  Clearly Mr. Putin has made the Chinese aware of his planned moves ahead of time…and received the OK.  This did not take the Chinese by surprise (though our responses may have).  We are “beholden” to China as they were gracious enough to lend us as much as we needed to borrow…until the end of 2011.  They lent us enough rope to hang ourselves and then just stopped which is why the Federal Reserve now buys (monetizes) 70% of our own debt.  But, they didn’t “stop” until they had acquired enough of our debt to become our largest creditor!

For anyone who has not thought this all the way through, when you become someone’s largest creditor there is “power” involved.  The old saying that if you owe $100,000 then the bank owns you but if you owe $10 million you own the bank does not hold true when discussing international “sovereign” debt.  Especially when the debtor is also privileged with the issuance of the reserve currency…and this is the rub.

By pushing Mr. Putin we are accelerating the game’s outcome, it is like we on our own are accelerating the clock.  We are daring our foes to go off of the dollar standard.  In fact, we will with sanctions that make it very difficult for Russia to use dollars even if they wanted to.  Which of course leads to “what is China’s position?”

Do you see the question that follows this?  “Who” exactly gets hurt the worst?  No, actually let me re phrase this, “who” has the most need for dollars to be used?  Russia or the U.S.?  Can Russia survive and do business without the use of dollars?  If the dollar all of a sudden just vanished, would Russia economically implode?  Then ask the same questions of the U.S.  How will we trade…for anything?  We have a $500 billion trade deficit to start with; will those goods still continue to “flow” into our ports?  What exactly will we pay in exchange for goods coming in?  IOU’s?

And this is the problem; we have been paying with IOU’s for years now.  In fact, I have termed it the “never pay model.”  Can we be foolish enough to not understand that our trading partners are already not happy with our IOU’s…yet we want to tell another nation “you can’t use them?”  It is clear that this is not a “U.S. vs. Russia” problem.  The G-20 has stepped up to the plate and is making them known.  They don’t like the “veto power” of the U.S. or China and want all 20 nations to have more equal power and voting rights.  A very good take on this was penned by Paul Mylchreest.

This is a dangerous situation for the U.S. as the 20 nations will meet April 10 to discuss.  The U.S. has still not amended legislation pertaining to the IMF which has this date, April 10th as a deadline.  The danger is that enough of these countries will come to similar views and decide to begin sidestepping the dollar.  Were Russia’s new “SWIFT” system to get up and running, the use of SWIFT and dollars may become unnecessary.

When I say “unnecessary” you should understand that the world is not happy with our antics.  They are not happy with the way we bullied other nations.  They don’t really know where we stand anymore on various issues as in one nation we will back one side yet they are our foes in another and different nation or conflict.  They surely do not enjoy the NSA spying on them (Mrs. Merkel has said as much and she now seems more sympathetic to Mr. Putin rather than Mr. Obama).

A response to the U.S. “isolating itself” was seen yesterday when Mr. Obama gave a speech in Hague, Netherlands.  Zero Hedge provided a clip which is less than 2 minutes in length.  Has this ever happened anywhere to any sitting U.S. president?  Ever?  You must ask yourself why or how something like this could have happened.  Even if your politics are extreme far left, this is a very scary response and illustrates global opinion of our actions.