An Idea So Stupid It Takes Your Breath Away

We’ve written extensively about the War in Ukraine. There’s no need to repeat all the details here. It’s enough to say that the U.S. provoked the war from 2008 to 2022, Russia responded with a special military operation in 2022, Russia is winning, and Ukraine is close to defeat.

On the financial side, the U.S. sanctions have failed. The Russian economy is booming and on a war footing even as the U.S. heads into recession and is out of ammunition.

It gets worse. The EU will not approve more money for Ukraine because of a Hungary veto, and the U.S. will not approve more money without border reform that Biden won’t agree to. Ukraine is practically broke, and they need cash to bribe the oligarchs. In the face of this impasse, Biden came up with a hare-brained scheme to steal the $300 billion of Russian reserves (in the form of Treasury securities) now frozen in U.S. and European banks.

Freezing assets happens with some frequency, but actually stealing them is tantamount to a default by the Treasury. Biden would give the stolen $300 billion to Ukraine. Of course, a lot of that would return to the U.S. in the form of campaign contributions and other gratuities to Democrats, with 10% for the Big Guy. This would destroy confidence in the U.S. Treasury securities market, hike interest rates, downgrade the U.S. credit rating, and more.

Biden has some buy-in on this from GOP senators (all warmongers except for Rand Paul) and from Mike Johnson, the new Speaker of the House. Johnson seems just not to know any better about international finance and is along for the ride. Is this the dumbest plan ever? Not quite. As reported in this article, some genius dreamed up a way for Ukraine to issue “Reparation Bonds.”

The idea is that Ukraine would issue $300 billion of bonds to be repaid with reparations from Russia once Russia loses the war. One obvious problem is Russia is winning the war and destroying Ukraine in the process, so there won’t be any reparations, but never mind.

The Reparation Bonds would be secured by the $300 billion of frozen Russian assets. If Russia wins the war (they will) and no reparations are actually paid, the $300 billion would be used to pay off the bonds. It’s like a deferred steal instead of an immediate steal.

Wait, it gets better! Who would actually buy these bonds? The Wall Street eggheads would structure them in tranches, with some more senior in payment and with greater collateral than others. The senior tranches (probably “AAA” rated just like sub-prime mortgages in 2006) could be sold to institutions, and the lower rated tranches would be sold to … wait for it … central banks!

These central banks would buy the Reparation Bonds with printed money. That printing causes inflation, so you end up paying the price since your money is worth less.

This idea has everything – shell companies, stolen collateral, Ponzi economics, kickbacks to Democrats, inflation, and the destruction of confidence in the dollar. I’m fairly sure Biden is too senile to think of this. Maybe, Hunter?

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