Article published on July 15, 2022 by of The Epoch Times
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War sanctions against Russia, along with misguided U.S. central bank and trade policies, are likely to fuel an economic storm that will catapult America into a major crisis, an expert has warned.
Michael Wilkerson—author, investor, and financial analyst—told The Epoch Times in a wide-ranging interview that the economic sanctions against Moscow combined with years of Federal Reserve stimulus and decades of bad trade policies are now culminating in a perfect storm of persistently high inflation.
He believes that stubbornly high inflation will, in turn, force the Fed to keep hiking rates aggressively, triggering the worst economic catastrophe in recent memory.
The Coming Storm
Wilkerson, a former managing director at financial advisory firm Lazard Ltd. and former CEO of investment holding firm Fairfax Africa, has moved around the Washington Beltway and American business establishment for most of his long career.
Beginning in 2000, he started to write about economic and financial issues, and in 2020 he foresaw some of the events that would take place along with the pandemic, like popular social unrest, worsening economic challenges, and increasing tension between the United States, China, and Russia.
He has over the years been critical of the cheap money policies of the Federal Reserve during and after the Great Recession and of the United States’ imbalanced trade relations with Beijing.
In his first book, “Stormwall: Observations on America in Peril,” Wilkerson identified four problematic economic trends that are about to converge to form a “giant tsunami-like wave” that he believes will cause the worst financial disaster in U.S. history.
The first of these trends is a dangerously cozy relationship between America’s political and corporate class and its counterparts in Beijing.
“We spent decades pretending on both sides that this was a great and healthy partnership of mutual benefit, and I think that we as Americans got the short end of that deal for a very long time,” said Wilkerson.
Policymakers in Washington let China into the World Trade Organization back in 2001, driven by the hope that political change in communist-run Beijing would be facilitated by closer economic ties.
Decades later, that hope has proven futile. Not only does the Chinese Communist Party (CCP) retain its grip on power and continue to repress its citizens, but China has also strengthened its posture as a mercantilist regime.
Theft from the United States
China facilitates the theft of U.S. intellectual property, unfairly subsidizes domestic rivals to the detriment of U.S. firms, and is busy expanding its weapons arsenal, posing a growing military threat to its neighbors and the United States, Wilkerson said.
“Too many technology transfers have already occurred, especially in intellectual property, both through legitimate and illegitimate means,” he said, while criticizing Wall Street for becoming too beholden to Beijing.
Decrying the fact that America has become reliant on China for critical supplies and manufacturing, Wilkerson said there’s now a growing sense among U.S. businesses and corporations that being dependent on Beijing—or any other adversarial power for that matter—is an undesirable state of affairs that poses a risk to the security and welfare of the nation.
The pandemic and recent tensions over Taiwan and Ukraine have brought home for many Americans the fragility of an overstretched global supply chain.
“I think we are coming to a new realization that the relationship has to change at the most fundamental of levels, and it has to be based on reciprocity and a benefit to the U.S.,” said Wilkerson.
He credits the Trump administration for blowing the lid off of what he called the “Potemkin village relationship between the U.S. and China,” arguing that the ties between the two countries were skewed to America’s detriment.
Former President Donald Trump sought to reset trade policy between the two nations, pressing for better trade deals and imposing billions of dollars in tariffs in order to bring about a fairer playing field for U.S. businesses and workers.
It has since been harder for even the staunchest pro-CCP lobbyists on Wall Street to turn U.S. relations with China back to the former status quo.
Although the Biden administration is mulling revoking many of the Trump-era tariffs, citing a potential reprieve from soaring inflation, Biden has so far largely retained Trump’s hawkish stance.
The U.S. government recently delisted more Chinese firms from Wall Street and has continued to suggest that the American military is prepared to defend Taiwan in case of invasion by Chinese Communist forces.
Poking the Russian Bear
Wilkerson said that one of the key dangers the world is now facing is the standoff between the Western powers and Russia regarding Ukraine.
He said that the Ukraine invasion was a terrible thing on a “human life perspective” and was a tragedy that could have been prevented by both sides.
Wilkerson believes that if the United States and its allies had not been pushing so hard to have Ukraine join NATO, the war would not have happened.
He also blames the Biden administration’s clumsy exit from Afghanistan for making the United States appear weak, emboldening Russia to invade.
“It was not something that would have likely happened under the Trump administration,” Wilkerson contended.
“Putin saw weakness in the current administration and saw what had happened in Afghanistan with the very ham-handed withdrawal that cost many, many lives,” he said. “We spent over 20 years fighting the Taliban only to return Afghanistan to the Taliban.”
He said he was not surprised that the Kremlin made a decision in what was clearly in its best strategic interest, since every Russian regime in history has made it clear that Ukraine is a key fixture in its sphere of influence in the region, much in the same way the United States sees Mexico.
“Whether that’s right or not from our framework isn’t the question. It is how [the Russians] look at the world,” explained Wilkerson, who said that Ukraine should have been kept neutral as had been agreed earlier by treaty.
Despite public outcries over the invasion, he said that Western leaders responded with the only real weapon they had while avoiding a war, which was economic sanctions against Russia.
“The problem is that they just don’t work, and in fact they usually backfire on the imposing countries rather than on the target country,” he said of the sanctions.
Wilkerson pointed out that the Russians were prepared since 2014 to sanction-proof their economy and the ruble by diversifying their sources of revenue in case they were cut off from the global financial system.
He said that the sanctions may lead to a bifurcation of the post-war global financial system into separate blocs, weakening the influence of the Western economies, which have dominated the world for hundreds of years.
Unintended Consequences
The sanctions have boomeranged on the West, worsening an already existing fuel and supply crisis in economies still reeling from the CCP virus and still heavily reliant on Russian exports.
“We have ensured that inflation will run much hotter than before, even so far that Europe’s energy security will be threatened by the perennial ability of Russia to withhold a flow of gas or other commodities, and in particular because Russia and Ukraine represent a significant portion of global grain exports and fertilizer exports,” he said.
Wilkerson added that the sanctions have also unintentionally contributed to a broader food crisis that could cause famine in parts of the world.
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