In the run-up to yesterday's debt ceiling deal between Congress and the White House, there was a lot of frustrated reaction from world leaders fearful of what a U.S. debt crisis could mean for their own economies. But Russian Prime Minister Vladimir Putin might have just won the prize for the strongest response so far. Today, he told a Russian youth group that the United States was "like a parasite" on the world economy.
They are living beyond their means and shifting a part of the weight of their problems to the world economy ... They are living like parasites off the global economy and their monopoly of the dollar ... Thank god that they had enough common sense and responsibility to make a balanced decision.
Russia holds a large amount of U.S. bonds and treasuries, which means had the United States defaulted, it too would have been in trouble. There was clearly some relief this morning, following the news of yesterday's agreement. Both of Moscow's stock exchanges opened up about two percent -- though, they later declined due to investor doubts about the Washington plan.
In today's speech, Putin said Russia should look for other reserve currencies to hedge against "a systemic malfunction in the U.S. economy," according to the Wall Street Journal.
What options do they have besides the dollar? The Journal reports that last year Russian President Dmitry Medvedev held talks with Chinese leaders exploring the possibility of moving reserve assets into the yuan and away from the dollar.
Russia cut back its purchases of U.S. treasuries in recent months -- down from $176 billion in October, 2010 to $115 billion in May. Still, they are unlikely to completely bail on the U.S. market any time soon since Russian officials concede it is still a safer bet than other world economies.
So, the Kremlin will most certainly be dealing with the U.S. "parasite" for the foreseeable future.
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