Saturday, March 12, 2022

The Russian Semi - Invasion Of Ukraine Has Caused A Financial Earthquake - Both The Old Normal And The New Normal Are Gone

 by Ian (editor) and Phil (finance expert)

Ahead of Russia's invasion of Ukraine, and let's be honest here, both of us predicted it would not happen because we thought US and NATO leaders would persuade the nutters in Kiev to stop provoking Russia and respect the Minsk agreements brokered by Angela Merkel in 2014,  we forecast a rough year economically and materially for the developed world coping with the aftermath of the hoax pandemic and in the grip of an energy crisis caused by the failure of loonytoons 'green energy' policies, which together would inflict unsurvivable cost of living increases on poor and middle income families and spirallig inflation on businesses and the affluent. We also predicted the collapse of the US$ as global reserve currency,  soaring prices in gold, oil and commodity markets, monetary, a rush to cryptos, ongoing supply chain crunch, and a pandemic of that uneasy, queasy feeling one gets on hearing the sound of large amounts of shit hitting enornous fans.

The Ukraine situation has changed all that, not because it caused the stuff we forecast not to happen but because it has caused it all to happen much more quickly and to a greater extent than we thought possible. That's what you get for being naive enough to believe that for once common sense might prevail.

What just happened in the last two weeks is enormously important and misunderstood by many financial pundits and almost every mainstream media finncial journalist we have read. Only yesterday The Daily Telegraph published and article by a respected finance writer which claimed sanctions had, in one short week, brought Russia's economy to its knees.

In the comment thread under that article comment after comment praised Joe Biden and Boris Johnson because their sanctions had really put that nasty bully Putin in his place, the Russian people and  his own inner circle were turning on him. On the contrary, as we wrote on the day the first sanctions were announced, the sanctions are hitting NATO and its allies harder than Russia. Energy prices in the west will soar even higher, inflation will accelerate and now there will be food shortages to because as Russian and Ukrainian wheat, maize and oil seed exports dry up, crop yields around the world will drop dramatically because Russia, which supplies two thirds of the world's ammonium nitrate (the mmain ingredient in commercial fetilizers,) has banned exports of that mineral.

The West's action of shutting Russia out of SWIFT, , the international payments system, is also ineffectual, Russia buys little from the west and if it cannot sell its oil and other products to the west it will sell them to China and probably find plenty of agencies based in tax havens prepared to act as middlemen and channel Russian goods into western markets. Sanctions have never worked before there is no reason to think they will now. And about seven years ago Russia and China set up a financial transfer system of their own so they would not be dependent on the American - controlled SWIFT.

In short Russia, with the backing and support of China, just told the world that it is no longer going to sell its oil, gas, minerals and wheat on which many Western economies are dependent. The West in its response just said to all countries around the world: “If you have foreign exchange reserves, held in our system, they are no longer safe if we don't like your leaders.”

The US Dollar has been the reserve currency of the world since WW II. This has given the US an enormous advantage and subsidy from the rest of the world because everyone else needs to produce goods and services to obtain dollars and the US can simply produce dollars at no cost by printing them.   

Putin is now cast in the role of Charles de Gaulle who complained about the "exorbitant privilege" of the US with its dollar hegemony. The arrogant, aristocratic de Gaulle demanded gold in exchange for France's US dollar FX surpluses and this outflow forced the US to abandon the gold standard in 1971. 

Recall that post this event, gold went from $35 per ounce to $800 per ounce (23x).  Russia's move will lead to a similar move in favor of gold. Putin could see that the US fiscal and monetary situation was becoming untenable and he decided to use this to create an existential threat to the US and the world financial system. Gold may become the de facto world reserve currency but as members of the public lose confidence in government backed paper money because of the obvious incompetence of governments in managing their national economies, many people will put money into cryptocurrencies, which are based on trust it is true. 

But while governments believe that their ability to raise money through taxation cushions them against the economic realities, crypto - operators know they must be whiter than white because once they lose the trust of people who hold their crypto - currencies, they have nothing.

 by Ian (editor) and Phil (finance expert)

Ahead of Russia's invasion of Ukraine, and let's be honest here, both of us predicted it would not happen because we thought US and NATO leaders would persuade the nutters in Kiev to stop provoking Russia and respect the Minsk agreements brokered by Angela Merkel in 2014,  we forecast a rough year economically and materially for the developed world coping with the aftermath of the hoax pandemic and in the grip of an energy crisis caused by the failure of loonytoons 'green energy' policies, which together would inflict unsurvivable cost of living increases on poor and middle income families and spirallig inflation on businesses and the affluent. We also predicted the collapse of the US$ as global reserve currency,  soaring prices in gold, oil and commodity markets, monetary, a rush to cryptos, ongoing supply chain crunch, and a pandemic of that uneasy, queasy feeling one gets on hearing the sound of large amounts of shit hitting enornous fans.

The Ukraine situation has changed all that, not because it caused the stuff we forecast not to happen but because it has caused it all to happen much more quickly and to a greater extent than we thought possible. That's what you get for being naive enough to believe that for once common sense might prevail.

What just happened in the last two weeks is enormously important and misunderstood by many financial pundits and almost every mainstream media finncial journalist we have read. Only yesterday The Daily Telegraph published and article by a respected finance writer which claimed sanctions had, in one short week, brought Russia's economy to its knees.

In the comment thread under that article comment after comment praised Joe Biden and Boris Johnson because their sanctions had really put that nasty bully Putin in his place, the Russian people and  his own inner circle were turning on him. On the contrary, as we wrote on the day the first sanctions were announced, the sanctions are hitting NATO and its allies harder than Russia. Energy prices in the west will soar even higher, inflation will accelerate and now there will be food shortages to because as Russian and Ukrainian wheat, maize and oil seed exports dry up, crop yields around the world will drop dramatically because Russia, which supplies two thirds of the world's ammonium nitrate (the mmain ingredient in commercial fetilizers,) has banned exports of that mineral.

The West's action of shutting Russia out of SWIFT, , the international payments system, is also ineffectual, Russia buys little from the west and if it cannot sell its oil and other products to the west it will sell them to China and probably find plenty of agencies based in tax havens prepared to act as middlemen and channel Russian goods into western markets. Sanctions have never worked before there is no reason to think they will now. And about seven years ago Russia and China set up a financial transfer system of their own so they would not be dependent on the American - controlled SWIFT.

In short Russia, with the backing and support of China, just told the world that it is no longer going to sell its oil, gas, minerals and wheat on which many Western economies are dependent. The West in its response just said to all countries around the world: “If you have foreign exchange reserves, held in our system, they are no longer safe if we don't like your leaders.”

The US Dollar has been the reserve currency of the world since WW II. This has given the US an enormous advantage and subsidy from the rest of the world because everyone else needs to produce goods and services to obtain dollars and the US can simply produce dollars at no cost by printing them.   

Putin is now cast in the role of Charles de Gaulle who complained about the "exorbitant privilege" of the US with its dollar hegemony. The arrogant, aristocratic de Gaulle demanded gold in exchange for France's US dollar FX surpluses and this outflow forced the US to abandon the gold standard in 1971. 

Recall that post this event, gold went from $35 per ounce to $800 per ounce (23x).  Russia's move will lead to a similar move in favor of gold. Putin could see that the US fiscal and monetary situation was becoming untenable and he decided to use this to create an existential threat to the US and the world financial system. Gold may become the de facto world reserve currency but as members of the public lose confidence in government backed paper money because of the obvious incompetence of governments in managing their national economies, many people will put money into cryptocurrencies, which are based on trust it is true. 

But while governments believe that their ability to raise money through taxation cushions them against the economic realities, crypto - operators know they must be whiter than white because once they lose the trust of people who hold their crypto - currencies, they have nothing.

US commodity crisis to give rise to new world order, says Credit Suisse’s Zoltan Pozsar:

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We The Good Guys Versus They The Bad Guys Reporting Does Not Make Sense For The Ukraine Crisis

 

Mainstream media reporting of the conflict in Ukraine has disappointed. Perhaps I was naive to suppose that lessons might have been learned from the hits their print sales and online trafic rates took as a result of their handling the COVID pandemic by abandoning any pretence of objective and unbiased reporting and bombarding readers / viewers with a daily torrent of propaganda in support of lockdowns, social restrictions and mandatory vaccination . vaccine passports. But instead of focusing on the most obviously newsworthy aspect of the build up to and escalation of the war, Russia’s view of NATO expansion into Ukraine and even further to Georgia and Kazhakstan.

While reports coming out of Ukraine should be treated with scepticism whichever side they orignate from, stories and articles making moral judgements about which side are the good guys and who is baddie really take the business of news reporting to the level of kids playing games of Luke Skywalker's rebels versus Dartth Vader and the Imperial Stormtroopers.

Despite the emotional nature of debate in this era of 'wokeness' when feelings trump logic and reason and beliefs outweigh facts, geopolitics is not a morality tale. Policies whould only ever be based on serving the strategic interests of the country you are defending. Talk of spreading European Union 'values' to Ukraine and further east into Asia is bogus, all Ukraine's new best friends are really interested in is spreading the economic and political influence To paraphrase a speech made in 1848 by British foreign secretary Lord Palmerston, there are no perpetual friends or enemies, only perpetual interests. Our interests are not only not the same as those of our adversaries in this conflict, they are not the same as those of our allies either so we either need to find a way to reconcile them in a satisfactory manner or prepare for an eventual war.

 

It may well be the case in the current conflict that while the current administration occupies The White House, Britain's interests align more closely with those of Russia than with America's or Ukraine's, yet for reasons that have more to do with virtue signalling or the desire to be one of the herd rather than a leader, Britain's current Prime Minister, along with those of France, Germany, Italy, Netherlands, Belgium, Sweden, Poland and most other European nations, along with their entire governments are going along with the line dictated from The White House and demented Joe Biden's handlers, Ukraine are the god guys in this conflict so we must support them in every way we can and Russia are the bad guys so we should do all possible to oppose then and effect regime change in Washington.

This kind of thinking is the main cause of NATO's problems with Russia since the turn of the century. For the last 30 years the U.S., and by extension NATO, have failed to acknowledge that Russia has legitimate interests in the area surrounding it. 

The Georgian conflict of 2008, which occurred after discussion of Georgia joining NATO and saw Russian troops marching into the former Soviet Republic, was a good example of this. Faced with a potential NATO member on its southern border, which like Balkan states would have provided a platform from which NATO military forces could attack, it was always likely that Russia would see the  Georgian breakaway entities of Abkhazia and South Ossetia as buffer republics with whom it could cooperate. It was Georgian entry into South Ossetia that led to the Russians crossing the border while pushing the Georgian insurgents back into their own country. It is reasonable to ask what role foreign advisors played in this conflict, given that it was an opportunity to gauge the nature and strength of the likely Russian response to any further attempt to draw certain nations it regarded as strategically threatening into the EU and NATO.

 In a 2018 speech marking the tenth anniversary of the Georgian conflict, Russian Prime Minister Dimitry Medvedev warned that an attempt by NATO to incorporate the former Soviet republic of Georgia could trigger a new, "horrible" conflict.

Dmitry Medvedev said in an interview with the Kommersant daily broadcast by Russian state television that NATO's plans to eventually offer membership to Georgia are "absolutely irresponsible" and a "threat to peace."

Medvedev was Russia's president during the August 2008 war, which erupted when Georgian troops tried unsuccessfully to regain control over the Moscow-backed breakaway province of South Ossetia and Russia sent troops that routed the Georgian military in five days of fighting.

The Russian army was poised to advance on the Georgian capital, but Medvedev rolled it back, accepting a truce mediated by the European Union. (Associated Press, August 2018)

Discussion about Ukraine joining NATO was an even greater provocation to Moscow. Not only is Ukraine a large country directly bordering Russia, prior to 2014 the Russians were leasing the naval base at Sevastopol in Crimea, which is the home of the Black Sea Fleet and their primary warm-water port. Although the lease was extended by another 25 years in 2010, a NATO-allied Ukraine would eventually make this position untenable for everyone given that, in the event of hostilities, NATO would certainly blockade the base. At this point, detaching Crimea from Ukraine would have become a strategic priority for Russsia, hence the 2014 referendum which achieved this without bloodshed but did not resolve the problem of a potential NATO force on Russia’s western border as NATO leaders continued their efforts to seduce the newly installed, pro - western government.

NATO forces in Ukraine have understandably always been a red line for the Russian government. The Russians regard NATO as a hostile power, a military alliance led by arch - enemy The USA. Thus NATO troops on their longest western border would be seen as an existential threat.That should have sent a message to Washington, London, Paris and the rest that after NATO and the EU had trampled on the 1993 agreement between Bill Clinton and Boris Yeltsin that Russia would respect the sovereignty of the former Soviet Union states and bother NATO and the EU would in return undertake not to recruit those states as members.

After NATO and the EU trampled on that agreement by granting membership to Poland, Lithuania, Latvia and Estonia the Russians signalled their dissastisfaction but did nothing else. When moves were made to incorporate certain Balkan states, including Bosnia and Croatia into the alliance. With NATO already having accepted Bulgaria and Romania as members it is hardly surprising the Russian government felt there was an organised campaign to surround them with states belonging to an organisation that had been Russia's cold war enemy. More significant from an independent commentators perspective is that NATO is highly unpopular among the majority of the citizens living in the Balkan states, who remembered its brutal military onslaught during the civil wars of the 1990s in the region. Taking that into consideration and it is more difficult to dismiss Russia's fear as nationalistic paranoia.

The Balkan states encompass a region of great strategic importance, due to which it has been turned into an arena manifest with inter-imperialist contradictions and agendas. A policy of ‘divide and rule’ operated by supr - national bureaucraies including NATO, and Non - Government Organisations backed by certain billionaire financiers has been used to facilitate the creation of new and weak states such as Kosovo and North Macedonia in the Balkans. This has contributed to instability and a situation in which rivalry may again cause bloodshed in the region. Should the fragile peace break down in that way,  not only would invite further foreign interventions in the region by nations and alliances with an interest in installing or propping up governments that are servile to the expansionist agendas of globalist organisations. Russia is aware that establishment of such regimes increases the prospexts of exploitation and would bind the Balkan countries to imperialist organizations like NATO and EU.

Why, then, has the West continued to toy with the idea of expanding further into the Balkans, recruiting Ukraine and offering membership to Georgia and even Kazakhstan (which far from having a coadstline on The Atlantic, is fully and indisputably in Asia. Pursuing such policies was is bound to lead to conflict eventually. It appears that the western democracies has been hoping that continuing economic pressure via trade and financial sanctions would weaken Russia to the point that it could do nothing to oppose Ukrainian membership of NATO. But that was only ever wishful thinking, Russia has plenty of markets around the world for its grain, oil and gas, ammonium nitrate (the main ingeredient of commercial fertilizer and other resources. furthermore, has vast reserves of gold and negligible sovereign debt and is energy independent.

There has always been an element of hypocrisy in the warmongering of the US / NATO bloc: if Russia had understaken the kind of activity in Mexico as the U.S. has in Ukraine since 2014, the U.S. Army would have occupied Mexico City long ago. There would be no talk of sovereignty or democracy, only the hard reality that Russians could not be allowed to expand and strengthen their presence on the US border. And in that case Washington would be right, it is simply not acceptable in the interests national security to permit a hostile foreign power to  meddle in the internal affairs of a weaker neighbour state.

There is also a big question mark over whether further NATO expansion is beneficial to its original member states. The original strength of the alliance , when it was formed in 1949, lay in the fact that it had a limited membership agreed on the defined objective of preventing Soviet expansion in western Europe. But that was then, this is now, the geopolitical balance has shifted, creating  two problems that have been ignored by politicians and news media. First, if NATO is still a defensive alliance, who or what is it defending itself against? The knee - jerk reaction is to point at Russia but to do so implies that the existence of NATO itself casts Russia in the role of perpetual enemy, because without an enemy NATO has no reason to exist. NATO needs a bogey man to believe in, in order to scare poorly informed citizens into compliance with oppressive, globalist policies that are in fact against the interests of the people

The Russians have worked this out for themselves and concluded that their own national interests are likely to play out against a background of low-level Western hostility.

The other problem takes us back to the words of Lord Palmerston about our interests not being the same as the interests of our allies. The geopolitical interests of NATO members have changed greatly since 1952 when Turkey was admitted to the alliance despite being nowhere near the Atlantic. At the time, under the enlightened leadership of Kemal Ataturk, Turkey had rapidly become more aligned to western social values in the years since the fall of the Ottoman Empire.

On top of that the country controls access to the Black Sea and its sheer size makes it a regional power. 

But  after seventy years it is hard to see how the interests of NATO members are aligned with those of Turkey. Firstly there is the question of the country's appalling record on human rights, and its genocidal campaign against the Kurds in the eastern extremity of its territory. The renewed influence of fundamentalist Islam in Turkey’s political establishment sets it at odds with its Western neighbours on important issues such as human rights, feminism and social inclusivity. 

Turkey is already a member however, it is difficult to see how the alliance could hold together when further NATO expansion risks drawing in countries whose own perception of their national interests may involve relying on NATO support for actions like that of Turkey in Kurdistan. That apart, we, or to be accurate our political leaders should consider precisely is our own security enhanced by including Georgia and Ukraine in NATO? 

While it would certainly antagonise Russia and committing us to the defence of countries which have a long track record for provoking their large neighbour. It is entirely possible that the nutters in Kiev or Tiblisi could launch a limited regional conflict anticipating that it would draw in the rest of NATO, as required by Article 5, and involve them in a direct attack on Russia.

If we take a critical and unbiased look at the current conflict it is quite possible the nutters in Kiev did provoke the Russian government beyond endurance, knowing that the USA had been itching for conflict with Moscow since the neo - con era, and felt confident that in the event of a Russian attack the west, especially the usual suspects in warmongering situations, France, UK, USA (the FUKUS axis) would leap to their defence. 

The prospect of an ever-expanding NATO carries significant risks that are not widely appreciated. While I am not defending Russia (let's be honest, when it comes to protecting their interests,they're complete bastards when anyone get in their way,), western foreign policy has contributed enormously to this crisis, and we need to accept that.  Russia has a legitimare right to protect its interests just as Britain, France, Germany have.

During this conflict and the build up to it influential figures on both sides have mouthed empty words about diplomatic solutions, but with the obvious diplomatic solution staring them in the effing face, all have talked of diplomacy then reverted to making demands of the other side that must be complied with before negotiations can begin. This is not the way to initiate negotiations. The first thing that must happen is Ukraine should be recognised as a buffer state between Russia and NATO allies, with NATO conceding that it will crease efforts to recruit Ukraine as a member and the Ukranian leadership accepting that gaining NATO back up for their future efforts to provoke Russia is just not going to happen. 

This must be settled by a formal treaty agreeing there will be no NATO membership for Ukraine and preferably no EU membership. Russia - haters will try to to argue this rewards Russia for its invasion, but given ongoing U.S./NATO provocation that refuses to even acknowledge Russian security concerns, how are the Russians to legitimately respond? 

All this is what should have been discussed in the debating chambers and committee rooms of democratic governments and reported, analysed and dissected by print and broadcast media but intsead of political debate there has been showboating as fools competed to heap ever more absurd vilifications on Vladimir Putin and Russia while presenting the thugs and clowns who govern Ukraine as only one small step below angels in the hierarchy of wonderfulness.

The way The U.S.A. and its allies casually usurp to themselves to themselves the right to meddle in the political affairsd of other nations in the 'interests of national security' (their definition of what constitutes national security being as solid as quicksand,) and then claimig the moral right to wage war on and effect regime chane in other countries which do the same do just isn’t tenable, and if it isn’t addressed honestly by the West it is inevitably going to lead to more conflict, whether armed or economic.

I have enormous sympathy for the Ukrainian people caught up in all this, and I hope that, if our homes were under attack, we’d fight with as much determination as them. But while though I acknowledge that Russia's incursion into Ukranian territory and the war they are waging on Ukranian citizens was by any standard unjustified, I do think it was inevitable. That the fer - right leaders of Ukrain have been doing over the past few years is the political equivalent of going into a pub, walking up to a mean looking, six feet six inch guy with muscles in his eyelashes, and deliberately spilling his beer. You can do that if you want to but you must expect consequences. If we in the west are going to poke the Russian bear, they will eventually hit back ... hard. Expecting them to accept the view that the West occupies the moral high gound and thus has a free hand in the Russian or Chinese sphere of interest and, eventually, in Russia itself is stupid beyond belief. We also have to ask ourselves whether the West, having displayed weakness and lack of resolve when its assumption of superiority is challenged benefits China which fot two decades has nurtured amitions of replacing the USA and the dominant global economic and military superpower. Taiwan aside, if Russia is squeezed to the point of collapse by western sanctions (unlikely as the current sanctions with hit European nations harder than Russia,) the Chinese are eagerly eyeing the vast natural resources of Siberia and eastern Russia and have the military capability of denying the West access to these resources if they choose. I doubt that the globalist wankerati in all there arrogance have thought through the likely chain of events so far ahead.

Russia and China are not natural allies, culturally they have little in common, but what they do share is a desire to run their countries as they think fit, without external interference. And they, along with Iran, have shown they can cooperate to protect themselves from outside threats if they have to.

I have earned myself many of the usual crop of insluts (Russian troll, Putin's rentboy, traitor etc.) for my dispassionate analysis of the Ukraine situation, but if we are to reclaim the internet from propagandists and self - appointed censors we should be clear about our own objectives. In order to persuade people to take a balanced and logical view of political adverseries rather than being led by emotions and so making themselves vulnerable to the machinations of propagandists and behavioural scientists, we must be able to understand the adversaries point of view. This is why reducing everything to good guys versus bad guys, and taking sides and hulrling insults at anybody who takes a different line is not the way to achieve lasting peace globally or to co - exist individually. We must at least try to provide a mature perspective that is not driven by the overriding need to be publicly perceived as Good People by the screeching harpies of progressivism, even if it sometimes meand playing Devil's advocate and arguing a case we do not fully agree with.

 

Sources:
Russia, NATO, Georgia
NATO The Destabiliser

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