- Did The 5 miss the mark: Too measured?
- Avoiding a near-universal aversion
- The “I Hope the Russians Love Their Children Too” era
- The nature of D.C.’s economic warfare
- [Spinning wheels] American trucker convoy
- Readers on Team Biden’s “economic amateurs”… Freedom on a scale from 1–100… Thanks for the lecture (really)… And more!
The impertinent questions your editor posed yesterday seem to have missed their mark.
In response to the president’s rhetoric about economic sanctions against Russia — how “defending freedom will have costs for us” — I wondered aloud how “free” Ukraine really was before the invasion… and how “free” America really is now.
I was expecting a torrent of email labeling me UNPATRIOTIC… a PUTIN LOVER… even a TRAITOR.
Was my logic that impeccable? Or is our readership largely immune to the hysteria sweeping the land?
For instance, the vandalism against the Russia House restaurant in Washington, D.C., that we noted yesterday. Or this…
Because this hysteria has been building up for a loooong time now…
“Dave, curious to know why you are a Russophile,” a reader wrote after we took note of several Russia-related developments one day in September 2016. “Are you or your ancestry from Russia, or are you married to a Russian lass?”
As I said at the time, I am not a Russophile, nor am I of Russian extraction. Nor is my wife. Further, I have never visited Russia, nor do I have any Russian investments — unless there’s a microscopic Russian presence I’m not even aware of within my gold-miner mutual funds.
But I also said, in the interest of full disclosure, I have an immense aversion to being vaporized in a nuclear war.
“Given the massive arsenals on hair triggers still possessed by Washington and Moscow, U.S.-Russia relations are the paramount issue,” I told our accusatory reader. “The markets and the economy become rather secondary matters if the Earth is pockmarked with smoldering radioactive craters.”
Five and a half years later, retired generals and other pundits are all over Anglo-American media talking casually about hot war between Russia and the NATO powers.
Indeed those are the stakes.
It’s appalling how cavalier, how blasé, many of our elites are about the prospect of nuclear war — compared with the zeitgeist in this country four decades ago.
On a Saturday in June 1982, as many as 1 million people jammed into New York’s Central Park to rally for the cause of nuclear disarmament. The headliners included Bruce Springsteen, Jackson Browne and Linda Ronstadt.
On a Sunday night in November 1983, nearly half of all American homes tuned in to watch the made-for-TV movie The Day After — depicting the aftermath of a U.S.-Soviet nuclear exchange.
I remember my high-school classmates making origami doves, boxing them up and shipping them off to the White House and the Kremlin. That was the atmosphere of the time.
President Ronald Reagan took the threat with utmost seriousness. “A nuclear war cannot be won and must never be fought,” he said in his 1984 State of the Union address.
As we’ve chronicled previously, Reagan sought to work with the Soviet leader Mikhail Gorbachev to eliminate all of their countries’ nuclear arsenals.
They came very close in 1986 — until Reagan was undermined by deep-state operatives like CIA chief William Casey, Defense Secretary Caspar Weinberger and especially Assistant Defense Secretary Richard Perle.
Will Joe Biden make the same pledge tonight in his State of the Union speech that Reagan did 38 years ago?
Say what you will about Biden, but at least for the moment he’s keeping a level head. When Vladimir Putin upped Russia’s nuclear-alert level, Biden did not reciprocate.
In addition, Biden’s ruled out a no-fly zone over Ukraine. “That is definitely escalatory, that would potentially put us in a place where we are in a military conflict with Russia,” says White House press secretary Jen Psaki. “That is not something the president wants to do.”
Note the word escalatory. “The process by which nuclear war happens is called escalation,” says our Jim Rickards.
In addition to his macroeconomics chops, “I’ve studied nuclear war fighting since the 1960s,” Jim tells us — “including major scholarly works such as On Thermonuclear War (1960) by Herman Kahn.
“There’s a lot of learning on the topic, but all of the studies boil down to the same warning: Don’t go there. What this means is that nuclear war is not a place where anyone begins an attack and it’s not a place where anyone wants to end up.
“But it can happen anyway,” Jim says — the good intentions of Joe Biden or anyone else notwithstanding
“One side escalates the conflict by doing something unexpected or extreme. The other side does not stand still; they take an extreme retaliatory action. The first actor then retaliates to the retaliation and so on.
“Again, it’s important to emphasize that neither side really wants a nuclear war, but once they start climbing the ladder, it’s hard to stop. Eventually one side pushes the other so far that the only response is to use nuclear weapons. At that point, you’re no longer just escalating; you’re at the brink of a nuclear launch. To make matters worse, the other side sensing that their opponent may go nuclear will be under pressure to go nuclear first in order to avoid being hit themselves.”
Point being, “It begins with small steps that spin out of control,” Jim concludes.
“The escalatory dynamic has begun. We’ll see where it ends up. Smart citizens should prepare for the worst. Let’s pray it doesn’t happen.”
One final thought about “preparing for the worst”: If the elites aren’t taking the nuclear threat seriously, it appears a critical mass of everyday folks is.
Potassium iodide tablets are out of stock at both Amazon and Walmart. Just sayin’…
So, the markets today: The big story is crude — a barrel of West Texas Intermediate up more than 10% as we write to $105.72. That’s the first over-$100 mark since July 2014.
The financial media are always eager to latch onto facile “explanations,” and now is no different: The jump comes “as Russia bears down on Ukraine’s capital,” per CNBC.
The more likely catalyst is this: While energy payments are exempt from the sanctions against Russia, Western banks are simply too skittish about running afoul of Washington’s dictates. Thus, they’re avoiding all transactions with Russian banks, just to be on the safe side.
|➣||That’s the nature of D.C.’s economic warfare. Example: In theory, food and medicine are exempt from Washington’s sanctions against Iran. But in reality, financial institutions are scared to death of processing anypayments for Iran. Thus, as we’ve chronicled in years gone by, kids with cancer go without chemo drugs or even basic painkillers.|
Around midmorning, the United States and other member nations of the International Energy Agency agreed to release 60 million barrels from their emergency reserves. The move did nothing to dampen crude’s monster rally.
Elsewhere in the markets, it’s a risk-off day.
Among the major U.S. stock averages, the Dow is taking it worst — down 2.2% or about 750 points at last check to 33,138. The S&P 500 is down over 1.8% and below 4,300. The Nasdaq has shed 1.65%, sitting at 13,523.
Bank stocks are getting really clobbered as hot money floods into bonds — pushing down interest rates. The yield on a 10-year Treasury note is back to 1.7%, the lowest in nearly two months.
Precious metals are also benefiting from the safety trade — gold powering up to $1,934 and silver back above $25.
Cryptocurrencies are holding mostly steady, Bitcoin at $43,443 and Ethereum over $2,900.
For the record: The American trucker convoy is going nowhere fast.
Supposedly one or two legs of the convoy were supposed to arrive in Washington today in time for the State of the Union. If the idea was to disrupt traffic, we see no evidence looking at the website of D.C.’s all-news radio station, WTOP.
The main group that set out from Southern California last Wednesday is making its way up Interstate 70 through Illinois and Indiana today — headed for Washington this weekend. But a revised permit issued by the National Park Service would suggest the crowd will be 1/6th the hoped-for size.
We can only speculate why. Easing mandates at the local level? Ukraine stealing all the media thunder? Fear of being de-banked like the Canadians?
Or is it as we suggested last week — a lack of coherent demands?
To the mailbag, and a reader who wishes to pick a bone with Jim Rickards…
“Rickards says there are economic amateurs on Biden’s team. I won’t argue that statement.
“But anyone who’s been reading The 5 for several years knows Jim has been insinuating Russia and China have been putting together a genius financial system that will de-dollarize both their economies.
“After eight years of their amazing work and putting together the biggest gold stash the world has ever seen, Putin has been kicked out of a silly little thing called SWIFT and his economy is disintegrating.
“Jim told us Friday in The 5 transferring physical gold is ‘a simple transaction.’ If there was ever a time for gold to prove it is real money this is the time. I am betting Putin’s gold stash won’t save his bacon.
“Russia needs the rest of the world a lot more than the rest of the world needs Russia. Any amateur knows that.”
The 5: It’s early days. Way too soon to predict how this all plays out.
Biden’s team is high-fiving itself in the financial pages for having already struck a decisive blow in the annals of economic warfare by supposedly neutralizing the bulk of Moscow’s substantial foreign exchange reserves. “Fortress Russia will be exposed as a myth,” according to a “senior Biden administration official” in The Wall Street Journal.
But as Jim said here yesterday, every Russian transaction stamped “DENIED” has a counterparty who expects to pay or be paid.
“Finance is a two-sided trade,” he patiently explained on Twitter this morning to Fox News’ Brit Hume. “Every buyer has a seller. Every sender has a receiver. The effects are playing out behind the scenes now.
“The public and the Fed are the last to know.”
Oh, and as far as “Russia needing the rest of the world more than the rest of the world needs Russia”? Don’t be so sure. Emily will get much more into that topic tomorrow.
“I loved the scale of 1–100 to evaluate true freedom in countries,” a reader says of the Freedom House ratings we cited yesterday. “But your commentary downgrades Ukraine for having a military draft in times of war.
“So does that mean that the USA is equally not free because we too have historically required a military draft as well? While you may be correct overall (I am certainly no expert) using many other criteria about the relative degree of freedom, I thought using the presence of a draft to protect the country was a poor choice to declare a lack of freedom.
“I’d actually love to see the numbers for ours and other countries if you get the chance.”
The 5: Maybe we weren’t clear. We weren’t necessarily connecting the draft to Ukraine’s respect for political rights and civil liberties. We were simply pointing out that if Ukraine had a level of political rights and civil liberties worth defending, it wouldn’t have to resort to a draft.
In any event, the full Freedom House ratings are here. The United States comes in at only 83 on a scale of 1–100.
Canada comes in at 98. If it doesn’t get a steep downgrade in next year’s ratings after the events of last month, Freedom House’s credibility will be in tatters.
“Thank you so much for the link to John J. Mearsheimer’s lecture Why Is Ukraine the West’s Fault?, writes one of our longtimers.
“Between his and Jim Rickards’ explanations of the history and Russia’s perspective, the whole goat show makes a lot more sense than the MSM’s fairytale good-versus-evil, ‘Putin is the next Hitler and wants to rebuild the Soviet Union’ narrative. I mean, I get why the MSM tries so hard to sell us that drivel. The first rule of propaganda is ‘demonize the enemy.’
“I found Mr. Mearsheimer’s lecture so fascinating, I also watched The False Promise of Liberal Hegemony, which does the best job I’ve heard so far of explaining the motive behind the U.S.’ Sherman-like march of death and destruction across the Middle East for the past 20-plus years. I recommend it highly, and I’ll be looking up more of his lectures. I’ll be very interested in his insights regarding China.
“I just wish I could get my husband to watch them. He thinks CNN preaches gospel.”
The 5: More recommended viewing: The Oliver Stone documentary Ukraine on Fire from 2016.
As we understand it, Mearsheimer is a China hawk. Your editor, on the other hand, is no more keen to poke the dragon than the bear…
The 5 Min. Forecast
P.S. Pat Buchanan — an ardent Cold Warrior in both the Nixon and Reagan administrations — is alarmed at the prospect of a land war in Europe going nuclear.
“What should U.S. policy be?” he asks in his latest syndicated column.
“Avoid a widening of the war by preventing any escalation to nuclear weapons. Secure the independence of Ukraine. Effect the removal of Russian troops from Ukrainian territory.
“If this requires that Ukraine give up any ambition to become a NATO nation, Putin’s declared purpose in launching the war, so be it. We might have avoided this war had we done so before it was begun.
“This is not where we appear to be headed.
“Finland, and Sweden, it is now being said, should be invited into NATO. Were that to happen, the U.S. would be obligated to help defend the 830-mile Finnish border with Russia.
“This would be an act of hubris of the kind that has led to great wars.”