Inception.

In Christopher Nolan's outstanding 2010 flick Inception, main protagonist, Dom Cobb, played ably by undeniably talented Leo DiCaprio, was using the so called totem, to have an idea if he was dreaming or was inside reality. If the totem toppled--Cobb wasn't dreaming. 

Totem was this Ariadne's thread allowing not to lose connection to the reality even in the dream. You may ask why I am waxing here Siskel-Ebertish in mostly geopolitical and military blog? The answer is simple: I allow myself once in a while go to Foreign Affairs publication by the Council on Foreign Relations site to get a gander on the state of America's allegedly most super-pooper, most sophisticated and most powerful minds behind what passes in the US as a foreign policy. Needless to say, that in the last few years those visits are increasingly rare, not least because I cannot tolerate American political "scientists" pseudo-intellectual newspeak--same phenomenon as economic lingo which is a newspeak covering the nature of the institutionalized robbery which passes in US as "economy" (see Michael Hudson's writing on this issue), plus, as I already stated not for once (hey, forget about me, many people stated this, such as Daniel Larison yesterday) I am not interested in wasting my time explaining a systemic delusion which is being presented as a viable "science". But today I ran into Richard Haas' (CFR's biggest honcho) piece about.... blah-blah-blah, yada-yada-yada accelerating something something history, something something to look intellectual and profound  etc. It is not profound, because Haas obviously doesn't know the real history of the 20th century and he is both energy, military and economy blind, using Arthur Berman's definition, but then something caught my eye and I took a screen shot:

Forget Haas' bloviation about WWII or WWI--drawing (pseudo)historic parallels is a fool's errand, not to speak of the fact that actual history of interwar period, not to speak of the realities of WWII is generally beyond the grasp (or is not allowed to be properly exercised in analysis) of US foreign policy "elite", most of which knows "strategy" and warfare from a white board abstracts in their Ph.D theses written away from warfare realities, any warfare. But it was so symbolic to see to the right of the Haas' "text" an image of what in Inception was Cobb's only connection to the reality--a rotating totem. Even in the closing moment of Nolan's masterpiece we are not given direct answer to the state Cobb and his reunification with his children are--is it still a dream or is he finally able to hug his children in a real world? 

I am on the record that far from experiencing any real respect to US foreign affairs establishment, I seriously think that these people live in a dream, in which the modern United States still can be compared to an industrial colossus, unscathed by horrors of 20th Century wars, which is capable (or at least it thinks so) to guide the world to a better future, dispatching its "finest fighting force in history" to remote shores and that it is just the matter of "selling" (that means outright lying) US foreign policy to Americans. Obviously Haas, being preoccupied with geopolitical and pseudo historic "profundities" doesn't use a single number to grasp a reality that the United States in China and Russia alone look at combined GDP and military capability which dwarfs that of the United States (Europe is not even an asset in all that) and is completely capable to deny the US access to Eurasia other than the US being incorporated as one among big equals into the new world order. But for Haas and CFR to really grasp the reality, albeit even he admits that the business is usual is pretty much over, he must wind the totem at the image to the right of his article and wait until it ether topples over, thus indicating the state of residing in reality, or will continue to rotate, indicating the most likely outcome of still dreaming, or residing in the dream in which cause and effect are not connected. But then again, ignoring causality is what makes the present state of the United States and her "elites", who should know better, but don't, so precarious. But I am sure we all know what it is to know about "exceptionalism" and how it destroys the nation which refuses to take a look at the rotating totem.          

On Mishustin And Conspiracy Theories (A Rant).

OK, OK, Russian Prime Minister Mikhail Mishustin has got COVID-19. So, what? Give the guy a break, let him recover, God damnit.

After all, BoJo also was infected and, actually, ended up being seriously sick. He is fine (if this term could legitimately be applied to any British politician) now. But the moment news of Mishustin going to self-isolation hit the waves the hydra of Russia's punditry, including allegedly of patriotic one, raised the head. I will not name a person--a very famous person in Russia--with whose some views on economy I agree, but it was this person who immediately took to every available media to declare that Mishustin is going to be removed, allegedly for some failures. Really? So, as I stated, this person is not a bad person but this person, as actually many on the "left" in Russia do, pushes a lot of conspiracies, including the ones which this person has no qualification of explaining. 

Just recently, this said person while being interviewed by one very popular Russia media, continued to push the theory that Russia is (was) secretly tied with some "obligations" to the West, through her liberal "elite", which would not allow Russia's development. On the question, of otherwise arrogant ignorant (manifestly pro-liberda) interviewer, how about Kalibr (this is the extent of their "knowledge" of military and industry), this, otherwise not a bad person couldn't answer with anything but platitudes. Obviously, the fact that R&D and introduction of many current weapon systems in Russia's arsenal started in early-mid 2000 somehow escaped both pundits. I cannot stand Alexei Kudrin, but it was on his watch as Finance Minister (2000-2011) when financing for such massive programs as Borei-class project 955 SSBNs, or massive upgrade of the Air Force inventory, among many other crucial programs, was provided fully and uninterrupted. So, what's the deal then with all those mythical "obligations" not to develop Russia which resulted in Kudrin doing his job, unlike it was the case then MoD Serdyukov and his sycophant Chief of General Staff Makarov, that strategic forces received this much needed boost, including financing programs for such weapons as Avangard. That was on Kudrin's watch. So, something doesn't add up with this "obligations" theory, which saw foundation of Russia's present military and economic power laid precisely in this period of time. 

Or, maybe, we should (as I always do) admit that we simply do not know all details of a rather complex policy kitchen in Kremlin before jumping to any conclusions? But even if to discount this obvious fact, First Deputy PM Andrei Belousov is now in charge of Prime Minister's functions and he is a bona fide' Gosudarstvennik (statehoodnik) not to mention being the main driver of increasingly visible economic policies of fusionism or, if one wishes, neo-Sovietism. One way or another, Russia has more than enough competent people running her economy and the issue Russia has, as it is always case historically, is not top echelon but middle-level bureaucracy much of which was planted in 1990s and early 2000s and the one who is actually a main source of sabotage of policies. The process of removing it is ongoing and it is visible. Meanwhile, let Mikhail Mishustin recover (he may go completely asymptomatic, unlike BoJo) and forestall any bizarre speculations about the Rothschilds having secret, invisible, noose around Putin's neck, or Mishustin being fired. In the end, even Kudrin is on record that Russian economy is going to be fine. As per Kalibr family missiles, they have been in development since early 1990s and, evidently, no "secret" obligations prevented Russia from deploying an astonishing array of hi tech stand-off weapons already early in 2010s. But then again, what do I know about it.

Guns For Hire?

I stumbled on this just now and was compelled to ask myself a question about purely military-strategic and operational matter: if Saudi Arabia really is afraid (I heard it to be the case) of Iran, what security arrangement thus becomes a most sensible one for her? Get this:

WASHINGTON/LONDON/DUBAI (Reuters) - As the United States pressed Saudi Arabia to end its oil price war with Russia, President Donald Trump gave Saudi leaders an ultimatum. In an April 2 phone call, Trump told Saudi Crown Prince Mohammed bin Salman that unless the Organization of the Petroleum Exporting Countries (OPEC) started cutting oil production, he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from the kingdom, four sources familiar with the matter told Reuters. The threat to upend a 75-year strategic alliance, which has not been previously reported, was central to the U.S. pressure campaign that led to a landmark global deal to slash oil supply as demand collapsed in the coronavirus pandemic - scoring a diplomatic victory for the White House.

It is a very loaded statement which shows both an American oil industry desperation and, simultaneously, extreme limitations, bar some clandestine operation to remove MBS, in measures the United States can take to "motivate" Saudis to dance to the appropriate tune. Considering Saudis' very real fear of Iran and her influence in the region and the fact that US anti-Iranian sanctions have a lot of Saudi "juice" behind them (not just Israeli one) and that Saudi-Iranian "relations" can only be described as Cold War with all "proxies" involved as a result, one has to ask the question, a purely theoretical (I stress this) one: if Iran was forced, could she devastate Saudi oil (and only viable) industry and mount a massive attack on Saudi state institutions? The answer is really simple--if push comes to shove Iran can disrupt with a dramatic effect Saudi oil production and wipe out storage facilities in several salvos of ballistic and cruise missiles and the United States which has Patriot AD complexes in Saudi Arabia will be able to do very little to prevent it. Simple as that. Iran doesn't need, objectively, to "invade" Saudi Arabia to push her over the threshold of economic chaos and, likely, palace coup if not outright revolution. 

Here comes this purely operational consideration: apart from the United States being royally pissed with MBS', and Saudis' in general, irrational behavior (nothing unexpected here, plus the US has this propensity to have among her allies a lowest scum of the Earth), the reality is very simple: if US is provoked to attack Iran, first localities which are getting devastated are US bases in the region and Saudi oil fields and storage facilities. Simple as that. What will be the "weight" of those salvos is a matter for pure speculations, what is clear, however, that Iran has enough of them and with a very good guidance packages to conduct a prolonged operation against variety of regional targets with very high effectiveness, that is to say decent rate of "leakers" against the most sophisticated air and anti-missile defenses the United States can deploy. In the end, nobody cancelled good ol' over-saturation method of overcoming any defenses. Do Saudis know about that? I don't know, they, let's be frank here, suck at everything related to operation of modern technology, let alone combat one. But one thing is clear--not only the United States cannot defend Saudis in case of an actual (God forbids) war, but the United States itself, including through Saudi lobbying, which is as prevalent in D.C. as Israeli one (I don't know what is current going rate for US Congressman or Senator on the market, but Saudis do have cash, for now), may unleash such a war which will not only result in US catastrophic losses against Iran, but will see Saudi's oil treasure burned by a variety of means ranging from missile strikes to oil fields sabotage, which inevitably will lead to disintegration of KSA as such. 

Hm. Thus the question--a very practical one--who can built a proper and effective air and anti-missile defense for Saudis' main treasure while simultaneously restraining Iran. In the end, he bottom line is always not how you live, however important, but if you live at all. Saudis, certainly, saw how certain country conducts object and area defense operations and how she uses both military and diplomatic power to "calm things down" in the country, to he North, infested with Saudis' very own Al Qaeda and Qatar's very own ISIS. They know how it goes there. But then again, Saudis were in the market for technology which actually works for a while:      

Key Point: The Russians have definitely made a breakthrough with sales of weapons to some NATO countries with uncertain futures in the bloc (e.g. Greece, Turkey) and strong US client countries such as Saudi Arabia and other Gulf states such as the UAE. Saudi Arabia’s agreement to purchase the S-400 anti-aircraft Triumf anti-missile system from Russia is a major blow to the United States and its European allies. The deal follows Turkey’s $2.5 billion agreement to buy the S-400, and ongoing negotiations with Egypt for the S-400. Egypt already has the S-300VM system (also known as the Antey 2500) which can engage short- and intermediate-range ballistic missiles, cruise missiles, precision guided weapons, strategic and tactical aircraft, as well as early warning and electronic warfare aircraft. (Originally the S-400 was called the S-300 PMU-3.)

So, you get my drift, right? As I say all the time--in matters of life and death nobody cares how shiny things are, everyone needs and wants the only one thing which matter--a thing which saves your life. That begins to explain a funny statements from Saudis few days ago when talking about Russia being "a family" and that close families always settle their quarrels amicably. You know, all kinds of statements of this nature from the highest power levels of Saudi elites. So, in this case, let me go out on a limb here and propose that Saudis may, actually, have been thinking about changing their posse for a while. In the end, Saudis' main enemy in the region, Iran that is, is in a fairly close relations to Russia who does have some influence on Iran. This influence is, if anything else, dramatically in Saudis' favor because Russia not only doesn't want a war in the region, but has enough wherewithal politically, economically and militarily to, indeed, calm things down. Moreover, behind Russia, which is taking Saudi's share of oil market, is rich China, with her global trade plans. So, Saudis, I am sure are thinking deeply now if they have to go out looking for new guns for hire. Especially, since Russia is openly in this business selling the most desirable, most coveted and most valuable product globally--political stability. How Russia does this, you all know, I write about this for years. In this case, Trump's threats of denying Saudi Arabia American "protection" may not be necessarily a bad news for at least some segments of Saudi princes who surely know where their instincts for survival lead them.    

Oh, Boy, Oh, Boy!

Just when you think that you repeated that USD and US stock market papers are just virtual "values" which are "worth"... well, let's leave at that for now, enough times to drive point home, news come in which in these strange times take it to eleven. From yesterday (in Russian):

Правительство России разрешило инвестировать средства Фонда национального благосостояния (ФНБ) в национальную валюту и гособлигации Китая.

Translation:  Government of Russia allowed to invest resources of the Fund of National Wealth (FNB) into national currency and state obligations of China.

This is exactly what many of us here discussed very recently, and that means acceleration of the removal of the USD as one of many (yes, Pound Sterling, Euros, Swiss Franks are also there) cash (I stress it--cash, not some BS paper) from Russia's main piggy bank. That also shines a light on the long-term policy of growth of trade between China and Russia and that means, among many other things, dedollarization of the oil trade. Reputable "establishment" Gazeta Ru then proceeds to make this astonishing statement:

Доля европейской валюты в отечественном экспорте в КНР за год выросла с 12% до 45,6%. При этом импорт китайских товаров и услуг в Россию почти на 25% оплачивается в «других валютах». Вероятнее всего, это и есть юани. 

Translation: The share of European currency in domestic (Russia's) export to China grew in one year from 12% to 45.6%. Meanwhile, almost 25% of import of Chinese goods and services in being paid for almost 25%  in "other currencies", which, most likely are Yuans. 

This is what drives many people in the US (like yesterday's Paul Brandus) totally desperate and butt-hurt, because removal of USD in mutual payments between geopolitical players who matter IS the end of the petrodollar. It is a very practical end, without much fanfare--just normal everyday economic activity which is ongoing without employing USD and creating a financial fortress and common Eurasian market whose actual size dwarfs US economy even when this economy is valued by Wall Street  fraudst.... pardon me, exceptionalists. Ah, yes, about exceptionalism. Daniel Larison published today a good piece related to Andrew Bacevich's latest article:  

It Took COVID To Expose the Fraud of ‘American Exceptionalism.’ Our leaders were so preoccupied with remaking the world they failed to see that our country was falling apart around them.

Well, I have a minor quibble with this title, because this fraud was exposed way before any COVID was present. In fact, I launched this blog in 2014 to do precisely this, prior to that I formed opinion on this fraud years before. As I state ad nauseam, American exceptionalism is a self-replicating delusion which is organic to the US body-politic as a main prerequisite of achieving anything on the way to power and money. It is also a main driver behind degeneration of American political and intellectual elites. As Larison observes: 

The more that U.S. policies have proved “American exceptionalism” to be a pernicious myth at odds with reality, the more we have heard the phrase used to defend those policies. Republican hawks began the decade by accusing Obama of not believing in this “exceptionalism,” and some Democratic hawks closed it out by “reclaiming” the idea on behalf of their own discredited foreign policy vision. There may be differences in emphasis between the two camps, but there is a consensus that the U.S. has special rights and privileges that other nations cannot have. That has translated into waging unnecessary wars, assuming excessive overseas burdens, and trampling on the rights of other states, and all the while congratulating ourselves on how virtuous we are for doing all of it.

As the recent events of the 2020 have demonstrated so dramatically--to have some "special rights and privileges" one has to perform across the board, from economy, to military to culture, to society. And, I mean, of course, in real terms not by cooking books, declaring defeats victories and praising social illnesses as achievements. The world is not impressed anymore, not to mention this ever present fact that, as I wrote in my latest book:

Today, the same titanic battle for life on Earth is being waged globally for a new, better, freer, more just and more peaceful global order to emerge. This struggle is not for glory and the sword for forestalling evil has been forged. 

But it will be ultimately up to Americans and America's internal struggles to determine if, she can be, as Larison observes:

American exceptionalism has been the story that our leaders told us to excuse their neglect of America. It is a flattering story, but ultimately it is a vain one that distracts us from protecting our own country and people. We would do well if we put away this boastful fantasy and learned how to live like a normal nation.

One can only hope.      

For Your Consideration.

A piece not by some journo but actually by a professional geologist and oil extraction expert, Arthur Berman, who, in his latest piece, makes two crucial observations which fall well in line with a number of theses about US elites I, together with number of others, continue to make for years. 

Most people, policy makers and economists are energy blind and cannot, therefore, fully grasp the gravity or the consequences of what is happening.

Bingo! I can add, I wrote two books on that (yes, I will continue to repeat it to drive point home), they are also military blind, geopolitics blind and real economy blind. Then, Berman commits a sacrilege by stating that:

                            Energy is the Economy 

And if that wasn't enough to spook all kinds of market analysts who think that stock prices are real economy and that bread grows on trees and iPhones are pinnacle of the technology, Berman delivers a knockout punch:

Gross domestic product (GDP) is proportional to oil consumption (Figure 4). That’s because oil is the economy. Every aspect of production and use of goods and services requires burning fossil energy. There are approximately 4.5 years of human labor in a barrel of oil (N. J. Hagens, personal communication and The Oil Drum). No other energy source comes close to that level of energy density.

I can add even more, do not forget electric energy, it matters together with oil. And, as we know, the electric energy can be produced without oil, such as hydro and nuclear. So, while statement on proportionality is correct, oil is one OF, not the only, metrics of energy consumption in relation to GDP. Here is, my friends, just one (out of very many) metric from World Bank (from 2011 no less) which shows an "adjusted" relations of GDPs when consumption of energy is considered (in this case per capita):

Speaks volumes, doesn't it? Especially when one considers this truism that Energy IS Economy. Of course for 2020 this updated overall (gross, not per capita) consumption data speaks volumes:

Which gives an idea of the REAL relation of REAL economies globally per their actual sizes. It also gives the insight into ACTUAL stakes of the geopolitical realignment by singling out the elite group of leading industrial and military powers who are reshuffling themselves. It also gives a good insight into why Germany or France are not global but regional players and why they will not be able to form serious military-economic-political block of global import alone. So really simple, so... realistic. Anyhow, consider this piece by Berman for your reading.     

Basic Arithmetic.

$250,000 x number of days. Say, one month of renting such a storage will cost you $250,000 x 30= $7,500,00. Boy, I am in the wrong business, can I get myself a tanker to rent out? There you go, everything you need to know about current state of the oil war and availability of the oil storage in the United States. 

Daily fluctuations of plus-minus 5-7% of the oil price mean absolutely nothing because price corridor is visible and, most likely, will stay more or less stable for months to come. This hurts, so much so that some cretin came up today with this.  

U.S. companies may go bankrupt, but Putin and MBS need petrodollars to keep their citizens from rioting

Paul Brandus, who wrote this butt-hurt drivel has an "impressive" by Western "standards" background, and you guessed it right--in journalism. American journalism, I stress, no less. And, of course, Brandus has it exactly backwards when he bundles Saudi Arabia and Russia together, especially when stating a deliberate lies that Russia needs "petrodollar". It is Saudi Arabia which needs it, Russia doesn't need it at all. In fact, as already has been stated not for once, and even this loser Brandus admits it:

If the Russians were out to inflict pain on the U.S. oil patch, they’ve succeeded. But what happens over the long term? If Moscow thinks they’re going to put the Americans out of business, they’d better think again.

The issue here is not "inflicting" pain on US "oil patch"--at issue for Russia here is what to do with a gigantic bubble of financial trash, aka US Dollar and US T-bills, in the nearest future since once this bubble begins to deflate, the issue of petrodollar, which is being obliterated as I type this, will be of secondary importance. This is happening precisely because Russia, in a long run, doesn't need petrodollar and views it as a main driver behind a financial catastrophe which is in progress. Russia and China, as an example, long ago, have no problem with Rubles and Yuan oil trade.

China and Russia are actively reducing dependence on the dollar in bilateral trade. In October 2017, Beijing launched a payment system for transactions in yuan and Russian rubles. This means that settlements for Russian oil deliveries to China, which have reached 60 million tons per year, can be done without using the dollar. After Monday's launch of the yuan-backed oil futures in Shanghai, there have been negotiation between Russia and China on mutual promotion of oil futures in national currencies, RIA Novosti reported. In 2016, the St. Petersburg exchange in Russia launched Urals oil futures in the Russian ruble, and support from China could prop up Russian crude futures.

But, of course, Brandus, being a journo, doesn't read news which he doesn't like. That is why he doesn't get it, that specifically for Russia "killing" US shale is a secondary aim, not to speak of oil market being artificially "elevated" precisely to keep shale oil alive. In other words, there was no real economic sense in propping up inherently economically senseless US shale oil by pouring billions of nonreturnable loans into it. And then, of course, there is this "power element" which goes missing in Brandus' moan, because Saudis are expendable in this big geopolitical transformation and nobody would cry if this backward shithole of a country disintegrates tomorrow, Russia is a completely different player--the only country which can wipe the United States off the map, and which has excellent real industry and real economy which even such radically pro-Western neo-liberal fundamentalists as Kudrin begin to believe in (in Russian).  

Remarkably, it is precisely US client state, Saudi Arabia, the pillar on which petrodollar rests, which is most interested in killing US shale oil. Russia here is just for the ride, doing what any sensible strategist would do--use someone's efforts, in this particular case by bat shit crazy MBS to improve own position. An additional benefit, so to speak, easily gained through the effort of others. In the end, Russia doesn't operate in tankers on the scale of Saudis: 

Fleet Of 28 Saudi Oil Tankers Could Send U.S. Oil Prices Crashing In May

So my suggestion to Brandus is to calm down and start learning about how real geoeconomics, geopolitics and power balance form and work, before expressing his opinions on any Russia's topic because it is the only country which realistically holds world from sliding into a global war. Especially when one operates with such numbers, which even 4 months ago would have been inconceivable, but then again--I warned, the time of real valuation of economy is coming:

Second quarter GDP being down 45% is one of the more bearish predictions on the Street. But it could prove to be on the mark judging by the lackluster read on first quarter GDP that only reflects a small sampling of the coronavirus’ effects on households and businesses.   

Does Mr. Brandus even know when such numbers happened before? Right, before World War Two. But that would require at least some brief acquaintance with the nature of conflict and warfare. So, no matter what Brandus and his ilk write on the issue, they will never grasp a full picture of the current events and they better pray that these events remain only in the realm of economic conflict without spilling into the realm of a practical military confrontation, which is far closer than Mr.Brandus can ever wrap his brain around. Especially when proper valuation of the US economy completes and we all will see the actual scale of devastation inflicted upon majority of Americans as a result of mindless and criminal robbery by the American financial class.

Americans Sing Tri Tankista.

This is in remembrance of the 75th anniversary of Soviet-American meeting on Elbe. As you might expect, there is a Russian-American love fest in comments. Wonderful singing. The best comment in Russian: These are OUR people. "Our" being a code word for people with similar human values.

Quoting Michael Hudson.

You all know my attitude towards Michael Hudson as one the brightest economic minds of our time. Here is a quote from one of his latest interviews, as always, loaded with insights and food for thought. 

Now Herman Kahn and I on another occasion went to the Treasury Department, and we talked about what the world would look like on a gold standard. I said, “Gold is a peaceful metal. If you have to pay in gold, no country with a gold standard can afford to go to war anymore. Because a war would entail a foreign exchange payment, and you’d have to pay this foreign exchange in gold, not IOUs, and you would end up going broke pretty quickly.” Needless to say, someone from the Defense Department said, “That’s why we’re not going to do it.”

How do we know that payments in gold bankrupt warring parties? Simple, really. Check where did British gold reserves go in the time span between September 1939 and the end of 1940. The whole mechanism of Great Britain becoming a financial lap dog of the United States throughout WW II is extremely well described  by Barnett. 

The last months of England's existence as a fully independent great power, able out of her own resources both to maintain her national existence and to wage war, passed away.  By the third quarter of 1940 the volume of British exports (including munitions for the empire) was down 37% on 1935. By the turn of the year 1940-1941, the dark mid-winter of the Blitz, England's stock of gold and dollars was near exhaustion... For obvious reasons the advent of "lend-Lease" was represented as an act of unparalleled generosity. In fact, it was clearly to America's advantage that American weapons should be carried into battle by fighting men of England and Empire rather than the sons of American mothers. Even after United States entered the war in December 1941--and not then by her own volition--it was still clearly to her advantage that England should be enabled to wage the war on far greater scale than would have been possible on English resources alone. 

United States, obviously, learned her lessons from British WW II experience and recognized that to fight the real war one needs a lot of gold, or, as it turned out in 1970s when Nixon took the United States, which by then lost Vietnam War, from gold--IOUs. Yes, IOUs which are built around, well... let Michael Hudson speak:

The gunboats don’t appear in your economics textbooks. I bet your price theory didn’t have gun boats in them, or the crime sector. And probably they didn’t have debt in it either.

Modern Western "economists" do not operate with power element at all--it is beyond their grasp because unlike some financial theories, military power requires a much higher level of education and knowledge. Economists do not study physics, systems' integration, chemistry or weapons' design, not to mention operations, in the West they also do not study real economics. Yet, all this IOU (or T-Bills and other paper) alternative universe collapses the moment American IOUs lose the main factor behind their forceful "validity"--US military power, or, rather, myth of it and the threat to use it in case some renegades decide not to "trust" IOUs. Do not believe me, even as early as 2015 there were numerous calls from inside US "analytic" community to consider military operations against Russia. I recently wrote about one such ignoramus, George Fridman, who described in 2014 how Russia will be defeated in Ukraine by combined NATO forces. Yes, they ARE that dumb. 

I am not saying anything new here, once the myth of the US military power began to be destroyed in public space, everything else started to follow. By 2018 it was clear that United States cannot win conventional conflict with Russia not only in her vicinity, which was the case since 2010, but even in Europe. I am not talking about nuclear one, because this kills all other reasonable outcomes and expectations. Once you cannot win the war, what's your next step, what's you next default position, so to speak? Right, money, currency and financial "instruments" manipulation. Indeed, China buys Russian oil and gas and pays for it in Yuan or Euro, what can the United States  do about it? Attack Russia or China? Well, we know what's going to happen. So, the only instrument left are sanctions and financial sabotage. But that doesn't change the fact that China and Russia trade, at least significant part of their trade, in Rubles and Yuans. China is  much more vulnerable to intimidation and  blackmail than Russia, but still, this doesn't change the fact that China is not Venezuela or Iraq and she cannot be invaded without the United States sustaining catastrophic losses. 

The fact that US "elite" is incompetent across the board is not a secret anymore to those who matter, and those are China, Russia and, to a degree, Iran as an emerging regional superpower. So, as Hudson states, and I subscribe to his every word here:

By waging this economic warfare against China to protect America monopolies, America is integrating China and Russia. And probably the leading Chinese nationalist in the world, the leading Russian nationalist, is Donald Trump. He’s saying, “Look boys, I know that you’re influenced by American neoliberals. I’m gonna help you. I believe that you should be independent. I’m gonna help you Chinese, Russians and Iranians to be independent. I’m going to keep pushing sanctions on agriculture to make sure that you’re able to feed yourself. I’m gonna push sanctions on technology, to make sure that you can defend yourself.” So he obviously is a Chinese and Russian agent, just like MSNBC says.  

Ability to integrate a complex interaction between military and economic factors  into systemic and easily grasped picture is not there in the US. The whole generation (or two) of the economic ignoramuses who can operate only in the world of neo-liberal voodoo and reign of financial capital has emerged since the collapse of the Soviet Union and it is incompetent, not able to face the realities, especially military realities of the 21st century, which define the catastrophic departure of the United States from her real, and perceived, greatness. "Economy" built on speculation and selling the snake oil of IOUs, or which depends on such news as this:

The explosion on the tanker in the northern Syrian city of Afrin killed at least 10 people, Reuters reported, citing initial reports from Turkey's state-run Anadolu news agency Tuesday. News of the bomb detonation led to a rise in oil's “risk premium, even in a market with a glut of crude,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch. Against that backdrop, the front-month June West Texas Intermediate crude (CLM20) briefly traded as high of $13.69 a barrel before turning lower again to settle down by 44 cents, or 3.4%, at $12.34 a barrel on the New York Mercantile Exchange.

Is not sustainable, especially when it lost its power to coerce anyone who matters into believing that Wall Street IS the economy, which it is not. But we all are yet to face unfolding reckoning of REAL valuation and that will shake the global economy to its foundation. Just some thoughts for today.   

I Like This Headline.

LOL.

Russia Steals Chinese Oil Market Share From Saudi Arabia

Oh boy, the number of sore losers out there is simply staggering. The only question one is forced to ask is, what about competition, people? What about this main founding principle of capitalism and of market as a place where one competes against others for the share of the said market? In related news--there is some opinion out there (you can find it if you want, I will not name a source) that Russia simply followed the game of Saudis in this oil war. Sure, Saudis will take the fall and formally they are the main driver behind attempts (successful, actually) to kill US shale oil, but Russia was not a reactive power in that. I don't buy for a second that Russians didn't calculate consequences of their refusal to to extend OPEC+ agreement in Vienna this March. I don't buy it, neither Putin, nor Sechin, nor Novak look like dupes who are not briefed by Russian Intelligence Community on the state of the affairs in the energy field and who didn't account for the worst case scenario. I don't buy it for a second. Why? Recall Russia "adjusting" her budget for $20 per barrel price of oil. One detail, to re-write the budget for such nation as Russia is a matter of not just days, but weeks, or even months. Yet, the speed with which this budget, evidently, has been already rewritten is a testimony to the fact that this whole shitstorm was anticipated. Why? here is funny "coincidence" today. 

Of course, everyone was affected negatively in this oil crisis, Russia is no exception, but the game is a typical Russian one, the winner is the one who is affected less and is standing in the end. Maybe because Russians know that in war, any war, being untouched by it is a fantasy, not reality. As for Russia "stealing" the Chinese market--I don't know under what stone those journos and "analysts" resided in the last 6-7 years but it is about time for them to admit to themselves that they are full o' shit--a defining characteristic of Western media and think-tankdom--and are good for nothing other than pure propaganda. 

As I already stated, the game is much more than about oil markets, it is about new world order which emerges as a result of the severe, unsolvable, crisis of liberalism and this is just the start. Oil market is but one of the links in a long chain of events which were set in motion in the Autumn of the last year. Covid-19 simply triggered the avalanche. Per this, obviously some recovery of economies of the United States and EU will happen, plus many things which we all got used to will return, as will return air-travel and some form of tourism, as will price for the oil rise to around $40 per barrel, but that will be already a different world in which ideological economic and geopolitical orthodoxies will be utterly destroyed and the volume (eleven, really) of butt-hurt in Anglo media, such as globalist Financial Times or any other pseudo-analytical outlets is the greatest testimony that the world has already changed and will change even more. I would suggest to the staff of NYT or WaPo to start looking for the jobs as lawn mowers, or Walmart night shift shelf stokers, because the process which will relegate them to those positions has started. Plus, I, being naive, am still waiting for the indictments from AG Barr of those Russigate (ahem, coup d'etat) perpetrators. But as I said, I am very naive.   

One Doesn't Need To Be...

An oil industry specialist (I am certainly not one--I stress it all the time), to understand how and why, as even oil-ignorant me warned about Saudis being royally fvcked once they initiated the oil war. Recall what I wrote exactly a month ago: 

My question in this case is this: didn't you, guys, see that coming? Have anyone in D.C. tried to mitigate the problem by engaging Russia, not Saudis, who is in real control of situation? Any diplomacy, any quid-pro-quo? No? Well, then I guess you have only yourself to blame for not having a faintest clue about Russia. Continue chest beating, while Russia will put Saudis on their knees and then will give the United States, yet another, chance to save face and come to the negotiating table.  

You see, even such oil ignoramuses like me knew that Saudis are minor players in this game because only people with nukes, navies, air forces and complex industrial economies of scale are major players. Well, guess what: 

China boosts oil imports from Russia, while slashing purchases from Saudi Arabia 

It is kinda self-evident that it is not enough to have product, one has to sell it, has market for it that is, and Russia has her markets, while Saudis are having a hell of a time trying to hold on to ones they...ahem, had. Don't trust me:

(Bloomberg) -- Oil-rich Gulf nations may turn to asset sales to complement an almost $50 billion debt spree to support economies rocked by the coronavirus pandemic and the collapse in crude prices, according to Citigroup Inc. Countries including Saudi Arabia and the United Arab Emirates have “really attractive” government-owned assets, which could be sold to the public or partnered with other investors, Atiq Rehman, head of Citigroup Inc.’s emerging-market cluster for Europe, the Middle East and Africa, said in an interview.

Russia knew from the get go that China will have to reposition herself towards Russia's energy (and not just oil) because neither tanker oil, nor LNG can compete with pipelines, especially the ones which are already built and operational, not to speak of a cluster of gigantic Russian processing plants being built right on China's threshold to provide all needs not only in crude and gas but in high value added products of hydrocarbons processing. You know, like Amur Gas Processing Plant. And then, and then... there are Indian Ocean SLOCs which cannot be defended by China once mighty US Navy's submarine force is given the order to interrupt Gulf's oil supplies to China. And yes, there is always Russia and her Armed Forces which can secure supply of necessary energy to China. So, simple--just one look at the map is enough to understand. And we even are not talking about nuclear energy part. Yes, about that: reading today about Rosatom (in Russian), I stumbled on this startling number about legendary MIFI's (MEPhI) international enrollment. While all kinds of fraudster rating agencies in the West blow smoke up our assess creating all kinds of university ratings, among Turkish students the competition for a single vacancy in MIFI reaches 72 applicants. 

So, Russian-Chinese relations are going to be growing not just because out of pure economic sense but geopolitical too. Or geoeconomical one, if one wishes. It seems that China finally understood who real friends are or, as they say in Caucasus, close neighbor is closer than the remote relative. As for oil wars, they are just but one episode of a much larger (and by much I mean order of magnitude) global realignment which involves way-way more than just actual oil, not to speak of worthless speculative papers aka futures, but a strategic reorientation of the world towards nuclear energy and, eventually, transition to a manned exploration of the Solar System.  

China Is In Danger;)

Because they used the "advice" from McKinsey & Company. I am being facetious, of course, but there is a grain of truth in this otherwise exaggerated claim. I ran this morning into Tucker's rant about them:

While Tucker uses those many tropes about American Century, he, actually, is correct in pointing out not just McKinsey & Company's "consulting practices" but in general giving a bottom line of most US "consulting" services and think-tanks because their "consultations", almost without exceptions, tend to end in disasters. It is inevitable when consultations are produced by people who have a single frame of reference and this one is of sheer incompetence planted into the fertile soil of American exceptionalism and profit only driven "economics". 

At this stage, one has to ask the question of why anyone in their own mind would ever need any "consultation" from any US consulting service, when these people are not able to consult themselves on proper bowel movement, forget developing any strategic concept grounded in reality which would allow to produce valuable suggestions which do not end up in some mess on a massive scale. Enough to take a look at the current state of the United States to recognize that American "expertise" across the broad range of issues is simply non-existent, in policy-development field it is a down-right fraud. Even some American observers who could hardly be called revisionists towards the United Sates can not deny this fact anymore, including sheer incompetence of US media and, especially so, people who can develop a viable foreign policy towards such nations as Russia. Recall:

"If our counterparts plan to end the current tensions by making Russia confess to all deadly sins and say ‘I was wrong in every aspect, forgive this sinner’ - if they have such expectations, it means they have no experts on Russia left."

This is the point I am trying to convey for years. Russians know that US "expertise" is a shady concept, as a result there are no American "consulting" on any serious policy issues in Russia. Especially policies related to serious national security issues, among which is real economy. But why China did employ and continues to do so such "advisors" as the company Tucker is talking about? I think we need, for that, to take a look at still very considerable "Americanization" of Chinese view of the world which still continues to manifest itself in different facets of China's activity. I can, with moderate degree of competence, state about manifestations in military and scientific field in regards to China. Enough to take a look at Chinese efforts to build aircraft carrier-centric navy when having no experience or technologies to do so properly, this is if to avoid talking about overall fallacy of Chinese maritime strategy since China lags dramatically behind the US Navy in submarine technology and Russia is not selling her latest to China. I wrote about it. Yet, military is not the only field in which China actually copies the United States. How about recalling this absolutely bizarre fact. 

It was my contention for years that China, for all her very real impressive economic achievements, will be struggling at finding her own self at the global arena where details matter. Did anyone here check when was the last manned space flight by China? I did--4 years ago. Anyone here has an idea about the fate of COMAC-919? Don't expect it entering service any time soon. These are China's weak spots, strategic weak spots, of which very few people are willing to talk openly with facts on hand. China could not have emerged in the last 25 years other than a some iteration of the United States, which willingly transferred American industry to the Chinese shores, with it came a necessity for China to be consulted in the "American ways" of doing business which was and still is in place despite China's final recognition in 2019 that the United States is an enemy. This will require China to seriously reconsider many practices and views which were imported from the United States, thus reducing dependence of the American "expertise" and advise, especially when given by such frauds as McKinsey & Company, who are, as most US think-tanks into making money selling BS, while having very little, if any, real expertise.This calls for thinking for themselves, a good practice for new world which emerges. 

Elbe. 1945.

Interesting development (and message), which speaks volumes. Very symptomatic, I would say. 

WASHINGTON, April 25 (Reuters) - U.S. President Donald Trump and his Russian counterpart Vladimir Putin issued a rare joint statement on Saturday commemorating a 1945 World War Two link-up of U.S. and Soviet troops on their way to defeat Nazi Germany as an example of how their countries can cooperate. The statement by Trump and Putin comes amid deep strains in U.S.-Russian ties over a raft of issues, from arms control and Russia’s intervention in Ukraine and Syria to U.S. charges that Russia has spread disinformation about the novel coronavirus pandemic and interfered in U.S. election campaigns. The Wall Street Journal reported that the decision to issue the statement sparked debate within the Trump administration, with some officials worried it could undercut stern U.S. messages to Moscow.

As you may expect a lot of butt-hurt in US media, but that is to be fully expected. Crypro-nazis of all flavors also have a bad day (especially in Ukraine) but the fact that this:

The joint statement marked the anniversary of the April 25, 1945 meeting on a bridge over the Elbe River in Germany of Soviet soldiers advancing from the east and American troops moving from the West. “This event heralded the decisive defeat of the Nazi regime,” the statement said. “The ‘Spirit of the Elbe’ is an example of how our countries can put aside differences, build trust, and cooperate in pursuit of a greater cause.”

Was made jointly for the first time in a decade, speaks volumes. Including the fact that this important historic occasion gave the opportunity to underscore Noblesse Oblige between superpowers. Some people in Riyadh experienced an unpleasant feeling. They should.

Globalization Which Is Good (Friday).

If there is one benefit of globalization which can be pointed out as one of the most important ones in humanity's history--it is internet. It opened an incredible opportunity for truly global conversation. Granted, some parts of this "conversation" are not that civil or productive, but others? here is my old hero Aldo Nova doing the song which got me acquainted with his music, yes, 37 years ago. He does it with his band completely on-line. 

I love this sound. But then you can go to the latest clip by Otava Yo (with English subtitles) and you get people across the world enjoying their music and saying pleasantries to each-other, most notably: Russian-Polish and Russian-American (and Anglos) love fests. 

In the end, I open daily my blog's "audience" stats and find out that thousands of people across the world, different ethnicities, religions, races read and converse here. I guess we all can live with such globalization, moreover, we may need it and we may not even know now full significance (and effect) of this global exchange.  Boy, do I sound like a... hippy, LOL. And I don't even sip on my Jack. 

Some Interesting POV.

As you may have noticed in the latest discussion on this blog the issue of those poor Russians--there are some poor Russians, no doubt--continues to haunt many Western minds. Famous shyster from "geopolitics" George Fridman of formerly STRATFOR even came up today with this, I am sure prophetic, wink, wink, vision of Russia and Russians--a collection of platitudes, rumors from Russian liberda (no one of consequence will talk to him in Russia) and cliches which he titled no less than that: 

Russia is the world’s biggest loser from oil’s crash, and that’s reason to worry

Mind you, this is the guy who described how the United States (and NATO) can defeat Russia conventionally in Ukraine in 2015. So, enjoy. Strangely, however, AFP came up today with by far more balanced and, most importantly, very significant distinction between Russians' and Westerners' lives. 

Sokolniki (Russia) (AFP) - After years spent on submarines with Russia's Northern Fleet, Ivan Chernyshyov is having no problem adjusting to life on coronavirus lockdown -- especially as, like many Russians, the retired sailor can escape to the countryside. "It's good here. We'll grow carrots and strawberries and maybe even some potatoes," the 78-year-old says, while his wife Lyudmila trims rose bushes in the garden of their country home outside Moscow.

This is what I am constantly stressing--comparing standard of living between Russians and Westerners, especially Europeans, is a fool's errand. Consider this crucial fact--you see, Western media can sometimes operate with reality, when they want to--which is absolutely not accounted for when talking about Russia's REAL economy:

Nearly half of Russia's population is estimated to have a dacha, so when authorities began imposing lockdown measures on Moscow last month, thousands streamed out of the city.

Very many, I stress that, of those dachas are, well, how to put it politely, full blown houses with garden lots and can give a run for the money to many US suburban houses within $150,000-250,000 price range in some nice established neighborhoods. Recall this comparison recently. Russia's sub-urbanization was proceeding apace for decades now and vast growing dacha communities were to be found as early as 1970s even in such places as Petropavlovsk-Kamchatsky (to be more precise, Elizovo) or some cities in Siberia, not to speak of Moscow. Dachas are not only great supplemental food or even income when some of this food goes to local farmers' markets by the so called "dachniks" (people who own dacha) who decide to sell, but also great places to relax. In my first book I wrote:

But even today each Friday in Summer or early Autumn big Russian cities suffer from enormous traffic jams with millions of Russians driving, or taking a train to their dachas or village homes to not only tend to their gardens and garden beds, small agricultural additions to houses, which in the hard times of the 1990s inhuman “reforms” allowed many to survive. Many still escape the city for the calm and relaxation of pastoral living, going back to their village roots, from where the Russian nation sprouted. It is a totally normal picture to see some Ph.D. in electronics or a designer of crucial parts for aircraft to enthusiastically tend their cabbage, or potatoes with carrots on their country side plots next to often solidly built luxury houses which are still built on the ground from which, throughout centuries, nobody could uproot the Russian soul. (Chapter 5, page 124)

As one commenters to this article noted:

Western media always portrays Russians as very poor people. However, it seems that half of them have a second home in a country side? How is that for being poor?

Yes, this is the paradox and reality which even best Western alleged "scholars" could not perceive during the Cold War 1.0 and still cannot wrap their brains around this whole thing today. Here is how dacha (and their neighbors') of our relatives looks like in 80 kilometers (50 miles) from Moscow and those are pretty average, nice, but nothing overly special, except a large lot (they don't grow anything). 

So, the way wealth is spread in Russia, despite inevitable catastrophic stratification of 1990s during a nation-wide robbery, is rather different from the West even today. The process or dual-residency will continue in Russia and here is another wowser for many westerners--most Russians OWN their apartments (flats) and dachas, that means are not in debt on this valuable real estate. Russia's mortgage market is minuscule compared to cyclopic debt bubble of the American real estate and, you may have guessed it already, in US "economic science" this huge bubble is counted towards GDP. This is the fact which great "strategic mind" of George Fridman simply cannot grasp--it is difficult when one is brought up within Wall Street bubble and on cooked books. 

Here Comes A Double Whammy.

This blog wrote on a number of occasions that US LNG is simply not competitive with pipeline gas practically anywhere in Eurasia EVEN without considering pure geopolitics (or geoeconomics as this term begins to enter a conversation) with the United States desperate attempts to sabotage Nord Stream-2. It is just the fact of life and technology (as in extraction, processing, liquification etc.). Poland, of course, thinks otherwise and is ready to pay about third more for US LNG, but it is Poland and basic economic logic doesn't apply there. But here comes this double whammy, which so far was merely in the background:

(Bloomberg) -- For the first time in more than a decade, U.S. natural gas is set to be the world’s most expensive as Covid-19 lockdowns wallop demand in other regions. Gas futures in the U.S. have rallied about 10% this month as traders bet that a historic crash in oil prices will drive American shale companies to halt more drilling and curb output of gas, which is extracted as a byproduct. In Europe and Asia, meanwhile, prices are sliding to fresh lows due to a supply glut and languishing consumption amid the pandemic.

So, these are not good news for the US "energy independence", because as even Bloomberg admits: 

The move is significant as it shifts the premium that gas in Asia and Europe has historically commanded over U.S. prices and adds a hurdle to American LNG exporters looking to boost sales to those regions. Buyers of U.S. fuel have canceled at least 12 cargoes for June loading, and traders estimate that more than 20 shipments could have been canceled for the month.

In general, the picture is not good since ramifications are wide and long lasting. It is one thing when Scott Ritter explains how things "will go from here" in terms of turning from net-exporter to net-importer of energy for the United States:

Even when the U.S. economy gets back online, a good segment of the U.S. oil industry won’t be there to help fuel it. U.S. energy independence, that illusory concept pursued by U.S. Presidents for the past seven decades, has evaporated. In the brief period that the U.S. was able to claim this status, it could only do so in a market that had been artificially skewed to promote U.S. overproduction at the expense of the rest of the oil producing world. This model of behavior will no longer be tolerated.  

And, mind you, actual cuts will be huge, much bigger, once the ball gets rolling and this will require a serious processing of new economic reality. But Daniel Larison came up today with a headline which was and is in heavy use here. How about that: 

 Please Tell the Establishment That U.S. Hegemony is Over.

But Larison, correctly identifies a strategic conundrum:

Our dominance in the world is in the rear view, yet Trump and other pols refuse to get the message.

This is the danger of which I warn non-stop. Stumbling into the conflict in which the United States cannot, which is pretty much anywhere in Eurasia, win may initiate a sequence of the events which may lead to a global thermonuclear catastrophe. larison, reviewing this newest book: 

    

Notes:

While the authors are quite critical of Trump’s foreign policy, they don’t pin the decline of the old order solely on him. They argue that hegemonic unraveling takes place when the hegemon loses its monopoly over patronage and “more states can compete when it comes to providing economic, security, diplomatic, and other goods.” The U.S. has been losing ground for the better part of the last 20 years, much of it unavoidable as other states grew wealthier and sought to wield greater influence. The authors make a persuasive case that the “exit” from hegemony is already taking place and has been for some time.

I write about this for years and what makes me slightly more hopeful in this truly hard time for everyone, including for majority of Americans who are already squeezed to the breaking point, is the fact that some "establishment" academic and policy-making figures begin to speak about this fait accompli more and more. It is also symptomatic that this book (I am still deciding if to buy it--I have a profound allergy to US political "science" lingo) is focused heavily on Russia (of course, China too) and finally speaks, from what I observed so far, in terms of actual.... tangibles: goods, military power, real economy. It also discusses liberalism. But in the end, Larison concludes with this:

The coronavirus pandemic has exposed how misguided our priorities as a nation have been. There is now a chance to change course, but that will require our leaders to shift their thinking. U.S. hegemony is already on its way out; now Americans need to decide what our role in the world will look like afterwards. Warmed-over platitudes about “leadership” won’t suffice and throwing more money at the Pentagon is a dead end. The way forward is a strategy of retrenchment, restraint, and renewal.

He basically spells out what Russia (Putin) were offering the United States for more than a decade. The calls have been dismissed and it may not be just up to the Americans alone anymore to decide the role the United States will play "afterwards" but only within the framework which is emerging as I type this.