Geoeconomics As The Derivative Of Power.

In 1990 Edward Luttwalk came up with the notion of geoeconomics and Western political "science" field was hooked. If you are a political "scientists" you cannot miss the opportunity to hang on to yet another theory, in fact--you are obliged to do so, because fraudulent field of political "science" depends on multiplication of essences and doctrine-mongering for a simple reason of a paycheck and tenures, because otherwise most of those "scientists" are unemployable in any serious capacity in which one bears responsibility for consequences. And, of course, who can forget "Thucydides Gap" or "Hybrid Warfare"--a multilayered theology of a BS concocted by people who, quoting great Alexander Pushkin from his Evgenii Onegin:

We all meandered through our schooling 

haphazard; so, to God be thanks,

 it's easy, without too much fooling, 

to pass for cultured in our ranks. 

So this great mind, Luttwak that is, came up with a fascinating stratagem that in modern world military power is really not that important and it is all about, speaking in a layman's lingo, about economic warfare, geoeconomics that is. Wonderful. This is expected from people who study "strategies" of Roman Empire in the age of standoff weapons, super-fast computers and nuclear power and try to apply those mysterious "principles" to the modern warfare. Not to speak, of course, about this teeny-weeny cognitive problem of Western "analysts" (at least most of those who study the world through the lens of various "concepts") which still cannot tie together a decisive influence of a modern military power, itself being a first derivative of large highly developed industrial economies, on a global economic order which is driven, with relatively short periods of peace, by the warfare. Modern Western economies emerged as a result of a warfare and warfare, sadly, remains the main tool of "running" the modern world. Enter US military power.

An embodiment and a main tool of US "rules based order" is a mighty US Navy's nuclear aircraft carrier. Together with hundreds military bases spread all over the globe, they form a foundation of what came to be known as Pax Americana, "Rules Based Order", "globalization" etc. There is NO geoeconomics without USS Theodore Roosevelt or 82nd Airborne Division, period. Never existed, because "economic warfare" can exist ONLY when it is propped up by the bayonets or, in our time, by "power projection force". In fact, US Carrier Battle Group is an Exhibit A of American imperialism rooted in economic system which can exist only through looting those who are "pacified" by means of those Carrier Battle Groups. In fact, those forces become themselves the economic entity because of the modern US economy losing its competitive edge with an astonishing speed and extortion by military means becomes the only viable method of supporting the US economically. 

So, an accelerating shrinkage of the US economy suddenly creates a huge difficulty in maintaining those immensely expensive forces and the reality begins to set in. 

WASHINGTON – An internal Office of the Secretary of Defense assessment calls for the Navy to cut two aircraft carriers from its fleet, freeze the large surface combatant fleet of destroyers and cruisers around current levels and add dozens of unmanned or lightly manned ships to the inventory, according to documents obtained by Defense News.The study calls for a fleet of nine carriers, down from the current fleet of 11, and for 65 unmanned or lightly manned surface vessels. The study calls for a surface force of between 80 and 90 large surface combatants, and an increase in the number of small surface combatants – between 55 and 70, which is substantially more than the Navy currently operates.

For (real) military professionals everywhere there is very little surprise in this development because, speaking in broadsides, the United States simply cannot afford such forces anymore. In fact, the US cannot afford even half of its present Armed Forces because not only the United States' real economy, that is to say industry, cannot produce anymore that number of forces (Google the fate of US tank industry), it cannot pay for them even if it continues to mercilessly print paper money. Moreover, immensely expensive carriers and their operations are not sustainable anymore because there is no effective defense against modern super-sonic anti-shipping missiles which proliferate and, even Iran has many of those, not to speak of having a very good targeting protocols in her ballistic missiles allegedly capable to hit moving targets. I, of course, am not talking about Russia, or China. So, here it is, as with the US shale oil, US military power as it exists today is not only unsustainable but it contributes dramatically to a decline of the US already shrinking real economy, it provides no strategic benefits as it used to, when many ignorant people believed in the myth of an American military power, which always cleared the road towards the economic benefits. 

But you know me, I cringe when I hear (read) people waxing economic and political without understanding the nature and application of military power and how it shapes economic reality. No amount of political doctrine mongering can change a simple fact that Real Revolution in Military Affairs is here, it is now and it seems that some people in the US begin to understand that US military and economic power in present "geoeconomic", let's call it that, paradigm counts increasingly for less and less. But I told you so, didn't I?  

Basic Economics.

This guy is awesome. He goes bananas and rants for you, allowing you to conserve your strength and resources. Absolutely magnificent. 

Vic Dibitetto is a rougher, much more spittier version of Tucker. 

I Was Going To...

Write a piece on all those post-Soviet states, especially Ukraine, and explain why Russia is not interested in taking Ukraine and Belarus on her balance for a number of reasons, especially in Ukrainian case, because Russians in general simply do not want to deal with this "brotherly" nation. But, luckily, there is Rostislav Ishenko who knows the issue much better than me and he wrote a superb piece on limitrophes in general, which covers Ukraine too. Use Google Translate--it is a superb piece, a typical Ishenko's succinctness and straight to the point essay (in Russian). 

                      Competition Of Limitrophes  

Russian/Soviet Navy has this saying:

Q: what is scarier than the nuclear war?

A: an arrogant sea-bass (Sea-bass is a title given to Navy's first year sailors). In Russian it sounds as oborzevshii karas'.

In geopolitics the rough equivalent of arrogant sea-bass are such nations as Poland, Ukraine etc. In other words, minor powers, at best, who think themselves the center of the universe. In practical geopolitics they play the role of a condom to be used and then thrown away, but they still think themselves powerful and important, nonetheless. But this is not how the real world works and once some minor player decides to get in between major powers trying to sort things out between themselves, well--look at Ukraine, which is turning fast into the full blown deindustrializing shithole, or you may take a look at Poland's real (I underscore it--real, not "valued" in US Dollars) economy and everything becomes very clear. So, read Ishenko's piece, it is wonderfully written and it gives a good sense of scale and proportion.  

Tangibles, Yet Again.

A little piece of news today. 

At a time of weak economic growth and increased market volatility, analysts are getting more bullish on gold. According to Bank of America, the precious metal is headed 78 percent higher, to hit $3,000 per ounce in 18 months.“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. And investors will aim for gold,” the bank’s analysts said, adding that the US Federal Reserve has provided enough momentum to propel investment demand and prices higher. They have warned that the Federal Reserve’s balance sheet as a percentage of GDP could rise 20 percent to 40 percent this year. They’ve also pointed out that the Fed “Can’t print gold.”

You gotta love this fancy BS "financial" lingo: "momentum", "economic output", "investment demand". What a load of a contrived BS. To put it in simpler words--paper, from dollars to all kinds of "paper gold" (certificates, not physical gold) and stocks are worthless because they are.... well, papers which merely reflect the mood of moneyed class, which, while being moneyed, is not very bright, to put it mildly, and believes in all kinds of fairy tales about "financial markets". But once crapola begins to hit the fan in earnest one needs to "hide" whatever "investment"--yeah, let's call greed and speculation that--one has accumulated in something which will not be burned, literally and figuratively, in the furnace of financial voodoo going off the ritual script completely. 

Now, The Donald in a futile attempts to keep his "promise" to resurrect a corpse of a deceased US shale oil, and reading this fresh news:

(Bloomberg) -- An historic crash in crude prices is driving U.S. shale into full-on retreat with operators halting new drilling and shutting in old wells, moves that could cut output by 20% for the world’s biggest producer of oil and leave thousands of workers unemployed. For shale companies, the price of West Texas Intermediate crude went from hunker-down-and-ride-it-out mode to crisis mode in just a few days, with many now unsure whether there will even be a market for their oil. Some 1.75 million barrels a day is at immediate risk of shutting down while the number of new wells being brought online is forecast to plunge almost 90% by the end of the year, according to IHS Markit Ltd.

Decided to employ his old (and only) trick in an attempt to "raise the price" and ordered:

WASHINGTON (AP) — President Donald Trump said Wednesday that he has ordered the Navy to “shoot down and destroy” any Iranian gunboats that harass U.S. ships, a directive that comes a week after the Navy reported a group of Iranian boats made “dangerous and harassing approaches” to American vessels in the Persian Gulf. Trump did not cite a specific event in his tweet or provide details. The White House had no immediate comment. The U.S. Navy’s Bahrain-based 5th Fleet referred questions about the tweet to the Pentagon, and the Pentagon referred questions to the White House.

Boy, you have to admire Donald's insouciance, that he has put US Navy professionals into stupor because "shooting down" gunboats requires a rather vivid imagination and a strict diet of fantasy novels for a long time in order to exist in the world of flying ships, magical spells and alternative realities. This is not to mention the fact that there are some practices in the maritime law, such as following other ships in neutral waters (I know, been there, done that), which are by no means forbidden and, in fact, are normal practice, like this, with Royal Navy's frigate shadowing Russian navy's corvettes: 

Of course, definition of "harassment" is a tricky one, but what do ya know, one has to do what one has to do trying to raise the price by any means. There is, however, a larger picture begins to emerge since the question of "who is winning" in oil war is not even on the agenda anymore, albeit Canadian oil analysts arrive to this conclusion:

North American producers are getting crushed as a flood of oil is expected to keep prices depressed for longer.RBC Capital Markets expects U.S. shale production to fall 1.5 million barrels per day. The bank says that the producers it is tracking have slashed 2020 investments by more than US$70 billion (about 30 per cent of total) since the beginning of March.“Meanwhile, temporary production shut-ins are already underway amid refinery run cuts due to collapsing refined product demand and ballooning storage levels,” RBC said. “We expect U.S. refinery utilization rates to fall from about 70 per cent currently to 60 per cent — and potentially further — as the second-quarter unfold.” 

No, the issue is broader, especially when one considers those funny statements from Saudis about Russia "being a part of the family" and that "families always overcome quarrels", just google that, the issue is US financial "empire" is at stake. Indeed, when one has these kind of forecasts:

All told, North American production could contract by 2.64 million bpd this year, with OPEC shut-ins at around 575,000 bpd, according to data gleaned from RBC and Rystad. “As storage fills up, countries are being forced to shut-in production on a large scale to counteract a theoretical oversupply of 21 million bpd in 2Q20,” said Rystad Energy senior oil market analyst Teodora Cowie. 

And increasing trade in local currencies between major players (as an example, find videos of Putin's visit to Kaliningrad and his stern demand to transfer all operations by ports into Rubles), plus parallel introduction of alternatives to SWIFT, all of it indicates that the world cannot run anymore on fairy tales but needs tangibles to find its new footing and for that, as they say, Petrodollar Delendum Est. I begin to believe that the plan for that was in place from the get go and was merely adjusted for the severity.  

About "Hegemony". Fast Thought.

Even today, when browsing media--I am not going to give links, they are easy to find--I stumble constantly on definition of the United States as hegemon. Hegemon this, hegemon that and all of this usage ONLY in the context of what Fed will do, how Mnuchin slept last night, and what is the state of banks. I think, using financial voodoo which is being presented as a "science" in Anglo-sphere media and its iterations in, say, Russia among what is known today as Russian liberda circles with appropriate media such as Kommersant of RBC, one is literally forced by narrative to believe that the US is a hegemon because US Dollar is world's reserve currency and everything flows from it. Well, this is a preposterous and utterly incompetent view because even a generic definition of hegemony doesn't support those assumptions in the least, because in real world US Dollar being (for now) global reserve currency is merely an advantage, malignant at that for the US itself, but hegemony is something else altogether:   

control by one country, organization, etc. over other countries, etc. within a particular group 

My latest book, my previous book, my third book which I am writing are all dedicated to a deconstruction of the myth of the United States being a real hegemon, because "control" is a very vague term until one begins to specify elements of this control and here is this slight problem: one cannot define "control" merely by balance sheet, because real hegemony realistically is built around... I know, I know, I am such a bore... tangibles. Or, as I write for years--by actual predictors, overwhelming majority of which are based on real economy and real capability. Let's recall this from more than 4 years ago: 

1. Owns and operates the international banking system;

2. Controls all hard currencies;

3. Is the world's principal customer;

4. Provides the majority of the worlds finished goods;

5. Dominates international capital markets;

6. Exerts considerable moral leadership within many societies;

7. Is capable of massive military intervention;

8. Controls the sea lanes;

9. Conducts most advanced technical research and development;

10. Controls leading edge technical education;

11. Dominates access to space;

12. Dominates aerospace industry;

13. Dominates international communications;

14. Dominates the high-tech weapons industry. 

Out of those 14 points, highlighted 11, that is 78.6%, are directly connected to a very serious manufacturing or, in modern lingo, "real economy". If one throws away BS about "considerable moral leadership" (a delusion still propagated by Huntington's founded Foreign Policy magazine) and the point about control of all hard currencies, this share increases to 11 out of 12, that is roughly 92%.  It is also what makes one a military power. And even this list is still incomplete....

In general, real hegemony without military hegemony is nothing more than exercise in PR and feel-good-about-oneself delusion. In general, hegemony without kinetic ability to prove, by means of power enforcing, of the order hegemon wants to establish is not a hegemony. This military hegemony is based on REAL economy, not on stock market or futures or any other paper issued by any bank. Well, guess what American hegemony was based upon--two myths: alleged military power characteristic of hegemon, myth of US economy based on valuations of financial markets. Once those two myths have been removed the collapse ensued, because trust, deep down, in the deepest recesses of their minds many believed primarily in those two myths. Not anymore, the trust had been broken. It doesn't work anymore, it is either non-existent in some places, in other--is running out and really fast at that. Reason--US cannot enforce Bretton Woods, petrodollar, Eurodollar or whatever the hell other simulacra anyone uses to describe Pax Americana, because to do so one actually needs to perform, especially militarily and technologically. US cannot do that. It couldn't for a long time, but it took some effort and time to "explain" or to convey this simple truth to people who, like majority of the so called "investors", know about fictional financial markets but do not understand anything in terms of actual warfare, how military works, how real economy operates based on tangibles, from R&D to industrial manufacturing. They just don't! It is not surprising that good ol' Henry Kissinger ended up on the board of directors of Theranos fraudulent company or Boeing had on its board of directors people, like Nikki Hailey, who have same relation to aerospace as I have to Kabuki Theater. Plus, of course, one cannot continue losing wars against weak opposition non-stop. The doubt, is a like a slow metastasized cancer--once started and not detected, it will spread and kill patient. This exactly what is happening now: we see doubts being realized on the level of general population, some of which is well-off and are "investors" who are completely at loss with their mostly virtual "papers" which very few will be interested in in coming months. 

Plans Within Plans, Within Plans....

You know, like in Dune's complicated saga of palace (interstellar) intrigue and of a conflicting interests we are dealing with a seemingly chaotic interaction of trends colliding, aligning or diverging. You may say why seemingly? Because it only seems as chaotic, in reality there is a very well defined method behind this seemingly chaotic events. It is called plans within plans, within plans. Just pay attention to the headlines:

WASHINGTON (AP) — A bipartisan Senate report released Tuesday confirms the U.S. intelligence community’s conclusions that Russia interfered in the 2016 presidential election to sow chaos. Senators warned that it could happen again this presidential election year. The heavily redacted report from the Senate Intelligence Committee is part of the panel’s more than three-year investigation into the Russian interference. The intelligence agencies concluded in January 2017 that Russians had engaged in cyber-espionage and distributed messages through Russian-controlled propaganda outlets to undermine public faith in the democratic process, hurt Democratic candidate Hillary Clinton and help Donald Trump.

Now, we  continue to browse these headlines and stumble into this curious headline:

(Bloomberg) -- China is falling behind in its promise to spend $52.4 billion buying U.S. energy over two years -- even as it is filling its storage tanks with Russian and Saudi crude -- independent oil producers warned the Trump administration Tuesday. The American Exploration and Production Council urged the administration in a letter to U.S. Trade Representative Robert Lighthizer to get tough with China. “China has only purchased a de minimis amount of U.S. crude in the first months of 2020, while it has increased purchases of crude oil from Saudi Arabia and Russia,” council chief executive Anne Bradbury said. “Rather than increasing imports from countries like Russia and Saudi Arabia, the Chinese government must take the necessary steps to remain in good standing with the U.S. as a trusted trade partner.”

Ah, a dawning reality after the whole absurd of stock and commodities exchanges and financial manipulations (fraud) also known as American "economy", which is run by financial fraudsters making money out of thin air collapsed and the pain of taking own medicine of lies and broken promises. I repeat ad nauseam my "tangibles" mantra because, as it is well documented throughout my writing over the years--I discard practically any information being fed into the US media about US finances as valid, because, as practical experience shows it is useless and, in general (some exceptions exist), is nothing more than a institutionalized lies for the consumption of sheeple who believe in "free markets". Well, last days, certainly, should have given all this cabal of "traders", "brokers", "market analysts" and other useless purveyors and procurers of the laissez faire cult a shocking doze of reality. Such as this:

What you see here is a material embodiment of the geopolitics (and geoeconomics) of the highest order and a bit of revelation of the game Russia (and China, I may add) were playing all along. I do not mention Saudis because for all their oil riches they are a minor player in all this. US Senate, in yet another manifestation of a complete dysfunctional state US governance exists today, confirmed that US political class in general IS NOT entity which is agreement capable and discussing anything with these people is useless since they, both deliberately and by faith, live in an alternative reality in which they do emulate some political activity which is as effective in international relations as putting a warm water compress on the head of a patient afflicted with a terminal brain tumor, effect in both cases is absolutely the same. Yet, one can sense a very real desperation coming through those attempts to dance on the rabble of Russian-American relations, thinking that the United States is a stronger party in this dyadic entanglement. 

Yet, as the second headline suggests, US oil industry is worried about...China. Why so? The answer is simple, as you can see from Oilprice chart, futures, you know useless funny papers which allegedly indicate the actual price of oil (hint, they don't--just another paper BS concocted in the dark minds of US money-"makers"), for any US produced oil stay in red. Well, obviously, price on anything cannot be negative--all this red is merely a figment imagination of "market" speculators BSing each-other in attempts to create BS money. But those "prices" give a good idea why Urals (which is Russian oil brand) stays in black (or green)--because China not only wants this brand and already contracted a shitload of this oil both through pipe and Russian tankers but it will increasingly depend on specifically Urals at the expense of Saudi oil precisely for the reasons of the FIRST headline which is a testimony that the United States is run by hysterical "exceptionalists" who may arrive to a completely insane solution in their attempts to preserve own (largely fictional) hegemony and actually start cutting Indian Ocean Shipping Lanes of Communications through which Saudi oil flows to China. Some even offer.... a piracy. That shows you a level of desperation (and stupidity). 

Because the US may unleash a war on SLOCs, and I described this scenario not for once, latest attack on China, and Russia, in media field tells us that not only it is possible but probability of this begins to grow. China inevitably will gravitate towards Russia's both gas and oil pipelines and Northern routs well defended by Russian Navy and Coastal Forces capable to keep China's supply of vital energy secure and operational. Even when China hits a recession (if not already)--China's economy for all her massive size is extremely energy inefficient and requires massive amounts of oil, gas and other products of their processing constantly. There is NO competition to Russia's pipelines and costs of delivering oil to China, period. In other words, Russian oil is contracted by China and Chinese are not interested in speculations on the "market", they are interested in actual oil (and gas) being in China here and now. Russia can provide this, the United States cannot, including for a purely geopolitical reasons because whatever China receives from the US WILL inevitably be CUT in coming volatile weeks and months. In other words, geopolitics becomes a driving force behind real economy, especially against the background of fake American "markets" of oil, which are completely disintegrating as I type this and this is just the start. The return to a grim, for the United States, economic and geopolitical reality will be extremely chaotic and painful, despite US "elites" trying to weave sophisticated, as they think, plans within plans within plans, which are seen by any high school graduate who has a rudimentary knowledge about how actual, not virtual, economy works. Ah, yes, shale oil--it is dead, so is petrodollar, the process of clean up will continue and, of course, oil cannot worth -37 or -13 or whatever minus USD, these are just convulsions of US (and global) speculators before many of them go bust completely. So, whose those plans within plans really are? Mind you, this is just a look at one player, China. There are many more.  

P.S. Forgot completely. Good luck to them, LOL. 

HOUSTON (Reuters) - The day after U.S. crude prices crashed into negative territory for the first time, Texas oil and gas regulators on Tuesday declined to force producers to curtail oil output for the first time since 1972. Oil and gas companies have been gushing red ink and cutting tens of thousands of workers as prices tumble, prompting regulators in the largest U.S. oil-producing state to wade into global oil politics and consider some producers' calls for cuts. On Monday the May futures contract for U.S. crude closed at a negative $37.63 a barrel as traders desperate to avoid owning oil paid others to take it. Two of the three commissioners of the Texas Railroad Commission, Chairman Wayne Christian and Christi Craddick, said they want the state attorney general to weigh in on the legality of production curbs. Commissioner Ryan Sitton said he was ready to cut output by 1 million barrels per day, or 20%. The issue is likely to be discussed again at a May 5 meeting.

Ma Baker.

I don't know if it is my high school in 1977 but there is something to have a kick out of this. Just enjoy. 

For some reason 1970-s call me....  I'll be adding later.