Sunday, February 15, 2015

The Orchestrated Attack on Russia Failed

A steady theme in my humble geopolitical writing is the desire of China, Russia and some rising large nations to build a separate world system. The USG dominated empire is a system. The major weakness to that system now is money. The problem with attacking the monetary system head-on, even if opposing nations are stockpiling dollars and assets, is that the US controls the levers to the system. This is why Russia and China are coming together to form an independent rating agency. This is why Russia is forming an alternative to SWIFT. A BRICS banks sounds silly, but there must be an IMF-World Bank alternative. This is why nations are stockpiling gold and crude oil. They all fit together. The world witnessed this fall and winter an attack on Russia using the might of the financial-media side of the USG leviathan. The attack failed. Looking at the coordination involved, one can see why these other powers are trying to slay the USG beast on an alternate battlefield with the construction of the attack.

Even before getting to December's events, why Russia? First, Russia is back to being the main adversary in the eyes of the USG (especially the media). Vladimir Putin, for all his warts, has symbolically become the embodiment of the one man standing up to the excesses of the USG war and profit machine. A comical way of looking at it is that the KGB might have been set up as one nationwide, multi-decade filtration program to find the one man capable to defeating the multi-headed beast known as the USG. Russia, along with help from China and even American military sentiment, stood up to Uncle Sam in Syria, preventing more Raytheon profits and securing Assad. Russia has also been enjoying their proxies in the Ukraine beat up on a shabby, demoralized Ukrainian national army. The other big problem, is that he does not play ball. By even mentioning gold and wanting to form a rival monetary system, he threatens the progs in control of the USG by not allowing for global money printing forever to keep every social welfare plate spinning. Playing hard with commodity competition is a threat even if all nations continue to print now. Russia must be punished, and Vlad must go if possible.

How does the USG pull it all together? Russia's weak spot is its dependency on oil revenue. Oil had been heavily financialized in the US as well with massive lending to the shale patch, pushing up production. Hedge funds were pretty long in their oil trade positions even as late as December. The key was getting the Saudis to open the spigots no matter the price of oil. I wrote on this last year as a reuse of the oil weapon from the conspiracy theory of the '80s, and the New York Times revealed it is a real ploy now to stop Russian support of Assad. That also hurts Iran so the Saudis were eager to help out. The keep pumping message is far different than the Saudi talk of $100 oil being a good, normal level for oil now. This benefits the leftist establishment holding the White House today in a variety of ways. Lower gas prices help a consumer tapped and left to spend money only on health care. The shale patch, a phenomenon only on private land, bust hurts donors for the other side, hurts employment in red states, and can cause fire sales of assets by producers to majors and banks.

The threat to the USG is the continued strength Russia and Putin show. Russia further defies the USG monetary system with the announcement by the Russian Central Bank that they would finish building its SWIFT alternative by the end of May 2015. The price of oil had been declining for months, but the heavy movement to the Russian ruble was in late November (the last week). The ruble, a traded currency on Western markets, was then shanked in mid-December by the Western banks who cut off liquidity. The rating agencies jumped in on the action and mentioned threats of debt downgrades or cut the ratings quickly. S&P downgraded Russia. In *ahem* unrelated news, the S&P settled the longstanding lawsuit with the federal government for a billion dollar fine, no jail sentences and a "so sorry" over the American financial crisis bad rating shenanigans. Even if all trading turns back to normal for the ruble from a mechanical standpoint, all rating changes now set the game up differently. The difference between investment grade and junk sovereign is significant.

The Saudis, the banks and the rating agencies were not alone in this effort. They had help. The media came to their aid by falsely reporting that Russia was selling gold reserves to keep the ruble stable. Business Insider corrected the report, but the initial report was allowed to go forward with sloppy translating as an excuse. The media also spread the idea that Russia could have a sovereign default just like in 1998. George Soros made public statements about a Russian default. What the media did not bother to explain was that 2015 is not 1998 and even in 1998, the Russian default took many people by surprise since Russia's sovereign debt load then was around 40% of GDP. It is around 13% today. The media pushed this because they, like George Soros, want to see Russia punished, Putin gone, and all those Russian oil and mineral deposits under Western financial control (Jew-Russian ethnic tensions as well). This is the same George Soros who visited Ukraine recently and then the Ukraine announced a draft of 50,000 men. The media entertainment wing has even added to the propaganda messaging with not one but two separate shows about Russian spies in the US, The Americans and Allegiance. As a child of the '80s, I do not recall any shows like that, but we were suppose to "understand" the Soviets back then. An extra month of media worrying about default would spoke even more marginal holders of Russian debt. Keep in mind, European bond yields have compressed despite nothing being fixed.

The media's role had a weird addition of seed sprinkling in December that feeds into this attack line of thinking. On December 11th, Masha Gessen, Putin hater, cishet hater, gollum look-a-like extraordinaire, penned a column on how Putin had slayed the oligarchs. She cites the work he did exiling, jailing and stripping some oligarchs of their billions as well as incorporating them into his system. A bit like Mayor Daley from the words Gessen writes. There are no politically minded oligarchs anymore. Weird thing is how the Western media really takes to this Khodorovsky exile. First in October, he calls for Putin to face a crisis like 1917. In December, he has a follow up with Bloomberg about how he'd like to come to power, maybe coup, maybe just regime change but hey, no revolution. The Financial Times and the Guardian were next to provide an outlet for this former political prisoner, and in January, CNN gave him a forum to spit his game. The Jewish Business News has had plenty of articles on him, including his link to recently convicted political prisoner Alexi Navalny. Are protests in the midst of a currency crash easier to sell as organic and homegrown? Yes. The messaging is clear that the oligarchs are all gone or corrupt Putin cronies while Khodorvsky is the political prisoner (VICTIM) only wishing to integrate Russia into Europe (BE A COMPLIANT COG FOR USG). Khodorvsky, Gessen, Soros, and the US media... if I did not know any better, I would start a website about an American Jewish conspiracy against Putin to cash in on the Google searches.

The coordinated attack still did not work. While oil revenues are down, the Russians do not earn more currency and do face budget issues. They do also have cheaper exports now, which in the beggar thy neighbor, currency devaluation global game actually helps. They devalued without everyone else accusing them of unfairly devaluing. Russia was pushed further into a partnership with China as the Chinese extended a financial lifeline to the Russians in December. An important thing no Western media outlet mentions is that when Putin speaks and uses "we" in reference to Chinese and Russian views, the Chinese are allowing Putin to speak on their behalf. That is huge in signifying coordination and partnership, yet American media must always say Putin is isolated. The ruble is still at decade lows versus the dollar, but the currency run was stopped. It has been reported in the media that the Ukrainians have reached some cease fire deal, but the only one smiling at and after the conference was Putin. Secretary Kerry even stated that the US may remove sanctions on Russia.

Russia just showed other nations it is possible to withstand an American financial attack. Stockpile reserves, stand firm, make calm public announcements, and yes, do not fear China. If one were building an alternative financial system, what better advertisement for it than "We just stared down Uncle $am, and he blinked". This is why they are pushing for an independent rating agency, an alternative to SWIFT, a BRICs bank, making contact with smaller nations in potential client-patron set ups, and stockpiling gold. All of those tools are in the USG locker to be used to punish who they deem wrong today, using whatever client (nation, bank or rating agency) like a Godfather calling in a favor. With a competitive system or even just discordant voices for ratings, the USG financial attack system cannot move swiftly and in such a strong manner. This specific attack is not possible if the Saudis were Russian-Chinese clients. An alternative SWIFT, and the attack is weaker.

This is not over. Who is positioned best for the end game of the current system does matter. Whether protests of decent size show up in Moscow on March 1st, and if they inspire widespread calls for change that affect the Russian elite, does matter. Right now, one nation is developing a partnership with China and the other is confronting China in multiple areas. The short sightedness by the USG in using the power of its financial-media Wurlitzer in a drunken manner over piss ant regions like Ukraine is horrendous. Oil prices may drop, but dropping will spur demand and kill marginal supply, which will bump prices up again and all the while the Chinese don't stop stockpiling. We are in Peak Cheap Oil Cycles, and nowhere is the US changing its transportation system to reduce gasoline dependence (transportation fuel is half of all US oil use). The US has a secondary effect to worry about from shanking the shale patch, but they have become so short term in thinking, that it does not hit their radar. America's financial, military, foreign standing and moral authority are all lower than when Putin first rose to power. That is democratic politics in all its high time preference glory. It might not work against an autocratic authoritarian regime with a leader who can stay until he wants to leave or another authoritarian power with a 100 year timeline. These coordinated attacks by the USG system have worked so well for so long, that the shock comes when they start to fail. The shock will still not be enough for the American elite to recognize how the game had changed and will only keep changing out of their favor.


Stirner said...

Excellent analysis.

Rune Soup had a similar perspective on the USG vs Putin antics, and has a nice detail on how Putin may be using Greece as a pressure point against Germany and the US/EU.

PA said...

USG is different from Russia and China in a key way: active antagonism to its core population. If the USG (writ large, inclusive of Europe) were nationalist, it would have our loyalty.

PA said...

Another way of looking at USG is that unlike the other two, it is playing short-term. The flooding of all of its countries (including South Korea now) with low-grade DNA can only be understood as an action of a manager who has no long-term stake in things.

TheCitadel said...

Greece is a very interesting cog here. It seems Putin has the ear of the Tsiparis government, and is making a Grexit more likely (a near mortal blow to the European economy). And if Syriza fails to do what Putin wants, the people in Greece will have no choice but to turn to Golden Dawn, who do not bluff. Putin has a winning hand whatever the outcome.

Portlander said...

The important question is

Is Putin, at heart, the modern equivalent of a Jefferson Democrat with his ultimate goal to help productive citizens of Russia and her client states be free and able to enjoy the full economic wealth they create?

Or is he SSDD -- welcome to the new boss, same as the old boss?

And even if he is ion fact the former, one still is left wondering did the Soviet experience, moreso the escape from it, radically change the culture in Russia such that the citizens there will jealously guard their freedom and liberty in any subsequent Presidents?

I don't know Russia all that well, but I'm doubtful. It's why the destruction of "the West," not just the US, over the last 50 years is so catastrophic. There is no escape. Statist totalitarianism won. OK, it wasn't Stalin's version, but that's about it. A kinder, gentler, statism is all that can be said.

nikcrit said...

Statist totalitarianism won.

Clarification request: when you say "statist totalitarianismn" do you mean something akin to social marxism, a la Sweden ----- statist='The state," as in "the state takes care of the people" -vs.- federated republic democratic capitalism, a la America prior to the New Deal?

Or do you mean something more draconian and totalitarian than pre-Glasnost Russia?

nikcrit said...

Statist totalitarianism won.

Clarification request: when you say "statist totalitarianismn" do you mean something akin to social marxism, a la Sweden ----- statist='The state," as in "the state takes care of the people" -vs.- federated republic democratic capitalism, a la America prior to the New Deal?

Or do you mean something more draconian and totalitarian than pre-Glasnost Russia?

RE. the impulse of the post-Glasnost Russian volk: it's my understanding from reading press reports and some follow-up feature writing of the period that the volk impulse is to reinstate the tyrannies again, as they symbolize stability to much of the population; a great source on this period, i believe, are the two books that New Yorker editor David Remnick wrote about Glasnost, one of which was called "Resserection" and features a hilarious meeting/interview between Remnick and the then-head of the KGB, whose name I don't recall; at one point in the interview, with a sense of narrative climax, Remnick asks, "what's the truth about Alger Hiss, was he a spy? And the head of the KGB, who was a top-three administrator in the KGB at the time of hte whole "Pumpkin Papers" scandal, replies with a bemused look, saying "Who's Hiss? Never heard of him."

survivingbabel said...

On the topic of Russia being isolated:

The EEU is really the wild card here. Georgia & Moldova, with their own ethnic divisions, have to have watched the Ukraine situation blow up in the EU's face. Why align with them, when your break away regions are emboldened by novorossiyan successes? The EU won't risk another disaster for two minor states. That's potentially 8 members (no idea on Azerbaijan) with an invitation to Turkey outstanding. The old divisions are new again.

Portlander said...


Statist totalitarianism

I don't know Sweden all that well, and from what I've heard the last 10 or so years I'm not sure I'd like living there, but I do mean something more sinister than mere cradle to grave socialism. Hence I called it totalitarianism.

Maybe this is my age showing (I ain't in my 20's no more :) ), but now I can appreciate a utility to cradle to grave socialism provided the population is homogenous enough that it's not a political patronage & spoils system -- ie. who/whom wealth redistribution.

I've been thinking about my post the last couple days since writing it. What was unique about Soviets and why should we be unlikely to devolve into it. Obviously Uncle Joe is one overwhelming reason. Perhaps the remarkable thing is how long the USSR lasted after his death -- talk about institutional inertia! Nonetheless, I've gotten more pessimistic about the future of Western Society. The Sociopaths have taken control, and there's not enough intelligent, critical people left to wrest control back away from them.

The Soviets failed because they were no carrot and a capricious & random stick. We know from animal studies capricious and random punishment is the surest, fastest way to turn an animal into a mental basket case. Well, the entire Soviet bloc was a basket case. No wonder it collapsed under its own weight.

The sociopaths are considerably more sophisticated these days. Like Hollywood, the music industry, and Silicon Valley, they know they have to have enough high-profile lottery winners to keep the fresh meat coming in through the door. That's the carrot.

The stick is if you don't grind away under their rules your neighbors are going to suck. Choose to live in a blue-city (let's face it there are no blue states, only blue cities) and your neighbors are NAM's, choose to live in a red state and your neighbors are boring red-necks.

So, it's: back to work, wage-slave. The system has rent to extract. And in the mean time no carping about raw milk, red meat, faggots and freaks, vaccines, Jesus or God. Follow the rules. All the rules, and all the time.

Robert What? said...

I think the greed of the current USG is getting the better of them. Plus they don't have the support of the American people (at least not the productive ones) so their only alternative is to pile lie upon lie. Hopefully the American public are smart enough to not be talked into war against Russia or one of her key allies.

Say what you want against Putin, but it is clear that he has the best interests of the Russian people at heart. You cannot say the same thing about the USG vis-a-vis the American people.