The horizon is not so far as we can see, but as far as we can imagine

Month: August 2014

The End of the Rebels in the Ukraine and the Ukraine’s Future

We’re down to street fighting in Donetsk.  The Russian leaders resigned in the last two weeks.  The rebels appear to be done, at least in terms of their conventional military phase (of course, I could be wrong depending on how much stomach Ukrainian troops have for house to house fighting).  It seems like that would only change if Russia decided to actually invade, and that seems unlikely (though predicting Putin’s decisions is always difficult.)

The Eastern Ukraine, bottom line, does not have enough support for joining Russia, nor coherent enough borders to avoid the West and Ukraine running an insurgency in it.  Conquering it would leave Russia controlling territory which could turn into a bleeding ulcer if it didn’t join peacefully (unlike Crimea, where the population overwhelmingly wanted to join, and where the geography is highly defensible.)

I’m not sure this is the “right” decision for Russia, because I can’t see that Ukraine won’t become a NATO member rather soon if Russia’s preferred solution, federalization with anti-NATO guarantees does not happen.

However, Russia does still have leverage: there are enough Eastern Ukrainians who will now hate the central government and want to join Russia, and the border is long enough and porous enough, that Russia can easily support an open ended insurgency within Ukraine.

Likewise, Winter is Coming, and the prospect of turning off the gas to the Ukraine and Europe will become much more effective.  Russia may believe that these two factors will enable it to get its minimal demands.  I doubt it, personally, because NATO expansion to Ukraine is something the US wants desperately, but we’ll see.

We move now to Ukraine’s future.

Dismal. Absolutely dismal.

Ukraine will be the second Greece of Europe, and soon.  Pensions slashed by half, gas prices through the roof, crown jewels sold to Westerners, civil servants slashed to the bone.  Its industry is integrated not with Europe, but with Russia, and Russia will move to get rid of its dependency on Ukrainian factories as fast as it can, especially as some of those factories create key defense equipment, and the Ukraine obviously cannot be counted on to supply them in any time of crisis, going forward.

Those factories are not competitive with Western factories, and when energy prices skyrocket, they won’t even be competitive with Russian factories.

Ukraine has some hydrocarbon reserves (though much will be lost with Crimea); it is an agricultural breadbasket, and that’s about all it has going for it.  Again, the economy will be opened by the IMF to the West, and whatever is worth buying, and throws off actual profits or can be downsized and firesaled, will be sold to Westerners.

Ukrainians, including the Western Ukrainians who think that joining the West will solve their problems, are about to find out that Russia’s deals and treatment were far more kind than anything the IMF will do to them.  Eastern Ukrainians, having lost a war, and being FAR more dependent on Russia, will find their economy devastated within a few years.  (This will make them far more willing to resort to violence again, of course.)

The key thing to watch now will be the negotiations between Russia, Ukraine and Europe to see if there are any NATO guarantees.  If not, well, we’ll see what the Russian response is.  Internally the Russian public does not want to attack Ukraine to take Eastern Ukraine, but that could change if an atrocity occurs or is created.  More likely, support for an insurgency, then the Ukraine building a huge wall across its border, and as noted, economic ruin.

This game isn’t over yet.  In a few years Russia may yet wind up with the East, with its citizens practically begging to join.  Not mostly because of anything Russia does, but because of what the IMF does.

Note also that efforts to de-dollarize the world are ongoing by the BRICS in general, and China in particular, and Russia is moving to decouple as much of its economy as it can from the West. In a few years the West will have far fewer levers to pull to hurt Russia.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Japanification and the end of the American Dream

Stirling Newberry and I have been writing about Japanafication for years—on blogs, at least since 2004.

Those of us who are old enough remember when Japan was THE miracle economy.  Technologically advanced, vibrant and rich.  It was eating America’s lunch, and most other countries.  For peak alarmism at this fact in a fictional form, read Michael Chrichton’s Rising Sun.

Tokyo real estate was worth more than the entire world’s real estate combined.

Then the bubble crashed.  Japanese policy was to protect the banks, and to bury the bad loans on the books.  They undertook literally decades of stimulative policy, mostly pouring useless concrete (exactly the wrong thing to do unless your country really lacks that sort of infrastructure, which Japan did not.)

To put in terms familiar to my readers, they extended and pretended.

Japan went into semi-permanent stagnation.

We have, now, the news of a quarter drop in GDP of 6.8% annualized for the last quarter.  (This is blamed on increased sales taxes, but it was coming anyway.)

The long stagnation is over (it’s been over for a bit).  Japan is actually in decline.

This is important because Japanification was always the plan for the US after the bubbles: extend and pretend, stagnate wages and employment.  Pretend.

But there were significant differences between the two countries.  Japan started with massive savings and a huge trade surplus.  It is now in trade deficit and savings compared to debt are way down.  Economic equality was relatively high, as well, spreading demand.

America came out of the financial crisis with a trade deficit, a pathetic savings rate and massive inequality.  This is why I predicted that Japanification would not work in the US.  It could not, because there was no saved fat to be used to create the long bright depression the Japanese had.

This brings us to stimulus and development (not just for developing countries).  The money must be used not for pork projects with no follow on, but to create new industries or to bring money off the sides into the economy.  Pouring concrete (and not even bothering to shore up nuclear reactors in areas which were not electorally viable) was pointless in Japan.  Buying bonds is pointless and even harmful.

Likewise you cannot have real open trade flows and expect to keep whatever you are building.  You build it, you make it work and once an industry is systemized, it can be moved to a low cost domiciale. It takes deliberate government policy to prevent that.

Monetary policy in Japan could never work, because the money went to the wrong things, and much of it immediately decamped overseas in the so-called carry trade—borrow low in Japan, buy securities somewhere else where they had a higher return.

All of this should be obvious and uncontroversial. It is not, it flies directly in the face of modern neo-liberal theory and it is that theory, in the face of decades of failure, that the Japanese followed.

The human capacity for ideologically driven stupidity and atrocity is endless. (Those who do not believed me are invited to study Church history and its effect on society from 1000 AD to 1900 AD or so.)  People will ignore the evidence in front of their eyes, years of failure and continue doing the “safe”, “orthodox” thing no matter what the results.  This is true even for well-meaning people.

Of course, in the US, Japanification has a US twist: it massively increases the wealth of the already wealthy, through unconventional monetary policy.  American leaders are far too greedy to make Japanification work: any surplus, or room to lend, or room to print money, must be given away to rich people as quickly as possible.

I point out, finally, that the first sin in Japanification was buying the bad loans.  This was a huge mistake in the US too, bailing out the banks and not forcing them and their share and bondholders to take their losses was the main mistake of the financial crisis.  Yes, things might have been worse if the US had done so (though steps mitigating the hit on the regular economy would have been easy enough to take with the 4 TRILLION dollars used bailing out rich people), but even so, the US would have recovered better afterwards.

Instead the US has an economy in which 90% of the population has seen an actual decrease in income and wealth, while 10% has seen an increase: with the 1% and the .1% and the .01% benefiting most of all.

Japanification was the plan for America. It isn’t working, it could never work, but the policies in place are nonetheless doing what is most important to their architects: they are making the rich richer, and everyone else poorer and doing it quickly.

The Bush years were the long suck.  This is the deep dive, and remember, the US isn’t in recession yet (though it is in depression).  The pain when it happens (and absent nuclear war, there is always another recession), will be unbelievable.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.



The rise of the ISA is a demonstration of the simple principle Napoleon once summarized as “The moral is to the physical as ten is to one.”

We have seen this for years, and the lesson is never learned by the West.

People who believe in what they’re fighting for, who are willing to both kill AND die are far better soldiers (and pretty much everything else) than those who aren’t.

This has been demonstrated, over and over again.  The Chinese in Korea, the Vietnamese, Afghanistan, Hezbollah.

Moreover endless low-grade war is moronic.  I once noted that Hezbollah was the perfect Darwinian organization; it had learned all the lessons Israel had taught.  It was used to fighting while outgunned and outnumbered.  It learned when not to use modern communications, to operate as a secret state, and so on, from Israel.

The modern form of electronic and surveillance warfare that the US practices is all very nice, and it is powerful, but the US and its proxies have been at war with the Islamic world for decades  The West, basically, does not learn. Its militaries are not getting better (though many will claim they are), except in terms of equipment.

The militaries of those who fight the West, on the other hand, are improving by leaps and bounds.  They move fast, give power to local commanders, isolate and destroy enemies, and regularly surprise their foes.  The ISA, to an extraordinary degree, chooses where to fight and when.  Of course they are winning.  The only people in the Middle East who are almost certainly the ISA troops equal are Hezbollah (and I would expect, their betters.  We’ll find out.)

When you fight wars as a superior power, you want to make them quick, over and out.  An America which invaded Irak, stayed in Baghdad for only two months, and installed the Colonel of its choice as the new leader would still be a US which terrified the Islamic world.

The ISA, I suspect, has another great advantage over the militaries it faces.

It doesn’t use much in the way of electronic communication (those commanders who do, get dead.)  This means that once units are given orders, the local commanders are free to execute those orders as they see fit, rather than being micromanaged by generals in the rear line.  No single person, or even staff, can react as quickly as the commanders on the ground can, or as appropriately.

The sheer stupid of Israel, of America, of the West is stunning to behold.  “Here, let us teach you how to beat us by engaging you in years of inconclusive warfare.”

The correct policy, from a hegemonic point-of-view (not what I would prefer), is to let them have their governments, let their elites rule, and if they get out of hand, knock them over.  Maintain the fear.  Let them get a bit soft and fat, let them have something to lose.

Failure to do this, and coddling of Saudi Arabian Wahhabism, has led to the rise of a truly barbaric form of militant Islam, which also happens to be startling effective on the battlefield.

Don’t teach people how to actually fight you.  Don’t support barbaric regimes like Saudi Arabia’s in exporting their loathsome ideology.  If you’re going to be an imperialist, learn how to actually play the game.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

It seems the Kurds had to retreat because they ran out of ammo

No, really.

Maybe instead of giving weapons and ammo and money to the Iraqi army so they can abandon it on the field to ISIS (now calling themselves the Islamic State), the US should be supplying the Kurds, who will actually fight.

Just a thought.

As for Iraq, the government policy of trying to fiscally strangle the Kurds is coming back to bite them,hard.  If they’d let the Kurds sell some oil, the Kurds might be holding ground.

I’m sure the supply situation will change. Once it does, there’ll be a real test of the Kurds ability to defeat ISIS.  They’ve taken two towns back with American air support, but they will have to do far more to defeat ISIS.

I suspect part of the problem here is that others who could help, like Iran, Syria, and Turkey are not doing so, since they all have Kurdish minorities and rather like the idea of Kurdistan being defeated and Kurds being slaughtered.

That’s a big mistake.  The Islamic State is far more dangerous to them than the Kurds ever were.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Russian Sanctions against the West

Per Russia, from a speech by Medeved:

Russia has completely banned the importation of beef, pork, fruits and vegetables, poultry, fish, cheese, milk and dairy products from the European Union, the United States, Australia, Canada and the Kingdom of Norway.

He also noted that Russia is considering revoking or changing airspace rights over Russia’s Asia Pacific region or Siberia.  This is not a small matter, and would make many flights from airlines in the affected countries far more expensive (while allowing their competitors, in countries which  haven’t imposed sanctions on Russia to out-compete them.)

As zero-hedge points out, the agricultural ban will have a significant negative effect on the European economy, which is already sputtering, and will likely lead to more special monetary policy (giving money to the already rich).

Such policy is very good at pumping up stock markets, but as the US experience indicates, it does nothing for ordinary people, whose wages in the US have fallen (only the top 10% has seen increases).  I warned in 2009 that the policies of the Fed and Obama would lead to at least a generation of worse economy.  Special monetary policy is worse than doing nothing, and very quickly.

The continued pivot away from the West and towards BRICS and other nations is not a good thing for the West.  An integrated Russia is in the West’s best interest: a Russia in the arms of China, is not.  I still cannot imagine anything in the Ukraine that is worth this.

The line in most Western media is that this will hurt Russia more than it does the West and perhaps even cause protests in Russia due to rising food prices.  We’ll see, to be sure, in the short to medium term it will hurt Russia, but Russia does still have plenty of inefficiently utilized agricultural land, and the rest of the world will be happy to sell to Russia.  Note, however, that the US, Canada, and the EU are very cost-efficient agricultural producers and the alternative suppliers are in the southern hemisphere, as a rule.    This will cause a permanent rise in the cost of food in Russia, whether it will be offset by a rise in domestic production leading to higher incomes for farmers remains to be seen.  Such would take time, in any case.

I note, finally, that if you are going to go to war with someone, you should cut off your food dependency before you do. Certainly NATO may not intervene if Russia decides to help the rebel states in the Ukraine, but certainly sanctions would ratchet.  If Russia intends to invade the Eastern Ukraine, it might as well do this now and prepare its economy.

Interesting times.  Let us hope this isn’t another step towards the interesting experience of a nuclear exchange over a country most Americans couldn’t find on a map.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Kurdish Peshmerga fail to hold Sinjar Mountains

This is bad.  Very bad.

As the article (which you should read) points out, the Peshmerga had the higher ground, and still lost (holding out all of 2 hours). I don’t expect these are the best Kurdish units and the article does not speak to numbers (though ISIS, traditionally, wins while outnumbered), but it is also true that the Peshmerga today are not what they were even 10 years ago: peace and expansion means they are not the hardened fighters of the past.

The Peshmerga need a victory against ISIS.  I will also suggest that they need to call back up the old veterans, many of whom will still be of fighting age.  This is only the first battle, but the loss was unexpected and should cause the Kurdish military and government to reevaluate.

ISIS is a plague, whose first act is to destroy holy sites of other religions (Shia is another religion to them.)  They do not even reliably keep the Koran’s rules about tolerance (with a tax) of other Abrahamic religions.

This is an existential issue for Kurdistan, the caliphate will not allow a Kurdish homeland.

Those fools who called for the Iraq war and who bungled the Iraq operation, along with those idiots who armed the Syrian rebels are directly responsible for the routine war crimes of ISIS.  Absent the Iraq invasion, ISIS is nothing; absent the Syrian civil war (which was heavily backed by outside arms and money) ISIS is weak.


If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Enough Russian Roulette with Nuclear Fire

As commenter OldSkeptic points out, Russia has now called up reserves:

“Russia’s Defence Ministry plans to call up military reservists across the country for two months of training exercises on new weapons, news agency Interfax reported on Friday.

Moscow has previously used such exercises to boost troop numbers on its border with Ukraine. There are concerns in the West that Russian forces could intervene in the conflict between the Kiev’s government forces and pro-Russian separatists in eastern Ukraine.

The exercises were planned last November, the defense ministry said, and will last from August until October.”

I have covered the Ukrainian crisis closely since it began for a reason: the real antagonists: Russia and the US, with NATO as an American proxy, are nuclear armed.  Let us review:

  • The Ukraine was part of Russia for about 200 years.
  • Crimea is Russia’s most important naval port.
  • The Maidan protests overthrew a government which, whatever you think of it, was democratically elected.  The Maidan protests were heavily backed by US money and aid.
  • The Russian deal with the Ukraine was far more generous than the EU/IMF deal, which requires cutting pensions in half and likely doubling gas prices, if the gas supplies continue at all. Russia, on the other hand, offered subsidized gas and a fifteen billion dollar loan at nominal prices.
  • While there are those in Crimea who did not want to join Russia, I am aware of no convincing evidence that a supermajority did not wish to. The referendum was somewhat coercive and produced results in line with the last referendum in the region.
  • The rebellion in the East and the South is in regions where the strongest economic ties are with Russia.  While I have seen no polls indicating majority support for the rebels, I have also seen no polls indicating majority support for the Kiev government.
  • Ukraine is very close to Moscow.  Moscow is not defendable, in war, if enemy forces are in Ukraine.
  • It is American doctrine that Russia without Ukraine is not a European Empire; with it, it is.

In 2008, during the Georgian war, I wrote that the next flashpoint would be Crimea.  The experts sneered at that: it could never happen, Russia and the EU had nothing to gain and everything to lose by allowing it.

The EU is, as Old Skeptic points out, however, not in the driver’s seat.  The US is, and NATO is, and NATO is currently led by a hawk.  What Merkel, or Germany, think is irrelevant  unless they are willing to threaten to leave NATO and follow through if necessary.  While Mark From Ireland has pointed out that there are signs of German and European realignment away from the US, they seem to be signs that will take years to develop to actual estrangement.  The current leaders, like Merkel, are of a generation which grew up under American hegemony. While many balked at Iraq, it will be far harder for them to refuse to act if NATO, including Britain and the US, goes to war.

It would take an incredibly brave leader to say no if NATO mobilizes to help Ukraine in light Russian regular forces.

The question, then, is whether Russian regular forces will be needed, or used.

We have, meanwhile, sanctions. So far they have amounted to not much, though they will increase financing costs.  However threats of greater sanctions continue, and slowly the strength of the sanctions has been increased.

I don’t know if OldSkeptic is right, and the plan is to force Russia into a humiliating retreat in the face of sanctions, with the use of military force ok’d to break Russia.  I actually doubt it, because it would be insane.

You don’t risk a shooting war with a nuclear armed state like Russia, who has enough nuclear weapons not just to destroy the US and Europe, but the world, multiple times over; and which has second strike capability which NATO cannot credibly expect to take out.  If either side starts losing and resorts to nukes, things can get out of hand very, very quickly.

But something being insane, or boneheadedly stupid does not mean it won’t happen: if Iraq or Syria (and the rise of ISIS) has not taught us this, nothing will.  American leaders are ideologues, drunk with power, who believe they rule the world and everyone else must bow.  Putin tweaked them hard over both Snowden and Syria, and they have worked since the fall of the USSR to move NATO right to Russia’s borders, something George Bush Sr. promised they wouldn’t do.

Russia feels itself under threat.  The military believes it cannot defend Russia from NATO if NATO is in the Ukraine, and notes also the constant moving up of anti-missile defense, closer and closer to its border; something it believes is meant to degrade its nuclear deterrent (it is, how well it will work is another question.  My suspicion is “not nearly well enough”.)

There is West’s sanction threats have been all stick: there is no upside to Russia buckling to the sanction threats, all they get back is the status quo.  Going forward, Russia having given in to sanctions once, they would have no independent policy the West could not veto by threatening them again.

So how does this play out?

I don’t know.  I do know that the people in charge in America, Britain and NATO are stupid, mad-drunk with power, and ideologues who believe in American primacy at any cost.  I do know that Russia believes it faces a potentially existential threat, and that Putin personally could not survive a humiliating capitulation.  And by not survive I mean he would probably wind up, personally, dead.  Russian leaders like Putin rarely leave office except in a casket.

This confrontation is over Russia claiming some right to interfere in territory it ruled for about two centuries.  Longer than the US has ruled most of its territory, I might note.  If the West can interfere in practically any country in the world, the Russians see no reason why they don’t have the right to interfere in their sphere of influence.

This is not, necessarily, to say that Russia should have the right to interfere with other countries, but given the West’s record of invasions, occupations and coups, it is simply laughable hypocrisy to make any claims that this is about territorial integrity of Westphalian states.


So if it is happening, it is happening for a reason.  To bring Ukraine into the Western fold, to force Russia to bow, and to show the world that even a power like Russia, with nuclear weapons and a huge arsenal, was forced to bow.

As much as the Gaza assault is an endless series of war crimes, and tragic, the greatest danger in the world today is in the Ukraine.  We are closer to nuclear war than we have been since the early 1980s when the Russian leadership was crazed by fear by US deployment of first strike missiles to Europe.

I will suggest, simply, that NATO needs to be disbanded.  The Europeans should simply step outside of it and put together their own military.  They can defend themselves from Russia if it comes to it (it won’t if they don’t poke Russia repeatedly with sticks).  They have a nuclear deterrent (I’m talking France here, not the UK, who probably can’t even use their nukes without American approval, and whose leadership are complete poodles for DC) and can build more if they so desire.

It’s time for Europe to grow back up, take responsibility for their own defense and future, and stop allowing America to drive the world to war, the brink of war, and possibly nuclear armaggedon.  As for the Ukraine, the Russian proposal of keeping it together, minus Crimea, but with a decentralized structure, and out of any Western alliance is entirely reasonable.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Powered by WordPress & Theme by Anders Norén