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The story in the novel is a work of fiction, any resemblance to people, brands, institutions, events or real locations is purely accidental. The characters in the novel are imagined and do not necessarily express the views of the author.

 

Since my last post, the situation in Ukraine is still by far the greatest potential trigger for the second wave of the global financial crisis. As I have often said, it is not just a question of adopting a simplistic view “The wicked Putin against the nice Europeans and Americans”. There are no nice people here, but some countries and politicians driven by purely selfish motives. On the ground, the situation continues to degenerate towards a civil war. It is interesting to note that the attitude of the mainstream media is so biased that an increasing number of leading figures are beginning to express doubts (see the interesting opinion of a former ambassador, of well known journalists such as Neil Clark or P.C.Roberts, see the TV program on the German ARD, etc. read and read and read and read and read). For those who are objectively interested in the events in Ukraine (read my previous articles), there is no doubt that the new prime minister in Ukraine (who only obtained 7% of votes in the 2010 presidential election!) has been put in place by a coup fomented by the United States. Much less obvious is the reason for the United States to intervene so blatantly in Europe. At this stage an invasion of eastern Ukraine by Russia (as was the case in 2008 for South Ossetia in Georgia) is still unlikely, just as the sending of NATO troops in Ukraine. Is the purpose of all this saber-rattling to push NATO to buy American military equipment to support one of the U.S. economy pillar (read)?

In a reinforced “friendship” climate with the United States against the “the evil Russian bear” is Europe going to rush in and sign the trade agreement (TTIP formerly TAFTA) whose negotiations have taken place almost in secret? A long time desire of the USA, (see) whose real goal is not to abolish already low tariffs (rarely more than 3% see) but to “gradually harmonize regulations on both sides of the Atlantic” in order to push Europe to abandon its protective measures against Monsanto’s GMOs, chlorinated chickens and number of other low quality. U.S. agricultural products. Of course this would provide new opportunities for U.S. shale gas, even if the road is still long before Europe can do without Russian gas (read)

Is the U.S. trying to bring Russia to its knees, a country that is preventing the USA from riding freely in Syria, Iran, etc.. If so, how? A first humiliation came in 2013 when huge Russian deposits were frozen in a number of Cypriot banks. This event not only affected Russia but also contributed to the deterioration of the financial situation in Ukraine in which Cypriot banks had invested heavily. Then came the coup in Ukraine and the active phase of the financial war against Russia with the consequent flight of capital and the need for the Russian central bank to sell its reserves to support the ruble, while Russia’s foreign currency debt is amongst the highest in the world (read). The above is somehow mitigated by the fact that Russian banks and companies have ample foreign exchange reserves (read). Another consequence is the loss of growth that went from 6% to 2%, with a very negative outlook published by the Russian central bank and finally the recent deterioration in Russia’s credit rating(read and read and read).

We can therefore list some reasons that explain the U.S. conduct, but what do European politicians have to win from a confrontation with Russia? Objectively, absolutely nothing. Why do they do that? Are they afraid of a confrontation with the U.S.? Total mystery.

Does the U.S. want to precipitate the economic collapse in Europe in order to encourage capital to flee, seeking harbor in the U.S.A.?

Ultimately, does the U.S. only have one real clear strategy to encourage confrontation with Russia?

To date, there are many questions and no certainty. Conversely, the first negative economic consequences are clearly visible. For Ukraine these are the risk of not being supplied with Russian gas and even oil as a measure to prevent theft (read), the collapse of its currency (read), a stronger dependence on the IMF and its requests for structural reforms (read). In the rest of the world an increase in gas prices has already taken place(read) while no real impact has yet been felt on stock exchanges and precious metals. But things could get much worse (or farther).

From a geopolitical standpoint, the coup by the United States in Ukraine at this time is to the advantage of Russia (annexation of Crimea, symbolic sanctions, etc). This new American failure in addition to those suffered in the Middle East and Afghanistan reassures China and its tough stance against Japan over Senkaku, an uninhabited archipelago in the East China Sea, which is controlled by Japan but forcefully claimed by the Chinese, where it is known as Diaoyu. From an economic standpoint, one sure consequence is that this will push Russia and China to join forces, with the support of India, Brazil, South Africa and many other countries in order to create an alternative economic bloc to NATO (read and read and read). European industries are likely exposed to the risk of being left out of the promising markets in this new Bloc. Financially, Russia will accelerate the establishment of a national payment system. MasterCard immediately reacted, condemning this decision (read).

But how is Russia going to respond if this financial war gets worse?

Russia is a major player in the production and export of oil, natural gas, minerals, refined metals and industrial minerals. . The mining, energy and chemistry industry are essential for the Russian economy and a vital source of foreign currency (read). Therefore I do not think we should immediately fear an embargo on the exports of nickel, platinum, gold, rare metals, and a subsequent reduction in oil and gas exports to the West. Such measures would cause a surge in raw materials and panic on very fragile equity markets that are currently operating in bubble mode, inflated by debt and yen/dollar and yen/euro carry trades (read and read and read).

Should we fear a sudden sale of U.S. debt securities held by Russia? Unlike China or Japan, the amount held by Russia is relatively small and could easily be absorbed by the Fed. Incidentally, according to the Belgian press, these securities are held in Europe and precisely with Euroclear, which explains why Belgium is the 3rd largest holders of U.S. sovereign debt (read and read).

According to Bloomberg, Russia could retaliate against sanctions by hacking into to U.S. banks’ or companies’ systems and Russian hackers are among the best in the world (read). Another response would be for Russia to sell its U.S. debt securities and massively buying gold to push prices higher. This precious metal acts as the best indicator of financial stress and may cause panic on the stock exchanges (see).

In the meanwhile, the financial situation continues to deteriorate around the world:

Japan

Officially everything is fine. In practice:

The Japanese Prime Minister has pushed the country deeper into the financial crisis:

  • The largest trade deficit in the country’s history (read).
  • Economic downturn (read and read and read).
  • The purchasing power of Japanese people is falling (read and read).

Meanwhile Abe is fanning the nationalist and military flames, in an attempt to distract public opinion (read). In a context of growing tension with China … (read)

Europe

Officially everything is fine. In practice:

Two examples show that everything is not as rosy as it is being painted. Good news, Greece is back on the market and it even has a primary surplus (i.e. a surplus in the state budget excluding debt interest!). However, in order to get there, Eurostat had to revise the way it calculates this figure by, for example, excluding expenditure on aid to Greek banks (read). Spain? Unemployment reached almost 26% (read) and the housing market shows no credible signs of recovery (read).

USA

Officially everything is fine. In practice:

  • The Real estate sector is plunging (apart from a few niches), this is clearly the end of the pseudo recovery caused by hedge funds that bought real estate for rental income in cash: sales down, mortgage rates climbing, foreclosures rising, mortgage companies in difficulty (read and read and read and read and read and read and read and read).
  • Nearly 50 million Americans live below the poverty line. 80% of the population is facing unemployment, poverty or reliance on welfare to make ends meet (read and read).
  • Real unemployment is increasing (read).
  • The credit bubble related to student loans is showing increasing signs of explosion (read).
  • Americans are buying less and less (read and read).
  • America is about to experience the biggest failure of a non-financial company (Energy Future Holdings read).
  • Is the army getting ready to manage major social unrest? (read).

China

Officially everything is fine. In practice:

  • The signs of weakness of the mega housing bubble continue to accumulate (read and read and read).
  • The weakness of the mega bubble of raw materials backed loans continue to accumulate (read and read and read and read).
  • The economy continues to slow down (read and read and read).
  • The Yuan continues to weaken with the risks discussed in my previous articles (read).
  • Wealthy Chinese are leaving China (read).
  • Even tap water is polluted and there is a shortage of drinking water in the country (read and read).
  • The army is getting ready for social unrest (read).
  • Citizens are flocking to gold … (read).

Food

As stated in my previous article, one of the most important parameters for me to measure how close we are to the 2nd wave of the crisis is food prices. ..unfortunately the news is frankly not good (read and read and read and read and read and read).

My goal is not to scare or depress readers but to prevent them. Personally, I am convinced that many good opportunities will arise once the system is rebuilt from scratch. This site provides general information and does not contain investment advice. The reader is responsible for its investment choices.

The opinions expressed on this blog, written or on videos are PERSONAL and do not necessarily represent the opinions of my employer.

This post is also available in: French

 

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