Mish's Global Economic Trend Analysis

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"Insatiable" Idiocy from the Economist on What to Do About Russia; Warmongers Can't Think Posted: 18 Apr 2014 03:33 PM PDT In "Insatiable" the Economist says "The cost of stopping the Russian bear now is high—but it will only get higher if the West does nothing". Economist: Mr Putin has used the Ukrainian crisis to establish some dangerous precedents. He has claimed a duty to intervene to protect Russian-speakers wherever they are. He has staged a referendum and annexation, in defiance of Ukrainian law. And he has abrogated a commitment to respect Ukraine's borders, which Russia signed in 1994 when Ukraine gave up nuclear weapons. Throughout, Mr Putin has shown that truth and the law are whatever happens to suit him at the time. Mish: What a bunch of one-sided hypocritical nonsense. The US and EU have shown the that truth and the law are whatever happens to suit them at the time. The US has a drone policy that has killed or injured thousands of innocent victims, including children. The US had no pretext for invading Iraq but did so anyway. Warmongers now sabre-rattle Iran. The EU removed elected leaders in Greece and Italy and replaced them with technocrats. The US fomented events in Ukraine by helping overthrow Viktor Yanukovych. President Ronald Reagan promised Russia NATO would stay away from Eastern Europe. Apparently it's OK for citizens to overthrow the elected government in Ukraine in violation of the constitution, but it's not OK for citizens in Crimea to do the same. Russia did not take a bite out of Ukraine as depicted by the Economist. Rather, a section of Ukraine voted overwhelmingly to return to Russia. Once again, I am not proposing two wrongs make a right, rather I am proposing this is none of our business. Economist: The West needs to show Mr Putin that further action will be costly. So far, its rhetoric has marched far ahead of its willingness to act—only adding to the aura of weakness. Not enough is at stake in Ukraine to risk war with a nuclear-armed Russia. And European voters will not put up with gas shortages, so an embargo is not plausible. But the West has other cards to play. One is military. NATO should announce that it will hold exercises in central and eastern Europe, strengthen air and cyber defences there and immediately send some troops, missiles and aircraft to the Baltics and Poland. NATO members should pledge to increase military spending. Economist: Another card is sanctions, so far imposed on only a few people close to Mr Putin. It is time for a broad visa ban on powerful Russians and their families. France should cancel the sale of warships to Russia. A more devastating punishment would be to cut Russia off from dollars, euros and sterling. Such financial sanctions, like those that led Iran to negotiate over its nuclear programme, would deprive Russia of revenues from oil and gas exports, priced in dollars, and force it to draw on reserves to pay for most of its imports. They would be costly to the West, especially the City of London, but worth it. Impose them now, and give Mr Putin reason to pause. Do any less and the price next time will be even higher. Not Our Battle For starters, this is not our battle. Moreover, Europe is tired of our heavy meddling in it. (see European Countries Resent US Hectoring Tone). If Crimea prefers to associate with Russia rather than the Ukraine, it is absolutely none of our business. Let the people involved, sort it out for themselves. Warmongers Can't Think France cutting off military sales to Russia would hurt France and help Russia - No one needs any more military junk. Pray tell tell what does Russia need warships for? Indeed, the idea is so silly, Russia should cancel the orders right now. Putting missiles in Poland and Baltics is counterproductive. Precisely what problem would that address? Here's the irony: The Economist says "Not enough is at stake in Ukraine to risk war with a nuclear-armed Russia." OK. Then what are the missiles for? At best, the proposal is waste of money all around. And who is going to pay for it? Further proving that warmongers cannot think, The Economist notes "European voters will not put up with gas shortages, so an embargo is not plausible." Amusingly, the Economist then continues with proposals to cut Russia off from dollars, euros and sterling, as if Russia would not retaliate. If extreme sanctions are put on Russia, then Russia will cut off all gas to Europe and likely default on all foreign denominated bonds. How come idiots cannot see consequences of their proposals? Because they are idiots, that's why. No one wins from idiocy. Unfortunately, idiocy abounds. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Ukraine Accord Broken Already; Key Uninvited Group to Peace Party Doesn't Like the Deal; Reflections on Hubris Posted: 18 Apr 2014 01:27 PM PDT Immediately after the 4-player Ukraine accord announcement yesterday (See Ukraine Talks End in Accord; What About the Key Missing Player?) I commented ... Lots of Questions This accord raises more questions than answers. Did anyone consult the separatists? Who is going to enforce the agreement? Is there a single voice, or even a small group of voices who can speak for the separatists? If the separatists are acting on their own, then unless Russia or someone else can convince the separatists to lay down their arms, the accord may break down. Separatists are the key players in this crisis, but it does not appear they were even invited to the table. Ukraine Accord Broken Already Here we are, one day later and the Financial Times reports Ukraine: The 'War Without War' that Rumbles On In Geneva on Thursday the US, the EU, Russia and Ukraine agreed steps aimed at reducing the tensions. But that agreement is already in danger of unravelling as separatists in the big eastern city of Donetsk refuse to evacuate their headquarters. Any violence risks creating the pretext for a Russian invasion. While the government in Kiev and much of the west stresses its desire to integrate with Europe, the east remains firmly anchored to Russia by language, culture and history. Many companies are also oriented eastward, above all those working in its Soviet-era agricultural, metallurgy, pipe-making and defence industries – all of strategic importance to Moscow. "The Russian market is very important, especially for the older, heritage economy," says Gennadiy Chyzhykov, president of the Ukrainian Chamber of Commerce, who is from Donetsk, now capital of the self-styled "republic" where activists claim to lead the anti-Kiev protests. "We export mainly raw materials and semi-finished goods to Europe, but finished goods, including sweets, to Russia. They share our tastes." Sentiment Read that last paragraph above closely. Most of the people in Eastern Ukraine lean towards Russia. Banning Russian broadcasts, or even forceful military action cannot change that sentiment. Indeed, it can only strengthen it. Geneva Agreement Does Little to Counter Russian Military Threat Also consider Geneva Agreement Does Little to Counter Russian Military Threat Analysts said the fact that US, EU, Russian and Ukrainian foreign ministers managed to agree on a document at all was positive, at a meeting for which expectations had been low. They agreed illegal armed groups should hand over their weapons, Ukraine should undertake reforms to give more powers to its regions, and a monitoring mission from the Organisation for Security and Cooperation in Europe would be stepped up. But several steps are difficult to implement, or provide no guarantee that the situation in eastern Ukraine could not escalate. "The wording of the agreement is fine, but when I saw it I immediately thought, how can this actually happen?" said Oleksiy Haran, a Kiev-based political scientist who was visiting Donetsk on Friday. Most importantly, Russia made no commitment to pull back thousands of troops it has massed on Ukraine's border. The groups which must agree to hand over their weapons, moreover, were not directly represented in Geneva. Hubris Please note the extreme hubris of the four parties that agreed to a solution without consulting the views, wishes, and demands of the key group: the separatists. Addendum: Russia Moves Troops Back to Ukraine Border Russia confirms that it moved troops back into the border area with Ukraine, according to this link I picked up from ZeroHedge: Russia confirms troops deployed near Ukraine A Kremlin spokesman confirmed Friday that Russia has built up its military presence on the Ukrainian border, Agence France Presse reported, as the United States warned that Moscow would face tougher sanctions if it failed to abide by a new international deal on Ukraine. "We have troops in different regions, and there are troops close to the Ukrainian border. Some are based there, others have been sent as reinforcements due to the situation in Ukraine," spokesman Dmitry Peskov told Rossiya 1 television, AFP reported. In Washington, Susan Rice, President Barack Obama's national security adviser, was quoted by Reuters as saying that Moscow would face tougher sanctions if it failed to abide by a deal arrived in Geneva a day earlier that held the hope of defusing the stand-off in Ukraine. She warned Moscow would also face sanctions if it moved to send Russian forces into eastern Ukraine. "Those costs and sanctions could include targeting very significant sectors of the Russian economy," Rice told reporters. Earlier Friday, armed pro-Russian separatists in eastern Ukraine said they were not bound by the conditions of the international deal until the government in Kiev government quit. Denis Pushilin, the head of the self-declared Donetsk People's Republic, was quoted by Reuters as telling journalists in the regional capital Donetsk that Russian foreign minister Sergei Lavrov "did not sign anything for us, he signed on behalf of the Russian Federation." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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