Mish's Global Economic Trend Analysis

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"Small Price to Pay" Posted: 08 Aug 2014 12:13 PM PDT In response to Russia Fires Back With More Sanctions: NASA, Pepsi, McDonald's, Autos in Spotlight a close friend responded "It's a small price to pay to counter naked aggression." Questions Naked aggression by whom? Who started this mess?  Who fomented the overthrow of former Ukrainian president Viktor Yanukovych.? Was it Russia or the US? What country reneged on promises to not expand NATO into Eastern Europe? Was it Russia or the US? What country has satellite coverage of the region and has failed to produce any evidence as to where Buk missile launchers were on the day MH17 crashed? Russia or the US? What country stood the most to gain from the downing of MH17? Why was MH17 rerouted far from its normal flight path to fly directly over a war zone?  But what the heck? Let's ignore all those pointed questions. Let's also ignore the Gulf of Tonkin resolution in Vietnam, an asinine war in Iraq, support for "moderate" rebels in Syria who in retrospect turned out to be Isis members, horrific errors in Afghanistan, lies that led us into war with Iraq, US involvement in the overthrow of the Shah of Iran, etc., etc.. And with virtually no evidence presented, please wrap yourself in the US flag, along with president Obama and senator John McCain, and believe every lie the US has to tell. Why? Because it's a "small price to pay". Goering at the Nuremberg Trials Please recall what Reichsmarschall Hermann Wilhelm Göring (in English his name is also spelled as Hermann Goering) Nazi founder of the Gestapo, Head of the Luftwaffe, said at the Nuremberg Trials. Here is a clip of the interview in Goering's cell in prison, after the war. Göring: Why, of course, the people don't want war. Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece? Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship. Gilbert: There is one difference. In a democracy, the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars. Göring: Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country. Well forget all that. Let's also forget about the lack of any evidence to date by the US. Let's instead depend on Ukrainian social media tweets, and be willing to march to war with Russia, China, Iran, anyone and everyone. Should that happen, don't worry. After all, my friend says "It's a small price to pay". The Hitler Card In a subsequent email, my friend played the Hitler Card with this set of statements: "Invading and annexing sovereign territory and their actions to destabilize a country which violates every major international agreement they have signed relating to the subject since 1945 is a major and egregious. It seems to me little different than Japanese actions in Asia in the early 1930s and German actions in 1938 and German/Russian actions in 1938-39. It is that international system that produced that peace that is now under attack. Letting that system fail would be idiocy and we will not let it happen." Comparisons to Hitler are inane. My friend should know better. Hitler wanted to exterminate Jews, create a master race, and rule the world. In contrast, Putin does not want NATO missiles on his doorstep, much like the US did not want them in Cuba. Ukraine is in the state of civil war. Russia supplies weapons. Did the US supply weapons or aid to rebels in the Syrian civil war? How stupid was that? At least Russia has a clear, understandable, and decidedly un-Hitleristic reason for his actions. The history of Crimea shows an association with Russia since 1783. And a large portion of the population in Eastern Ukraine speaks Russian, not Ukrainian. My friend finds the overthrow of the former president of Viktor Yanukovych quite acceptable (even though the US had a hand it), but somehow a vote by Crimea to rejoin Russia is invalid. What hypocrisy. Now he supports the ridiculous notion of an "international system that produced peace". Where? Vietnam in the 60s? Iraq numerous times? Afghanistan? Egypt? Syria? Just because there has been peace between Germany and France since WWII, let's not assume the cause is an "international system of peace". No Price Too High "Letting that system fail would be idiocy and we will not let it happen,"  says my friend. Apparently no price is too high to pay to make sure Russia does not get away with annexation of Crimea, even though over 90% of Crimea voted that way. Rigged or not, it's safe to assume an overwhelming majority supported that view. Sanctions, trade wars, shutoff of gas to Europe, no-fly zones over Russia, and punishment of Russian citizens who had nothing to do with this mess are all fair game to teach Russia a lesson, and make it comply. The indiscriminate bombings by the Ukrainian army smack in civilian population centers are clearly fair game in the name of international peace. And let's ignore Ukrainians Ordered to War, Women Burn the Military Writs "We will not let it happen!" Such arrogance, coupled with idiotic comparisons to Hitler and the constant promotion of war from warmongers on both sides of the aisle (especially senator John McCain), could precipitate the next world war. But don't worry, WWIII with Russia would be a "small price to pay" to maintain an "international system of peace". 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 Threatens to Block Gas to Europe; Bluff or Stupidity? Posted: 08 Aug 2014 08:50 AM PDT Sanction madness has gotten so silly now that Russia may not have the option to play the nuclear card of blocking gas to Europe. Ukraine might play that card first. Please consider Ukraine May Block All Transit from Russia in Sanctions Row Ukraine ready to impose sanctions against any transit via its territory, including air flights and gas supplies to Europe, Prime Minister Arseniy Yatsenyuk said Friday. Kiev has also prepared a list of 172 Russian citizens and 65 companies predominantly Russian to put under sanctions for "sponsoring terrorism, supporting the annexation of Crimea, and violating the territorial integrity of Ukraine," Yatsenyuk said at a briefing on Friday. Proposed sanctions include asset freezes, bans on certain enterprises, bans on privatizing state property, refusing to issue licenses, and a complete or partial ban on transit- both aviation and gas. "We simply have no other choice," the Prime Minister said, adding that Ukraine will use part of the planned $17 billion IMF aid to achieve energy independence, and may go to the World Bank for help. The country, which is on the brink of economic default, received the first $3.2 billion tranche in May. Ukraine wants to "put a stop" to its gas dependence on Russia, its main source for energy to heat homes and buildings, but understands it will not be an "easy" process, Yatsenyuk told reporters. The Prime Minister estimates Ukraine could stand to lose $7 billion as a result of imposing sectorial sanctions against Russia, its biggest trading partner after the European Union. If approved, a halt to Russian gas transit would hit Europe as the continent gets 15 percent of the energy it needs from Russia. In June Gazprom, Russia's national gas company announced it was stopping deliveries to Ukraine, but would continue to ship 180 billion cubic meters of gas to Europe. The falling out with Russia's gas major over pricing and debt has forced Ukraine to cut back on its heavy use of energy. Until the winter, homes will go without hot water to cut gas consumption by 30 percent. On top of that, Ukraine is also exploring reverse flow options; importing gas from neighboring European countries. Gas Pipelines   Bluff or Stupidity? My first thought was this is an obvious bluff. However, sanction madness is so ridiculous, Ukraine might do it as an act of one-up stupidity. No Hot Water, Reverse Flow Madness By mandate, Ukrainian homes are supposed to have no hot water until winter. Is Europe supposed to follow suit? This reverse flow talk is laughable. Europe gets 30% of its gas from Russia, yet somehow Europe is supposed to send gas to Ukraine. I would like an explanation from the mathematical wizards who think this may be possible. Moreover, even if the gas was available, pipeline changes need to be made. When are those supposed to occur? 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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