Economics, finance, markets:
- The BIS is definitely not on team transitory.
- G7 proposes price cap on Russian energy.
“The gas cap would operate simply by European countries refusing to pay above an as-yet unspecified fixed price for Russian gas.” This is the most absurd idea I have seen yet from our side. One doesn’t have to be a Diocletian scholar to recognise the folly of such a proposal. Not only will it not work, it stands to make things much worse in the long run. Who is advising the G7? Seriously. Is it Wile E. Coyote?
The idea may be to cut off Putin’s income. But markets don’t work like that. A buyer’s strike doesn’t work if the buyers doing the striking are desperate and suffering from shortages. It’s like going on hunger strike during a famine. Or telling a mafia boss you’re just not gonna pay up. Or the USSR in 1989 pretending it could really stand up to the West.
I have been pretty clear from the start of the war that the sanctions policies we put in place would do little to thwart Putin. And that (despite our volumous internal propaganda) Putin has the economic leverage because of his commodity position. That’s the uncomfortable truth our side still won’t admit to for unknown reasons. Our side prefers to misleadingly cite intraday moves just to make it sound like these rouble and Moex rebounds aren’t happening.
It’s really not that complicated though. Commodities, and specifically energy, represent the oxygen in the lifeblood of the system. You can have all the fancy assets and economic value in the world, but without a consistent supply of oxygen you and all your asset wealth will die. And it matters not that it it’s just a small energy deficit that you may be experiencing. It only takes a little bit of an oxygen deficit to kill you.
What I am most shocked by, however, is the degree to which serious economists and financial media commentators (who should know better) have been supporting this delusional G7 stance. It’s almost like conscious self-sabotage. In fact, it’s almost like they have been paid off by Putin to propagate such nonsense.
Naturally, I am also asked by those defending sanctions policy what would I do differently. Simple. I would draw lessons from Sun Tzu and recognise that we are in no position to wage war or assert ourselves over Russia. The better pathway, at least if the priority is death avoidance, would be to encourage the Ukrainians to drop arms and save lives, while never giving up claims over annexed territories via diplomatic channels. I would then encourage Europe and all NATO countries to spend the next two to three years reversing the madness of net zero in a bid to make ourselves truly energy resilient. If we can shut our economies off and suspend freedoms for two years to save Covid lives, it shouldn’t really be that illogical to encourage the Ukrainians to bear the yoke of Russia until we have the means to come in and fight Putin properly. Once strong, we move strongly.
The logic of this is hardly rocket science. In fact the strategy is an ever present plotline in almost every Cold War movie. Russian advantage is eventually turned into schadenfreude by plucky Western come-back kids. Has no-one at the G7 seen Rocky IV?
This is literally what we should be doing, but in energy terms:
It doesn’t even matter that the Russians would be watching us “getting strong now”.
The only logical explanation for this crazy policy is that we are playing some sort of Sun Tzu game ourselves — appearing weak when we are really strong because secretly we have discovered cold fusion. Somehow, however, I doubt that. It’s far more likely that we are the ones about to suffer from schadenfreude. Sorry to be blunt. -IK
- Helium shortage forces Harvard lab to shut down.
- Ecuador’s president has promised to lower fuel prices across the country after weeks of disruptive mass protests over the cost of living.
- Millions told to turn their lights off in Japan.
- Sri Lanka has run out of fuel.
Sri Lanka’s entire cabinet resigned from their posts on Sunday following mass protests in the country owing to growing signs of an economic collapse.
- French power supply is teetering in the face of Russian gas cuts.
- Poles are being encouraged to gather firewood.
This is precisely what those who warned about the follies of net zero policy predicted would happen. Faced with growing energy insecurity, they said people would end up turning to coal and firewood — the dirtiest and least efficient of all the hydrocarbon fuels – to survive, putting the green transition backwards in the process. It didn’t have to be this way. – IK
- Goldman cuts Coinbase to sell.
- Solana unveils Web3 mobile phone, which would include an integrated, decentralised Web3 mobile store.
It appears questionable at best that Solana, whose digital cryptocurrency has been in severe turmoil in the recent crypto-crash, will be able to muster the commercial prowess needed to fully launch an allegedly groundbreaking mobile phone.Nevertheless, the promise to integrate decentralised mobile stores, and other Web3 features, is interesting nevertheless. Let’s watch this space. – DGG
From the “fake news” zone:
- The Putin speech nobody in the mainstream wants to talk about.
- Peter Doshi, a senior editor of the BMJ, has a paper out with other peers flagging mRNA vaccine safety issues.
- Qanon is back.
- Lithuania’s blocking of EU-approved goods through the Suwalki Gap, a region that separates Russian Kaliningrad from its ally Belarus, has inflamed tensions in the region – with Lukashenko being particularly pronounced in denunciations of Lithuania’s move.
- Poland displays wrecked Russian tanks in central Warsaw square.
- Raytheon and Northrop win US defence contract to develop missiles to intercept hypersonic weapons.
Rumblings in the pacific:
- Australia, Japan, the United Kingdom, and the United States have formed the informal Partners in the Blue Pacific Alliance to convene and discuss pressures in the Pacific region.
- Taiwan struggles to fix its plummeting fertility rate, which is set to decline by around 13 per cent by 2050 based on current estimates, recently released figures have shown.
- As if this year’s energy crisis couldn’t get worse, Italian hydroelectric power production plummets due to a severe drought. Italian commentators are fearful this may lead to water restrictions and difficulty for the country’s agricultural sector’s activities.
Troubles in Spain’s Melilla border:
- Gigantic migrant assault on Melilla’s border fence, one of Spain’s historic enclaves in North Africa, leaves 23 killed and several hundred injured among migrants, Moroccan and Spanish police.
Yours truly was partially raised in this unique city and can detect prominent blind spots in mainstream coverage of this issue. The migrants typically originate from sub-saharan Africa and are always camped out at a nearby forested hill. They are drawn there by the promises of human trafficking mafias.
This ready reserve of desperate victims can be easily manipulated to exert PR pressure on Spain (or Morocco, as we will see). For instance, sources tell me that in Spain and Morocco’s recent spat over Western Sahara’s diplomatic status, which was actually over the control of rare-earth minerals in Western Sahara, it was Morocco which encouraged migrants to carry out the largest assault on the border fence yet this March.
However, in this most recent recent Spanish-Moroccan entente the sides have changed – on this occasion five Moroccan police were severely injured (with dozens more wounded) protecting the Spanish border fence.Though the Spanish government has blamed unspecified ‘mafias’, Andros Lozano of Elmundo highlighted the critical role Algeria played by relaxing its border to allow thousands of illegal immigrants through into Morocco. It may be no coincidence that Algeria recently broke its decades-old ‘friendship’ treaty with Spain, which committed both sides to cooperating in controlling migration flows, as a result of the Spanish-Moroccan entente. Algeria has also banned imports from Spain as of June 9.
The centrality of Melilla’s art-deco buildings, where imams, rabbis and Spanish generals converse in palm-tree-covered cafes, to this region’s emerging geo-political intrigue is something to watch closely. Notably, because the ‘door to Africa’ is sure to rise in value; the region’s rare earth minerals extraction and logistical infrastructure will continue to gain in strategic importance for the West – DGG.
Angry vegans in Bristol:
- Online reports state that militant vegans have been attacking shops in Bristol, including a local butchers’ shop and an ice cream parlour.
Middle East heating back up:
- Nationwide Iranian protests continue, which the Ayatollah attributes to foreign enemies attempting to topple the government.
- Fascinating Der Spiegel article on the Assad regime’s dependence on the exporting of Captagon amphetamines.
- Hamas restored ties with Assad’s Syria, 10 years after the Palestinian Islamic group closed relations owing to their opposition to Bashar al-Assad’s crackdown against the Syrian rebels.
- Turkey potentially renews military operations against the YPG/SDF in north-eastern Syria.
Our subscribers know we have been paying a watchful eye for potential geopolitical bartering to meet Turkey’s demands vis-a-vis Finland and Sweden’s entry into NATO. For those who haven’t; Turkey has threatened to block these countries’ entry should they continue to allegedly support the PKK and other Kurdish forces in Anatolia and beyond. Several items point to the solution of this barter resulting in additional territorial gains for Turkey in north-eastern Syria.
Erdogan has mentioned intentions to venture southwards towards Manbij and Tall Rifaat – currently held by the YPG dominated, US-aligned Syrian Democratic Forces coalition that holds most of east and north-east Syria. Local movements make clear such an offensive is likely, particularly since in recent months the YPG has been moving closer to Bashar al-Assad’s government (and Russia), likely in exchange for an autonomous status similar to that of the Kurdish Regional Government in neighbouring Iraq.
It would be entirely unsurprising if the United States’ regional balancing act entailed forcing a renunciation of YPG/SDF claims to the two key cities in exchange for Turkish concessions to Finland and Swedish NATO accession requests, and allowing a YPG-Assad rapprochement to conclude in a solid regional autonomous state for the SDF. Autonomy in the oil-producing region may procure benefits for American allies and industry, while an SDF entente with Assad will surely facilitate the extraction of such dividends.
- Three were arrested in Lebanon as Lebanese security forces identified locals alleged to have been working for Israeli intelligence agencies.
- King Abdullah of Jordan supports the creation of a Middle-Eastern NATO equivalent.
Libyan turmoil continues:
- Parliament-appointed Prime Minister of Libya visits London, and tells Reuters he approves removal of foreign fighters and mercenaries from Libya, including Wagner.