Risk appetite remained subdued at the end of another tenuous week.
Russian-backed separatists and the Ukrainian government traded more accusations of cease-fire violations, and the Kremlin said Vladimir Putin will monitor strategic defense drills over the weekend, including ballistic missile launches. The Northern and Black Sea fleets will take part in the exercises and Russia will also hold live-fire drills in a day of fun and games with Belarus. Nuclear weapons drills, Russia said, are “routine” and aren’t meant to fuel tensions.
Although planned talks between Sergei Lavrov and Antony Blinken offered some respite for beleaguered equities, Blinken’s remarks to the UN Security Council underscored the threat. Putin, he said, should state “with no qualification, equivocation or deflection” that he doesn’t plan to invade Ukraine. “State it clearly. State it plainly to the world,” Blinken continued. “Then… send your troops, your tanks [and] the planes back to their barracks and hangars.”
Russia will do no such thing, of course. Instead, Russia’s Deputy Foreign Minister Sergei Vershinin said Moscow “long ago clarified everything.” Suffice to say the rest of the world is still a bit unclear on any number of “things.”
Russia claims Ukraine is engaged in ethnic cleansing, allegations the US called “categorically false.” Russia, Blinken said, “may describe a genocide” and could be planning to “manufacture a pretext for attack” in the form of a “fabricated terrorist bombing inside Russia, the invented discovery of [a] mass grave, a staged drone strike against civilians or a fake, even a real, attack using chemical weapons.”
A Russian document, circulated among the UN Security Council and seen by Reuters, described an “extermination” campaign against the civilian population in eastern Ukraine. On Friday, the Kremlin called alleged cease-fire violations by Ukraine’s forces “very dangerous.”
Although the implications for equities may be limited, the link to commodities and thereby inflation (and thereby US political realities headed into the midterms) simply can’t be ignored. “Regardless of what happens, already elevated gas prices may have second and third order impacts on industrial goods and some agricultural commodities, something which bears watching given the already inflationary environment and supply chain complications generally,” RBC’s Helima Croft said.
I’d reiterate the importance of being judicious about where you source your “news.” Market participants, especially in the US, developed bad habits in that regard in the decade after Lehman.
Until 2016, the cost of those bad habits could be calculated by simply pulling up a chart of US equities and noting how many crashes there weren’t. Beginning around 2015, when Europe’s migrant crisis worsened and populism swept across Western democracies (where demagoguery found victims aplenty among an increasingly disenchanted middle class to whom the purported benefits of globalization most assuredly weren’t accruing if you don’t count cheap goods at discount stores), the cost of consuming propaganda went up. Fast forward to 2022 and countless millions across the world’s most advanced economies are intellectually bankrupt.
In A Friday note, Rabobank’s Michael Every did an admirable job of stating the facts while nodding to the notion that the West, and particularly the US, is the furthest thing from above suspicion.
“It’s easy to look at the stumbling US military-industrial complex and conclude D.C. is trying to instigate something: Some mutter a distraction from, or a fig leaf for, the mess the Fed is about to make,” he wrote. “However, this denies agency to the stumbling Russian military-industrial complex, which also instigates things to change the global architecture to its benefit,” he added, noting that Russia “is the one with 150,000 men on Ukraine’s border, and demanding the US remove all troops from central and eastern Europe or face ‘military-technical measures’ as a response, while knowing full-well the US and Europe cannot comply.”
If Putin forces the United States into a military engagement to protect democracy in Ukraine, Biden would do well to consider how he can leverage this to solve the biggest threat to democracy everywhere in the world. Deposing Putin wouldn’t be unthinkable since he’s the one instigating conflict. Considering the damage he’s caused to all western democracies the past 20 years, we would be doing all of them a favor by deposing him, not to mention the people of Russia who are subject to his regime regardless of how they feel about it. To your point, millions of people are now unable to discern propaganda from fact and his cyber operations have played a bigger role in pushing people that direction than anyone else. I also suspect, if Putin were to go away, certain politicians and news outlets that have been repeating pro-Russia propaganda might change their tune which would benefit all global citizens to some degree.
Deposing Putin through military means would be “difficult”.
Building the energy infrastructure to wean Europe off Russian NG is an alternative. European countries (looking at you, Germany) should be urgently building NG storage and LNG terminals, following France’s lead on nuclear, and solar/wind with battery storage should be popping up everywhere.
The USSR was not defeated through military means. It was defeated through economic means. Putin’s Russia is as vulnerable as the USSR was, having failed to diversify from oil & gas as its primary product. Take away Russia’s energy leverage and it will wilt.
Let’s hope the Europeans do this (ahem, Germany). They are more likely to, if Russia invades Ukraine.
In the US as well as Europe, a lot of good would come from exposing and blocking foreign-directed media – primarily social media – bot-amplified propaganda campaigns. FB knows, or can know, which of its accounts are foreign and which are bots, but it doesn’t act on that because it doesn’t have to. Domestic campaigns of that type should be blocked too, but it may be politically easier to start with the foreign ones.
The State Department and the DOJ would do well to force US-based propaganda outlets to register as foreign agents when they can provide clear evidence of a Kremlin connection. That doesn’t require those outlets to cease operations or stop making money. It just requires them to formally recognize their own affiliation.
I consider it yet another failure of the Democrats and of American Democracy overall that neither has been unable to effectively warn their citizens about what propaganda is and when they are being exposed to it. Especially when it’s obvious that it is causing dire consequences for those citizens.
The propaganda is very sophisticated, powered by foreign state resources, enlists some of the largest and most influential US companies (FB TWTR FOXA etc) and media / political figures (Trump etc) so can’t really expect people with low information to see through it – US needs to treat this as the external attack that it is.
This is a really good point. Green energy would disable the Russian economy, too bad it’s been slandered by Republicans in the United States.
FB can absolutely detect where accounts are being created from and it ignores foreign accounts because those accounts are the only thing keeping the platform alive. They were going to die an uncool death before they started throwing conspiracy theories and propaganda at all of their users.
What’s worse than FB though is Fox News and elected Republicans who spout Russian propaganda that they know are lies because there is zero accountability for either to be truthful about anything.
When the history of this period is written fifty or a hundred years from now, Rupert Murdoch will be singled out as one of the most malign, anti-democratic agents of the era.
If Putin’s goal is to keep democracy as far from Russia as possible (in order to protect his position as head of the Russian autocracy) – he will take only those actions necessary to achieve that goal. He already knows that NATO would never accept a country that has Russian occupants- hence his previous occupations of Georgia and Crimea. The threat to Putin is democracy, not NATO. The only solution (one that solves the current problem) is to depose Putin.
Gosh, who knew Chamberlain was German.
@jyl – just following Donald Trump’s declaration to the UN that all governments should look out for their own interests first and foremost.
But the Chamberlain reference is apt given that Hitler used the pretext of the treatment of ethic Germans in the Sudetenland to move into Czechoslovakia.
Even a cursory and reasonably objective look at History implies that every issue involving altercations between Nations has at least two distinctive and differing points of view . When neither or any side is willing to acknowledge that fact it could be argued that all that remains should be categorized under the heading of propaganda (for dissemination in the respective public arenas.
All this talk about knowing propaganda when one sees it and Russia invading its neighbor on false pretenses sort of reminds me of Iraq and its weapons of mass destruction and yellow cake …. They did have some WMDs, of course. We knew that because because we sold them to Sadam to help him fight Iran, who had bloodied our nose in the Carter administration. Boy, all that payback was so expensive.
I assume that we have already armed the Ukrainians so they will be able to prosecute a bloody guerilla war against tRump’s daddy. While Putin is busy with the Ukrainian project, we’ll have the perfect opportunity to remove his corrupt autocratic dictators from Cuba, Venezuela and Florida.
Global GDP is about $95T in 2022. Russia’s GDP is about $1.6T. Ukraine’s GDP is about $181B (11% of Russia’s GDP). I don’t know how much of the total GDP that an authoritarian dictator such as Putin can syphon off the top- but having more direct access to that additional piece of pie would not only add to Putin’s wealth, but it would also shore up his organization by scaring other non-NATO countries. Maybe he is doing this because he is getting bored with the “status quo” or he needs to flex his muscles so he doesn’t get “Hoffa-ed”.
When you start adding up the GDP of the countries on China’s “hit list”, this is not an insignificant number either.
Since WW3 is not an option, we are left with either reducing trade, sanctions/freezing funds or hoping for an internal “event”.
My guess is the US/German response goes something like this:
“Shame on you. You have disappointed me very much. Don’t let that happen again”.
Hopefully, as Putin and Xi age, they lose their energy to take over additional parts of the world. But we can’t count on that. What we really need is safe nuclear energy. How about a $1.5T nuclear infrastructure bill?