Double, double toil and trouble; Fire burn, and cauldron bubble.
Representation of the Three witches by Kathryn Hunter
It is now clear that no amount of gaslighting can finesse a Ukrainian military rebound from here. Shoigu [who has resurrected himself from the dead You will recall Information Warfare Specialists had informed us that he was on his last legs] has pronounced the Lugansk People's Republic liberated. As mentioned before, I see Russia moving eventually towards Odesa, landlocking Ukraine and only then coming to the Table.
The inability to read the battlefield, the extraordinary propaganda threads on Twitter, the deplatforming of any voice that countered the Propaganda effort have produced a ''Fairy Tale'' reality and a geoeconomic boomerang effect which is shredding the standard of living in the West and whose consequence will be Regime Change in Western Capitals long before Moscow.
The choice for Western Policy Makers is extraordinarily bleak. It is either an ignominious retreat a la Afghanistan [and this creates a risk of a domino effect with Taiwan making it a potential Trifecta of reversals [Afghanistan, Ukraine and Taiwan]. The Ukrainian Military is largely extinguished and there will be no insurgency which will bleed Russia. Therefore, given the singular lack of understanding about the efficacy of sanction warfare
Less than two months ago The ''Leader of the Free World'' President Biden said his sanctions against Russia would “reduce the Ruble to rubble” [May 29 Vanity of Vanities! All is vanity]
“You know, we can play chess, too,” Singh said. “It was important for us to show that the fortress could come crumbling down.” [The @POTUS Official Who Pierced Putin’s “Sanction-Proof” Economy @NewYorker]
BIDEN ADVISOR BRIAN DEESE: "This is about the future of the Liberal World Order and we have to stand firm." @Breaking911
CNN: "What do you say to those families that say, 'listen, we can't afford to pay $4.85 a gallon for months, if not years?’"
The overarching Point remains
‘’You can print money, but not oil to heat or wheat to eat’’ wrote @CreditSuisse’s Zoltan Pozsar. Sunday, April 10
Therefore, it is clear Western Policy Makers are going to double down on the failing sanction warfare strategy.
The Flaws in this Strategy are in plain sight but apparently invisible to the Architects of the Strategy [who by the way would have been stopped out an eternity ago if this was a Trading Floor] Western markets are turbo finiancialized and for an eternity, Western banks and Central Banks have been able to distort the commodity price complex with little difficulty. Take the Gold market for example where derivatives are 100x the underlying. One can create inorganic cascade like price moves in the derivatives market and thereby control the physical commodity. There are plenty of examples of these inorganic price moves. In essence, the Tail wags the dog. The challenge is where the Supply/Demand balance is precarious and a small adjustment [reduce Supply or increase Demand] tips the situation into disequilibrium. The Tail will no longer wag the Dog and the Dog will simply run amok.
JP Morgan says oil (currently at $110pb) could skyrocket to $380pb if the West continues to sanction Russia and Russia decided to cut off supplies @AlexeiArora
“Well, of course, Gazprom was forced to reduce the volume of gas supplies to Europe by 20%+. But you know, prices have increased not by 20%+, but by several times! ''
Today Europe is back to paying 7.5 times more for natural gas than the US @DoombergT
Any scenario analysis would be forecasting a complete collapse of Western economies and an exponential and parabolic increase in the cost of living if any of these outcomes come to pass. Today the Russian Ruble is the best performing currency in the World. There are plenty of Armchair Generals and Commentators on Twitter who will dismiss the Ruble rally but they are like the Armchair Generals who told us Zelensky was going to take his Army to Moscow and the Russians were going to strew rose petals at his Feet.
By sanctioning the Russians, we created a reverse '' Petro Dollar'' We created a ''Petro Ruble'' a currency backed by commodities. It is a straightforward calculation now between a Money Printer and a currency backed by hard and soft commodities. Its a No Brainer and a seismic macro development.
During the last few trading sessions, interest rates in the US and Europe capitulated, bonds rebounded as markets began to price in the risk of recession. The overarching Problem remains Inflation and a recession is secondary. If Inflation is at 8.6% in Europe and the US, just how far can [US] bonds with a 2 handle rally?
US 10y yields crashes <3% on recession fears @Schuldensuehner
The market reaction is Pavlovian. Sure it's been an annus Horribilis in the First Half but betting on a return to QE, lower rates and easy money seems to me a seriously sub optimal Bet.
On a YTD basis, just 4 of 38 non-currency assets in DB's sample are in positive territory @Schuldensuehner
In many respects @RahulGandhi best captured the current moment.
.@RahulGandhi was mocked for saying this. @SriniSivabalan @srinivasiyc
Therefore, recent [largely inorganic] Price corrections in the commodity complex [Oil, Gas, Wheat, in particular] should be accumulated into and not sold.
The negative spillover and feedback loop in EM and Frontier markets [particularly the Commodity Importers] has further to run.