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Today, I'm going to go over some Bretton Woods III stuff, talk about the French elections, as well as give an update on Ukraine. I want to update my Macro Chart Rundown this week, so stay tuned for that.
Let's dive in.
I'm completely astonished by the amount of people entertaining an oil-backed money theory and "Bretton Woods III". My latest podcast is all about this topic, so if you haven't checked it out, do so now. I respond to this silliness by reacting to a great explanation of BW3 by George Gammon. My podcast preempted this similar Rabobank opinion the next day.
Anyway, there is a reason oil is not used for money. It is a consumable and a highly variable product. Not only does the oil itself exist in many forms of quality, from from sour to sweet and light to heavy, but it is also very susceptible to economic and environmental shocks. It's simply asinine to think an oil-backed currency would work.
The other problem with BW3 a lack of appreciation for the cost to produce oil. It is an ongoing cost that requires financing and expertise. If there's no access to cheap financing, like if Russia and China simply ditch the Eurodollar system, or they don't have access to the Western expertise required, their costs will soar and their production will plummet.
Bretton Woods III theory also depends on Russia filling the consumption gap for China. The argument goes, if China loses the US and Europe as customers (and suppliers I'll add), Russia can pick up the slack. (!) Thinking that China and Russia can form a viable high-level economic pact is a naïve idea. Even if you add India, there's simply not enough high-value add consumers to support anything near the current standard of living in China (and it's already stuck in the middle-income trap).
There's no future reality where the US loses economic preeminence. Anyone who believes that is not objectively looking at the situation. I summed up my thinking in the below tweet.
We'll see a fragmentation of the world, with the different zones of relatively self-sufficiency. Most of them will have significantly lower standards of living than currently. With the US being the exception. We will likely maintain roughly the same standard of living, but build toward a more healthy North American culture and economy.
As a disclaimer up front, I'm not taking sides in this conflict. I'm watching it with a skeptical eye from both sides, hoping to predict the outcome and its effects.
Reports started rolling out last night (first from alternative media, followed by corporate media) that Russia had begun a widespread bombing campaign in Ukraine. This might be a surprise to people who believed Russia was thoroughly beaten already, blindly believing approved narrative that Russia was being humiliated. The obvious conclusion is that Russia was holding back this capability for strategic reasons.
Targets appear to be concentrated in Kiev, Kharkov, and around Odessa. This could be the escalation in pace I've been waiting for. How did we get here?
A couple weeks ago, Ukrainian forces carried out a raid into Russian territory, bombing a fuel depot. Russia responded with, 'Don't do that again or we'll bomb military command and control targets in Kiev and elsewhere, which we have up to now refrained from hitting.' Paraphrasing of course.
Well, two days ago, Ukraine carried out a second daring strike into Russian territory with some helicopters, striking civilian targets with no military presence several km inside the border. Well, this second strike was a mistake, Ukraine is getting shelled. Perhaps this is the beginning of Phase 2?
After the initial phase of Russia's strategy concluded, they maneuvered to new starting positions. From my military experience and study of recent conflicts including this phase 1, they align their troops for a week or two and then sprint into a new advanced position. Rapid maneuver masks their true objective and strength.
Watching the below video of the first days of the conflict, notice how fast the Russians approached the two largest cities in the North, Kiev and Kharkov, with a limited number of troops not meant to storm a city. They sprinted pretty much the entire border, but the objective was Mariupol and the land bridge to Crimea. The area with the best troops and equipment.
Ukraine had already massed 100,000 fully trained troops on the border with Donetsk, which was most of their regular army and equipment. They had a plan to invade the Donbas themselves within days, so all their men and equipment were there. Russia beat them to the punch.
The feints in the north including around Kiev, was to freeze those forces from attacking the rear of Russians surrounding their true objective, Mariupol and large land bridge.
This pivot is two weeks old now, troops have exited the Kiev area, Mariupol 99% complete with only a few holdouts in the Azov steelworks, and things are set up for yet another encirclement in the east. Over that last week, thousands of Ukrainian soldiers have surrendered in the heat of the caldron, and the next phase is looking nigh.
My guess on what we could see in the near future is a complete encirclement of the remaining forces in the east, who are out of fuel and food at this point. My red arrows are where I think the next sprints will be, and possibly the black arrow back toward Kiev. The objective is the black circle. The pace could begin to quicken, as the overnight shelling shows.
The gloves are starting to come off. And like I've been saying for the entire conflict and months leading up to the conflict, this should be a one-sided fight. Russia was using only the amount of military effort necessary for their task. They are turning up the heat now.
For those who have been following my content for a while, you are aware that I think the geopolitical axis by which to make sense of global events is a gravitational shift from globalism and globalization toward populism, nationalism, and non-global trade networks.
A brand new development on this front is what's happening in the French Presidential elections. A couple weeks ago, the globalists thought they had Le Pen wrapped up. They purposefully planted a couple candidates in the election that would steal votes from her, while demonizing her in the press.
It was a surprise that she still finished second in the first round, making it to the run-off in a couple weeks, despite their best efforts. But the bigger surprise was the populist vote blew away the status quo Macron faction. The globalists thought he would still get 40% of the vote. When he only received 28%, they began to panic. He still finished first, but when/if the populist vote they split between candidates consolidates back to her, she would win.
Marine Le Pen would represent a massive anti-EU/anti-globalist shift in France and a defeat of the globalists in the very heart of the EU. She is a Trump-like figure that I believe would signal the rapid breakup of the EU and NATO.
It's such a big deal perhaps it's wishful thinking, and there's no way the globalists would allow Le Pen to be elected. The EU has a long history of disrespecting election results and the actual will of the people, in favor of their own authoritarian aims.
Of course, if the globalists steal the election it will only strengthen their opposition and the shift away from their world view. Just like the election in the US that has created a scenario of a Biblical flood in mid-term elections, against the globalists and for the populists.
There is nothing they can do to stem the tide that is coming, whether Le Pen is elected or not. Just like there is nothing the West can do to stop Russia from taking what they want in Ukraine. The exact timing isn't known, but the pendulum of history won't be stopped.
That's where I'm going to leave it for this issue. Questions or comments, reach out on twitter to @AnselLindner.
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