Over the weekend Russia has begun to invade Crimea and parts of the Ukraine. Violence had steadily increased last week with their President more or less abdicating and fleeing to Russia. Putin has used as cover “we are stepping in to protect Russians from the violence and harm.” Plausible? Yes of course but this is surely not the primary concern.
First off one must understand that Russia is an “oil and gas” nation, huge in production and that the Ukraine is a “choke point” for their distribution to Europe. Primarily natural gas enters through the east and north of Ukraine and travels mostly west to end users in Europe. This delivery system is absolutely key to Russian cash flow and “leverage” in the region. They can somewhat “manage” pricing by threatening to slow or even cut supply, the “leverage” part comes in because these threats can also be used to political advantage.
Over the last 2 years, because of new fracking technology it looks like western Ukraine, Romania, Poland and Moldova all have supplies of gas that can be recovered. This is obviously a potential problem for Russia’s Gazprom because it could offer new supply into Europe which would lower prices somewhat (bad for Russia) and lessen Russia’s “leverage” in threatening to slow or shut off supply (even worse for Russia). Add into this mix the fact that Chevron has cut many deals in the region to explore and produce hydrocarbons, you have the makings here for an “East vs. West” showdown.
The moving parts are many because of alliances known and yet unknown (China has already sided with Russia). Is it any coincidence that last Friday China officially lashed out at the U.S. over our “human rights” issues? China has basically called us out for acting as hypocritical “judges” to over 200 other nations. In question is PRISM spying, drones, domestic gun violence, homelessness and unemployment. Please keep in mind that this statement was issued by and from “our banker.”
Unanswered questions are many and the answers may end up shocking (and changing views) the world. Will the U.S. step up militarily if Russia extends their occupation? What went on during the Putin/Obama phone call? Did it go something like …you better not…who’s going to stop me? The U.S. is not even talking tough if you listen to John Kerry’s statements and please remember that it was just last week that the trial balloon of shrinking our military to pre WWII levels was floated. Coincidental timing or something else? From a financial standpoint the Russian banking system looks to be the ones on the hook were the Ukraine to default but not for huge money. The Russian ruble is in freefall as is their stock market; their central bank has hiked interest rates in an effort to stem fleeing capital. I just wonder what credit default contracts are outstanding and if there are any “chain” links that reach into the bowels of the western banking and financial systems?
This is very bad from the standpoint that it is a step further than the Syrian situation last fall because “boots are on the ground.” The boots are Russian as the Chinese look on with a high degree of interest (and support) I am sure. If we “let this stand” without any military reaction, could this possibly embolden the Chinese in their island disputes with Japan? Could a U.S. response cause the Chinese to hit the “sell” button for their Treasury holdings and dollars? Or worse, could it cause them to hit the “buy” button in the gold market? Do they have “opaque” accounts set up with COMEX where buy orders with “instructions to deliver” are ready? I have no idea but common sense tells me that if “we” know the COMEX is vulnerable to a delivery default then they surely know…the only difference is that they can do something about it whereas “we” are just mosquitoes.
Other questions in my mind are “why” or “why now?” I have read reports that place blame on the west for stirring up the unrest; I would as usual ask “what is the upside?” Yes I understand there is gas in the ground which can be sold for a profit and yes this would be a thorn (if not a knife) in Mr. Putin’s side but did anyone not expect him to act? A very brief read of history tells you that the Ukraine is thought of as “Russian” by Russians. Kiev was Russia’s first capital and the Ukraine was (is, by Russians) always considered a Russian “state.” Though not a perfect analogy, this would be like New Jersey claiming Long Island from N.Y. after Jed Clampett discovered oil…and after pipelines had been built to export N.Y.’s biggest product.
I am not taking any sides as to who is right or wrong because as with anything there is always “your side, the other side…and the truth.” The “truth” is that this is a highly flammable proposition. “Flammable” because it has already moved quickly and we do not know what actions that anyone on any of the sides will take. The only thing that does know for sure is that Vladimir Putin is willing to fight. He waited until the Olympics were over (why didn’t this flare up “during” the Olympics?) and has moved swiftly since then. We also do not know how big the financial “shifts” will be when they open the markets Monday morning. I say this because leverage and gearing has never been higher than it is now. Will carry trades unwind? If the U.S. does not “step up” will the dollar see instead of safe haven inflows…the opposite and a panic out of dollars because of perceived weakness? I guess the biggest question and one that hasn’t even been asked yet is the most obvious one, if Russia decides to move forward in an occupation effort, who is going to stop them?
I surely do not have many if any answers to the above questions. The only thing that I do know from history is that as wars approach and begin, “money” is a good thing to have. The question is, “What is money?” If the Ukraine situation does escalate I think that it’s a safe bet that we will soon find out exactly what “money is and what it isn’t!”
I think it was Oliver who used to tell Hardy, “Now look at the mess you have us in now.” That is probably what is going on in our government right now. I will let you figure out who is playing the part of Oliver and who is playing Hardy?
Like they say about computer programs, Crap in and then Crap comes out.”
There’s another reason the U.S. cannot respond. Our military is using Russian air space to exit Afghanistan.
I did not know that
I agree Bill, we will find out what real money is…for sure….for sure. From the monetary perspective we have been checkmated by both Russia & China regardless of what we do. They both can afford to fail & may even welcome it, as they have the proper real 3 dimensional assets to fall back on. We have “NON-DIMENSIONAL ASSETS”.. That is right, way to go team…’non-paper derivatives’. They don’t even qualify as 2 dimensional paper assets, they are ‘non-dimensional’.
Sad sad sad is the situation in the west. We are witnessing the single biggest shift in power in our lifetimes, and it is funded by our debt. These guys (east) are using our debt instruments to buy real assets. Brokered by our own banks to some degree. What do they, the east, care if things implode, they will come out the other side on more solid footing. Ah well I shouldn’t be so concerned we have plenty of “NON_DIMENSIONAL ASSETS”……at least Weimar had 2 dimensional paper objects to burn to keep them warm.
SG concerned & out
thanks SG and yes you are correct.
I watched a video a few weeks ago by “Fabian for liberty” when he stated that Russia was going to take over Ukraine right after the Sochi games and now it has come to pass. I also remember watching some Lindsey Williams videos where he said to watch what China and Russia are doing and follow them closely. Williams also said that the currency of the elites is oil and according to Andrew Carnegie “gold is the money of the elites” (ABC’s’ of money). What Bill wrote here is more of confirmation to the things I have watched and read, that his writings are correct analysis.
I just watched today, videos on youtube by this guy “Belangp”(https://www.youtube.com/user/belangp)and he shows how the dollar is indirectly backed by gold through oil. In other words OPEC top 5 Members only accepts payment in physical gold which is handled through London for their oil. This was an arrangement made during 1973 oil embargo. This is the reason Venezuela was able to ask for their gold and received it without problems. We did see that Hugo got lynched just like Saddam and Khadafi. Matter of fact every country who decides to sell oil in anything but dollars is in the line to be bombed to death. This selling of oil in anything but dollars is what is referred to as “weapons of mass destruction” by America’s leaders.
What I got from this is that, now that the gold is depleted from Comex and London,and future gold cannot be bought from mines because it is becoming expensive to do so(i.e oil production is depleting), the entire fate of the dollar is in question and about to collapse. What we are witnessing is MOB wars at the highest levels. This is countries fighting against each other and manipulating each others economy. Think about that for a moment and you will see that WW3 is already begun, we just have not seen it on a nuclear level as of yet. These rumors of wars will escalate to physical wars in the near future because, soon someone will become a sore looser or believe they should be world leader or remain so. I know this because when I was a child, we played and we took and gave losses. But I can also remember when real fights came about due to someone who felt they were cheated or deserved to be the leader or big bully. Rusia’s interest is not the people but their economy which is all OIL. They saw what happened to Iraq, Iran, Venezuela, and all the other oil rich countries suffering from the demise of the dollar through sanctions.
Rev 6:5 And when he had opened the third seal, I heard the third beast say, Come and see. And I beheld, and lo a black horse; and he that sat on him had a pair of balances in his hand.
Rev 6:6 And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.
It is not dollars that makes the world go around, it is OIL. And that is the currency(or if you may “money” because it is tied to gold) of those in power. But their money which they save in is Gold. If people wake up to this, they will buy every last ounce of gold available in a jiffy. Without OIL we will not have an economy and without Gold we will not have anything to settle our labors with.
Bill if you have not watched Belangp’s videos, he has an interesting take on it along with srsroccoreport.com
You are correct Marco, if you remember 1986-1990 the price of oil was “crashed” which destroyed the USSR. This was done on purpose and approved by Reagan…the USSR was no more after 1990.
Exactly Bill! I remember this clearly. I also remembered that Iraq’s economy was destroyed after they went after Iran and they were in debt to the teeth and went to conquer Kuwait and that caused Operation Desert Storm to come about. China was destroyed in like manner when silver was demonetized earlier in the century. What got me thinking is, how can any American sit back and think that these nations which were destroyed and are now waking up are not thinking about revenge for the carnage these leaders of America has done? Matter of fact your headline stated “Who is going to stop him”. It should read “who is going to stop them”. For we can see that a real physical war is at the precipice.
BTW I remembered you saying that you do not know what the price of an ounce of gold will be, all that matters is that you own it or don’t. I believe this and I think that many people out there who are in doubt should keep this saying in their minds always. I watched another video which shows “Gold has no Market price”. Now that is in line with your writings because you cannot price something that is the standard and foundations of what everything should be measured and priced in. The video can be found here http://www.youtube.com/watch?v=oh-jhz6E-5Q(gold has no market price).
this is why no one can truly forecast a market price.