Doug Noland: Honor

Michael Bond: The Geo-Political Economy is a driving force in the global economy and finance. Extreme Geo-Political risk means extreme risk to the global economy, the financial markets and your investments meant to bring you future cash flows in retirement. In all the recent wars, never was a Democracy attacked by an Authoritarian whose greatest fear is not NATO but Democracy, the free-will of the people. This war will expand to the financial markets as well as the economy.

But Democracy comes first. So some divergence from pure economic commentary this week is warranted.


by Doug Noland

“One person’s terrorist is another’s freedom fighter,” as they say. The battle of “Good Versus Evil” rarely presents itself as clearly as in the movies. Yet this is indeed a rare moment in history: what is being inflicted upon the innocent Ukrainian people is an absolute travesty. If this is not an act of pure evil, then I struggle with what might meet the definition. To be sure, the two-decade debate on Putin’s character and the risk he presents to the world has been resolved. “Unilateral aggression and crimes against humanity,” as aptly and succinctly stated by Ian Bremmer.

February 25 – Associated Press (Yuras Karmanau, Jim Heintz, Vladimir Isachenkov, Dasha Litvinova): “Russian troops stormed toward Ukraine’s capital early Saturday, and street fighting broke out as city officials urged residents to take shelter. The country’s president refused an American offer to evacuate, insisting that he would stay. ‘The fight is here,’ he said.”

February 25 – Reuters (Idrees Ali and Phil Stewart): “Russia is facing more resistance than Moscow anticipated in its invasion of Ukraine, including in its advance on the capital, Kyiv, and appears to have lost some of its momentum, a senior U.S. defense official said on Friday. Russian missiles pounded Kyiv on Friday, families cowered in shelters and authorities told residents to prepare Molotov cocktails to defend Ukraine’s capital from an assault that the mayor said had already begun with saboteurs in the city… ‘We do assess that there is greater resistance by the Ukrainians than the Russians expected,’ the senior defense official said, adding Ukraine’s command and control of its military ‘remains intact’. ‘They are not moving on Kyiv as fast as what we believe they anticipated they would be able to do. That said, they continue to try to move on Kyiv…’ Ukraine’s military was putting up a fight, the official said. ‘They are fighting for the country,’ the official said, noting that Russia had yet to establish control of the airspace above Ukraine or used the extent of its electronic warfare capabilities.”

February 25 – CBS News: “The war in Ukraine is taking a devastating toll on the country’s civilians. Just 48 hours ago, they could not have imagined what they’d be forced to endure. CBS News senior foreign correspondent Holly Williams said the mayor of the country’s second largest city warned citizens to seek shelter as Kharkiv became the focus of a fierce fight between Russian forces and Ukrainians trying to defend it. Russia claims it isn’t targeting civilians, but Ukrainian officials said a Russian missile hit an apartment building in the town of Chuhuiv, just outside Kharkiv, killing a teenage boy and injuring 15 residents… On Thursday night, an exhausted looking Ukrainian President Volodymyr Zelensky accused Russia of aiming at civilians, and he said he and his own young family were the top targets. Officials say Zelensky remains in Ukraine, but they won’t say where.”

February 25 – The Sun (Imogen Braddick and Will Stewart): “Thirteen Ukrainian soldiers bravely told a Russian warship to ‘go f**k yourselves’ before they were brutally massacred after refusing to surrender. The defiant border guards had been tasked with protecting Snake Island in the Black Sea from Russian invaders after Moscow launched a full-scale invasion of Ukraine. When the troops faced an ultimatum from the Russians to surrender and give up the strategic island, the guards fearlessly told them to ‘f**k off’. In a radio message from the vessel, the Russian soldiers warned the guards: ‘This is Russian military warship. I suggest you lay down your weapons and surrender to avoid bloodshed and needless casualties. Otherwise, you will be bombed.’ But the Ukrainian troops defiantly refused to give up the territory, and replied: ‘Go f**k yourselves!’ The Russians were reportedly heard swearing back at the Ukrainians – before all 13 border guards were massacred in an aerial bombardment.”

February 25 – The Sun (Adrian Zorzut): “A hero Ukrainian soldier has selflessly blown himself up to destroy a bridge and stop Russian forces from storming in from Crimea. Ukraine’s armed forces confirmed that Vitaly Skakun Volodymyrovych died while trying to fend off a column of Russian tanks at the Henichesk bridge, Kherson region. The brave trooper decided to blow up the bridge – which connects Russian-occupied Crimea with mainland Ukraine – after volunteering to carry out the dangerous mission of mining it with explosives, an Armed Forces official said… ‘According to his brothers in arms, Vitaly got in touch [with them] and said he was going to blow up the bridge. Immediately after an explosion rang out.’ Skakun, a military engineer, is being hailed by his comrades for ‘significantly slowing down the advancement of the enemy’. It also allowed Ukrainian military units to regroup and redeploy its defences.”

February 25 – The Guardian (Adam Gabbatt): “A video which apparently shows a Ukrainian man attempting to block a Russian military convoy has gone viral online, with comparisons being drawn to the ‘tank man’ of Tiananmen Square. The 30-second clip, shared by Ukrainian news outlet HB, shows a man standing in front of what appear to be military vehicles. As the vehicles try to swerve around him, the man jockeys to the side, seemingly in an attempt to block their progress.”

February 25 – CBS News (Charlie D’Agata, Justine Redman, and Haley Ott): “Ukraine’s Minister of Defense had issued a call for civilians between 18 and 60 to take up arms to help defend the country, but on Friday, as Russian troops got closer to the center of the city, he asked anyone over the age of 18 to volunteer… CBS News saw a steady stream of people entering one makeshift recruitment center in Kyiv on Friday morning, ready to join the fight. ‘This is my country. I have my family here, and I have a duty to protect my family and to protect my country. And this is the duty of each and every Ukrainian,’ 44-year-old Georgiy, a mapmaker by trade who was arriving to help defend Kyiv, told CBS News. When asked if Ukraine was ready to fight, he said: ‘We will fight as much as we can. We will fight because we have our families… our country and our lifestyle that we are not ready to give up.’ A commander at the center… told CBS News that thousands of people had arrived to fight, but that many did not have any military experience. He said there were not enough guns to go around. ‘Citizens of Kyiv are gathering here. They are receiving weapons here and guidelines how to run urban combat, how to provide medical first aid, and how to destroy Russians and take their weapons,’ he said.”

“You can veto this resolution, but you cannot veto our voices. You cannot veto the U.N. charter. You cannot veto the Ukrainian people. You cannot veto accountability.” Linda Thomas-Greenfield, U.S. ambassador to the United Nations, speaking to the Russian U.N. representative following Russia’s veto of a U.N. resolution condemning Russia’s invasion of Ukraine and calling for an immediate troop withdrawal.

February 24 – The Sun (Pjotr Sauer and Andrew Roth): “Vladimir Putin has said there is broad public support for the invasion of Ukraine that he announced just before dawn on Thursday morning. But by evening, thousands of people in cities across Russia had defied police threats to take to central squares and protest against the military campaign. Police had made at least 1,702 arrest in 53 Russian cities as of Thursday evening…, as they cracked down on the unsanctioned protests. Most of the arrests were made in Moscow and St Petersburg, where the crowds were largest. The protesters chanted: ‘No to war!’ as they exchanged shocked reactions to the attack on Ukraine. In Moscow, Alexander Belov said he thought that Putin had ‘lost his mind’. ‘I thought that we would never see a war like this in the 21st century,’ said Belov… ‘It turns out we live in the Middle Ages.’ The mood in Moscow was dark and sombre hours after Putin had announced that he was launching a broad military offensive targeting Ukraine. ‘I am embarrassed for my country. To be honest with you, I am speechless. War is always scary. We don’t want this,’ said Nikita Golubev, a 30-year-old teacher. ‘Why are we doing this?’”

February 24 – The Quint: “Jailed Russian opposition leader and anti-corruption activist Alexei Navalny said on Thursday… that he was against President Vladimir Putin’s invasion of Ukraine, reported AFP. In a video published by independent news outlet Dozhd, Navalny said, ‘I am against this war,’ as he stood trial from prison on Thursday… Wearing a prison uniform, Navalny can be heard saying: ‘This war between Russia and Ukraine was unleashed to cover up the theft from Russian citizens and divert their attention from problems that exist inside the country.’”

“Russian lawmaker Mikhail Matveyev, who voted to recognize Donetsk and Luhansk, calls for an immediate end to attack on Ukraine: I voted ‘for Russia to become a shield… not for Kyiv to be bombed.’” February 25, 2022 (BNO News)

February 25 – inews (Graham Keeley): “In an act of rebellion against the Putin government, Russian daily Novaya Gazeta said it would publish editions in Russian and Ukrainian. Its front page on Friday read: ‘Russia. Bombs. Ukraine.’ Editor Dmitri Murátov, winner of the Nobel Peace Prize in 2021, wrote: ‘Together with pain, we feel a sense of shame. What is the next step? A nuclear war? Only a Russian opposition movement against the war can save the life of this planet.’”

February 25 – ESPN: “Russian tennis player Andrey Rublev wrote ‘No War Please’ on a TV camera moments after advancing to the final at the Dubai Championships on Friday. The seventh-ranked Rublev had just beaten Poland’s Hubert Hurkacz… in their semifinal match before writing his message on the camera… ‘In these moments, you realize that my match is not important. It’s not about my match, how it affects me,’ Rublev said… ‘What’s happening is much more terrible.’”

“One person’s terrorist is another’s freedom fighter,” as they say. The battle of “Good Versus Evil” rarely presents itself as clearly as in the movies. Yet this is indeed a rare moment in history: what is being inflicted upon the innocent Ukrainian people is an absolute travesty. If this is not an act of pure evil, then I struggle with what might meet the definition. To be sure, the two-decade debate on Putin’s character and the risk he presents to the world has been resolved. “Unilateral aggression and crimes against humanity,” as aptly and succinctly stated by Ian Bremmer.

This is happening too often. Two years ago, I asserted the pandemic was a history-changing development. It wasn’t clear how, but I feared (after witnessing shock and awe monetary and fiscal stimulus) that a major global pandemic erupting at the critical “Terminal Phase” of a historic Bubble period would come with momentous consequences. I’ll again admit to a cloudy crystal ball. But the world changed decisively for the worse with Thursday’s Russian invasion of Ukraine. This time, a historic development – the largest European war since WWII – erupts at the dawn of what I anticipate will evolve into the greatest global down cycle since the Great Depression. A new global “iron curtain.” A grim New Age “cold war” – at best.

Of course, the U.S. government and its allies have made their share of mistakes over the years. Should the U.S. and NATO be condemned for opening membership to Eastern European countries? Or did we witness this week why it’s been imperative to offer security against a deceitful and dangerous Russian leader? It’s an awfully complex world.

This week, the expanding global fissure turned more glaring. “Axis of evil” is perhaps too strong. But there is now a more distinct line that separates divergent views on morality. Autocracy vs. Democracy. I don’t believe China is “evil,” but this week Beijing further demonstrated that it operates with an impaired moral compass.

February 23 – Washington Examiner (Joel Gehrke): “China has given ‘tacit approval’ for Russian President Vladimir Putin’s latest invasion of Ukraine, in the judgment of U.S. officials, as part of a joint effort to undermine the institutions that American and allied leaders established to minimize conflict in the decades following World War II. ‘Russia and the PRC also want a world order,’ State Department spokesman Ned Price said… ‘But this is an order that is and would be profoundly illiberal. … It is an order that is, in many ways, destructive rather than additive.’ China and Russia have made a show of their alignment over the last several years, culminating in the release this month of a communique that outlined a wide range of plans for economic and diplomatic cooperation — including the Kremlin’s support for Beijing’s claim to sovereignty over the island democracy of Taiwan and Chinese General Secretary Xi Jinping’s support for restrictions on NATO activities in Europe. Price declined to draw an explicit inference from that statement that China supports Russia in the brewing war, though his Defense Department counterpart didn’t shy from voicing an ominous conclusion.”

February 25 – Bloomberg: “Chinese state media left Russia’s invasion of Ukraine off their front pages Friday as Beijing weighed its response, even as the outbreak of war in Europe dominated conversations on Chinese social media. People’s Daily, the mouthpiece of the Communist Party, put the war on the bottom of page three on Friday, carrying a small piece on Foreign Minister Wang Yi’s call with his Russian counterpart and criticism of the U.S. for ‘hyping’ a military offensive that British Prime Minister Boris Johnson called the biggest conflict in Europe since 1945. The official Xinhua News Agency’s website on Friday morning relegated the crisis, which Japanese Prime Minister Fumio Kishida said ‘struck at the very core foundation of our international order,’ to a bullet on the site. In its media section, it showed people in the Ukrainian capital, Kyiv, going about daily life. While state broadcaster CCTV had some on-the-ground coverage, the front page of its app didn’t mention Ukraine. A story by state-backed news site Jiemian, titled ‘The most difficult day for Ukrainians,’ was censored within hours.”

The world has changed so profoundly since President George H.W. Bush assembled a coalition of nations to remove Saddam Hussein’s forces from Kuwait (“Operation Desert Storm”). Saddam didn’t possess nukes, so the world was not intimidated. Putin commands thousands of nuclear bombs, along with advanced hypersonic missile technology. Moreover, he is certainly these days not shy with threats. AP headline: “Putin Waves Nuclear Sword in Confrontation with the West.” This week, for the first time, there was every reason to believe he might be mad enough to actually use them. “Fuhrer 2022” – with a photoshopped Putin sporting a Hitler mustache – found a home on the Drudge Report.

There will be only losers in the Russia/Ukraine War. For Ukraine, catastrophic losses appear unavoidable. An independent nation is at the brink of collapse and dissolution at the hands of the military of a foreign dictator. This is not my area of expertise, but Russia is already a loser. Putin gambled and lost. I can only presume he expected the Ukrainians to roll over at the prospect of being mowed down by the great Russia military machine. Perhaps he thought President Volodymyr Zelenskyy – the former comedian and actor – would hastily flee with his cabinet to the Swiss Alps. And with no functioning Ukrainian government, surely the Ukrainian people would succumb with minimal bloodshed.

Honor holds a special place in my heart. It’s a hardwiring issue: my eyes well up. In the heat of battle, Zelenskyy is demonstrating extraordinary courage and leadership. The neophyte politician is in an exclusive club (seemingly of one): A national leader willing to face down Putin. And it’s difficult to believe Putin saw this coming, and it makes a tremendous difference. This is not Crimea circa 2014. The Ukrainian military is fighting ferociously – against all odds. David vs. Goliath. Loyalty and Honor. Heroes everywhere. The Ukrainian people are an inspiration.

“I think this is the time where we need to, at the invitation of Ukraine, declare Ukraine a no-fly zone enforced by NATO and the United States. We certainly have the capability to do that. The air space is still contested by the Ukrainians. We can shut down Russian air operations, even if we don’t directly engage Russian troops on the ground… Vladimir Putin has threatened the use of nuclear weapons. That shows you how dangerous this man is. And he only stops when his bayonet hits a brick wall. The United States and NATO must be that brick wall tonight. I would love to see us declare at the invitation of Ukraine that Ukraine is a no-fly zone, and we will enforce that. I’ve got to tell you, for anybody that thinks that somehow we’re going to be equally matched with Russia – NATO and the United States would crush Russia in the air in a second.” Congressman Adam Kinzinger, appearing on CNN, February 25, 2022.

I once again appeal to the military personnel of the armed, do not allow the Neo-Nazis and Banderities (Ukrainian radical nationalists) to use your children, wives, and elders as human shields. Take power into your own hands, it will be easier for us to reach an agreement with you rather than with this band of drug addicts and Neo-Nazis who sat in Kyiv and took all of the people of Ukraine hostage.” Vladimir Putin, February 25, 2022

These are not the words of a rational man. Contrived to intimidate? PSYOPS? Or might Putin be losing touch with reality. There is talk of possible negotiations between Russia and the Ukraine leadership. We can only hope, though at this point Russia will demand complete surrender and the establishment of a puppet government. Each day the Ukrainians hold out the greater the pressure on U.S. and European governments to provide military assistance. And the more damage inflicted upon Russian troops by American weapons (i.e. tank-destroying rockets and Javelins), the more frustrated, belligerent and unpredictable Putin becomes.

“A new Cold War, or the start of World War III?” “Russia-Ukraine crisis: How likely is it to escalate into broader war?” “‘I just hope this is not the beginning of World War III,’ says Rep. Michael McCaul.” “Will the Ukraine conflict go nuclear?” “Is This the Start of World War III or Cold War II?” “Sen. Lindsey Graham warns of World War III if Putin, China and Iran ‘get away with it’”

I don’t ever recall a week with such frightening headlines. I find it particularly troubling to see China grouped with Russia and Iran. Having gambled on Putin, Xi and China were big losers this week.

February 23 – Bloomberg: “China expressed opposition to sanctions against Russia and criticized the U.S. for inflaming the Ukraine crisis, suggesting its support for NATO’s expansion had left President Vladimir Putin with few options. Beijing didn’t view sanctions as ‘the best way to solve problems,’ Foreign Ministry spokesperson Hua Chunying said… She also criticized the U.S. and the North Atlantic Treaty Organization for placing offensive weapons near Russia, asking whether ‘they ever thought about the consequences of cornering a major power.’ Hua called the U.S. the ‘culprit’ of the Ukraine situation, saying it was ‘adding oil to a burning house while pointing fingers at others trying to put out the fire.’ ‘This act is irresponsible and immoral,’ she said of the U.S. moves.”

The U.S. is the “culprit” and “immoral.” China refused to even call it an invasion, let alone denounce Russia’s aggression. China has chosen sides, and an already fractured U.S. relationship is on a deep downward spiral after the week’s developments.

February 25 – New York Times (Edward Wong): “Over three months, senior Biden administration officials held half a dozen urgent meetings with top Chinese officials in which the Americans presented intelligence showing Russia’s troop buildup around Ukraine and beseeched the Chinese to tell Russia not to invade… Each time, the Chinese officials, including the foreign minister and the ambassador to the United States, rebuffed the Americans, saying they did not think an invasion was in the works. After one diplomatic exchange in December, U.S. officials got intelligence showing Beijing had shared the information with Moscow, telling the Russians that the United States was trying to sow discord — and that China would not try to impede Russian plans and actions, the officials said. The previously unreported talks between American and Chinese officials show how the Biden administration tried to use intelligence findings and diplomacy to persuade a superpower it views as a growing adversary to stop the invasion of Ukraine, and how that nation, led by President Xi Jinping, persistently sided with Russia even as the evidence of Moscow’s plans for a military offensive grew over the winter… Some American officials say the ties between China and Russia appear stronger than at any time since the Cold War. The two now present themselves as an ideological front against the United States and its European and Asian allies, even as Mr. Putin carries out the invasion of Ukraine, whose sovereignty China has recognized for decades. The growing alarm among American and European officials at the alignment between China and Russia has reached a new peak with the Ukraine crisis… In the recent private talks on Ukraine, American officials heard language from their Chinese counterparts that was consistent with harder lines the Chinese had been voicing in public, which showed that a more hostile attitude had become entrenched, according to the American accounts.”

Without China’s partnership, I don’t think Putin risks the onerous sanctions that the invasion would provoke. Now China will provide Russia a lifeline, surely subverting western sanctions. I’ll assume the U.S. and the “non-autocratic” block will rally around Taiwan’s independence. And the world will be watching for Beijing to begin tightening the noose. Xi will try to appear more balanced, working to play a constructive diplomatic role in Russia/Ukraine negotiations. Yet the damage is done. Xi and Putin are partners – with “no limits”.

It is undoubtedly a new world order in the making. It’s a deeply troubling world; an unstable world. It points to a world of market, financial, economic and geopolitical instability. After this week, both inflation and risk look persistently higher. Defense spending looks much higher. “Globalization” took another major blow. Energy and food independence became more pressing issues. And the unfolding bipolar world will see less trade and cooperation between competing, and increasingly hostile, blocks. Inflation and fragility: A central banker’s nightmare. It was one wild week for acutely unstable global markets, but we’ll leave that for another day.

And if I were selling subscriptions or using an email list, this is where the cancellations come. Here it goes: I guess I’m a traditionalist. As Americans, during a crisis we would rally around the President. This is not the time – the era – to crave – to strive – for his failure. There’s no Honor in that. Most regrettably, we today have our own domestic “iron curtain” and “cold war” mentality. It will not serve us well.

Original Post 26 February 2022

TSP Smart & Vanguard Smart Investor supports the fight of Democracy over Autocracy, or Decentralization of Power & Wealth over Centralization.

Categories: Perspectives