EU resolution equating Communism & Nazism is tawdry piece of Russophobia
John Laughland
RT.COM
Mussolini, Hitler, and Chamberlain at the Munich Conference, Germany, 29 Sep 1938 © Wikipedia
Yet this is what the European Parliament did last week when it voted a resolution on “the importance of remembrance for the future of Europe,” a text which proves that when legislators try to be historians, the result is just cheap propaganda.
The dangers of using legislatures to write history are even greater when, as in this case, the purpose of the resolution is polemical. The general idea of the text is that Europeans must remember their dreadful past in order not to repeat it in the future: everyone knows that the European project was born in the ruins of the Second World War. But the goal of this resolution is to recalibrate the usual memory of the Nazis and the Holocaust to put the memory of Communist totalitarianism on an equal footing with Nazism. Communism, the resolution says, was Nazism’s ideological twin, and the USSR shares equal guilt with Germany for starting the war.
With its 31 references to the Soviet Union, communism, and Stalinism, as against only 19 references to Nazism and Nazi Germany, the resolution complains that awareness needs to be raised of the crimes of Communism. It also repeatedly alleges, by making no fewer than five references to the Molotov-Ribbentrop pact of 23 August 1939, that the war “was started as an immediate result of the notorious Nazi-Soviet treaty on non-aggression... whereby two totalitarian regimes that shared the goal of world conquest divided Europe into two zones of influence.”
The authors of the resolution perhaps do not realize that they are rejecting the findings of the Nuremberg trials, which elsewhere they quote approvingly. The Nazi leaders were put on trial for the crime of planning and executing a war of aggression; no other state was accused or convicted of this. When the chief prosecutor, the American Robert Jackson, rose to make his opening statement, he referred to the privilege of opening “the first trial in history for crimes against the peace of the world.” Only Germans were in the dock: the Soviets, like the other anti-Nazi allies, were on the bench.
Over nine months later, when the judges handed down their sentences, they ruled that, “To initiate a war of aggression is the supreme international crime, differing only from other war crimes in that it contains within itself the accumulated evil of the whole.” It was on the basis of the new rule against aggressive war that the United Nations was founded in 1945 with the USSR as one of the five permanent members of the Security Council charged with protecting the world against aggressive war in the future. If, as the European Parliament now says, the USSR was in fact just as guilty as Germany for starting the war, then logically, the UN, the basis of today’s international system, should be disbanded as a criminal organization.
This revisionist claim that Hitler and Stalin were both guilty of starting the war does not stand up to scrutiny. On the contrary, the leaders of the day themselves, like later historians, understood that the history of the outbreak of the war started not on 23 August 1939, but instead a year earlier, on 28-29 September 1938, when, to their eternal shame, Britain and France agreed with Italy and Germany that Hitler could dismember Czechoslovakia. This duly happened when Hitler seized first the Sudetenland and then, in March 1939, the whole of Bohemia and Moravia (i.e. including Prague). It was at this stage that Britain and France tried to retrieve the situation they had created through their own cowardice by issuing their guarantee to Poland and threatening war if Germany attacked that country.
In the months that followed, Britain, France, and the Soviet Union entered into uneasy negotiations to try to conclude an anti-Hitlerite alliance. Distrust was at its maximum because the Soviets were convinced that the capitalist powers had been actively trying at Munich to deflect Hitler to attack them in the East. Nonetheless, Stalin announced in secret negotiations in August 1939 that he was prepared to deploy one million Soviet soldiers to counter the German threat. This was more manpower than Hitler had and it would have stopped him in his tracks: if this plan had been adopted, the war would never have broken out.
John Laughland, who has a doctorate in philosophy from the University of Oxford and who has taught at universities in Paris and Rome, is a historian and specialist in international affairs. 
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U.S. Ships More Air Defense Systems That Do Not Work To Saudi Arabia
DISPATCHES FROM MOON OF ALABAMA, BY "B"
First run on September 21, 2019
[dropcap]T[/dropcap]he Washington Post notices Russia's offer to sell its air defense systems to Saudi Arabia. It does not like that:
The attack on Saudi Arabian oil facilities last weekend were a disaster for both Riyadh and Washington, with weapons allegedly made in Iran circumventing expensive U.S. missile defense systems.
But in Moscow, news of the attack was greeted as yet another chance to mock the United States and its allies — all while extolling the virtues of Russia’s own missile defense technology.
“We still remember the fantastic U.S. missiles that failed to hit a target more than a year ago, while now the brilliant U.S. air defense systems could not repel an attack,” Russian Foreign Ministry spokeswoman Maria Zakharova told a briefing on Friday. “These are all links in a chain.”
The Yemeni attack on Saudi oil installations caused serious damage (more photos). In Abqaiq at least five of nine stabilization columns were destroyed. These are needed to make crude oil transportable. The three phase separators that separate the fluids into gas, oil and water were likewise eliminated. Most of the gas storage tanks at Abqaiq were penetrated.
Some 5,000 additional workers are now racing to repair the damage. It will still take weeks if not months to get everything up and running again.
Saudi Arabia had to delay oil deliveries to Asian customers. Some will receive heavy oil grades instead of the light sweet crude they ordered. Deliveries to Bahrain were halted completely. Deliveries to Saudi refineries were cut. Saudi Arabia bought additional gasoline and kerosene from the international markets as its own refineries received less crude oil than needed. Saudi citizens report of a lack of gasoline and a video shows long queues in front of a local gas station.
The air defenses surrounding Abqaiq proved to be ineffective. That may have been because they were shut off. But it is doubtful that the systems, even if they had been on alert, would have made any difference.
The U.S. made Patriot system in question was built as an air defense system against fighter jets. It was later upgraded to give it some capability against ballistic missiles. But even its latest iteration is not capable of defeating smaller drones or low flying cruise missiles.
While the Washington Post writer recognizes that the Patriot system can cover only one third of the horizon and fails to detect smaller low flying objects he still asserts that it is better than the systems Russia makes:
While Russia’s S-400 system may have impressive specifications on paper, many analysts are cautious in their assessment of it. It has not been fully tested in real life, whereas the Patriot system successfully intercepted missiles during both the Gulf War and the U.S.-led invasion of Iraq.
The "successfully intercepted" link goes to the a site named missiledefenseadvocacy.org which is obviously a lobby organization to promote U.S. air defense systems. Its description of the Patriot includes these two claims:
During the Gulf War, U.S. Patriot batteries brought down at least 11 enemy missiles and other Patriot batteries deployed in defense of Israel’s major cities intercepted numerous incoming missiles as well.
...
During Operation Iraqi Freedom, U.S. Patriot batteries intercepted a total of nine enemy tactical ballistic missiles. One notable intercept occurred on March 23, 2003 when Iraqi forces launched an Ababil-100 tactical ballistic missile (TBM) at coalition forces in Kuwait. The TBM was destroyed by a Patriot system protecting over 4,000 Soldiers and the Aviation Brigade of the 101st Airborne Division.
There is serious doubt that those numbers are true. Besides that the number of hits does not say anything about the system unless one also knows the number of missiles it failed to engage. After the first Gulf war Congress investigated the issue and concluded:
The Patriot missile system was not the spectacular success in the Persian Gulf War that the American public was led to believe. There is little evidence to prove that the Patriot hit more than a few Scud missiles launched by Iraq during the Gulf War, and there are some doubts about even these engagements.
During the first Gulf war the Patriot system had a systemic software problem that made them incapable of hitting the targets:
On February 25, 1991, during the Gulf War, an American Patriot Missile battery in Dharan, Saudi Arabia, failed to track and intercept an incoming Iraqi Scud missile. The Scud struck an American Army barracks, killing 28 soldiers and injuring around 100 other people. A report of the General Accounting office, GAO/IMTEC-92-26, entitled Patriot Missile Defense: Software Problem Led to System Failure at Dhahran, Saudi Arabia reported on the cause of the failure. It turns out that the cause was an inaccurate calculation of the time since boot due to computer arithmetic errors. Specifically, the time in tenths of second as measured by the system's internal clock was multiplied by 1/10 to produce the time in seconds. This calculation was performed using a 24 bit fixed point register. In particular, the value 1/10, which has a non-terminating binary expansion, was chopped at 24 bits after the radix point. The small chopping error, when multiplied by the large number giving the time in tenths of a second, led to a significant error.
Twelve years later, during the war on Iraq, the Patriots also failed:
The 32nd Army Air and Missile Defense Command, which is charged with protecting U.S. ground forces from air and missile attacks, recently released its account of “Operation Iraqi Freedom.” As part of that history, the command reports that the Patriot missile defense system, which is designed to destroy short- and medium-range ballistic missiles, scored a perfect nine for nine in intercepting Iraqi missiles. Colonel Charles Anderson, chief of staff of the command, wrote, “The critics concerns over Patriot lethality should be forever silenced.”
Yet Iraq fired at least 23 ballistic and cruise missiles, according to the report, during the three-week span it took U.S. forces to fight their way to Baghdad and topple Saddam Hussein’s regime.
Nine out of more than twenty three is better than zero but not a great record. But the Patriots also achieved two hits on fighter planes. Unfortunately those were the wrong ones:
A US Navy fighter has been shot down over Iraq by a Patriot missile in the second friendly-fire incident involving the weapon.
The F-18 Hornet from the carrier Kitty Hawk went missing on Wednesday night during a bombing mission. The incident follows the shooting down of an RAF Tornado GR4 by a Patriot as it returned to base in Kuwait, with the loss of its two-man crew.
In 2017 the Saudis fired Patriot missiles against Yemeni ballistic missiles that were launched at Riyadh. All of them failed to hit their targets:
[M]y colleagues at the Middlebury Institute of International Studies and I closely examined two different missile attacks on Saudi Arabia from November and December 2017.
In both cases, we found that it is very unlikely the missiles were shot down, despite officials’ statements to the contrary.
The Patriot system does not work. It is one of those typical U.S. big ticket items that enrich the owners of the defense industry but are of little combat value.
Assembling a Patriot launch station.
The U.S. is now sending more soldiers to Saudi Arabia with more Patriot systems and additional Terminal High Attitude Area Defense, or THAAD, systems. Neither of these can protect against drones or cruise missiles like those that were used in the attack on Abqaiq. The whole operation is useless security theater.
When the U.S. attacked Syria with 105 cruise missiles the Russian equipped Syrian army managed to shoot down 71 of them. The cruise missiles that got through were aimed at undefended targets.
The Russian base in Syria was attacked several times by swarms of drones. All were taken down by either electronic countermeasures or by short range air defense systems. The long range S-400 have not been engaged yet because no situation required their use.
What Saudi Arabia needs is a layered defense systems similar to the one Syria deploys. It requires point defense systems like Pantsyr-S1 and medium range defense systems like the BUK-2. Long range defense systems like the S-400 can be added to protect against high flying bombers and against ballistic missiles. Electronic countermeasures like the Krasuhka-4 system can be added to suppress radio commanded missiles and drones.
No western country can provide such a modern layered system. If the Saudis really want to defend their country they will have to buy the Russian stuff. But the U.S. is unlikely to allow that.
That makes it more likely that the Saudis will accept the ceasefire the Yemeni Houthi have just offered to them (machine translation):
In a speech marking the fifth anniversary of the September 21 revolution, President of the Supreme Political Council Mehdi Mashat launched a peace initiative in which he called on all parties from all sides of the war to seriously engage in serious and genuine negotiations leading to a comprehensive national reconciliation that does not exclude anyone from injecting blood. In the interest of the remaining bonds of brotherhood and to overcome the higher national interests.
He announced the cessation of the targeting of Saudi territory by flying planes, ballistic missiles, wings and all forms of targeting.
"We are waiting for the same or better greetings in a similar announcement to stop all forms of targeting and aerial bombardment of our Yemeni territory and reserve the right to respond if this initiative is not met," he said.
We will have to wait to see how the Saudi clown prince reacts to that offer. If he rejects it the Houthi will surely remind him that his oil exporting desert country is a target rich environment.
Posted by b on September 21, 2019 at 17:02 UTC | Permalink
This article is part of an ongoing series of dispatches from Moon of Alabama
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Attacks on Saudi oil facility and the changing landscape of the Middle East
Hamid Alizadeh
MARXIST.COM
ABOVE: Location of Houthi strikes on Saudi oil facilities. With their new missiles, practically the whole region is now within their range. [dropcap]A[/dropcap] series of attacks on Saudi oil installations have set sparks flying once again in the Middle East. Only months after a last-minute cancellation of a US strike on Iran – and weeks after reaching out for talks without any preconditions – US President Donald Trump is yet again filling the twittersphere with threats and intimidation. Meanwhile, oil prices shot up by 20 percent and the ripple effects are already working their way through the sensitive oil and currency markets.
The attacks hit the world's largest oil processing plant in Abqaiq, Saudi Arabia – responsible for processing 70 percent of Saudi oil – as well as the Khurais oil field. The attack has left Saudi Arabia 5.7m barrels per day short of its previous daily oil output, which translates to 5 percent of overall global crude production.
Responsibility for the attack was claimed by the Yemeni Houthi movement, which has been locked in a bitter, four-and-a-half-year war with Saudi Arabia. In the past six months, the Houthis have increased their abilities to strike targets inside Saudi Arabia, hitting airports, oil pipelines and even reaching Riyadh with ballistic missiles. Nevertheless, the present attack is by far the most serious, striking the heart of Saudi Oil production.
Yesterday however, the Qatari-linked website, Middle East Eye, reported from an anonymous Iraqi intelligence source claiming that the attack was carried out by an Iranian-supported Iraqi Hashd al-Shaabi (Popular Mobilisation Forces – PMF) base in Southern Iraq. This follows a series of attacks on key PMF bases, convoys and weapons depots throughout Iraq. While these attacks were most probably carried out by Israel, they saw the collaboration of the US, as well as Saudi Arabia.
As the Iraqi intelligence source told Middle East Eye, this weekend's attack was a response to the attacks on PMF positions in August:
“The latest attack comes for two reasons: another message from Iran to the USA and its allies that, as long as their siege of Iran continues, no one will have stability in the region. However, the second, more direct reason is Iranian revenge for the recent Israeli attacks by drones launched from SDF-controlled areas in Syria against pro-Iranian Hashd bases.”
Whether it was Iraqi Shia or Yemeni forces who carried out the attacks; and even if Iran facilitated them, the US-backed Saudis have been the main aggressors in the region in the last period / Image: Fahd SadiUS and Saudi officials, have pointed the finger at Iran. US Secretary of State, Mike Pompeo tweeted that there was no evidence the weapons were launched in Yemen and accused Iran of “an unprecedented attack on the world’s energy supply.” Gulf princelings and official lapdogs have been howling all weekend about Iran’s supposed “bullying” in the region, saying they are ready to take any measures necessary.
But wait a minute, you may ask yourself, is it really Iran who are the main bullies in the Middle East? In the recent period alone, the Saudi regime has been stoking sectarianism throughout the whole region. It has also funded a barbaric sectarian war in Syria, which has so far destroyed the country as well as neighbouring Iraq. In Yemen, the Saudis have launched a one-sided war of slaughter, killing tens of thousands of people and keeping millions at the edge of starvation.
From the gold-embellished seats in lavish palaces, and from the back seats of armoured luxury cars, the country’s de facto ruler, Mohammed bin Salman, behaves like a child playing a computer game. He directs daily raids by swarms of state-of-the-art jets and bombers, supported by the US Reaper drones, reconnaissance planes and Naval forces. He orders thousands of precision-guided missile strikes to every corner of the Houthi-held areas, and commands mercenary armies full of Sudanese child soldiers, Yemeni Salafis and Moslem Brothers. With the violence that he has unleashed, he is keeping the poorest Arab country in a tight stranglehold.
On the other side of the conflict you have the Houthi movement, consisting of underweight men in bands of two-to-five, armed with AK-47s, grenades, Soviet-era vehicles and small rocket launchers. With Iranian assistance, the group has now developed homemade “ballistic missiles” and drone technology, which is equivalent to customising drones of the type that can be bought on Amazon in any Western country. Now, who are the defenders and who are the aggressors here?
The same points can be made about the rest of the US alliance in the Middle East. The Israeli army is one of the most-advanced militaries in the world and the only nuclear power in the Middle East. Its drones and F-35 jets fare unchallenged in Middle Eastern airspace, bombing anything they see fit. Just a few weeks ago, they bombed several Hezbollah offices in Beirut, as well as the aforementioned bombings, which took place throughout central and western Iraq. Their targets, Hezbollah and the Popular Mobilisation Forces, while better armed than the Houthis, are nowhere near the military strength of the Israelis.
And of course, all of this is backed by the US armed forces: the most powerful military in the world, which is – by the way – operating out of more than a dozen military bases and has more than 50,000 troops stationed in the Middle East, around 10,000 kilometers from US shores. The US plays a role in the war on Yemen, it was behind the war on the Assad regime, and it supports Israel’s attacks on targets throughout the region. Since Donald Trump became president, he has torn up the Iran nuclear deal and imposed crippling economic sanctions on the country, which (along with the Israeli-executed bombings) are part of the US’s “maximum pressure campaign, aimed at forcing Iran into submission.
So, whether it was Iraqi Shia forces or Yemeni forces who – in an act of retaliation and self-defence – carried out the attacks on Saudi Arabia, who can blame them? And if Iran facilitated this attack, which it probably did, so what? What we have in the Middle East is a low-intensity military conflict between, on the one hand, a bloc led by the strongest military power on the planet, which keeps pushing, provoking and upending the equilibrium; and on the other hand, a far-poorer and less-advanced country, supported by a network of militias. How is it acceptable for US imperialism and its allies to ravage and murder at will, but unacceptable when someone defends themselves?
Vulnerability of Saudi Arabia
In spite of all of the hypocritical hue and cry, the crisis brings to the surface for the first time a process that has long been brewing. After the fall of the Soviet Union and until the beginning of the new millennium, US imperialism appeared invincible. Unmatched in raw military power, it waded into one country after another, launching strikes, wars or pushing for regime change.
The Americans invaded Iraq and Afghanistan in quick succession, thinking this would be a swift affair. But in both countries, they suffered humiliating defeats and had to retreat (although they have still not managed to finish those retreats), with a trillion-dollar bill and mass opposition to war at home. Compounded by the general economic and political crisis in the US, the option of direct military interventions is therefore ruled out for a whole period.
At the same time, the Iraq War destroyed the Iraqi army, which had been used to keep Iran in check for two decades. In this power vacuum, the influence of Iran rose, as did Russia’s later. The most tangible result of this was the resounding defeat of US imperialism in Syria, where Iranian-supported groups now form the strongest force on the ground. Today, Iranian backed groups are also the strongest on the ground in Lebanon, Syria, Iraq and Yemen. This was the basis for the Iran nuclear deal, which was essentially a formalisation and recognition of Iran’s increased military weight in return for the Iranian regime’s collaboration with western imperialism, to stabilise the region.
The weakness of the Saudi regime, and the reluctance of the US to intervene militarily in its aid, have been exposed for all to see / Image: PoR
However, the Saudi and Israeli regimes regard the rise of Iran as a threat to their position as uncontested powers. In particular, the Saudi regime sees an existential threat in Iran’s increased strength. This is rooted in its historic weakness, being an artificial nation only kept together by US imperialism and oil money. Underneath all the pomp and ceremony lies a very fragile base of Royals, Islamic fundamentalist Wahhabis, tribes, ordinary Saudis, Shias and workers: all key constituents of the Kingdom, and all more-or-less bitter enemies of each other. This is the main reason that Saudi Arabia has never waged a ground battle with its own forces, because no force is loyal to the Royal family and the Kingdom. Despite having one of the most expensive military forces in the world, the Saudis would not stand a chance faced with the considerably-less-advanced Iranian army.
The Saudis have been pushing Trump to attack Iran, but the US is in no position to defeat Iran in open battle. Even airstrikes could have severe consequences for the US. As an Iranian commander reminded US officials yesterday, all US military bases within 2,000 miles of Iran would be within striking range of Iranian missiles. Last spring, the Saudis, along with now-former-Trump advisor John Bolton, were conspiring to push Trump to launch a war on Iran. But Trump backtracked at the last moment, even at the cost of much humiliation. Trump and the Pentagon realised that an attack on Iran holds many dangers for US imperialism, and would in any case not be able to achieve much more than a temporary setback for Iran’s military. Trump’s desire to reach a deal with Iran was the key reason behind his later split with Bolton.
Following countless provocations, sanctions and attacks on Iranian-supported groups in Syria, Lebanon and Iraq, Iran is drawing a line in the sand and showing the US and its allies what is at stake. Through a surgical strike, it has shown how easy it is – through its vast network of groups – to hit key facets of infrastructure, which are supposed to be highly secured by US-supplied missile defence systems.
Furthermore, Iran is increasing pressure on the US, by calling its bluff. The truth is that, despite all the furore raised by Trump and Mike Pence and all the messages of solidarity they are sending to Saudi Arabia, their basic position has not changed. Trump was very careful when tweeting about the attacks, saying that “[We] are locked and loaded depending on verification, but are waiting to hear from the Kingdom [of Saudi Arabia] as to who they believe was the cause of this attack and under what terms we would proceed!” [our emphasis]. What he means by “under what terms we would proceed” is “which forces would you send along if you want us to attack Iran” – to which, of course, the Saudis have no answer.
A military conflict with Iran would be an extremely risky affair for US imperialism – as well as for Saudi Arabia! The US will not come to the rescue of Saudi Arabia. Even if Trump carries out some symbolic attack (like the bombing of empty airfields in Syria a few years ago), it would not be enough for the Saudi regime, which can only be satisfied by the installation of a new, weak regime in Iran. But that is not on the agenda anywhere. If anything, the present threats and tensions are strengthening the Iranian regime to overcome the protest movements that swept through the country last year, by diverting attention towards an external threat.
Far from getting ready to go to war with Iran, Trump is looking to make a deal with the regime. That is why he broke with Bolton, and that is why he has been pushing for a meeting with Iranian President Hassan Rouhani at the UN General Council. Once the dust settles on the Saudi drone attacks, he wants to resume that course of action. He has no other viable option. Meanwhile, the crisis of the Saudi regime will continue to deepen, making it increasingly prone to desperate and risky measures to maintain itself.
Effects on world economy
The Saudis were hoping this attack and resulting damage to the global oil market would rally the international ruling class behind them against Iran. But it is possible the imperialists will hedge their bets / Image: White House
The Saudis were hoping this attack and resulting damage to the global oil market would rally the international ruling class behind them against Iran. But it is possible the imperialists will hedge their bets / Image: White House
In the ‘70s and ‘80s, Saudi Arabia was so important for US capitalism that the Americans would have been ready to intervene militarily to maintain the Kingdom’s stability. Today, however, the US has overtaken Saudi Arabia as the world’s biggest oil producer. Furthermore, as explained above, it is constrained in its ability to impose stability via military means anywhere.
In revealing this vulnerability, this weekend’s attacks are already translating into higher oil prices. The markets opened this morning with a 20 percent jump in oil prices: the second-highest single-day jump since 1990. But while the prices might fall slightly in the short term, the markets are counting on this changed geopolitical situation to generate higher oil prices going forward.
The Financial Times concluded:
“Regardless of their origin, oil traders say they must now assume that Saudi Arabia’s enemies in the region are capable of striking deep inside the Kingdom, targeting its infrastructure and oilfields. That risks upending its reputation as a reliable producer and supplier of crude [oil], which it has spent decades cultivating.”
Andy Hall, one of the most-notorious oil speculators, issued a statement underlying the consequences of this situation:
“This attack underscores the vulnerability of oil-production facilities in the Middle East in particular and the world in general. All the tens of billions of dollars the Saudis have spent on weapons could not protect them from a dozen or so low-tech drones. Asymmetrical warfare indeed!”
“It would seem the oil market needs to not only price in the current supply loss but also a higher risk premium for the future. On the other hand, the apparent fragility of the global economy will now be further tested by an oil price spike.”
In the context of a general slowdown, this will become a further drag on the world economy. As Société Général put it, “Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth.”
Reflecting this, stock markets were under pressure throughout the world today, along with the currencies of “emerging economies”, which are highly sensitive to oil prices. Meanwhile, gold prices, the yen and other “safe havens” were rising, based on the biggest disruption of world oil production since Saddam Hussain invaded Kuwait in 1991. This reveals the nervousness in the markets for the future of the world economy.
The Saudis were hoping this threat would serve to rally the international ruling class behind them against Iran. But they risk the opposite. Seeing the weakness and instability of Saudi Arabia, it is more likely that the western ruling classes will hedge their bets by increasingly supporting other powers, such as Iran and Turkey, as forces of stability in the region. Thus, whatever happens, in one way or another, every social, military or political earthquake in the region will only serve to bring forth the contradictions that have been maturing underneath the surface – amongst which is the terminal crisis facing Saudi Arabia.
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New World Order in Meltdown, But Russia Stronger Than Ever
Jon Hellevig
The Saker Blog
[dropcap]L[/dropcap]ast few weeks were full of portentous events. Only somebody who has not been awake for the last few years will fail to realize how these at first sight unconnected events are part of the same matrix. There was the ever louder talk in mainstream media about an approaching global recession, inverted yield curves and the negative yields, which tell us that the Western financial system is basically in a coma and kept alive only by generous IV injections of central bank liquidity. By now it has dawned on people that the central bankers acting as central planners in a command economy and printing money (aka quantitative easing) to fuel asset bubbles are about to wipe off the last vestiges of what used to be a market economy.
Then we saw Trump taking new twitter swipes at China in his on-and-off “great trade deal” and the stock markets moving like a roller coaster in reaction to each new twitter salvo. Also, we had both Trump and Macron sweet talking about getting Russia back and again renaming their club G8. Last Tuesday at a G7 presser in Biarritz, the Rothschild groomed Macron took it one step further opening up about the reasons why they all of a sudden longed for friendship with Russia: “We are living the end of Western hegemony.” In the same series, Britain’s new government under Boris Johnson was telling his colleagues in Biarritz that he is now decisively going for a no-deal Brexit, after which he went back to London and staged a coup d’état by suspending parliament to ensure no elected opposition interfered with it.
Perhaps the weirdest news to crown it all, came from Jackson Hole, Wyoming, where the Western central bankers were holed up for their annual retreat. The president of Bank of England Mark Carney shocked everybody (at least those not present) by announcing that the US dollar was past its best-before and should be replaced with something the central bankers have up their sleeves.
The New World Order is in its death throes
Russian economy from strength to strength
And the Russian economy. Believing their own propaganda, they had got that totally wrong. Endlessly repeating their own self-serving talking points they must have truly fancied that Russia’s economy amounted to nothing else than export of fossil fuels, that “Russia’s economy is the size of Holland’s,” that “Russia does not produce anything,” and that Russia was “nothing but a gas station with nukes” (somehow managing to ignore the significance of the nukes part). I seriously believe, that the propaganda had become so complete that the Western leaders and the intelligence people actually had come to adapt their own propaganda as the truth. What is for sure, is that all Western media, including what should be the most respected business journals and all those think tanks, had not published one honest appraisal of the Russian economy in 15 years. Every single piece I read over the years had clearly been written with the aim to denigrate Russia’s achievements and economic development. Nowhere to be found were reports on how Putin by 2013 had totally overhauled the economy transforming Russia into the most self-sufficient diversified major country in the world with all the capabilities of the foremost industrial powers. In fact, I tend to think that even the US presidents from Bush to Obama were fed in their intelligence briefings cooked up fake reports about the Russian economy and the whole nation. Actually, I would go one step further. I bet that the CIA itself in the end believed the propaganda it had given birth to. (It has been said that at some point the genuine Russia analysts had all been dismissed or demoted and replaced with a team specializing in anti-Russian propaganda).
But actually all the data was there in plain view. I myself took the trouble to compile a report on the real conditions of Russia’s economy fresh at the onset of the 2014 crisis. In the report, I set out to show that Russia indeed had modernized and diversified its economy; that it had a vibrant manufacturing industry in addition to its energy and minerals sector; and that its budget revenues and economy at large were not at all as dependent on oil and gas as it was claimed. Among other things, we pointed out that Russia’s industrial production had by then grown more than 50% (between 2000 and 2013) while having undergone a total modernization at the same time. In the same period, production of food had surged by 100% and exports had skyrocketed by almost 400%, outdoing all major Western countries. Even the growth of exports of other than oil and gas products had been 250%.
The gist of the study https://www.awaragroup.com/blog/putin-midterm-interim-results/ may be summarized with this quote from it: “The crisis-torn economy battered by years of robber capitalism and anarchy of the 1990’s, which Putin inherited in 2000, has now reached sufficient maturity to justify a belief that Russia can make the industrial breakthrough that the President has announced.” Events have borne out this insight. And it is therefore that Russia won the sanctions battle.
The report represented an appeal to the Western leaders to give up on their vain hope of destroying Russia through their sanctions and risking nuclear war at it. Russia was invincible even in this respect. For that purpose I expressly added this missive in the introduction to the report:
“We strongly believe that everyone benefits from knowing the true state of Russia’s economy, its real track record over the past decade, and its true potential. Having knowledge of the actual state of affairs is equally useful for the friends and foes of Russia, for investors, for the Russian population – and indeed for its government, which has not been very vocal in telling about the real progress. I think there is a great need for accurate data on Russia, especially among the leaders of its geopolitical foes. Correct data will help investors to make a profit. And correct data will help political leaders to maintain peace. Knowing that Russia is not the economic basket case that it is portrayed to be would help to stave off the foes from the collision course with Russia they have embarked on.”
A follow-up report https://www.awaragroup.com/blog/russian-economy-2014-2016-the-years-of-sanctions-warfare/ of June 2017 covering the sanctions years 2014 – 2016, showed how Russia went from strength to strength never mind the Western attempts at isolation. This report stressed that Russia’s economy had now become the most diversified in the world making Russia the most self-sufficient country on this earth.
In this report we exposed the single biggest error of the propaganda driven Russia analysis. This was the ridiculous belief that Russia supposedly was totally dependent on oil and gas just because those commodities made up the bulk of the country’s exports. Confusing exports with the total economy, they had foolishly confused the share of oil and gas in total exports – which was and remains at the level of 60% – with the share of these commodities of the total economy. In 2013 the share of oil and gas of Russia’s GDP was 12% (today 10%). Had the “experts” cared to take a closer look they would have realized that on the other side of the equation Russia’s imports were by far the lowest (as a share of GDP) of all major countries. The difference here is that while Russia does not export a great deal of manufactured goods, it produces by far a bigger share of those for the domestic market than any other country in the whole world. Taking the 60% of exports to stand for the whole economy was how the “Russia produces nothing” meme was created.
Finally in a November 2018 report https://www.awaragroup.com/blog/russian-economy-strong-and-stable/#chapter2 , I could declare that Russia had won hands down the sanctions war having emerged from it as a quadruple superpower: industrial superpower, agricultural superpower, military superpower and geopolitical superpower.
Macron et co. realizes that Russia actually is a superpower
These facts have now finally dawned on certain key stakeholders of the globalist regime can be discerned from the fact that they have tasked their handpicked puppet president Macron to make up with Russia. Trump has got the same assignment, which is evident from the siren calls of the two leaders in Putin’s address. Both want to invite Putin to their future G7-8 get-togethers.
As it was said, Macron went as far as unilaterally capitulating and declaring the decline of the West. He went on to spell out that the reason for this spectacular geopolitical about-face was the rise of the Beijing – Moscow (de facto) alliance that has caused a terminal shift on the world scene. Curiously, he also openly blamed the errors of the United States for the dire state of affairs pointing out that “not just the current administration” were to be blamed. No doubt, the foremost of these errors, Macron had in mind, was the alienation of Russia and pushing the country into the warm embrace of China. It is quite clear, that this is what they want to remedy, snatch the bear back from the dragon. Fortunately, that won’t happen. Good if there will be rapprochement and good if the West will try, but after all what Russia has learnt by now it will not sell out on China under any circumstances. I think Putin and the Russian powers that be have clearly opted for a multipolar world order. That is definitely not what Macron’s and Trump’s employers have in mind but let them try.
Until Trump took office, the strategy of the US regime had been to pursue only Russia in its geopolitical ambitions, but by then it had dawned on them that Russia was invincible especially in the de facto alliance with China. In a sign of desperation, the empire then opened big time another front with China. Essentially going from bad to worse.
The world order is being shaken like never before
“The world order is being shaken like never before…”, that’s another quote from Macron. Obviously, it refers to the military and geopolitical strengths of the Sino-Russian alliance, but certainly also to the economic shifts as the West has lost – and will keep losing – its economic domination. This brings us back to Mark Carney of Bank of England and his unprecedented attack on the US dollar (*1) https://www.zerohedge.com/news/2019-08-24/why-mark-carney-thinks-dollar-can-no-longer-be-worlds-reserve-currency arguing that it was time to end its global reserve currency status. As one option Carney brought up that the major Western central banks would instead issue a digital cryptocurrency. That is to say, a NWO currency controlled by the central banks. That would effectively mean the replacement of the Federal Reserve cartel with a cartel of the Western central banks (the Fed obviously being a part of it). That’s yet one step further north from any kind of democratic control and a giant step towards world government.
What could possibly have prompted such a radical US hegemony puncturing idea to be put forward? One reason obviously is that the Western economies really are in that extreme critical condition that more and more analysts caution about. (We shall look at the economic facts further down). There’s a very real possibility that we will be hit by a doomsday recession. What’s sure is that Carney’s bizarre speech could possibly not have occurred in a normal economic environment (any more than Macron’s admission that the Western hegemony is done with). According to Zerohedge (*2) https://www.zerohedge.com/news/2019-08-26/things-will-never-be-same-again-here-are-20-questions-central-banks-admit-defeat Financial Times, the party organ of the globalist elite, admitted as much in its report on the Jackson Hole meeting. The central bankers “acknowledged they had reached a turning point in the way they viewed the global system. They cannot rely on the tools they used before the financial crisis to shape the economic environment, and the US can no longer be considered a predictable actor in economic or trade policy — even though there is no imminent replacement for the US dollar in sight.” There was an effective admission that the central bankers had run out of tricks to pull the economies out of the everything-bubble mess, not to mention the looming doomsday recession. According to FT, Carney went as far as flashing the war card saying: “past instances of very low rates have tended to coincide with high risk events such as wars, financial crises, and breaks in the monetary regime.” On the one hand this can be seen as an admission on how deeply tormented they are about the financial situation and what could happen when it comes crashing down. On the other hand, it can be seen as a sales pitch, “only we can fix it, trust us, give us a carte blanche.” Or more probably, both.
Note from above Carney saying: “the US can no longer be considered a predictable actor in economic or trade policy.” Bank of England President here directly attacking President Trump.
And just a couple of days later William Dudley an ex-president of New York Federal Reserve Bank (the most influential of the 12 federal reserve banks that comprise the Federal Reserve System) followed up on a direct attack on Trump. But as they say about spies, there are no ex-spies, and I would think the same applies for the global financial elite. And yes indeed, Dudley is a card carrying member of the Council of Foreign Relations. Dudley had penned an op-ed for Bloomberg titled “The Fed Shouldn’t Enable Donald Trump.” (*3) https://www.zerohedge.com/news/2019-08-28/member-elite-bill-dudley-could-open-can-worms-quite-staggering , where he openly lobbies for the Fed to deliberately damage the economy in order to neutralize the policies (namely trade wars) of the sitting president and prevent his reelection chances by willfully ruining the economy.
One thing is for sure, the elite is desperate and in serious disarray. Very probable that the elite is split, too. It seems as if there were two globalist factions competing with each other and wanting to follow vastly different strategies. One faction supports Trump and the other is against him. Possibly, one that wants to do things with force and another that wants to gain by stealth. That could be Pentagon and the military-industrial complex vs. the financial elite, who also owns the media. My argument does not hinge on the veracity of those division lines, but that some rupture exists among the elites must be taken for granted, otherwise Trump would have been ousted by now with all that pressure on him.
To summarize this introduction. The Western world is in turmoil: the previous overwhelming geopolitical domination is gone and over with; military solutions against the main adversaries – China and Russia – are off the books; hybrid wars against them have failed; China and Russia are economically stronger than ever, too strong for the adversary; and to boot the domestic Western economies are in extraordinary bad shape, risking a depression of epic proportions.
Further down in this report, I will look at the one aspect of the question I am best equipped to handle, namely the economy. I will outline just in how bad shape the Western debt-fueled casino economies are. Having that as the background, I will then show how surprisingly strong the Russian economy is, at least in comparison with the Western gambling nations. Most importantly, Russia is virtually debtless, and that’s really the clue to survival in this extraordinary economic environment. In addition to the solid finances, Russia has other things going for it, too, as we will see below. I will not provide comparative data on China. One reason for that is, that China is not an economic risk. China does not have the debt problem that it is frequently touted in Western press to have. China, as the world’s number one export country, would of course take a hit in a serious global crisis, but that would not kill the economy. Although, China is the biggest exporter, there has been a shift from export-led growth towards domestic investment and consumption. The share of exports of goods and services in the country’s GDP was by 2018 down to 19.5%, half of the 2006 peak of 36%. On the contrary, the Chinese economy would stay vivid and therefore also help to sustain Russia’s exports.
I may add as one more piece of background, that it is my firm belief that the approaching economic disaster has long been evident to the central bankers and the globalist elite decision makers. Most likely the game plan was to establish the absolute world hegemony – which they not long ago thought was within early reach – and then after that deal with the debts as they saw fit as democratic dissent would not matter a bit anymore by then. That’s why they felt confident in building up the asset bubbles to carry them over to the final solution. Reminds me about a story told about Moscow’s so-called Khrushchyovka tenement buildings. These are low-cost three- to five-storied houses built quickly and cheap during the Khrushchev era to address the dire housing shortages of the 1960s. According to the story, the planners knew they would serve only for a few decades, but that would not matter all that much because by that time there would be Communism and everything would be perfect anyway. No Communism materialized, but presently the Moscow government under Mayor Sobyanin has initiated a program to tear them all down and erect new buildings where flats with title will be given for free to house the 1.5 million present residents of those buildings slated for replacement. – Well, that’s sort of Communism, isn’t it? – This kind of wishful thinking must have kept the globalist elite going, too. Unfortunately for the dreamers, though, their plans hit a snag in form of Russia and China.
Central bank fueled asset bubbles
Russia is low in debt, but you can’t say the same about the US and other Western nations. And that debt really is what got the world in the present mess and brought it teetering on the brink of financial collapse. Since the late 80s, the US central bank, the Federal Reserve under Alan Greenspan developed an addiction to cure any downward tick on Wall Street with easy credit, eventually requiring after every downturn ever bigger central bank liquidity injections to keep the stock indices on a growth curve. Greenspan was experimenting with a policy aimed at creating a “wealth effect” aka “trickle-down.” The idea being that Wall Street bankers and big corporations be stuffed with all the free money they can swallow for the purpose of keeping stock and bond prices high. The theoretical frame told that doing so something would eventually trickle down to the real economy, and everybody would live happily ever after. After stocks and bonds, Greenspan’s wealth effect policy was addressed to inflate home prices and all real estate with that. That was the road that eventually led to the 2008 subprime loan crisis, which took down Lehman Brothers and then all of Wall Street and the whole global economy.
But Wall Street recovered soon, because Greenspan’s successor Ben Bernanke had set forth to blow up an even bigger asset bubble. And the Europeans followed suit. The Fed fueled the market frenzy with creating money out of thin air (aka quantitative easing) in favor of governments, banks and corporations to the tune of $3.5 trillion in the decade following the 2008 collapse.
The European Central Bank has done the same for Europe in volumes more than 2.5 trillion euro to date. All the other Western central banks joined the gambling by flooding the markets with fiat money at same levels relatively speaking.
But anyway this astronomic leverage and the humongous budget deficits of the Western countries didn’t get the real economy anywhere. They have blown up asset bubbles of phantasmagorical proportions with preciously little trickle-down. Since the pre-crash peak in October 2007, the broadest US stock index (Wilshire 5000) has gained 95% (on top of covering the nearly 60% crash from in between). In the same 12-year period industrial production (manufacturing, mining, energy, utilities) has grown only 5% combined over all those years. (*4) https://www.deepstatedeclassified.com/heres-what-happens-when-the-fed-cuts-rates/ Deduct – the in itself lossmaking – shale oil and gas and there is barely no growth left in the 12 years. In fact, the US manufacturing sector was in June still 1.6% below the pre-crisis peak in December 2007. (*5) https://www.deepstatedeclassified.com/industrial-production-is-punk/ So we have a 5% gain in the most important part of the real economy vs. 95% in stock market gambling. The absurdity of the stock market growth is further evidenced by the gap between growth of real final sales and stock valuations since 2007 peak. Since then, the former has grown on an average 1.6% per year, while the stock market has delivered annualized growth at levels of 15%. Total industrial production share of the GDP in the US has sunk to 18%. (For comparison, the figure for Russia was 32% and growing.)
Trickle-down, anyone?
It would be false to claim there has not been any trickle-down at all. Millions of people have kept their jobs because of it. But at the same time they have had their real wages squeezed and the overwhelming majority have seen their standards of living drop. Only massive loads of consumer credits and ultra-cheap mortgages have kept up an illusion of superficial prosperity among the middle classes. This debt-fueled prosperity and it’s cursory result, the artificial real estate asset bubble will prove a wolf in sheep’s clothing when the everything-bubble bursts.
There’s been another form of trickle-down, too, a much more real and actually beneficial one. By creating the debt-fueled illusion of prosperity, the Western central banks have actually subsidized China, Russia and all of the emerging world as they have flushed their export goods on the global markets where the Western nations have picked it all up on borrowed money. Thanks for that, though. At the same time, that has driven production costs up in the West with the consequence that their own industries have been priced out.
The humongous borrowings fail to produce GDP growth
Every year since the last bout of the crisis in 2008, growth of debt in the national economies of each Western country has far exceeded the growth of economic output measured as GDP. Below chart shows just how bad it has been in the US.
The debt and GDP growth curves started to diverge in the late 70s, but from
2000 debt has spiraled out of control delivering preciously little incremental GDP. Deduct the wasteful debt and wasteful spending and there would be no growth whatsoever.
Not only has there been no real GDP growth but even the nominal growth has to a crucial extent been provided for by means of the enormous government borrowings. We see from below table that that in each year from 2008 to 2017 even the nominal GDP growth has been less than the growth of government debt, with 2015 and 2015 as the only exceptions when they were on par.
In the peak crisis years 2008 and 2009, debt growth was a staggering 5.7 and 6.3 times that of GDP growth.
The debt game has been equally miserable all over the West, perhaps with the only exception of Germany, who has wisely refrained from participating, even when egged on by liberal economists calling Germany’s more prudent policy unfair to the gambling nations. Below chart shows how much more the Western governments have borrowed than produced economic growth. The chart covers years 2004 to 2013, but the trend has been the same ever since. GDP growth has been vastly less than the growth of the colossal debtberg.|
Note Russia in the graphic as the shining exception.
Below chart ranks countries according to their debt burden relative to GDP. And again you see how debtless Russia is compared with the squandering nations.
These charts concerned only government debt, when we add private debt to it, the picture is doubly worse. From the point of view of a national economy it really doesn’t matter in which form the excess debt expands, public or private. In fact, on an average in the West the situation with household debt is equally dire. Below chart tells you just how bad. And again note Russia as the one shining exception.
And it’s no better with corporations, which have throughout the last decade been enjoying mindboggling levels of central bank largesse in form of virtually unlimited interest-free financing. For example, compared to earnings, US bond issuers are about 50% more leveraged now than in 2007. (*6) https://www.zerohedge.com/news/2019-08-24/corporate-debt-risk-flash-crash
Finally, there is the black hole containing trillions and trillions of bankers derivative risks. Deutsche Bank – which was recently placed in emergency care – alone is said to have 49 trillion dollars in exposure to derivatives. These risks alone could take down the whole global financial system. (*7) https://www.zerohedge.com/news/2019-07-20/bank-49-trillion-derivatives-exposure-melting-down-our-eyes
First no real interest, then on to negative yields
One of the many deadly side effects of the central bankers’ practice on gambling with the national economies is that they first eliminated real interest rates (pushed rates below inflation) and then doubled down on the destruction of sound economic principles by cooking up a system with negative yielding bonds (bonds which yield below zero). By now $30 trillion of the $60 trillion US bond market yield below inflation (no real interest) and nearly $17 trillion worth of bonds are in negative yield territory. That’s mostly made up by sovereign debt of Japan and European governments (12 at the moment) but recently the mass of negative yielding corporate bonds has also doubled to $1.2 trillion. Half of the $5 trillion worth of European government bonds sport a negative yield as well as 20% of European investment grade corporate bonds.
Inflation risk
Normally, this kind of excess liquidity artificially put on the market (aka money printing) would have led to high inflation if not hyperinflation. Several factors have helped to keep prices in check. First, it needs to be pointed out, though, that inflation is actually a lot higher than what the government reports. This has been pretty convincingly proven in the case of the United States. (See, for example, (*8) https://www.zerohedge.com/news/2019-08-17/cpi-constantly-understates-inflation-why-will-lead-catastrophe?fbclid=IwAR0byF4lMciG77ItFvkFhftV9qEnkXAuKaj9oYLmnZn5c8C4ds4E8mie7rk). Official statistics may not see it, but people sure feel it.
Secondly, the asset price bubbles in real estate and financial markets in fact represent inflation, it’s just not officially recorded as such. As it is only the 10% (and increasingly, the 1%) who get the money, they spend it on the stuff that counts for them, stocks and real estate. Keeping their loot offshore also helps to dampen inflation at home. The squeeze on the middle classes and stagnating wages, is sadly an important factor in keeping inflation down. Ordinary people just can’t afford to buy.
One should also note, that resulting from the illusionary debt-fueled prosperity and its effect on keeping the local Western currencies artificially high, there has actually been an inflation in wages and production costs, but only in relative terms in comparison with the emerging world. This in turn has led to further offshoring of manufacturing jobs.
A crucial factor, which in the crazy money printing environment has kept consumer goods from hyperinflating has been imports from the emerging Asia and especially China. Huge growth of the Chinese manufacturing industry coupled with massive influx of cheap labor from the rural countryside into the cities enabled China for a couple of decades to constantly increase its exports to the US and Europe and these countries to keep prices down. (Including by domestic industries having to lower prices in competition). With the Trump trade wars and dramatically increasing protectionism, this will change. And it could get very ugly.
Finally, there is an important consideration that few if anyone seem to understand. That is the fact that the US and other Western countries have been able to print the stupendous amounts of money while keeping rates down and without the currency values crashing only because they enjoy local currency monopolies in their respective territories. The USD has of course been enjoying a global monopoly, but that is fast fading. All the other factors mentioned above (and several other ones), have enabled to prop up and prolong these currency monopolies, but there is a limit to everything. In the coming recession, I would expect some of the lesser currencies to lose their monopoly trust and that would shatter the position of the bigger currencies USD and Euro and force them to raise interest rates. I have earlier written more in detail about this in a report titled How the Dollar and Euro Monopolies Destroyed the Real Market Economy. https://www.awaragroup.com/blog/dollar-euro-monopolies-destroyed-market-economy/
The below chart suggests that the Western countries are already on the way to lose their respective currency monopolies. The BRICS countries (Brazil, Russia, India, China, South Africa) now have a combined GDP (measured in PPP, which is the only correct way to measure the relative size of national economies) larger than not only the G7 countries, but the US and Eurozone economies combined.
At its foundation in 1973, the G7 countries had a combined GDP PPP of 50% of the world economy, by today it is down to 30%. In the same time the nominal GDP share of world economy has crashed from 80% to 40%. The currency monopolies came with the economic superiority, it is therefore only natural that with the economic domination goes the currency domination, too. If we haven’t reached the tipping point yet, then that will happen within 5 to 10 years.
In summary, everything else unchanged, the risk of inflation picking up with just a few percentage points could have the entire Western financial systems coming crashing down due to the pressure on interest rates growing. The Fed and the ECB are continuously speaking about their inflation targets and how they want to pump the markets with more liquidity to raise inflation. There could yet be a big surprise in store for them. Interest rates as such could also be the primary trigger (even without inflation first rising), as nations would have to protect their currencies and attract financing for their colossal debtbergs.
Must add as a P.S. that the incipient flight to gold might well be one of the trigger events for those currencies to lose their monopolies. (Gold price is up 20% since May).
Deleveraging will come
These massive borrowings have delivered nothing of tangible value. Now, when the party is nearly over all there is left are the debt bubbles that have hit the roof. The real values of all the assets below bear no relation to the money that went into inflating the balloons. What’s left is economic hardship for 80% of the people, a crumbling infrastructure and simmering social tensions.
The debt saturation point has been reached, therefore this time it will be different, the central bankers have lost their magic wand and won’t be able to renew the debt binge and extend it with one more decade. Instead, there will be a day of reckoning. Governments and corporations will have to put their act together and let the market weed out the failed entities. Those who cannot carry the debt, will have to shed it. There will be bloodbath with defaults, bankruptcies and massive unemployment. – Perhaps a revolution here and there. – There will be no choice, deleveraging must happen.
Now, whether this system will come crashing down or just slowly die as it trundles downhill will not matter all that much. It will eventually die either way. Most people would prefer the slow motion option, but only with the crash would a cure come. Whatever, it has become increasingly difficult to stave off the crash and this time around, the financial markets would take the real economy down with them big time.
The impressive figures on Russia
The question then is, who would be left standing? Naturally, those who are less leveraged. Now, scroll back to have a new look at the above charts on government and household debt. Find the position of Russia there? That’s right. Russia is the country with – by far – the least debt, both public and private. Having after 2014 following sanctions been cut off from the Western debt orgy, even Russian corporations are shielded against a possible Western debt apocalypse.
In a global recession, no country is safe, but Russia looks to have quite a lot going for it in terms of economic advantages. Russia’s national balance sheet is next to none with by far the lowest debt of all major countries. All economic actors, the government, corporations and households are economically solid and minimally leveraged. Not only is the government virtually debtless, but it has again replenished its spectacular forex and sovereign wealth fund reserves. On top of that comes a hefty budget surplus. – Yes, you heard that right, surplus. In a time when all Western countries are in a chronic fight against deficits, you rarely even hear the term budget surplus. And more, Russia runs the world’s third biggest trade surplus. Add to that the current account surplus, and there’s the hat trick in form of your classic triple surpluses. Russia has a lot more going for it, too, as we will see.
Let’s look at Russia’s present financial health report.
Thanks to import substitution (domestic production instead of imports to neutralize sanctions) Russia’s industrial production rose 2.6% year-on-year in June. (USA +1.1%, UK +0.8%, Japan -2.4%, Germany -5.9%). Above, we mentioned that US industrial production was up with as little as a cumulative 5% since 2008 to date. In the same period Russia’s industry grew 18% notwithstanding the hardships of sanctions and sharp drop in oil price. In fact, since 2014 when the sanctions were first imposed, Russia’s industry has grown 12%.
Russia’s merchandise trade surplus for the first half of 2019 was $93 billion, ranking third in the world after China and Germany and before South Korea. Imports were down by 3%, the other side of the coin of growing domestic manufacturing. Even when exports also were slightly down, lower imports will keep the surplus on track to reach levels near $200 billion for the full year, just under last year’s record $212 billion.
Q1 current account surplus clocked in at $33 billion, up 10% over the year.
In this connection, it might be helpful to remind that Russia’s economy is nowhere near as dependent on fossil fuel extraction as it is habitually believed in the West. In fact, oil and gas only account for 10% of Russia’s GDP according to World Bank statistics. (In 2017, total natural resources share of GDP was 10.7%, but that includes minerals and forest, too).
We also need to point out that Russia has an enormous strength by way of being the world’s most self-sufficient major country. Russia has the by far lowest level of imports relative to GDP of all countries, as evidenced by below table. It shows that Russia’s imports as a share of GDP was as low as 7.2%, while the corresponding level for Western European countries was between 30 to 40%. The extraordinary low levels of imports in a global comparison obviously signifies that Russia produces domestically a much higher share of all that it consumes (and invests), this in turn means that the economy is superbly diversified contrary to the claims of most so-called Russia experts.
Despite initial scares, inflation has remained low even when the VAT rate was from the new year raised from 18% to 20%. The rolling 12-month inflation runs at 4.6% but with the declining trend the full year inflation is expected to hit the central bank’s target 4%.
The job market continues strong with record low unemployment levels, while the job participation rate has not deteriorated (so no tricks here). The July reading of 4.6% translates to 3.4 million unemployed, which is low for a country with a population of 146 million. The strength of the labor market was underscored by an increase of real salaries by 3.5% by July. This while disposable income otherwise has remained subdued.
Whereas the US is combating persistent budget deficits (latest reading, a deficit of 4.5% of GDP) – likewise the EU countries – Russia mustered a huge budget surplus equal to 3.4% of the GDP by July this year.
Russia’s foreign exchange and gold reserves have also done a spectacular comeback reaching $520 billion.
The Russia sovereign wealth fund surged in July to reach a value equal to 7.2% of GDP.
Despite the wholesome macroeconomic environment and impressive figures, Russia’s GDP growth has been less than 1% so far this year (year-on-year 0.6% in Q1 and 0.9% in Q2). However, by the looks of it the fundamental economy seems to be growing and modernizing, while the drag on the growth comes from depressed household consumption. What’s more important, though, is that while Russia’s growth is hovering around the 1%, so is that of all of the Western world. (Accuse me of whataboutism if you will, but these things need to be put in perspective). Q2 growth in the Eurozone was 1.1%, with Germany even about to slide into recession. UK clocked in at 1.2% and Japan at 0.4%. (All figures, year-on-year). The US showed only 2% (revised down 28 August) even when fueled by a mountainous budget deficit set to reach $1 trillion for the fiscal year and despite all that easy money the Fed keeps pumping out. Only China remained firmly in growth territory with 6.2%.
But, the real conundrum is, how can Russia produce the same GDP as all the Western countries with their seemingly limitless injections of give-away money? How is it possible that all those trillions and trillions that the Western central bankers have thrown on the economy do not produce any real incremental economic output?
The big disadvantage Russia has compared with the Western countries is the exorbitant real interest rate that the central bank maintains. The steering rate is presently 7.25%, with inflation predicted to be 4%, that translates into a primary real interest of 3.25%. Compare that with the negative real interest – and even negative yields – of competitor countries. As, the Russian central bank has failed to create a real banking sector which would lend according to international standards to the country’s businesses, the ones that are lucky to get a loan at all would look to pay interest at the level of 15% of more (save the largest corporations). The Governor of the Russian Central Bank Elvira Nabiullina does not see this as a problem, though. She has said that instead she would pin her hopes on improving the countries investment climate (sic!). (She calls for improvement of corporate governance, development of human capital, and all kinds of nice things. That would sure do it). (*9) http://ibcongress.com/en/news/nabiullina-nazvala-glavnye-ogranichenija-dlja-razvitija-ekonomiki-rossii/
Just this week, Putin called a high profile meeting with Nabiullina, the minister for economic development Maxim Oreshkin, and the finance minister Anton Sulanov, to express his deep concern with the sluggish GDP growth and stagnating income. No doubt, that the depressed income is not only a drag on the economy but on the president’s popularity. There is only one quick fix for it. The government and the CBR must ditch their overzealous austerity programs. It’s good that Russia is not over leveraged with debt, but certainly some debt would be in order to finance the infrastructure and other national strategic development programs instead of ripping it off people’s backs. Free the funds for raising pensions and public service salaries instead. And most importantly, Nabiullina must lower the rates and not run real interests in excess of 3% when the rest of the developed world is in negative territory. There is no other quick remedy for raising people’s income. That’s Putin’s choice. Hope somebody tells that to him.
In conclusion, we are not saying that Russia would not be hurt by the coming recession, we merely express our confidence that Russia is among the world’s countries best placed to cope with it.
Jon Hellevig, originally from Finland, works and lives in Moscow since the early 1990s. By education lawyer and MBA, Hellevig first worked in Moscow as a financial controller for a Russia-American joint venture engaged in shipment of oil and later became founder together with Russian partners of a business administration and consulting firm. Hellevig has written several books on Russian taxation and labor law. From mid-2000, Hellevig has written books on philosophy and social practices. The combination of his experience of actual life and governance in Russia with the theoretical framework pushed Hellevig to engage in the public debate about Russia’s development path including by way of writing articles for the part of the media, which is interested in the truth. Having at least a working knowledge of seven languages (English, Russian, Finnish, Swedish, Spanish, German, and French), Hellevig has been able to follow first-hand the news across the Western hemisphere. Doing so, he realized a decade or so ago, that all the Western media in unison report the same stories about Russia and circulate the same fabricated scandals in the same words at the same time. Frustrated with the totalitarian style propaganda lies about Russia, Hellevig began to regularly produce fundamental analysis reports on the Russian economy in the wake of the sanctions that the Western powers imposed on Russia following the Ukrainian crisis in 2014
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ALL CAPTIONS AND PULL QUOTES BY THE EDITORS NOT THE AUTHORS
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Dissent Is Being Criminalized Right Under Our Noses
Mike Siegel
“Federal prosecutors could charge terrorism if actions might ‘affect’ or ‘influence’ a government policy.”
If you painted “Black Lives Matter” on a wall to advocate against police violence, that could be prosecuted as terrorism.
Many of us are deeply concerned about the recent wave of mass shootings and hate crimes that have taken place across the United States. As the Department of Justice reported , in 2018 alone there were 25 race-based terrorist attacks on U.S. soil, each committed by an alleged white supremacist. Immediate action is needed to address this crisis and tragedies like the Aug. 3 shooting in El Paso, Texas.
McCaul—Texas politico, Homeland Security, Republican, "terrorist expert"—you connect the dots. A land that specialises in producing dangerous jingo reactionaries.
So I read with interest a recent press release of Rep. Michael McCaul. (1)—the Republican incumbent in the Texas 10th Congressional District and my opponent in the 2018 election—in which he announced a new bill to respond to domestic terrorism.
My hopes for reasonable legislation were quickly dashed, however, and replaced by deep concern.
The proposed bill would create a broad definition of “domestic terrorism” to include any attempt to “affect” or “influence” government policy or actions. And it would include property damage—even attempted property damage—as a terrorist act subject to a 25-year prison sentence.
In other words, if you opposed the Dakota Access pipeline at Standing Rock and wanted the government to revoke the pipeline permit, you might be considered a terrorist.
If you painted “Black Lives Matter” on a wall to advocate against police violence, that could be terrorism, too.
And if you threw a rock at a bank window to take a stand against the 1% —even if you missed—you could spend half your life in a federal prison.
So far as I can tell, McCaul and his co-sponsors are taking advantage of a moment of profound insecurity to advance a bill that will criminalize dissent.
A Close Reading
The full bill is less than four pages, and would accomplish three main things: 1) define the “intent” necessary to commit a crime of domestic terrorism; 2) identify five sets of qualifying offenses; and 3) punish unsuccessful “attempts” and “conspiracies” to commit these offenses.
The definition of “intent” shows the bill’s sweeping impact, far beyond responding to recent mass shootings.
In regard to five criminal offenses, an act is “domestic terrorism” if is performed “with the intent to intimidate or coerce a civilian population or influence, affect, or retaliate against the policy or conduct of a government.”
As a civil rights lawyer, I’m trained to look for vague language, because that is often the gravest threat to constitutional rights. Here, federal prosecutors could charge terrorism if actions might “affect” or “influence” a government policy. This is an extremely broad definition of terroristic intent.
Five crimes are included in the bill’s broad definition of domestic terrorism: murder, kidnapping, aggravated assault, simple assault and property damage. With respect to the crimes against people, these are already punishable under existing state and federal law, although the bill would impose longer sentences, such as 30 years for assault. Property damage would result in a 25-year sentence, far beyond the bounds of any state vandalism law.
The final key aspect of the bill has to do with how it treats unsuccessful attempts and conspiracies: “Attempts or conspiracies to commit an offense … shall be punished in the same manner as a completed act of such offense.” In other words, don’t even find yourself in the same room as someone contemplating political property damage—or you can be deemed a terrorist, too.
Context: Standing Rock and “Antifa”
The bill includes the word “conveyance” in its definition of property damage, which is a signal that the Standing Rock protests were likely a consideration.
On the same day as McCaul’s press release, The Intercept reported that American Fuel & Petrochemical Manufacturers is lobbying to enact legislation that will enhance criminal penalties for any pipeline damage. With the support of the American Legislative Exchange Council, it has enacted laws in nine states. Oklahoma, for example, created a crime punishable by up to 10 years in jail for damage to a pipeline—again, far beyond existing federal penalties.
The McCaul bill mirrors this approach, and creates major federal crimes for property damage connected to a political cause.
For all of the crimes in question, from murder to vandalism, existing penal codes give prosecutors ample room to bring cases. Nothing is stopping federal authorities from charging mass shooters with hate crimes or crimes of violence and seeking sentences up to and including life in prison and the death penalty.
But there is currently no law that would empower federal prosecutors to charge protesters with major federal crimes for property damage caused during a protest.
“Bree Newsome Bass, who scaled a flagpole in Charleston, S.C., to remove a Confederate flag would be considered a terrorist.”
While this bill is rolled out, President Trump is ranting daily against “antifa” (i.e., anti-fascists). Recent news footage showed clashes in Portland, Ore ., between white supremacist groups and anti-fascist demonstrators. Were those confrontations tantamount to domestic terrorism? The McCaul bill would give federal prosecutors near blanket authority to charge either group with terrorist charges. And Trump has already made clear which group he would focus on.
There are countless examples of protest activity that McCaul would open to terrorism charges. As for Bree Newsome Bass, who scaled a flagpole in Charleston, S.C., to remove a Confederate flag? She’d be considered a terrorist. Students at Duke University who toppled a Confederate monument ? Also terrorists.
Under this definition, the Boston Tea Party itself was a terrorist act: “Property damage, with the intent to influence a government policy.”
This is not the way we reduce mass shootings in America. This is not a tool to confront white supremacist attacks. Rather, this is an open invitation to trample the Constitution and give free reign to a dictatorial regime.
(1) QUITE A PIECE OF WORK—ANOTHER GIFT FROM TEXAS
Michael Thomas McCaul Sr. (born January 14, 1962) is an American attorney and politician serving as the U.S. Representative for Texas’s 10th congressional district, since 2005. During 113th, 114th, and 115th Congresses, he served as Chairman of the House Committee on Homeland Security. Congressman McCaul is a member of the Republican Party. The district stretches from Austin to Houston. As of 2018 he is the fifth-wealthiest member of Congress.[2]
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
ALL CAPTIONS AND PULL QUOTES BY THE EDITORS NOT THE AUTHORS
Read it in your language • Lealo en su idioma • Lisez-le dans votre langue • Lies es in Deiner Sprache • Прочитайте это на вашем языке • 用你的语言阅读
[google-translator]
Keep truth and free speech alive by supporting this site.
Donate using the button below, or by scanning our QR code.
And before you leave
THE DEEP STATE IS CLOSING IN
The big social media —Google, Facebook, Instagram, Twitter—are trying to silence us.