Bonfire of the Governments, Part One

Expect chaos to continue making new highs.

Guest post by Robert Gore at Straight Line Logic

When Machiavelli wrote The Prince he had Vladimir Putin in mind. The president of Russia has adroitly sought, maintained, and used power, the theme of Machiavelli’s masterpiece (see “The Black Belt Strategist,” Robert Gore. SLL, July 19, 2018). That he is an amoral snake is both true and laughable as a criticism coming from the amoral snakes who populate Western power structures. Nobody who slithers to the top of those pits is anything other than an amoral snake. Western snakes hate Putin because he’s repeatedly outsnaked them.

Call Putin a rattlesnake for he clearly rattled before Russia’s invasion of Ukraine. That he was ignored is a worrisome indication of the epistemological breakdown that grips the West. Its leaders are unable to grasp that Putin meant what he said because they rarely mean what they say. Facts are not facts and the truth is whatever narrative they’re promoting at the moment. It’s become axiomatic that power flows from control of the narrative.

Until it doesn’t. Power flows from understanding reality and making use of what it can offer. If narratives were power, Ukraine’s army would be in Moscow by now. We haven’t seen this kind of excessive excrement from governments and their media minions since . . . Covid. Narratives are for simple-minded sheep and the wolves who devour them.

The propaganda is devoid of any mention of: the 2014 U.S.-sponsored coup against a democratically elected government; rampant corruption within the Ukrainian oligarchy; Ukranian payola to American political figures (e.g., the Bidens and Clintons); widespread neo-Nazi infestation of Ukraine’s military and government; their eight-year war on its Russian-heritage citizens in eastern Ukraine; the government’s willful failure to adhere to the Minsk accords that were meant to resolve that conflict, or the latest—U.S. supported bioresearch labs in Ukraine.

Simply trying to find accurate information about the military situation in Ukraine is virtually impossible amidst the propaganda onslaught and the censoring or shutting down of Russian information sources. Previous wars have featured regular press updates and maps that detailed the situation on the ground, that is, reality. Not this one. No matter how loathsome the opponents, it’s always a good idea to know what they’re doing and saying, even when its demonstrably untrue. During the first Cold War the West had armies of analysts studying every scrap of information that came from the Soviet Union.

Now Western leaders and most of the populace are flying blind. They’re children sticking their fingers in their ears and screaming over anyone saying anything they don’t want to hear. It’s yet another sign of epistemological breakdown and reflects a terrifying feedback loop. Mental chaos leads to chaos in reality, which leads to more mental chaos and so on.

Trying to explain the Russian position on Ukraine, even when the explanation is festooned with disclaimers that it’s not a justification of the invasion or Putin, is as useless as trying to explain the dangers of Covid vaccines, even by doctors and scientists who have promoted vaccines their entire careers and who have had the Covid vaccines themselves. The children have their masks jabs, and boosters, they’re waving the blue and gold. You’re antivax, pro-Putin, and must be canceled immediately—that’s it, end of story.

This childishness can only lead to disaster, which has arrived on multiple fronts. Russia is a net exporter of grain, minerals, metals, oil, and natural gas. The U.S. and non-Russia Europe are net exporters of debt. The former are exchanged for the latter via the SWIFT inter-bank messaging network, fiat currency and debt’s global circulatory system. Some Russian banks’ access has been cut off, stopping the flow of debt and the counter flow of Russian exports. Although payments for gas and oil exports have been exempted, Russian oil and gas still trades at a steep discount on fears the exemption will be lifted if the war gets worse.

The exemption reflects Europe’s dependence on Russian oil and gas. However, Germany canceled approval for the completed Nord Stream 2 natural gas pipeline from Russia. The energy situation in Europe was already strained, with natural gas trading at a large premium to the rest of the world. Renewable energy is meant to replace fossil fuels and nuclear, but solar and wind are intermittent. The stopgap is coal, ironically the dirtiest fuel. European energy’s shortages and high price hurt the competitiveness of its industries, particularly Germany’s. Stopping Nord Stream 2 exacerbates the problem.

Biden administration energy policies have shifted towards the same delusory green agenda, making the U.S. an importer again after it had achieved energy self-sufficiency during the Trump years. Although it’s not a huge percentage of total energy used, the U.S. has been importing Russian oil, gas, and coal, giving Russia additional wherewithal to make war on Ukraine.

Recognizing that awkward fact, the administration banned those imports by executive decree (now the favored form of rule), which will put more pressure on prices from non-Russian energy sources. Ascending gas prices are not helping the administration politically, notwithstanding its blatant lies that they are due solely to Russia’s invasion. (Prices had almost doubled prior to the invasion.)

The U.S. and Europe’s energy miscues are matched by their financial folly, which amount to children holding their breath until they suffocate and die. Stopping Russia’s exports via the SWIFT cutoff is severe. The price of nickel, a big Russian export, recently jumped 250 percent in one day.

Tsingshan Holding Group, a Chinese stainless steel giant whose largest creditor is J.P. Morgan Chase, has a huge short position in nickel. The London Metals Exchange, caught between its own Chinese owners, Tsingshan, and one of the world’s systemically important banks, shut itself down and is trying to undo some trades. A tentative settlement has been reached, but this kind of mess can reverberate quickly throughout the world’s financial daisy chain, sparking globalized financial meltdown. It certainly doesn’t increase faith in financial clearinghouses.

That’s not the worst of it. Curtailed access to SWIFT hinders Russian companies’ ability to service their debts. As with most of the sanctions regime, this hurts Europe the most. Several of its banks have large exposures to Russia debt, and its banking system was dangerously over-leveraged pre-Ukraine war, much more so than the U.S.’s. Bank insolvencies in Europe could also reverberate across the planet, as mortgage and mortgage-security insolvencies did in the 2007-2009 financial crisis.

Even that’s not the worst of it. The U.S. and Europe crossed a monumentally important red line when they froze the Russian central bank’s foreign exchange reserves. The U.S. dollar’s reserve currency status has given the U.S. what’s been called an exorbitant privilege—the world sends it goods in exchange for its fiat currency, of which it can produce unlimited amounts.

Freezing the Russian central bank’s dollar reserves tells the world the reserve currency is no longer a safe haven. The move is not entirely unprecedented—the U.S. has frozen the Afghanistan and Venezuelan central banks’ reserves—but freezing the reserves of a nuclear power is an order of magnitude greater breach of global financial arrangements and contracts.

Joining Canadian dollar deposits, some of which Justin Trudeau recently froze, U.S. dollar deposits can now be frozen and potentially expropriated on a political whim. Of course dollars have been stealth-expropriated on political whim via monetary inflation since the Federal Reserve was established in 1913, but this crystalizes the threat that nations who don’t toe the U.S. line will have their dollar reserves stolen.

Russia and China have been reducing their dollar holdings—which they often invested in U.S. Treasury debt—for years, switching to euros, yuan, yen, and gold. They’ve also created alternatives to SWIFT. Now that the U.S. government has demonstrated that holding dollar deposits is like caching stores of food in a wolves’ den, this move is sure to accelerate until their dollar holdings are the bare minimum required for international trade.

The Russians have a financial nuclear option. As exporters of oil, gas, crucial raw materials and industrial goods, they can demand payment in gold rather than in the fiat currencies the U.S. and Europe have now rendered worthless to them. With this one masterstroke Russia would collapse what Alasdair Macleod calls “the global fiat Ponzi scheme.” The reserve currency will no longer be a fake money whose value is only maintained by political promises not to produce too much of it.

Gold—real money (see “Real Money,” Robert Gore, SLL, September 9, 2015)—will be restored to the place it has held for centuries as countless government-issued fiat currencies went to their ultimate value: zero. The current crop of fiat currencies is headed to the same destination, but the Russian nuclear option would bring down the curtain on them once and for all.

Russia and China are both large producers of gold and their governments have been stockpiling it for years. The U.S. government reportedly owns 8,000 tons of gold (Russia has a known 2,000 tons and Macleod estimates the Chinese government has 20,000 tons), but those holdings have never been audited and calls to do so have been fiercely resisted. Unknown as well is how much of the U.S. government’s physical gold has been collateralized, leased, or is otherwise tied into derivatives in the paper gold market. Tellingly, the U.S. has discouraged other countries for whom it acts as custodian of their gold reserves from withdrawing them.

War is the ultimate chaos and the Ukraine-Russia war has sparked another upside breakout. To say that the military situation favors Russia, or that the sanctions against it will end up hurting the U.S. and Europe more than Russia, or that Russia can bring down the global financial system is only to say that one way or another the situation adds to the chaos. Assuming Russia eventually achieves its military objectives in Ukraine, the U.S. will undoubtedly foment an insurgency by feeding weapons and the usual unacknowledged mix of intelligence spooks, covert military advisors, and private mercenaries into an Ukrainian resistance.

The goal is a long-running and enervating guerrilla war that drains Putin’s support and leads to his ouster. Cheap Stinger missiles will take out expensive Russian aircraft and cheap Javelin missiles will take out expensive Russian tanks. The template is the successful mujahideen-led and U.S.-aided war against the Soviet Union from 1979 to 1989 in Afghanistan, often credited with helping bring down the Soviet government two years after its military withdrawal.

Syria may end up as the actual template, an effort by U.S.-aided jihadist groups to regime change that nation’s leader, Bashar al-Assad, which failed after Russia came to Syria’s defense. Even were that the case, if Putin thinks he can invade Ukraine, impose his objectives, and then withdraw with the country pacified and compliant, he’s as deluded as American schemers have been with all their surgical strikes, covert operations, limited wars, and regime changes since World War II. Insurgencies are always messy regardless of who “wins.” Ukraine has become another theater for the uncontrollable chaos engulfing the world.

It’s not hard to imagine what forms further amplification of that chaos might take. Modern agriculture is dependent on energy and fertilizers are made from minerals of which Ukraine and Russia are significant suppliers. Both countries also export grains. Skyrocketing food prices and famine in some areas loom, and food riots and other forms of civil unrest are sure to follow.

There is no limit to the pandemonium either centralized actors—governments and globalist institutions—or decentralized actors can wreak. Infrastructure is never completely protected. Electrical grids can be short-circuited, water supplies poisoned, transport and logistics disrupted or destroyed, and the internet sabotaged. The World Economic Forum’s Cyber Polygon “simulation” may well be an eerie harbinger of that last possibility, just as its Event 201 in October of 2019 presaged the Covid-19 pandemic. We’re still early days in chaos’s lengthy run.

Controlling chaos requires energy, resources, and production. While there is no way to determine the mathematical relationship between chaos and control (remember Get Smart?), that it is direct and exponential seems a reasonable hypothesis. Herein lies the contradiction at the heart of the globalist design. They are fomenting ever-increasing chaos while destroying the energy, resources, and production necessary to control it.

This is Part One. Part Two will be posted next week.

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