TRICKs!

Zoltan speaks. Worth reading.

1. Zoltan Pozsar, Credit Suisse. 24 August 2022.

(T)he U.S. got very rich by doing QE. But the license for QE came from the “lowflation” regime enabled by cheap exports coming from Russia and China. Naturally, the top of the global economic food chain – the U.S. – doesn’t want the lowflation regime to end, but if Chimerica and Eurussia are over as unions, the lowflation regime will have to end, period. As we noted in our prior dispatch, the special relationship between China and Russia (”Chussia”) is a powerful one: a marriage of commodities and industry, uniting the largest commodity producer (Russia) and the factory of the world (China), potentially in control of Eurasia…

The special relationship (“alliance”) between China and Russia is a little bit as if one disenfranchised spouse (China from the Chimerica union) found another (Russia from the Eurussia union ) to form an economic union out of revenge: one gets commodities it does not have, and the other chips and other stuff it can no longer get from the West owing to Western sanctions. The other two spouses are getting together too to form a union, but this one is more like a “shotgun marriage,” in which one gravely needs the other for economic security.

Wars, like the currently unfolding economic war, are about control. The control of technologies (chips), commodities (gas), production (zero-Covid), and straits – chokepoints like the Taiwan Strait, the Strait of Hormuz, or the Bosporus Strait. Wars are also about alliances. In today’s complex conflict between the U.S. on the one hand and Russia and China on the other, the world is best described by “the enemy of my enemy is my friend”: Russia and China hold naval exercises with Iran around the Strait of Hormuz; Iran has recently hosted talks between Russia and Turkey regarding grain shipments through the Bosporus Strait; not surprisingly, the first shipment sailed to the Syrian port of Tartus, which hosts a technical support point (not a base) of the Russian Navy; even more recently, Turkey and Russia agreed to clear bilateral trade flows, including gas, in rubles.

In this complex web of geo-strategic hotspots around the Eurasian landmass, the noose is tightening for the “friends of my enemy”: Ukraine is under attack; Taiwan was effectively subject to a weeklong sea and air blockade recently; and South Korea is being pressured by China to uphold the “Three Nos” policy, the essence of which is to end all forms of military cooperation with the U.S., while at the same time North Korea says the peninsula is on the “brink of war ” – the checkmate-like position that Seoul finds itself in is so hard to navigate that President Yoon didn’t meet Speaker Pelosi on her stop in South Korea….and opted for theater instead (“strategic ambiguity”).

“Our commodities, your problem” is branching into “chips from our backyard, your problem” and might also branch into “our straits, your problem”: the U.S. threatening Turkey with secondary sanctions for financial cooperation with Russia should be understood in light of the inconvenient geographic fact that NATO’s access to the Black Sea goes through Turkey’s Bosporus Strait. That makes the threat of sanctions only that – a threat, or a “check.” If I step back, I see a fierce, geo-strategic game of chess in progress on the Eurasian landmass.

Forget the BRICS….and try to focus instead on Turkey, Russia, Iran, China, and North Korea playing “TRICKs” on the Eurasian landmass – an alliance of economies sanctioned by the U.S. getting ever closer economically and militarily. This Eurasian “alliance of the sanctioned” is forcing the friends of the U.S. to play pragmatically: for example, despite pressure from the U.S., India decided to increase its imports from Russia and participate in Russia’s Vostok-2022 military exercises, and the U.S.’s “no-response” to China’s sea and air blockade of Taiwan puts South Korea in a very difficult situation given the fact that the U.S. decided to not include South Korea in the AUKUS defense pact. As Pippa Malmgren has recently noted: “the feeling in Washington, D.C. is that South Korea chose China over the U.S.; their “strategic ambiguity” is now clear. Seoul is no longer fighting China’s ambitions in the North. […] If the two Koreas are reconciled, there is no need for the U.S. to station 30,000 troops to protect South Korea ” – and that may well explain why President Yoon didn’t meet Speaker Pelosi.

No way you say…..Damascene Conversions happen only in the Bible, but not in geopolitics. You are wrong: read history or grow up in Hungary. I was eleven years old when on June 16th, 1989, a young Viktor Orban demanded that Soviet troops withdraw from Hungary. That was just months before the Fall of the Berlin Wall on November 9th, 1989, an event we associate with the birth of globalization…..and economists associate with the birth of the “lowflation” regime. (Read the rest. Source: interest.co.nz)