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Is America Preparing For The Wrong War?

Politics / GeoPolitics Apr 25, 2014 - 04:18 PM GMT

By: Raul_I_Meijer

Politics

Arseniy Yatsenyuk, PM in name only of certain parts of what was once Ukraine, today solemnly declared that Russia wants to start World War III. I am not kidding you. He said it this way: “The world has not yet forgotten World War II, but Russia already wants to start World War III.” An estimated 28 million Russians died in World War II, which might be more than in all other nations combined, so if there’s one country that has not forgotten it, it’s Russia. Yatsenyuk’s remark needs to be seen in that light, because he knows very well how it will be received in Russia. That’s why he says it. It’s such a dark sort of provocation that one might suspect it’s meant to start a war. It’s not that different from accusing a group of Jewish people of wanting to start a holocaust.


But Russia knows that Yatsenyuk may be a fool, but much more than that he’s a shill and a tool, and his words are scripted. As Russian FM Lavrov said a few days ago, the US runs the show in Ukraine. Which is why discontented protesters in eastern cities, who may be armed but are still Yatsenyuk’s own people and compatriots, can first be labeled terrorists, then have their own army set against them, and when that army refuses to shoot their own neighbors, see it be replaced by Special Forces, in which there can be no doubt Blackwater mercenaries play an increasingly large role. Putin said turning your army against your own people proves you’re a junta. He may have a point.

The little man inside says that Yatsenyuk is not the only scripted puppet in this wargame theater. Obama looks like he’s playing that same role. He had maintained a good working relationship with Lavrov and Vladimir Putin, which greatly helped defuse tensions in the Middle East. And now all of a sudden it seems as if America is no longer interested in defusing anything, no dialogue, no diplomacy, it’s all just words of war. Headlines in media such as Forbes have even started to talk about nuclear war. And you wonder; where is all this coming from? US Secretary of Hair John Kerry manages to outshout the foot in his mouth, and anything that comes out is takes by western reporters as gospel, damn proper journalistic standards. RT, labeled by Kerry today as a “propaganda bullhorn” (which is at least a little funny), used these words:

Kerry’s described protesters as those brandishing “the latest issue from the Russian arsenal, hiding the insignias on their brand new matching military uniforms, and speaking in dialects that every local knows comes from thousands of miles away.” Kerry again cited photographs – the most notorious of which Kiev claimed proved the involvement of Russians in Ukraine. “Some of the individual special operations personnel, who were active on Russia’s behalf in Chechnya, Georgia and Crimea have been photographed in Slavyansk, Donetsk, and [Lugansk],” he said.

The New York Times, which carried the photos and unverified claims from Kiev, published a climbdown two days later – ‘Scrutiny Over Photos Said to Tie Russia Units to Ukraine’, where it admitted failing to properly verify the Kiev photo dossier. The photographer who took and published a key photo contradicted Kiev’s claim it had been taken in Russia. While the State Department acknowledged the error, Kerry continued to refer to ‘evidence’.

Kerry cited NATO’s top military commander Gen. Philip M. Breedlove, who claims “a military operation” is being “carried out at the direction of Russia.” Contrarily EU intelligence head, Commodore Georgij Alafuzoff, assessed the so-called ‘green men’ are “mostly people who live in the region who are not satisfied with the current state of affairs.” Speaking on behalf of “the world,” Kerry “rightly judged” that Ukraine’s interim government is “working in good faith” and has implemented all the points of the Geneva agreement.

Now I don’t want to widely wax into a story about neocons, but I do wonder who got to Obama to make him do his about-face. For all of his long list of failures, he’s never before sought to draw blood in his public speeches. And if you want to figure out who’s started to overrule him, you easily, if not inevitably, end up in the far right corner of America. Some two weeks ago, I think it was Bloomberg that ran a piece saying Putin wouldn’t dare take Alaska, and I was thinking that is the craziest thing I’ve read in a while. And it doesn’t really matter that Putin last week at his press-op said Alaska was too cold to annex, it’s about the ideas US media try to plant in people’s brains. and get away with. It’s all such an insult to the few remaining American functioning neurons left, and they should not take that sitting down. I suggest you tell those blood thirsty octogenarian wankers like McCain and Brzezinski you don’t want to send your kids into another war. They won’t live to see the end of it anyway.

Besides, the US might be well advised to focus on another kind of war that picking up speed, that of global currencies. Unless all the shouting over Ukraine is merely an attempt to hide the fact that it has already conceded defeat, and all bets are now on the armed forces. The loss of value in the Chinese yuan (renminbi) is taking on “real proportions”, and that has Tyler Durden wonder what it all means:

The PBOC’s willingness to a) enter the global currency war (beggar thy neighbor), and b) ‘allow’ the Yuan to weaken and thus crush carry traders and leveraged ‘hedgers’ is about to get serious. The total size of the carry trades and hedges is hard to estimate but Deutsche believes it is around $500bn and as Morgan Stanley notes the ongoing weakness means things can get ugly fast as USDCNY crosses the crucial 6.25 level where losses from hedge products begin to surge. This is a critical level as it pre-dates Fed QE3 and BoJ QQE levels and these are pure levered derivative MtM losses – not a “well they will just rotate to US equities” loss – which means major tightening on credit conditions…

Remember, as we noted previously, these potential losses are pure levered derivative losses… not some “well we are losing so let’s greatly rotate this bet to US equities” which means it has a real tightening impact on both collateral and liquidity around the world… yet again, as we noted previously, it appears the PBOC is trying to break the world’s most profitable and easy carry trade – which has created a massive real estate bubble in their nation (and that will have consequences). [..]

In other words: Is Beijing merely trying to damage the USDCNY carry trade in an effort to diminish the role and size of the shadow banking system, or is that merely a sleight of hand behind which it – desperately – tries to regain the trade and related growth numbers it’s losing hand over fist? Durden:

The bottom line is the question of whether the PBOC’s engineering this CNY weakness is merely a strategy to increase volatility and thus deter carry-trade malevolence (in line with reform policies to tamp down bubbles) OR is it a more aggressive entry into the currency wars as China focuses on its trade (exports) and keeping the dream alive? (Or, one more thing, the former morphs into the latter as a vicious unwind ensues OR the market tests the PBOC’s willingness to break their momentum spirit). The escalation of the unwind in recent days suggests the vicious circle is beginning.

The flood of less than positive numbers emanating from China recently, despite the leadership’s attempts to play them down, tell us China is seriously hurting. And by now it’s large enough to spread that hurt around the world, if only to lessen its own pain. What Durden doesn’t mention but also plays a major role here is Japan’s troubles in exports and trade deficits. If China plays beggar thy neighbor, the closest main neighbor it has after all is Japan. And the yen is already down 20%. Which is painful for China. The Chinese government pretends it can do a controlled demolition of its credit bubble, but how many times has that been done successfully? As anyone knows who’s ever stuck needles and pins in a fully inflated air balloon, bubbles tend to pop in unexpected ways and places. Durden quotes Russell Napier:

“Mercantilist alchemy transmutes China’s external surpluses into foreign exchange reserves and renminbi. But with capital outflows from China at record highs, those surpluses are only maintained due to its citizens’ foreign-currency borrowing. Bank-reserve and M2 growth are already near historical lows and are driving tighter monetary policy. This will lead to severe credit-quality issues and force the authorities to accept a credit crunch or opt for a major devaluation of the renminbi. They will do the latter; and despite five years of QE, the world will get deflation anyway.”

I think it should be obvious that the US is not the first and foremost casualty here for now, since the Euro picks up much more of the hurt for now, late as the EU is to the currency musical chairs game (that really is a good metaphor). But when you start talking trade in general and and carry trades in particular, the USD is still the reserve currency, and even if Europe suffers the first blows and will stumble if not start falling, the American dollar has a lot more exposure. In unflattering terms not meant to hurt anyone, the US has a much bigger and therefore slower ass to put down on that chair when the music stops.

That, I would think, is a bigger risk to Washington than Ukraine war games. Unless, as I said earlier above, it has already conceded defeat. If that’s the case, a war over pipeline access may have to be seen in a whole other light.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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