Armstrong Economics Blog/China Re-Posted Feb 28, 2022 by Martin Armstrong
BRASILIA, BRAZIL – NOVEMBER 13: (RUSSIA OUT) Russian President Vladimir Putin (L) greets Chinese President Xi Jinping (R) during their bilateral meeting on November 13, 2019 in Brasilia, Brazil. The leaders of Russia, China, Brazil, India and South Africa have gathered in Brasilia for the BRICS leaders summit. (Photo by Mikhail Svetlov/Getty Images)
Russia and China have aligned in recent years both financially and politically. Russia recently showed support for China during the Beijing Olympics as other world leaders declined to send even their diplomats. Earlier in the month, Vladimir Putin and Xi Jinping unified in their opposition to NATO expansion and stated that there are “no limits” to the China-Russia partnership.
According to the Carnegie Moscow Center, as reported by Business Insider, trade has dramatically increased between Russia and China. In 2004, the two nations traded $10.7 billion, but now exchange $140 billion between the two. As for the leaked instructions, the Chinese Communist Party is studying Russia’s Ukraine invasion for tips. “In the future, China will also need Russia’s understanding and support when wrestling with America to solve the Taiwan issue once and for all,” the post noted. Alliances have been formed and Russia and China are now standing as a united front against the West.
On February 10, President Joe Biden stated that he would “work like the devil to bring gas prices down.” That was short-lived. By February 22, Biden announced that gas prices will continue to rise. “Defending freedom will have costs for us as well, and here at home. We need to be honest about that,” Biden stated to deflect the blame.
Biden continued: “But as we will do — but as we do this, I’m going to take robust action to make sure the pain of our sanctions is targeted at the Russian economy not ours. We’re closely monitoring energy supplies for any disruption. We’re executing a plan in coordination with major oil producing consumers and producers toward a collective investment to secure stability and global energy supplies. This will be — this will blunt gas prices. I want to limit the pain to the American people fueling at the gas pump. This is critical to me.”
Then there is the Keystone XL Pipeline Project that was terminated in June 2021 after President Biden revoked the permit as soon as he took office. The climate change crowd declared this a major victory, blindly ignoring the consequences. The climate change advocates have also caused fracking to become a moral issue, preventing an increase in domestic production.
Once nations are unable to purchase gas from Russia, they will turn to the Middle East and elsewhere, which will tighten global reserves. Rising energy prices will contribute to inflation, and transportation costs will rise. The West has lost control over the energy crisis in its bid to burn down the world to Build Back Better.
Russia’s central bank announced that they would no longer permit short-selling Russian stocks. Once a market turns down and confidence vanishes, the only support is short-covering. Without that, you get the 90% declines, as was the case during the Great Depression in the USA. They were hunting down shorts aggressively, and nobody would play the short-side. This resulted in a steady erosion of the market value. The MOEX crashed 45% on Thursday when the central bank made the announcement. Only shorts will take the risk of buying during wartime. So there is NO BID without the short-players, which makes markets far less liquid.
UPDATE: While now the EU and Canada have closed their air space to Russia, and Hungary publicly states they will NOT get involved, I can report that some people I know in Kyiv have made it out to Germany. Putin does not appear to prevent civilians from leaving the country. EU states it is now sending arms to Ukraine. The White House said Sunday that China needs to condemn Russia’s invasion of Ukraine. I am not sure if they noticed that China has now aligned with North Korea because of the “new situation” and North Korea resumed missile testing just today. Do we have complete blind idiots in charge of the West? Putin has NOT committed all his troops to Ukraine as he waits for Europe’s stupidity to unfold further. Nobody seems to have ever played chess other than Putin.
COMMENT: Marty, I can see why you have been an adviser to governments. You said sanctions never work. Biden has come out and admitted they did not prevent anything. Who is making these decisions in governments? The Keystone cops?
REPLY: Even in the case of Iran, Erdogan was secretly laundering money for Iran selling gold into the market to allow them to circumvent sanctions. The sanctions imposed on Russia for taking Crimea are still in place. They produced nothing. It becomes a dog and pony show pretending that sanctions will be a deterrent or end something. I have NEVER seen even one instance where sanctions ever worked. They have, on the other hand, been taken as an act of war.
We have a Panic Cycle in the Russian Ruble the week of March 7th. Note the Long-Term turning point was due this week and last week was the Double Directional Change signaling that indeed the trend was shifting. Our model picked up February as a turning point in Japan with high volatility in March with a Directional Change.
Imposing sanctions and removing Russian banks from SWIFT, in addition to freezing Russian shares trading in the West, will fail to do anything. In fact, Western brokers and bankers will now avoid anything to do with Russia. Companies like Sberbank, Gazprom, and others are now on the “restricted securities” list. We are looking at diverse funds who invested in Russia are now trapped and Russia and now just void all obligations to the West.
These political morons are clueless about cross-border investments and capital flows. Biden did not bother to look but the US has the biggest investment in Russia according to the statistics released by the United Nations Conference on Trade and Development (UNCTAD). The data clearly shows that the US was the largest investor in Russia and accounts for 8.9% of the Russian economy which is almost $40 billion.
While people speculate that there will be a massive run of Russian banks, they are also not looking at the damage removing Russia from SWIFT will mean to foreign investors. Russia now escapes all foreign liabilities.
The object of the new restrictions against Russia’s Central Bank is to limit the Kremlin’s ability to access the more than $600 billion in reserves hoping to cause a crash in the Ruble that will unleash a free fall, triggering spiraling inflation there. But Putin is smart. He can back the ruble with gold only for domestic use in effect reversing the strategy of FDR who confiscated gold domestically.
The sanctions have not been a deterrent. China and Russia have been moving to create an alternative to SWIFT which has become a political weapon. We are looking at the collapse over even SWIFT in the years ahead due to political abuse.
I have been warning the West should not mess with Putin. It is so obvious that the West has made the same fatal mistake as that of Rome. It has weakened its economy with COVID and it is so obsessed with trying to force Russia and China to comply with their Climate Change directives set out by the UN, that they have lost sight of the fact that there is no qualified leadership in any of the major countries and they have weakened their entire military establishment demanding vaccines or you are out.
Even during the debate between Biden and Trump, he actually admitted he would stop Fracking on Federal Land, and said he was going to end the oil industry in addition to joining the UN’s Paris accord “to force China to comply” which confirms everything I have been getting from sources that the Globalists needed to remove Trump to use American power against China and Russia. Now here we are and make no mistake about it – this is all for climate change.
If there was ever a PERFECT time for World War III – this is it.
I have been warning that if China and Russia combined, the West will be defeated. Reliable sources have confirmed that China has entered into a “friendly” relationship with North Korea for mutual benefit. North Korea has one of the largest armies since 2018 it stands at 1,469,000.00. North Korea has been also demonized by the West so they too have a grudge match that has never been settled. With rising shortages of food, the North has never been the breadbasket of Korea and that also provides an incentive to join a triumvirate against the West with Russia and China. Cyclically, North Korea could even start its aggression by January 2023 at the latest.
Additionally, Putin has just dramatically just upped the stakes ordering Russian nuclear deterrent forces put on high alert today because of the boasting of the West and the “aggressive statements” by leading NATO powers. Lost in all of this is the fact that Putin has also made a direct threat to Europe that if Sweden and Finland join NATO there will be “detrimental military and political consequences.” Sweden has closed its air space to all Russian flights.
Putin is playing chess while the rest of the world was playing checkers. When America wages war, they seek to destroy all the infrastructure, take down the power grid, and destroy the water supply. US troops then move in as more of a mop-up operation. The West is judging Putin by the same way the US wages war and they are so wrong. Putin is not using that strategy of a video game for he wants to take Ukraine intact for it also has the richest land in the world for food production – hence Stalin stole all the food and killed 7 million by starvation.
Putin is NOT backing away from resistance, he is encircling it the classic way war is traditionally fought – you laid “siege” to the city by surrounding it, and starvation forces their surrender. That often takes time, but you then have the city and the people. You do not raze it to the ground and kill everyone. Anyone who has studied ancient war strategies should see what Putin is doing and the Western press is either deliberately putting out propaganda, or they are complete idiots.
Putin seeks to install a new government with minimal casualties to civilians. Every dead civilian creates a blood enemy of their survivors. But the US way means it then costs billions in aid to rebuild what they destroyed – i.e. Iraq. Putin is NOT using that strategy and the Western press is judging him by American standards of destroying everything and winning in a few days.
Putin is not seeking to destroy the Ukrainian Army. He wants to capture it and once a new government is installed, they will then become allies. This is the very strategy of Alexander the Great. He conquered the known world, but those who were once his enemy joined his army. In Babylon, he defeated Darius III but he left the infrastructure intact and he installed Persian satraps (governors) who poured what would have been Darius’s taxes into Alexander’s coffers. This is the strategy of Putin – not to obliterate his enemy and then pour billions in to restore it. Putin has wiped out the air force and owns the skies over Ukraine. He could annihilate the country in less than 3 days, but he is not doing that to the West’s befuddlement.
Moreover, the real concern is that Putin has NOT sent in his hard-core troops. Only about 30% of the troops on the border were sent into Ukraine. The majority of the troops are there to take Europe if they are foolish enough to walk into this mess. Putin is obviously playing chess and he is very good at it while Biden has to change his diapers. Putin’s reputation until this moment has always been as a shrewd ex-KGB man. He understood the Obama game of putting a pipeline through Syria to cut off Russian gas to Europe. He moved decisively into Syria and then escalated forces there shutting down Obama’s strategy. Assad refused it and this has been the entire pretend reason why the Obama Administration wanted to invade Syria. The reason for the refusal was to protect the interests of Assad’s long-time ally, Russia, which is Europe’s biggest natural gas supplier based upon all the data.
Clearly, Obama has targeted Russia from the outset. There was a meeting between Obama and Putin at the United Nations where Putin tried to get Obama to side with Syria against ISIS. Obama rejected the proposal. So when Russian forces entered Syria on the ECM turning point to the day, it was an ominous event. Russia was not only backing the Assad regime, but it was also backing the Iranian pipeline.
However, Ukraine has also been used as a pawn against Putin just as NATO has constantly moved eastward ever closer to Russia. Kyiv has been so corrupt that few are willing to blame anyone other than Putin. Ukraine has failed as a pawn and despite promises the US would support it, it did not send military troops. More broadly, the use of Ukraine has been at the expense of the European security architecture that America spent 75 years building and maintaining. Why do you think Putin has now put his defensive nukes on standby?
Zelensky has been handing our AK47s to civilians. Zelensky is telling residents to make Molotov cocktails and firebombs to help fight back in Kyiv as Russian forces close in on the capital city. This is insane and he clearly wants to use dead civilians for dramatic footage. This is outrageous for civilians who are not trained with such weapons and would then be easily killed by professional soldiers. Putin is fully aware of what Zelensky is doing and he somehow hopes that dramatic footage will force Europe and America to send in troops.
Additionally, Zelensky has done what Sadam Husein was doing. Putting heavy weapons surrounded by civilians. This is also intended to ensure that as many civilians are killed once more to paint the Russians as evil. Putin knows this and so far he has adopted the siege strategy. The internet is NOT down in Ukraine. We have people there and I personally have friends in Kyiv.
So while the Western Press is demonizing Putun and Russians, they are indeed just playing checkers and are not opening their eyes. Just as Sparta attacked Athens and turned to the Great enemy Persia for support, Putin has the backing of China and nobody seems to be bothered by the sudden turn of China to embrace North Korea. Hello! Our press is so corrupt that they cannot see past their nose. There is something much larger in play here and they better wake up.
We are preparing a Special Report on the view of our computer with repect to war and how it is unfolding globally. We will let everyone know when it is ready next week.
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