Sometimes the significance of events doesn’t hit you until far after the event took place. One of the hardest parts of this job is knowing when not to write about a subject and let it sink in for a bit rather than burp out the first thing that comes to mind. It also helps to spend that time considering what others say on the subject.
The Saker’s thoughtful post on the outcome of the Biden/Putin summit is worth your time. He rightly points out that the main outcome was a signal from Biden’s team, and handlers, that the hyper-aggressive war against Russia going on since 2013 is now over.
… what Biden did and said was quite clearly very deliberate and prepared. This is not the case of a senile President losing his focus and just spewing (defeatist) nonsense. Therefore, we must conclude that there are also those in the current US (real) power configuration who decided that Biden must follow a new, different, course or, at the very least, change rhetoric. I don’t know who/what this segment of the US power configuration is, but I submit that something has happened which forced at least a part of the US ruling class to decide that Obama’s war on Russia had failed and that a different approach was needed. At least that is the optimistic view.
I have some ideas about who actually ordered this shift in tone, which has become readily apparent in the weeks since the meeting. More on that in a bit.
This summit was the signal of the major shift in policy. Kissinger is no longer the driving force intellectually for U.S. foreign policy. Divide and conquer hasn’t worked.
As Alex Mercouris brought up in my talk with him recently, the likely main offer made on Biden’s behalf by Jake Sullivan to his Russian counterpart was to cut Russia in on the infrastructure deals in Africa if Russia would loosen ties to China. China is the new pivot for U.S. foreign policy.
If that offer was made, then it was a calculated move to tell Putin that the U.S. was unserious about changing the dynamic between them. I think there was a lot more said than just this. But Putin didn’t say it directly to Biden. This summit was a ceasefire in the war against Russia, a typical move to retrench and rethink options after a major defeat. That defeat was not ginning up a war in the Donbass. The two events are intimately connected.
In fact, that show of force and ultimatum by Putin to NATO (and more specifically The Davos Crowd) in Ukraine is what catalyzed this summit in the first place. That and the collapse of the COVID-19 narrative were all the excuse needed to publicly pivot U.S. aggression from Russia to China.
This was a major summit, with hundreds of people on both sides, as The Saker points out, that took months to put together. My initial reaction to it was that nothing substantive had changed. A ceasefire with Russia isn’t an end to the war with her, so what changed exactly?
That’s why I took some time to think things through.
In order to understand my broader point I’m about to make, you have to see things from Davos’ point of view and their goals. I took the time to work through this in Part I of a recent podcast series I did to lay the background out (listen to it here).
Most importantly, keep in mind that Davos isn’t a monolithic organization under complete control of puppet master WEF Chair Klaus Schwab. It is, at best, a loose coalition of interested parties all looking for their piece of the globalist pie. And it only hangs together for as long as Schwab et.al. win and continue doing so.
Davos sees the best path now for them to complete their Great Reset agenda comes from placing the U.S. and China on an irrevocable path to war. Making a temporary peace with Russia is part of that plan. It’s also a major defeat for Davos.
Russia has refused to fight the war Obama started and MI-6 ran during the Trump Interregnum on Davos’ behalf. It played the long game of freezing the conflict in Ukraine while allowing the political attrition to take its toll on everyone involved. It also allowed Russia the time necessary to complete its strategic theater dominance in Eastern Europe, now having hypersonic missiles capable of neutralizing any thought of NATO air superiority.
Culturally, Russians understand how to deal with this type of European aggression. The Russian people have pride in themselves but are not nationalistic, i.e. they are not subsumed by cultural hubris the same way both China and Europeans/Americans are. This is a critical difference in understanding why events have played out as they have.
European/American ethnic hubris is nothing new. However, anyone who doubts my read on the Chinese in this respect, I only have to remind you of how easy it was to blow up Japanese/Chinese relations in 2012 over the Senkaku islands, which led to vandalism against Toyota and Honda dealerships… over nearly worthless rocks.
So, by this calculus, now that Ukraine refused to show up for the war Davos threw, war with Russia is off the table for the time being and the pivot to China commences. You have to force an existential crisis on Russia to get them to fight, and failing that, there is no point in pursuing it directly. Putin made the point very clearly that any aggression in the Donbass would be an act of war which would not end at the contact line in Gorlovka.
Their response would target the real enemy, NATO. And this is why both nothing changed and everything changed with this summit.
Davos is still going to run their script of destroying the U.S. and China by pitting them against each other while trying to pull off the full-blown remaking of Europe into a technocratic supranational police state. On that last part, they are more than 80% of the way there.
But, at the same time, the only reason for the European Union’s existence as it has been sold to Europeans is to prevent any further devastating wars fought on European soil. If Putin threatened a wider war with NATO, he assured them Russia would this time win, then the whole rationale for the EU vaporizes like the first F-16 or logistics center hit by a Kinzhal missile.
Rock meet hard place, Herr Schwab. For once, someone else presented you with a no-win scenario.
So, in order to insure that Russia remains placated and happy to reopen somewhat normal relations with the EU, Biden was sent to Geneva to craft a face-saving summit and co-sign a simple statement committing to reopening arms control talks, coordinating on terrorism and not nuking Europe.
Part II of my podcast series went over in detail the whys and hows of the summit in much more detail.
The two exceptionalist-minded empires, the U.S. and China, make for much easier adversaries to spark into conflict because of the intense need for both sides not to lose face. For the U.S. as the global ‘hegemon,’ losing face is a clear loss of potency. When you rule the hierarchy through dominance and fear, any moment of weakness is deadly.
It’s why Putin’s intervention in Syria, the freezing of the Donbass and reunifying with Crimea were so significant. They were a series of events which blew holes in the perception of U.S. potency. And since then it has been one brush fire after another which has not panned out.
As The Saker rightly points out in his article, Biden took a big hit with the Davos-controlled media for not “standing up to Putin.” And it was significant that that they even entertained that calculus, no less made the diplomatic overtures. It’s why I feel my analysis of the situation is right. Only a real, credible military threat by Putin could have forced the outcome we saw at Geneva.
That said, weakening Biden and the U.S. only sets the stage for when he or (more importantly) his Republican/mid-term successor has to confront China for real.
Now that I’ve laid that out, did anyone miss the Fed’s surprise hawkish statements released the same day as the Biden/Putin summit?
Did anyone not notice the extreme reaction to the supposed nothingburger statements from the FOMC?
All the Fed did was move a couple of dots on the rate forecast ‘dot-plot’ and bump IOER and RRP up by 5 basis points.
And yet the Euro crashed into the end of Q2 and opened Q3 still crashing. And yet the Yen was thrashed. And yet, everyday more people jump on the bandwagon highlighting the huge run up in the Fed’s Reverse Repo Facility. Since that announcement, what was a record amount of reverse repos at around $450 billion has more than doubled to just under a trillion.
Since the Fed no longer reports Excess Reserves of the banking system, we have no idea how much has flowed into those either. In short, a measly 5 basis points drained at least half a trillion in dollar liquidity in less than two weeks.
And too many people can’t make the connection.
The dollar spiked to a significant bullish monthly reversal in June. The Fed followed up Powell’s statement with Bullard’s to ensure the technical reversal in the minds of currency and bond traders.
And the question is why?
Just before the meeting, I told my Patrons I thought at some point the Fed would have to come in and defend the U.S. dollar. Biden’s consistent trashing the dollar for Davos simply couldn’t stand forever.
I’ve written in the past about what Davos’ Great Reset plans are for the commercial banks, to scapegoat them for the next crisis and throw them to the angry Millennials they’ve taught to hate all things not-Marxist and be pilloried on the altar of egalitarian envy. And honestly, it’s not like these fucking people deserve anything less for what they’ve done to the world.
But at the same time, they still have allies and cards to play. And that means the Fed may align with Davos on some issues but not all of them. And I think it’s clear to everyone now that this is the plan, and that plan is not workable.
The Fed is now ready, I think, to go to war with Davos over the future of money and they aren’t ready to hand over the keys to the candy store to a bunch of European commies, at least while also cutting Wall St. out completely of the New World Order.
Part III of the podcast series goes over the Fed’s moves and how it ties into what comes next.
The plan is pretty obvious at this point: hand over the keys to capital formation to the central banks and destroy all risk assessment. Commercial banks aren’t needed. Only socially acceptable projects going forward will get funded. This is what Christine Lagarde wants with her new all-European Green Stock Exchange she introduced at Ankara last week.
But what’s clear to me now is that Davos went for the boob too fast on Prom Night at the Eschaton. It’s too much, too soon and the acceleration is exposing its flanks. Why would China and the U.S. go to war over COVID-19 and trade issues when they are being manipulated into it by a bunch of feckless Eurocrats with delusions of adequacy.
Why not turn on them first, at a minimum, wipe them out with a wave of your hand, i.e. 5 basis point rise in RRP, and remind everyone where the real power in the markets lies.
It’s hard to ignore what’s happened during the week of June 16th both geopolitically and monetarily. There are no coincidences here. If Powell hadn’t blown up the markets that week, then I would be writing a different take on the Putin/Biden summit today.
But he did, so I am.
So many people mischaracterize the Fed’s policies. They miss the global significance of what they do by hyper-focusing on bad and misleading U.S. economic data. But the dollar is the global reserve currency, a point Martin Armstrong makes every single day, and that means Fed policy is made in the context of global capital shifts and politics.
Most analyst myopia comes from their training. They’ve trained a particular skillset and because of that, miss the bigger picture. They get lost in the miasma of low-quality, conflicting and purposefully confusing domestic data and miss the bull rampaging through the political china shop.
What’s lacking, for example, in The Saker’s analysis of Geneva is looking at it, for the most part, from a monolithic Russia v. U.S. perspective, while ignoring the bigger picture of who is vying for control over the monetary system. This isn’t a rebuke, it simply isn’t his top priority.
But it is a rebuke of those trained in these areas to know better.
Geopolitics stems from control over the flow of capital, not the other way around. So, when you see big changes on both fronts from one major player like the U.S., it means something. The U.S. changed its stance on Russia while also course correcting monetary policy and throwing markets into a tizzy – on the same freaking day!
That’s why you have to do the multi-variant analysis of ALL the players, not just the two dominant ones, and analyze all of their motivations. This was a story so big, I took two hours of podcasts to scratch the surface of it.
The bottom line is this: I maintain that Powell isn’t the same kind of globalist other Fed chairs have been, like Yellen and Bernanke. His private equity background marks him with a different mindset and set of priorities than his predecessors. That means he may be more willing to buck Davos when the time is right.
That understanding along with Davos’ needle-scratch mistakes has a lot of powerful people questioning the plan. It can easily explain why the cracks are beginning to widen as to who should actually be in charge after this is all done.
The real war now isn’t between the Empire and Zone B. Or the Commies vs. the Conservatives. It’s Davos against itself and we are now, unfortunately, caught in the middle between these factions.
All hierarchies built on force are meta-stable. Up until recently Davos maintained its control because it competently managed all of the players, moving pieces where they needed them. Now, they’ve made fatal errors — COVID, Trump, Brexit, NordStream2, Russia’s intransigence, the JCPOA, Syria, Ukraine, — and from where I sit, it looks like the various factions are going all Knives Out on each other, quickly.
And as Daniel Craig said so eloquently in that movie, “I do suspect… foul play.”
I don’t doubt for a second Powell would crash the global economy in 2021 to protect Wall St. and back China down. I also don’t think he was given the green light to do so by Biden. I think he was told to fire a warning shot by, for lack of a better term, Wall St.
If Davos listens to that in the same way the Brits listened to Russia’s warning shots at the HMS Defender in Crimean waters recently, then expect a full salvo at Jackson Hole. Can anyone say 25 basis points?
Biden and Obama have been told to pull back and refocus on China by Davos, but those behind Powell are setting them up for a massive backlash for the mid-terms.
The smartest thing for Xi Jinping to do during all of this is nothing. If he is truly interested in carving up the world and not replacing the U.S. with a Chinese hegemony, then these next few months of turmoil in the West will prove that.
Given his recent actions and statements, however, the likelihood of that is slim.
The more things change…well, you know the rest.
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