The Gladstone
Economic Newsletter
Volume 17, No. 3
March 13, 2022
I Thought I was Wrong Once…
DISCLAIMER: The following is not intended as investment advice, but is rather intended to promote your own analysis of markets and the economic climate. The author is not a registered investment professional. Any action taken as a result of this analysis carries a high degree of risk. This newsletter contains the personal opinion of the author.
Dear readers-
I thought I was wrong once, but I was mistaken……
I completely blew it with my call that Russia would not invade Ukraine. In retrospect, I should have gone to my go to websites from the Russian viewpoint. Since the invasion (excepting a week long vacation in Panama), I have drilled down on the origins of the Ukraine war and the ramifications of it. In short, I plain and simple goofed. This will be a lengthy newsletter, but I have come down squarely on the side of ……..the Russians. If anyone was justified to start a war, it was probably the Russians. As follows is a quick summary of the reasons, and not in order of importance:
1. Ukraine planned an invasion of the separatist regions of Ukraine in late February or early March of this year. As I had written in previous newsletters, since 2014 Ukraine had planned to launch two previous military actions to eradicate the breakaway republics. Just prior to such actions starting, the ammunition storage sites of the Ukraine Army blew up, depriving the Ukrainian forces of there most needed supplies. There are no coincidences in the world. The Russian GRU has copies of the signed invasion orders to the Ukrainian forces within 24 hours of their being issued. It seems that some Ukrainian generals sympathize with Russia and keep the GRU apprised of such things. The Russians have also taken the lessons of World War II to heart. It seems that Stalin was within three days of launching a war against Germany when the Nazis did a pre-emptive strike. The Russian forces in 1941 were totally out of position to defend against an onslaught, and this is one the reasons that Soviet losses were so high, and that Stalin is thought to have had a nervous breakdown at the start of the war. Back to Ukraine, today. A copy of the signed orders (probably authentic) were released by the Russian military and can be found here:
and here is more information:
https://thesaker.is/the-gru-has-exposed-dangerous-ukrainian-plans/
2. Putin and the Russians time and time again announced that Ukraine joining NATO was a redline that could not be crossed. Russia has never tolerated a potential military power on its border. This has been true since the time of the early Tsars. Why should it be different now? The US deliberately goaded Russia into the invasion when it had Kamala Harris announce to Zelinsky and the rest of the Ukrainian delegation at the Munich Security Conference on February 24th that “Ukraine should join NATO.” This was not a misstatement, but rather a clear iteration of US policy. The invasion launched on February 24th. Yes, the Russians had planned to have forces prepared to invade if the US and the West did not back down from what Russia viewed as an existential threat.
3. The U.S. had established up to 30 biowarfare facilities in Ukraine that were working on a panoply of biowarfare agents including such beauties as Crimean-Congo Hemorrhagic Fever, Wuhan Virus, and enhanced African Swine Fever. The major facilities were getting ready to open in March and April. If you remember, I mentioned the catastrophic outbreak of African Swine Fever in China during the trade war was of curious timing. That was as far as I could say at the time. Methinks there are few coincidences in the world.
Why are these labs in Ukraine? The US biowarfare connection in China had been terminated after the release of the Wuhan Virus. Also because Ukraine post Maidan Uprising has been an almost wholly owned entity by the US and the EU. I will explain a bit more in another point. The Russian military had a two star general give a detailed briefing on the documents that had been captured on this biowarfare program on Russia’s borders. This is a must watch video! The English subtitles are well done:
https://thesaker.is/a-briefing-on-the-medico-biological-us-activity-in-ukraine-must-see/
If you have watched the above video, you are probably quite shaken at this point. The logical (ostrich head in the sand) part of your mind is probably arguing that this is Russian propaganda. The problem with conspiracy theories is that they are generally becoming conspiracy facts these days. The Russian general is believable, and Satan’s mistress herself, Victoria Nuland, confirmed this information at a Senate hearing last week. Marco Rubio asked Nuland about this expecting a firm denial to go on record, and instead she spilled the beans. My better half actually did a transcript of Ms. Nuland’s comments:
“This starts after the 8:30 time stamp...
Marco Rubio: "Does Ukraine have chemical or biological weapons?"
Victoria Nuland, Undersecretary of State for Political Affairs: "Ukraine has biological research facilities which in fact we are quite concerned Russian troops, Russian forces, may be seeking to gain control of. So, we are working with the Ukrainians on how they can prevent any of those research materials from falling into the hands of Russian forces should they approach"
Marco Rubio: "I'm sure you're aware that the Russian propaganda to groups that are already putting out there are all types of information about how that they have already uncovered a plot by the Ukrainians to release biological weapons in the country and with NATO's coordination. If there's a biological or chemical weapon incident or attack inside of Ukraine, is there any doubt in your mind that 100% it would be the Russians that would be behind it?"
Victoria Nuland: "There is no doubt in my mind Senator, and it is classic Russian technique to blame on the other guy what they're planning to do themselves."
https://rumble.com/vx2iq7-the-white-houses-game-playing-denials-of-bio-labs-in-ukraine.html”
4. Since 2014, artillery shelling by Ukrainian Armed Forces has cost up to 13,000 lives in the breakaway republics of Lughansk and Donetsk. This includes 3,000 civilian deaths. Even if this death toll is overstated, the situation could not be allowed to continue.
5. Ukraine had signed the Minsk Accord, which called for a plebiscite in Donetsk and Lughansk areas to determine if the people wanted independence or to stay in the Ukraine. Ukraine has totally refused to implement any part of the Minsk Accord. This was especially true under Zelinsky.
6. Volodymar Zelinsky (called an “absolute hero” by the Western press) is totally corrupt and I believe he is in the pay of the US and its allies.An account of the the plotting to get Zelinsky elected in 2019 could fill a small book. Zelinsky campaigned on a promise to improve relations with Russia.The plan was actually to push for membership in NATO and thus to have Russia painted into a corner. How corrupt is Zelinsky? Well, even I was shocked by the following article alleging he has US$1 billion stashed offshore, and his deputy has US$56 million stashed:
Zelinsky could have ended this war at any time with a single phone call saying he was implementing the Minsk Accords and recognized Crimea as Russian. I believe he is being paid to hold out as long as Ukraine can, thereby costing countless lives. Putin made an odd comment about “drug addicts” in the Ukrainian leadership early on. Reports have Zelinsky being a cocaine addict who favors “Baltic Tea,” a potent mixture of vodka and cocaine. Some hero.
7. Zelinsky announced that Ukraine would reactivate nuclear weapon production, which was another redline for Moscow. There was a report that Ukraine may have held back a few nuclear warheads from its disarmament in 1994, and that these weapons were stored at Chernobyl, where their existence would just fade into the high level of background radiation. Who knows? Remember the outraged fit the western press launched about the fact the Russians seized control of Chernobyl as their first act of the invasion? It does have a certain brutal logic to it.
8. The US announced that it planned to station hypersonic missiles in Ukraine (when it actually has these). The hypersonic missiles would have a three minute flight time to Moscow. This was another huge red line for the Russians. The U.S. forced Putin to make the least bad choice he could and consequently invade Ukraine.
9. There is a substantial Nazi element in the Ukrainian Government and military. I am not talking “Neo Nazis” either. These are honest-to-god Nazis left over from World War II. It is not well known that there was a lot of Nazi collaborators/sympathizers in Ukraine in World War II. I resisted this whole concept for some time as propaganda. No, that is not the case. The Nazis got a lot of their concentration camp guards from Ukraine (remember John Demanjuk of Cleveland?) and the Ukrainians largely participated in the killing of 1.6 million Ukrainian Jews, gypsies, etc. The Azov Battalion, formed in 2014, is a notorious Nazi formation that was absorbed into the Ukrainian Army. The Azov Battalion is holding out in the port of Mariupol, where they are executing civilians, and shelling civilians attempting to leaving via the humanitarian corridors that Russia has pushed for in many places in Ukraine. Other Ukrainian nationalist formations (read “Nazis”) are committing other atrocities. The Russian and Separatist forces are probably going to wipe the Azov Battalion off the map. This is why Russia has insisted that the Ukrainians agree to “de-Nazify.” For the record, Chrystia Freeland’s (Canadian Deputy Prime Minister) grandfather was a top Ukrainian Nazi who emigrated to Canada after the war.
The Russians have lost the propaganda war. The sheer din of the Western misinformation campaign has been huge. Almost every article and news report on the Ukraine war has been a false narrative. War is horrible, civilians suffer and die in them. This one is no different. The facts are that the Russians have a clear strategy to continue the war until Ukraine surrenders or is conquered. The Russians are winning, and have worked very hard to minimize civilian casualties and civilian building damage. The Russians know they are going to foot a large part of the bill for rebuilding Ukraine.
My two best sources of information are
http://thesaker.is/
and
https://southfront.org/
These are both written by Russians (presumably). You are an intelligent adult- you can identify propaganda when you see or hear it. Some Americans at this point know the Ukraine reporting is a lie. On the bus back to the airport parking facility after our Panama trip, one couple in the bus was complaining about the Biden Administration deliberately creating hyperinflation. I pointed out to the bus for people not to believe a word from the press about Ukraine. This was heartily agreed to by my bus mates. I was at breakfast in the hotel in Panama and was explaining to my long suffering better half about Ukraine (for the record, she asked!). The two men at the next table stopped me outside the hotel and said “For the record, we agree with almost everything you said at breakfast.” They were not Panamanian. They were African Americans.
What is the best summary of the military situation in Ukraine? I go to this recent map reprinted by The Saker (formally known as “The Vineyard of the Saker,” with a banner saying “Stop the Empire’s War on Russia”):
The red cross hatched area is this map are areas mostly controlled by Russian forces. The Saker claims Russia has conquered 30% of Ukraine, and I tend to accept this figure. The blue cross hatched are is a large part of the Ukrainian army surrounded in eastern Ukraine on the front lines of the separatist areas. This Ukrainian Army formation will be wiped out by the Russians if the war goes on much longer.
South Front is more of a questionable site sometimes. Its maps are out of date and its discussion is not as complete as The Saker. South Front got taken down for a few days by its western site hosting firm. Andrei (the author of The Saker) does a huge job trying to present what is known. A good discussion of maps is as below, again from The Saker:
http://thesaker.is/on-maps-wars-and-hate-filled-mobs-canceling-russia/
The Ukrainian Army has to be running out of ammunition at this point, despite the supply of missiles by the west. Military supplies coming into Ukraine are a legitimate target once they are in Ukraine. It appears the Russians are capturing enough Javelin missiles to necessitate writing an operations manual in Russian. The Ukrainian forces are reportedly looting all civilian food supplies as they retreat, thereby causing a huge humanitarian crisis in the conquered areas. The Russian Ministry of Defense claims that about 100 Ukrainian aircraft have been destroyed on the ground or in the air, and that Ukraine has lost 1200 tanks. The totals are probably close to this. The Ukrainian forces have been losing a lot more than the Russians in this, but the Ukrainians have downed Russian aircraft and destroyed tanks in ambushes.
What happens if Ukraine does not surrender and the war goes on two to four weeks more? It’s simple. Ukraine will end up partitioned. Russia will claim the southern and eastern areas, which are historically Russian speaking. Not many people know that the western eight provinces of Ukraine were part of Poland until Stalin had them absorbed into the Soviet Union in 1945. Poland got East Prussia from Germany in compensation for this. I think Poland is waiting in the wings to reclaim all or part of those provinces at the peace table. Hungary may claim Trans-Carpathia. Tom Luongo published this map of what a post war Ukraine might look like (minus the Polish claims, if they occur) :
What would be left of Ukraine? Some rump state centered around Kiev that would also inherit all of Ukraine’s sovereign debt is my guess. Good luck with that….
Why have I spent so much time on the Ukraine situation in what is supposed to be an economics newsletter? Because the economic sanctions against Russia have doomed the western economic system is the reason. The US and the EU have illegally seized the Russian Central Bank reserves in the west, they have seized the assets of the oligarchs in the west, and have cut off trade with Russia from the west. Russia under Putin has a very intelligent group of leaders and I am sure the Russians have created alternatives to these sanctions. Yes, the Russian economy is in a tailspin until alternate oil and trade flows can be implemented with China and India. Yes, there is a lot of pain in Russia, but the Russian people went from being against the war at first to seeing the necessity of the war due to the western sanction response. How do I know this? I had booked a tour of St. Petersburg for June. When I cancelled it, I wrote “the whole world is not against you.” The travel agency in St. Petersburg replied “Nobody wanted this war.” That situation has changed to 70% of the Russian population supporting the war as of a week ago.
I will write more in my next newsletter about why the US and EU had to have this war occur. They needed to destroy Russia, and later China, for being independent of International Banking Cartel control. Martin Armstrong has done some excellent pieces on this:
Do yourself a favor- read armstrongeconomics.com occasionally.
The people who control the governments of the US and EU (I am not talking Biden or elected European leaders by the way, they just follow orders at this point) have made a huge error in understanding Russia’s resolve in this matter. Russia is in this until the death. Russia has too much essential commodity production (oil, gas, grain, nickel, etc.) to not survive the sanctions. The west cannot survive without this output from Russia. That is why the writer of this newsletter was a heavy buyer of Russian stock ADR’s before trading was banned completely. These stocks included Norilsk Nickel, Surgutneftgaz, Sberbank and Gazprom. Yes, I may be crazy. My ownership may be stolen by the western powers. However, if I am right about Russia surviving and ultimately thriving again, I bought this issues for as low as 5 cents on the dollar or even better.
The ultimate effect of the sanctions will be to destroy the western financial system. Any element of trust in “rule of law” regarding investments in the west is now gone. Any faith in the US dollar is also now gone. The US dollar may go up versus other currencies further as the looming financial crisis deepens, but at the end of the day, the Biden administration destroyed it by the sanctions and removing Russia from the Swift system. Those assets seized by the US and EU? The value of the assets seized is easily outweighed by western investments in the Russian Federation. Let’s look at the example of one western gold company with substantial operations in Russia. The gold company produces 350,000 ounces of gold per year in Russia. I had identified this company as being controlled by the international banking cartel many, many years ago (as they have been protected at almost every instance by government and the financial firms). This company immediately ceased gold production in Russia at the first sanctions. They did not need to do this. The Russian mines could have run independently, as their cost of gold production is $870 an ounce and all of their inputs are priced in rubles. The company did this to deprive Russia of the gold output from these mines, which could be used by Russia to pay for imports, etc. Putin has proposed seizing the operations closed by western companies that meant to hurt Russia. This company may very learn the price of being controlled by the International Banking Cartel. The western financial system (think players like Goldman Sachs) hold a lot of Russian debt. They have a tremendous incentive to get the sanctions lifted once a peace of some sort is established in Ukraine.
On to the markets. Captain E-wave published this chart on February 13th. Since then, the S&P has generally plunged along the red line. The full destructive effects of the sanctions will not be felt until 2023 or even later. The effects will be huge, and I believe Harry Dent’s projection of an 80% fall in the US equity markets is going to be spot on.
Gold, silver, and the Singapore Dollar are the only protections I can think off. They are not making anymore gold……
On to the graphics for this issue of the newsletter (from various sources):