View From The Couch 22/Feb/2022

Happy Palindrome Day

That is, if you're into this thing and you go by DD/MM/YYYY format. If you don't, it is not. 

The next palindrome day would be 23/02/2032 and we'll have one every decade up to 29/02/2092. That last one is kind of amazing because we get a leap year exactly where we need it to get that palindrome day. One hopes civilisation does not wipe itself out in the 2040s so that we can get there. Heck, I'm hoping they cure death and ageing so that I myself can see that day. 

You certainly hope Putin doesn't start World War III and wipe us all out. Speaking of which...

Putin In The Boot?

It's been a few weeks now of this will-he-won't-he business of Ukraine. It's hard to miss, but Vladimir Putin has been running training camps for his troops all along the North and East borders of Ukraine, perhaps to send the not-so subtle message that he still considers Ukraine to be Russia's bitch. 

The reports seem to swell the numbers of the Russian troops each day and by now there are between 140,000 and 190,000 depending on whom you count amongst the military, all amassed along the border. Joe Biden even announced last week that 16 February was the most likely date of invasion, but obviously, announcing it took out the sting from that plan. 

His troops according to the Belarus press does not appear to be in good nick:

"The first thing that catches your eye is the situation with COVID-19, which, according to official statistics, is breaking all sad records, and Omicron has begun its “victory march” around the country, everyone has already begun to infect each other.

Russian and Belarusian officers and soldiers are getting sick, followed by local residents; and so on in a circle. But a particularly alarming situation is observed in the Gomel region, and not all military men end up in hospitals, some of them are treated in field camps, especially if the case is mild.

In addition to the possibility of getting sick, there is fear among local residents, and not even war, but firstly, occupation, because no matter how much they say that the Russian military will leave the country at the end of the exercises, doubts about this still remain."

Right. So Covid-19 seems to be subtracting form the sum total of that mighty force. The article goes on to deride the Russian troops as being mostly horny drunks from who one must keep one's daughters and pets safe - even if they are ostensibly on their side. Worse still, the demographic of the Russian troops is described as resembling the Mongol and Tartar horde of old which indicates the units were pulled out from the Far East. The article goes on to conclude:

"Against this background, you believe more reports that you don’t want to believe at all, that “under the guise” of exercises, now you can get hold of weapons, allegedly even a Kalashnikov assault rifle can really be bought, you just need to know how and to whom to approach. And the fact that they sell rations, diesel fuel, uniforms is no longer news, it is already a business, including barter for alcohol and cigarettes.

And - it's true, with such a number of troops, equipment, equipment that is now in Belarus, no one will notice the loss of any pistol or machine gun, hundreds of boxes of rations and several tons of solarium, how can this be written off as expenses during the exercises? The “rear front” knows perfectly well, there is definitely no doubt about this.

In general, the mood in Belarus now is approximately the same: everyone is waiting for the end of these exercises, which look more like a Mongol-Tatar invasion. And in any case, one thing can be said: this has definitely not happened in our country yet, and it would be better if it did not happen."

It doesn't sound like the Belarus are terribly excited about the prospect of the Russian army staying or for them to wade across the border into Ukraine. It just doesn't sound like General Norman Schwarzkopf assembling a force of 400,000 in Desert Storm - the picture of a modern, integrated, technological military might - if they're getting compared to the Mongol horde of yore. And that leads one to suspect that maybe the invasion will be beset by the same kind of bungling friendly-fire-filled nightmare that was the Georgian excursion back in the 1990s. 

Of course, one thing that can be said about Vladimir Putin is just how stupid he looks if he lets this circus continue. You either do this with the full knowledge your moves have been telegraphed, or you cut your losses before you lose even more in the debacle that is about to break loose. By now the Ukrainians are ready for the Russian drive towards Kiev. If that drive gets bogged down, the Russians are really going to be like that monkey with its fist in the jar holding a cookie, but unable to pull out. When that happens, there would be no sugar-coating the mounting death toll.

As Dirty Harry says, a man's gotta know his limitations. At this point, it's more like "make my day."

That Weird Interest Rates Discourse

The markets this year have been a bit of a bumpy ride, thanks to the above Ukraine business, but also the looming interest rises that are expected to be made by the US Fed. I've explained before how it is unlikely in the context of global supply chain issues that raising interest rates will be taming the price spikes. A lot of them are because oil has shot through prices unseen in a very long time. Of course, in normal times, when oil gets closer to $100 a barrel, the US shale oil business starts looking viable again, so the OPEC price manipulation tends to head that off. Now with the pandemic, perhaps it has become a bit harder to keep oil prices low for Russia and Saudi Arabia, the two biggest fish in OPEC.

Even so there are other people who are not fans of the US Fed raising interest rates - like Xi Jinping. Having started his own property market debt bubble pop in China, the markets are in a precarious state in China. Considering the towering debt that is out there in property and elsewhere, just trying to deleverage has been a nightmare of defaults from major firms in the property development sector. As such Xi issued a warning that the US Fed raising the interest rates would be a terrible thing for the world market. Of course he woulds ay that because China would have to service its debt in US Dollars and they would become more expensive. In the olden days it used to be, America sneezes and the world catches a cold. Xi is saying if China sneezes we'll all catch COVID. Which, essentially, we have.  

Jokes aside if the US Fed wants to make it their thing to target inflation once more, then 7% inflation probably needs rates to go as high as 14%. That's kind of what Paul Volcker did as Chairman of the US Fed in the early 80s in order to tame inflation. Let's say Jerome Powell is not as hawkish and lifts interest rates to only 5%, that would still be a right punch in the face of the debtors out there in the emerging economies. I'd love to see him do it, but I don't think the global economy can take it. There's a reason why interest rates got so low even before the pandemic and thanks to the 'Taper Tantrum' of 2013, came back down again. 

All of this is to say, if Jerome Powell raises rates and China's economy goes into reverse, the world will suffer and the world economy outside of the US is now big enough that America would suffer from that event and so Jerome Powell will be back to lowering interest rates just to protect the US economy. It's almost not worth going through the dance of raising rates, only to lower them within 3 months. Perhaps it's this kind of damned-if-you-do- damned-if-you-don't nature of things is contributing to the market volatility.