This week we discuss the potential for an escalation of the war in regions worldwide, the economic impacts of several central bank actions, and the latest outlook for asset prices through the end of the week.
If you are a new reader, there are helpful links at the bottom of this post.
All times given in this update are in US Central time (UTC-6 clock).
Song of the Week - Lord Lorenz - Murdercaust (flavor of the week tik tok song)
Table of Contents
The Forever War
France-Africa
Greece-Turkey
Azerbaijan-Armenia
China-Taiwan
Ukraine-Russia
Other Regions
Economic Calendar
Central Bank Meeting Minutes
Australia
USA
New Zealand Interest Rates
US GDP
Crypto Macro
Conclusion
Internal References
1. The Forever War
One of the themes of this substack has been about the global economic separation into two separate trading spheres. It was once famously said that once goods stop crossing borders, bombs, and bullets cross instead. I don’t remember the exact quote but it doesn’t really matter.
It’s been discussed here in a significant manner that the western sanctions on Russia didn’t really work because most bureaucrats presumed we lived in a world gone by that no longer exists.
You can probably guess what the above map looks like today, but here it is.
The obvious takeaway is that China has claimed a lot of trade partners from Europe and the US. Some of the biggest losers here may not be obvious upon initial viewing but a closer look shows that Europe’s biggest losses were in Africa. Which leads to…
France - Africa
France lost a significant portion of their African trading partners. To the point where in 2020 the only African countries left that still traded with France more than China were Senegal, Djibouti, and the Central African Republic. Yet, as we covered last year, France lost that trading partner as well. It’s not televised much at all for Americans, but French troops have been escalating combat in most of Central Africa as they’ve lost their hegemony in the region.
But of course, the French aren’t the only ones interested in Africa. By virtue of trade, China, and Russia have a vested interest in securing this sphere of trade, and as such, this brings US troops into the fold as well. In much the same way that Syria was a proxy war last decade, much of Central Africa is a proxy war this decade. Russian troops in Africa are supposedly fighting one group of terrorists, while French and US troops are in the same regions supposedly fighting a different group of terrorists.
Currently, France has ~3,000 troops spread across 5 countries in Africa.
It’s the same faces as in Ukraine, a very similar conflict just in a different geography.
Greece - Turkey
We were seeing similar lines being drawn between Greece and Turkey. And if it wasn’t for a series of tragic earthquakes in Turkey very recently that led to a decrease in tensions, we might be discussing this becoming the next field of conflict in this broader global conflict. But prior to the earthquakes the tension has been ratcheting up, some could argue it began in 2020 when Erdogan declared the Hagia Sophia to be a mosque again.
Most conflict between Greece and Turkey stems from the fact that the original inhabitants of Turkey were ethnic Greeks, and these ethnic Greeks still reside in Western and Northern Turkey as well as on the island of Cyprus. These ethnic Greeks are typically orthodox Christians, and as such saw the move to make the Hagia Sophia into a mosque as an attack against their cultural heritage. Since that point, Turkey has been claiming Greek islands to increase their territorial waters and the offshore oil they can claim ownership of. They’ve been violating Greek airspace with fighter jets thousands of times since then and currently support the current government of Turkish-occupied North Cyprus (an unrecognized government, except by Turkey).
North Cyprus is a further conflict because Cyprus was previously inhabited by ethnic Greeks until Turkey invaded in 1974 and expelled the Greeks from the Northern side of the island and brought in their own people to occupy the island supported by troops. To this day there are Turkish troops occupying the North and UN troops occupying the South. The Greeks view this as an affront to them as well. While Turkey may be in NATO, they recently have not been cooperative with the western agenda. You may remember that Sweden and Finland applied to join NATO last year to protect themselves from potential Russian aggression. Turkey is one of the few NATO members that refuse to approve their accession to NATO. If this conflict were to escalate, it’s possible that the same players would be joining the fight in this conflict as well. Turkey is one of a few western nations that have not complied with sanctions and increased their trade with Russia. They would quite likely join the BRICS sphere and have Russian military support while Greece would gain NATO support.
Azerbaijan - Armenia
I am less familiar with the specifics of this next conflict, but Azerbaijan and Armenia were in armed open conflict in the 2020s. That ended when Russia brokered a temporary peace deal between the two after Azerbaijan took territory from Armenia. There are still bouts of artillery fire between the two and intermittent conflict. The UN and the US are trying to negotiate for longer peace between the two but at the moment Azerbaijan is blockading one of the trade routes to a part of Armenian territory.
This conflict is of less interest to the west and primarily of interest to Russia and Turkey since it’s on their borders. Ironically it’s an area in which Russia and Turkey tend to disagree as Turkey has been in support of Azerbaijan and claiming Armenia was the aggressor and caused the Azeris to invade. While Russian FSB forces have primarily been deployed into Armenian territory to stop/halt the invasion by the Azeris. If the current conflict in Ukraine were to escalate into a broader conflict, the west could certainly inflame this conflict or destabilize the peace talks in order to further distract Russia and Turkey while simultaneously distancing the two from each other diplomatically.
China - Taiwan
For the hundredth time, the US has sent another delegation to Taiwan on a 5 day visit to the island starting today.
This conflict is fairly obvious and requires the least new information for you all here. If unfamiliar, my piece prior to Pelosi’s visit to Taiwan should serve as a catchup. The US, Japan, and Australia would side with Taiwan, potentially with additional support from the UK. While China would have support from Russia.
The only recent development worth touching on is that the US shot down a Chinese balloon that had illegally entered US airspace. Unfortunately, after that we got a little bit carried away after that and shot down some “unidentified objects” in our airspace. These other objects are slowly turning out to be American civilian balloons from hobbyist clubs, but to a hammer, everything looks like a nail after you’ve embarrassed it for missing a nail.
Ukraine - Russia
It should be fairly clear to most that the conflict in Ukraine will persist forever.
Neither side will back down, concede or negotiate for terms that all involved could begrudgingly agree to. While Biden is in Kyiv, Putin will be addressing the nation (Russia) tomorrow and we can most certainly expect that we (America and NATO allies) will be the prime topic of conversation.
We’re in a forever war here, and as more of Ukraine’s internal economic functions are destabilized or collapse, the more outside support they will need to fund anything above a guerilla resistance.
There are some who claim that the US and UK had torpedoed a potential peace deal back in March of 2022 between Ukraine and Russia. This is half true as they were making progress back then with Ukraine even agreeing to one of Russia’s biggest terms to remain neutral and vow to never join NATO. But several negative developments came together to halt peace talks.
Poland kept pushing to have their troops allowed to enter Ukraine under the UN flag.
UK PM (At the time, lol) Boris Johnson visited Zelensky and urged him to stop negotiating with Putin because he committed war crimes.
All the evidence makes it look like US and UK involvement (along with Poland) were what ended the negotiations. But one of the other key terms that never got agreed to was for Ukraine to give up its eastern territories to Russia. While they had never formally agreed to it in the preceding discussions, they had also never ruled it out until May of 2022. You’ll see many people framing this as if Ukraine and Russia had a fully formed peace deal and the US and UK killed it. But in reality, Ukraine and Russia had an open channel for potential peace if negotiations continued, but had one major hurdle to get over, but the US and UK used their influence to make these negotiations more difficult.
Whichever way you frame it, this is a forever war. The West does not want peace, and this week we’ll likely hear from Putin that he views the entire western sphere as his enemy and that the current conflict is not about Ukraine anymore but something much larger.
The only conclusion to all of this that I can see is an inevitable world war. One with fronts developing in Africa, Asia, and Europe. Meanwhile, many nations will be destabilized through currency inflation or political revolution.
Other Regions
There is a major coup ongoing in Peru as we speak and the Canadian government is directly involved, but this is hardly news compared to what’s going on.
Protestors are setting banks on fire in Lebanon after the Lebanese pound lost 98% of its value in the past 2 years.
The Moldovan government has stated “they’re at war” as their recent president has stepped down and Russian troops have been stationed in Transnistria. Their current fear is that a coup will happen any day and they are blaming it on Russia.
As the current inflationary crisis continues worldwide, many regions are finding that when goods can’t cross borders, soldiers will. And if that doesn’t happen, we see internal revolutions instead, as we covered last year in Sri Lanka. This decade will be one of inflation, revolutions, and escalating global conflict.
We’re going to be watching the world continue to choose sides based on their own economic interests, and based on their partners for import and export, and we’ll watch previously stable governments or reliable diplomatic partners destabilize and evaporate before our very eyes.
No one will ever say that the 2020s weren’t interesting.
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