Bit of a ramble about the news, feel free to skip to the links below.
I was writing a follow-up on investing in the face of regime change when it began to look overwhelmingly likely that Russia would invade Ukraine.
My previous articles covered how quantitative tightening and the return of inflation could change the landscape for investors. Now Russia was set on redrawing maps the old-fashioned way.
Suddenly paragraphs on why you should still hold government bonds in case of shocks or reasons not to go all-in on equities didn’t look academic.
And how would the conflict unfold?
I held off completing my article, and like everyone I turned to watching the news.
War
Russia crossed into Ukraine. Markets fell. Bonds rallied a bit.
Most investing pundits were sanguine. They shared graphics like this one from Ryan Detrick:
(Click to enlarge the drama)
I wondered when we should do something similar. Traffic to Monevator had dwindled due to the sudden news-binge. But experience tells me investors can get spooked by geopolitical events.
Though everyone knows this these days.
So pundits on Twitter waved aside worry and talked up a buying opportunity. After a nod to the human tragedy, financial TV commentators debated the merits of energy firms versus cybersecurity outfits. And so on.
I have no problem with this. Sure it can look ugly in the moment. People complained about heartless traders during many of the latter events in the table above.
But there’s nothing to be gained by capitalism shutting down in the face of geopolitical horror. And it’s not like 99% of us are in any position to influence events, if only we could tear ourselves away from our brokers.
You might question someone’s priorities. But I don’t think it’s a question of morality.
Relax
No, something else was bugging me about all this talk of filling your boots on war.
It crystalized when I heard a couple of American bloggers waving away concerns by comparing the GDP of Russia to the (larger) economic output of Texas.
Again that was true. But as I retorted this missed something important:
Attention younger members of #fintwit. It’s true that Russian’s GDP (c.$1.5tn) is less than Texas’s GDP (c.$2tn)
But Texas does not have c.5,000-7,000 nuclear warheads in various states of repair capable of ending the world in the next ten minutes
This is “why it matters” 😐
— Monevator (@Monevator) February 24, 2022
We can debate which geopolitical events of the past few decades realistically might have put nuclear Armageddon onto the board, however unlikely.
But I think you have to go back to the 1960s for it to be a potential feature of conflict, not a bug.
Rage Hard
Maybe I’m showing my age, but these younger commentators mostly didn’t seem to get it.
Of course I fully agree that in a scenario where both sides launch nuclear bombs you may as well own shares versus bonds. Because who cares when the planet is in rubble?
Once you acknowledge that, the nuclear question is moot.
And perhaps all these chipper dip-buyers had already done that calculus.
But I doubt it. I don’t believe most gave it any thought, especially early in the week.
As child of the early 1970s, I well remember talk of four-minute warnings and visions of hiding under the kitchen table when you hear the siren. The relief when treaties reversed the expansion of the nuclear arsenals. The fall of the Iron Curtain that the Russian leadership now laments.
The reality is Russia could roll-up Ukraine and Belarus and Lithuania and reinstate its buffer with the West and we would be basically powerless to stop it.
Will we take the annihilation of London or Berlin in exchange for defending Vilnius? Of course not.
Again as a middle-aged bloke who has read my fair share of military histories I am well-versed in the counter-argument. Mutually Assured Destruction (M.A.D.) doctrine tells us neither side will act to start a nuclear war because nobody will win. Many say this is what has kept the peace in Europe since World War II.
Only this isn’t keeping the peace in Europe this morning. Russian troops are in Kyiv, with at least 1,500 ready-to-go nuclear weapons at their back.
Two Tribes
How should this change how you invest?
Barely, if at all, especially if you’re a passive investor.
All correlations between asset classes go to one in a worst-case scenario. (Good luck verifying your blockchain too).
But in that scenario the Great Filter does its job and Earthlings won’t have to fret about rising bond yields again for a few hundred years, if ever.
Therefore it’s only rational to ignore the worst outcome from your planning.
And so whether tough-talking or naive, those pundits were right. Take it out of the equation. Buy any panicky dip.
Sure enough the market went on a bender before the conflict had barely begun. Early losses reversed. Gold fell too. Many of my individual stocks ended the week higher than they started.
Again, all the theories. Falling bond yields meant it was now safer to buy growth stocks (except yields didn’t fall much). Central banks would raise rates more slowly. (Again, only the slightest nod to that in the data). The sanctions turned out to be too weak to cripple the European economy through friendly-fire. (The likeliest candidate for the rally, in my view). The West was galvanizing and that was good for future returns. The economy would slow sooner, and maybe that was good too. (Because, again, lower rates).
Russia was bogged down, and had proven itself weak. Russia had shown it would win quickly, and the war would be short-lived.
Who knows.
Warriors of the Wasteland
Like Matt Klein (and as I wrote a few week’s ago when bemoaning the distraction of Brexit) I have long fretted about how we’ve enabled a menace on our doorstep.
For example Germany shut down its nuclear reactors in a burst of progressive righteousness after Fukushima – only to become more dependent on a dictatorship with ambitions to produce the worst-ever sequel to Back to the Future.
As Klein writes:
The perverse result is that Europe is at greater risk of Russian pressure than the other way around. Natural gas prices in Europe are now about 5-6 times as high as in the U.S. because Gazprom has been withholding supply and because the lack of LNG terminals has prevented ships from moving gas across the Atlantic.
And while Europeans have made some modest investments in solar and wind energy over the past decade, it hasn’t been nearly enough to make a dent in the overall energy mix, especially after factoring in the impact of the decisions to decommission existing nuclear power plants.
The Europeans seem to have – belatedly – realized the implications of all this.
The Cold War was hard won. It cost blood and treasure.
Yet we seem to have forgotten that the world is a dangerous place, whether living out little England fantasies and electing dangerously failed property developers on the one side, or canceling writers for what a goblin said in a fairy story on the other.
A could-have-been unifying global pandemic only made things worse.
I have a bug-out plan for some less-than-worst case scenarios. Do you?
Have a good and safe weekend.
From Monevator
Social care in later life can be a financial black hole – Monevator
From the archive-ator: Don’t make a crisis out of a crisis – Monevator
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1
Warning: UK household energy bills could top £3,000 a year – BBC
Students in England to pay back loans over 40 years instead of 30 – Guardian
Taxpayer on hook to pay billions due to Covid fraud, says MP report – BBC
Rightmove predicts UK property boom after record 2021 – Yahoo Finance
Annual inheritance tax receipts rise £700m to £5bn – Wills & Probate
Fears of UK food and fuel prices rising due to war – BBC
Some 97% of adults in England now have Covid antibodies – BBC
Products and services
Virgin Money launches installment plan option for credit cards – Which
People want green pensions but they’re reluctant to switch out of default funds – ThisIsMoney
Stake enables you to trade on the US market with zero commission fees. Sign-up via our affiliate link and fund your account within 24 hours and you will get a free share. When you invest, your capital is at risk – Stake
How Waitrose’s revamped loyalty scheme will work – Be Clever With Your Cash
John Lewis scraps its historic ‘Never Knowingly Undersold’ pledge – MSE
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
Rates rise on UK mortgages as lenders look to inflation fallout [Search result] – FT
What is Swift and why are leaders divided on banning Russia? – BBC
Interest rates on easy-access savings accounts inching up – ThisIsMoney
Insulated homes to weather the storm, in pictures – Guardian
Comment and opinion
How it happens – Humble Dollar
Beware past return smoke-and-mirrors with alternative assets – Factor Research
Now you get it – Morgan Housel
The worst thing you could do right now – The Reformed Broker
Patrick Geddes: the two greatest enemies of investors – T.E.B.I.
Never a better or worse time to be an investor – Behavioural Investment
Wealth doesn’t buy freedom – A Teachable Moment
Big fish – Indeedably
The last time the market was fairly-valued – Of Dollars and Data
How to find TikTok and YouTube ‘finfluencers’ you can trust – Bloomberg
Martin Wolf: as inflation rises, the monetarist dog is having its day [Search result] – FT
Crypt o’ crypto
The case for Bitcoin as ‘digital gold’ is falling apart – CNBC
Starting a crypto hedge fund [Podcast] – Animal Spirits
Manchester police return millions to cryptocurrency scam victims – Sky
Quantum computing will break the blockchain [Or it won’t] – CFA Institute
Naughty corner: Active antics
Obscure inflation traders making a killing in London – Bloomberg via Yahoo
Can we trust Unilever’s dividend after Glaxo disaster? – UK Dividend Stocks
Covid corner
Five things we need to watch as legal restrictions end – BBC
Hong Kong: what went wrong with its Covid plan? – BBC
Kindle book bargains
Real Life Money by Clare Seal – £0.99 on Kindle
The World for Sale by Javier Blas and Jack Farchy – £0.99 on Kindle
The Joy for Work by Bruce Daisley – £0.99 on Kindle
The Perils of Perception by Bobby Duffy – £0.99 on Kindle
Environmental factors
Chernobyl: radiation spike at nuclear plant seized by Russian forces – BBC
Reef ball burials: new trend for becoming ‘coral’ when you die – Guardian
Sea level protection? Not in my park – Hakai Magazine
Kenya experimenting with growing crops beneath solar panels – Guardian
Off our beat
Rich People’s Problems: I’ve got superyacht envy [Search result] – FT
The solace of ‘at least’ and the sting of ‘if only’ – Daniel Pink
Amazon’s $31bn ad business explained – Trung Phan
I’m a creator. You’re a creator. We’re all creators! – Vox
And finally…
“People will choose unhappiness over uncertainty.”
– Tim Ferris, The 4-Hour Work Week
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Comments on this entry are closed.
History just repeats -like the stockmarket with its periods of ebullience followed by downturns so the human condition on a greater scale continually relapses into periods of strife especially after long periods of peace
My grandfather had to fight ,so did my father but not me or my son but perhaps my grandchildren will-I have two youths -18 years of age!
Sadly it is the way we humans are made -we can constantly try to mitigate the situation as best we can but strife( like market downturns) are an unassailable fact of our human existence
xxd09
From market close Wednesday to market close Friday, my portfolio (measured in GBP) was up just over 4%. (To be clear, I did no trading during this time.)
We seem to be in a bear market, so I’m sure it’ll soon wack down again. But it illustrates the futility (imho) of trying to trade on `events’.
The Morgan housel article is spot on. Easy to say you’d load up when things are down but there will be a reason things are down. I remember back around early 2010s you could negotiate good property deals and discounts. Plots would stick on the market because nobody wanted the risk. Completely different to how things have been lately. My confidence has been knocked by holding too much cash and getting battered by h.p.i
Cheers for the links.
Depressing read. Especially because it rings so true. Can you share more info on your bug out plan? I didn’t find anything concrete on the blog. Thanks
It seems crass to worry about stock prices when there’s a war going on. I’ve not checked my portfolio but expect my month end will be deeply red – perhaps (but then again maybe not) as bad as March 2020.
How long until we start seeing adverts for war (Brexit) bonds from HM Gov?
+1 We certainly need the Monevator short guide to Prepping
M.A.D. works great for the world’s nuclear powers, while effectively providing cover for crimes like this conflict. No one dares interfere and Russia gets to veto even a basic censure motion in the UN. Incredibly depressing to watch this all play out in the 21st century.
Russia may have a lower GDP than Texas, and as well as a large nuclear arsenal, it has a rather larger standing army, natural and human resources and a history of being difficult to defeat.
I’ve had similar conversations with millennials about climate change – usually from their starting point of “woe is us, it’s never been so bad”. While I agree climate change is an existential risk to civilisation as we know it, it’s not quite as terrifying as the threat of a nuclear exchange was during the 70s and 80s. And if you want to go back further – I doubt coming of age during the early 1900s was a high point for many either.
Yet the conclusion is the same as younger bullish types, all you can do is keep calm and carry on.
I get that gas and fossil fuel prices are rising globally, and Russia has some part in it. Does anyone know why UK consumer electricity prices are rising so dramatically in the UK? (basically in lock step with gas rises). We have a fair amount of renewable energy which hasn’t changed price in the short term, and gas is only about a third of our electricity generation. I would have thought the rises would be more in gas and less in electricity. Is this ofgem’s choice?
What is the reason for the electricity price rises?
@ Alex (9)
https://gridwatch.co.uk/
we used gas for 25/60ths of our electricity production last 12 months. A sizable proportion
JimJim
@alex I’m fairly sure that the price cap for gas increased by a higher percentage than the price cap for electricity. However, I still can’t work out how the price of gas per kwh is so much less than that for electricity – one would have thought that the economies of scale make it more efficient (and cheaper) to generate and distribute as compared to everybody having their own little boiler.
@Gentleman’s Family Finances It feels wrong (morally) but can’t help it. I bought my first flat last year and even before this kicked off worried about what appears to be very choppy economic waters. So my first thought was what is this going to mean for my bills and future remortgage. (Given I chose to graduate into the GFC, job hunt during austerity, and buy at a likely market top, I’m glad I don’t try to time the market with my SIPP) Still, we don’t have hyperbaric missiles, chechen mercenaries, or have to sleep in the tube. It’s a fairly stark reminder how lucky we are in the West compared to many in the rest of the world.
Really interesting times. Looks like a smart move by Putin that has been planned for sometime. Russia’s black Queen just took out one of Europe’s white Pawns. The question is will Russia (together with perhaps China) try to take out the white rooks and knights (Western Europe). Quite feasible over the next few decades as The West’s economic situation worsens with resultant political damage (and thus weak or conflicted leadership). But still quite clearly a very far out tail risk event.
Whether at the level of Putin or at the level of everyday average folk, we are all self interested in one way or another. It could be fighting against others for that well sought out property or career position, or a country invading another for self preservation, it is all fair game IMO given what human nature is REALLY like. Bloodshed, whether it is literal or metaphoric, who are we to judge? All we can do is fight if it is directed at us.
All that matters, to me anyway, is caring for loved ones. Everyone one else is expendable to me. Thus, I sit back with my legs up and a bag of popcorn and enjoy the events of Russia’s invasion of Ukraine.
@Alex. I posed the same question to Ofgem after their spokesman stated on Radio 4 that electricity from renewables has been getting progressively cheaper. In short their explanation was that the cost of generation was getting cheaper but the strike price for forward contracts of electricity is not based on generation source, i.e. electricity from coal, oil, gas, and renewable generation is all bundled into one. Moreover, renewables were ‘cheaper’ due to lower build costs and subsidies. For proof of this Ofgem suggested looking at the strike prices for CFDs. If generators produce electricity at a lower cost than the strike price then they are paid the difference by the LCCC (owned by the Govt).
https://www.lowcarboncontracts.uk/cfds?title=&agreement_type=All&field_cfd_current_strikeprice=All&allocation_round%5bAllocation%20Round%201%5d=Allocation%20Round%201&sort_by=name_1&field_cfd_generator_start_date_from=&field_cfd_generator_start_date_to=&page=1
Unfortunately, due to this structure my supplier, who is 100% renewable, does not have to pass this saving on to me and pockets the difference. In contrast, the price I pay for gas (and petrol) is linked to forward contracts of these commodities (plus local green levies of course).
Since the main reason for choosing a renewable supplier was ‘cheap renewables’, I feel a bit ripped-off!
@No free lunch: Enjoy? Just chilling
@nofeelunch i feel very uncomfortable about your comment about sitting back to “enjoy” the events. there are many ways to describe this situation, but to suggest this is a fun piece of light entertainment seems extremely cold and seriously lacks the empathy human nature is also very capabale of showing.
@ No Free Lunch
You might find this helpful: https://psychopathyis.org/screening/
@G
“…. Russia…., a history of being difficult to defeat…”
Difficult, but not impossible.
Russia was defeated in WW1. That defeat was signed off at the Treaty of Brest Litovsk in March 1918. The Russian Empire collapsed, and led to the appearance of new states. Poland’s independence was restored,
and Latvia, Estonia, Lithuania and Finland gained statehood for the first time in their history.
Afghanistan, 1979. Russia/USSR withdrew, essentially defeated. Like others, before and after.
“…When you’re wounded and left on Afghanistan’s plains,
And the women come out to cut up what remains,
Jest roll to your rifle and blow out your brains….”
‘The Young British Soldier’ (1895) Rudyard Kipling
Great article, really balanced and insightful against many of the poor articles produced by the mass media.
feel free to ignore the ignore the ramblings of a keyboard warrior……
– Scottish independence would be a disaster for our island geopolitically with no where to house a nuclear deterrent and England having a land border to guard for the first time in hundreds of years. Hence why Russia is keen to support the nationalists. Just no.
– I felt y/d the biggest shift here could be Germany and today we’ve seen a very substantial announcement by them. France must have skipped a heartbeat hearing the news but with US stretched, Germany is the most likely answer to balancing Russia with the UK/ French economy unable or unwilling to support military expansion.
– It’s almost negligent sending token British forces into Estonia with an obsolete challenger 2 tank. Massively underpowered vs the Russian offering.
– I wonder how many US citizens are aware they’ve guaranteed the safety of the citizens of North Macedonia since 2020 or indeed could even place it on a map.
– Fukushima disaster was a major benefit to Russia and you wonder if they provide funding to the extinction rebellion crew (tongue in cheek). Hopefully UK electorate will realise (they won’t) that energy security needs to be a no 1. priority for us for security, climate and economic reasons
– I’ve got some of the components of a bug out plan, second passport, offshore accounts, hard currency albeit none of those components were obtained with a bug out plan in mind, they were just acquired. People still seem to bug-out to the UK or US if they can so I’m not convinced there’s many places to go. Plus I have minimal transferrable skills, wider family in the UK and summer here is goldilocks 🙂
– The problem with bug out plans generally is history shows people typically leave it to late to enact them. Take Taiwan – would you stay, go? I have some friends with relatives who are stuck in Kyiv and even last Tuesday thought it would be ok. Tough to enact given the upheaval and the need to go before it’s actually clear you need to leave. But good to have options if you can
– No Free Lunch – I understand a small part of your comment – talk is cheap and hard power is the only thing Russia cares about but no-one should enjoy watching this.
– In 2015, who would have predicted – Brexit, Pandemic, Ukraine and FTSE / S&P higher than now. It shows no-one knows what’s coming next. For most people, maintaining a diversified asset allocation with plenty of liquidity and tuning out of markets is the right approach.
Thanks for the comments everyone. I would chip in here and there but I’m appreciating the input from others.
To the point of my article, grim development today:
https://www.standard.co.uk/news/world/putin-nuclear-deterrent-nato-b984915.html
We can only cross our fingers, hope it’s just posturing, and trust to the good sense of the senior Russian military. (Has Putin purged and replaced them all with rabid loyalists? I don’t know.)
News today that bp and now the Norwegian Sovereign Wealth Fund will sell off their holdings in Rosneft:
https://www.bbc.co.uk/news/business-60548382
https://www.bloombergquint.com/markets/norway-starts-process-to-drop-russia-from-sovereign-wealth-fund
Can anyone explain how this will be done? I assume not tomorrow as dumping all their holdings at once on the market would cause problems and (we asume) make those who buy them wealthy, should (when) prices recover.
Longer term and strategically, does this move make sense? Someone is going to hold the shares, and while it’s unpalatable to do so now and dumping the shares will cause problems (I assume) for Rosneft’s liquidity, does it not merely change who owns part of the company and nothing more?
Started my long weekend on Thursday with the daily Wordle at 6:20 AM.
Checked Reuters, saw that Putin had declared war to the country next door, Russian tanks were already moving in Ukraine and their military airports were being hit by missile strikes.
Then I spent the other part of my weekend alternating between being glued to the internet for news about the war and doing absolutely normal stuff: buying groceries, walking my dogs, visiting my sister to play board games. Because even though a few hundred kilometers to the north bombs are being dropped on people, nothing had materially changed for me here. I am protected by the thin, thin shield of a NATO membership that my neighbors do not have.
It took until Friday afternoon to realize that the thing I feel the most is rage. Incandescent, pure, unadulterated rage. This one thing kept going through my mind: “How dare he?!” We fought this war already. Our grandparents fought this war for us, so we do not have to learn this lesson again. We know what war brings and it’s always death and pain, but only for the little people. I always thought if the war would come to my country I would be afraid. I would be the first one out, my plan to leave the country in place and ready to execute. I never considered that I would be too angry to be afraid and that I would be so enraged at a discount Hitler’s chess game with real people that I rather choose to stay and fight than flee.
I went grocery shopping on Saturday to buy long shelf life food to send to the border. Everywhere in my country NGOs and regular people are organizing transports of food and essentials to the borders and opening their houses to the refugees. There were 10.000 of them in the first day alone, we’re expecting maybe up to half a million, depending on how long the war will continue. I think most of us feel survivor’s guilt, it could have easily been us and, to be fair, it can still be us, depending on how Ucraine’s invasion goes for the Russians. For now, it looks like they’re holding on, and that protects us a bit, too.
This Sunday my husband took the car to the border. He’s coming back tonight with a family with 3 small kids. A friend is moving with her mother for the night and giving them her apartment, in the morning they will leave further away from the war. They probably bribed the Ukrainian border patrol, otherwise the father could not have exited their country as all men between 18 and 60 must stay and fight. Money is never meaningless, even in the war.
Inspiring post!
We are with the people of Ukraine !
Who would have thought that Europe would have to suffer this sort of savagery again!
xxd09
I know this is a finance blog but… what the public lacks awareness of is how devastating conventional weapons are now, both in power and accuracy. You don’t need nukes now to level significant areas or take out large forces. Russia has invested heavily in this tech for many years and has battle tested it.
R’s account above is very powerful, but I have to question the final paragraph. If the man fleeing with his family is not prepared to fight for their country, why should anyone else do so on their behalf?
Talk is cheap and I do not pretend to know what I might do in their situation, but I do remember reading about wealthy draft avoiders in the USA, Clinton, Bush, Trump etc and the discord it generated.
@Bill — Personally I admire those who fight in the face of an aggressor and I understand those who flee.
There but for the grace… etc. 🙁
Free Lunch @12 “Everyone one else is expendable to me. Thus, I sit back with my legs up and a bag of popcorn and enjoy the events of Russia’s invasion of Ukraine.”
Those of us who don’t share these sentiments, who don’t “enjoy” witnessing the misery and death of civilians and children, may wish to donate to the Red Cross appeal.
https://donate.redcross.org.uk/appeal/ukraine-crisis-appeal
https://www.theguardian.com/uk-news/2022/feb/28/how-can-britons-help-the-people-of-ukraine
I think its easy to forget that a percentage of seemingly healthy individuals of any age could have health issues that prevent them being able to stay in their country, however much they wished to remain, especially if access to essential health services or supplies they need to function normally may be at risk.
I also think it’s easy to forget that Eastern Europe has direct experience of Russians rolling into their country (e.g. Czech invasion of 1968) and them not leaving again for 30 years, with much repression and misery in-between.
It’s a horrible choice to have to make, in a fight that hardly looks fair.
@Bill, he wasn’t a wealthy draft avoider. Just a regular guy, working remotely in finance. He was trying to reach a place where he could continue working. The war might be long, 2, 3, 10 months, you need to have some money to sustain a family of 4 in a different country, if you don’t want them to spend months in tent cities together with hundreds other refugees. Is it wrong to do this? I don’t know. His wife spoke no English(or any other language that would be of use), sending her alone with 3 kids, I don’t think that’s an option. His parents have refused to leave the country. I wouldn’t wish his choices on anyone.
And I would not presume to tell a man what he needs to die for. Their government might ask for everyone to fight for them, but in reality that’s posturing. They don’t need another hundred thousands people fighting for them. They need air fight capabilities, drones and trained soldiers, not poor sods who have not held a pistol in their life. At best, he would have been cannon fodder. The time when wars were won with men is long gone. If Putin truly wanted to conquer Ukraine in a month or two, all he had to do is level their bigger cities to the ground with air strikes. He’s whole shtick is that he’s coming as a “liberator” from the “Nazis” that have been running Ukraine so he has refrained from bombing the hell out of civilians for now. Who knows how long that will last.
As a Czech citizen I can vouch for that. Luckily I haven’t lived through a lot of it but we are still dealing with the aftermath of it. It crippled otherwise very competent nation.
Unfortunately, if it was to happen again, we wouldn’t be able to put up any fight. I’ve often wondered if nato would step up if it was truly tested. And so far I’ve been very pleasantly surprised about the response to Ukraine crisis.
Of course, if nukes came up play, I don’t expect anyone to sacrifice London for Prague. But then what’s a nation to do. Should all nations have the right to possess nuclear warheads if that’s the only reliable means of defense?
Though questions
Free Lunch @12 “Everyone one else is expendable to me. Thus, I sit back with my legs up and a bag of popcorn and enjoy the events of Russia’s invasion of Ukraine.”
This comment is crass, cruel and incredibly stupid.
You are clearly an idiot!
Interesting the comment about Texas GDP v Russia’s GDP.
I’ve always thought GDP figures like that are a waste of time since you probably get much more for your dollar in Russia in terms of spend ability.
Similarly you look at the whopping budget of USA’s military ($700Bn circa a year) and perhaps China’s “alleged” military budget is $250Bn (only did a Google to get that). It may be a whopping difference, but personnel costs will be so different so I’d think the true value of both may be nearer than we think. Raw materials maybe similar but labour costs totally different. I take there are other factors to consider too, such as quality.
The same could “probably” be said for Russia’s military.
Meanwhile the UK have two very capable complete aircraft carriers that are only just about ready to take aircraft (flight testing, etc). Go figure!
This article brought to you in association with Frankie goes to Hollywood.
@JohnN — Congratulations, you are a winner! (Commiserations: there’s no prize… 😉 )
Interesting to see how with a weeks hindsight many of the “accepted wisdom” comments have not aged well at this admittedly early juncture. To be clear if I’d have commented it’s highly likely I’d have made the same assumptions. Reminder that the obvious isn’t always the truth applies to finance just as much as warfare and geopolitics.
Also @No free lunch, hope you have enjoyed the “show” seeing as your black Queen appears to have failed to pay attention to logistics or vehicle maintenance and the white pawn had NLAW/Javelins + sheer guts in its back pocket…
Coming up to the fourth year of war now and Russia having comprehensively lost morally and militarily (albeit it has fared better than expected economically) has won with the ‘Manchurian candidate’ DJT back to sow chaos. What leverage has Putin got on him? It’s appalling.
Appeasement isn’t a fair comparison here because Chamberlain was an honourable albeit naive statesman who, whilst proved wrong, sincerely wanted to avoid war for the best of reasons.
No such excuses exist for Trump and his cronies.
Latest take on the shameful and craven capitulation to Putin from Noahpinion:
https://open.substack.com/pub/noahpinion/p/america-is-being-sold-out-by-its
To be clear I’m not in the 5% (of GDP) camp on defence.
It seems to me to be a false choice. We can behave as an honourable people and do the right thing by Ukraine by increasing both our and our European NATO partners’ aid to Ukraine to make up for the Americans’ missing contributions without having to try to do the impossible and to now add £72 bn p.a. to the UK current £59 bn defence budget.
A quick and dirty, back of the envelope type, calculation suggests that an extra few billion a year of aid from the UK if matched in proportion by the rest of European NATO should cover it. UK GDP is a tad over £2,800 bn p.a. so were talking approximately an additional 0.1% or so of GDP as extra aid to Ukraine. That is totally doable, even in the current precarious state of thr public finances.
So, there is a moral but pragmatic half way house between re-militarising and going to a direct war with Russia and selling the brave Ukrainian victims of Russian chauvinistic imperial recidivism down the river.
Perhaps Trump regards China as the main threat today to American interests (China currently now conducting live fire drills off the Australian coast -interrupting air traffic)
Russia perceived as no longer a strategic threat to America at the moment – may indeed be useful partner against China
Russia is of course a real-time threat to the Europeans who appear unwilling and unable to to defend themselves
America therefore going to reduce its European defence foot print substantially to encourage a change in European behaviour -Europe not the main American priority at this time
Latavia,Lithuania and Estonia lookout not good
xxd09
There’s an excellent comment (amongst many) to the Noahpinion piece that, in terms of its history, China has not been all that expansionist, at least relative to other large powers like Germany (1871-1945), Russia (say from the expansion of Moscovy in 1462 through to the Alaska sale in 1867, and then as the USSR from 1939-40, with Molotov-Ribbentrop, or from 1944-45), the US (from the outset and maybe only now pulling back), and each of France, Spain. Portugal and Britain (with their respective empire building, from the 1500s for Portugal and Spain, and until Suez in 1956 for Britain and France).
China was the victim of multiple aggressions from the British with the 1st Opium War (1839-42) through to the Japanese invasion of Manchuria in 1931 and the rest of China in 1937.
It was forced into confrontation with the US in 1950 in Korea to maintain a defence perimeter in a traditional sphere of influence.
In 1962 it stumbled into a war over the Himalayan boundary with India which it was quick to end even though it was the victor.
It pulled back from military confrontation with the USSR in 1969 and ended its shelling of Quemoy and Matsu in 1958 before things escalated with Taiwan/US.
It’s punitive attack on Vietnam in 1979 was short lived and exemplary.
Whilst it did take Tibet in 1951, like Taiwan, this was seen as part of the de jure territory of China (which slipped from control of the nationalist KMT from 1911/12 to 1949).
Significantly perhaps, China doesn’t have the same sense of resentment and bitterness as Russia has today.
It didn’t undergo a collapse of 1st it’s sphere of influence and then of the State itself, as occurred to the USSR from 1989 to 1991.
Nor has it endured the collapse of its economy, as occurred to Russia in 1992 (hyperinflation) to 1998 (default crisis).
Russia is more similar to Germany from 1918/19 to 1932/33 in this regard, whereas China is not.
Although Xi has taken a much more strident and nationalist position since 2013, does this in itself make China a peer challenger to US hegemony?
China appears to want to secure its trade routes and its overseas investments and to avoid direct conflict with the US or indeed India.
Perhaps I’m over rationalising Chinese motivations and strategy here (especially vis a vie Russia’s or America’s presently) but, whilst a multi polar world is less stable than a bi polar one, this does not seem to require that conflict between the great powers is inevitable – less still that it is something sought out by any of them.
In this regard Noahpinion seems a bit too hawkish on China for my tastes.
China has never been an Imperialist power unlike the Europeans who straddled the globe many times from the Romans onwards conquering countries and empires
The Chinese have never physically expanded outside their natural borders-perhaps there was no need .It is also a 5000 year old empire so unlikely to change now
However trade with the outside world has become very important so soft power is deployed -money(bribes) used,ideas stolen etc etc
This has got the wrong side of the Americans -there is an large imbalance of payments,abuse of patents etc -the Americans can blockade China’s access to the world by sea very easily disrupting Chinas trade routes
Big games afoot
xxd09
PS China is also a true totalitarian police state with absolute Orwellian overtones-anathema to the free world especially the Americans
Some comments here on potential Trump led US – China “grand deal”:
https://open.substack.com/pub/davidstevenson/p/links-worth-investing-in-buried-pylon
I suppose that, whilst it might be shameful to contemplate, cosying up to dictators has the benefit of reducing the immediate risk of a global conflagration – albeit if Europe were to follow the US lead and abandon Ukraine now then it would be surprising if Putin didn’t eventually try something in the Baltic republics or Poland. At least the Russian military seems pretty mashed up. Maybe that will deter the Kremlin for a while.
@Delta Hedge — Indeed, I agree and I agree it’s also shameful to contemplate. As I said to a friend of mine at lunch today, a Trump-esque deal probably reduces the risks over the next ten years and escalates them over the next 20 and beyond.
These guys seem to think America was just a dumb patsy to fight the Cold War, to backstop democratic Europe, and so on. They don’t appear to have noticed it delivered the American Century, and left America the undisputed champion of the world.
Not to deny that previous superior generations did put some high-mindedness into the mix. Fighting through two World Wars in 20 years will do that to you. As opposed to fighting through Manhattan traffic all your life in the back of a limo.
They talk about an impoverished America the same way a super rich trust fund kid bemoans that he has to get a trustee to sign over the month’s £1m allowance.
So much blood and painstaking diplomacy being set on fire in the populist bonfire.
@TI: re: “the next 20 years and beyond'”: We’re facing a wholesale attack on the principle of territorial integrity in favour of a world where increasingly the strong do as they want and the weak suffer what they must. Ultimately though, the global chaos of land grabs is not winner takes all but an everybody looses somehow scenario – as the computer Joshua says in War Games “a strange game” in which “the only winning move is not to play.” Already the consequences of the new world disorder since 2014, when the Russian invasion began, are showing up in conflicts as varied as Yemen, Sudan, Ethiopia and Tigray, Armenia and Azerbaijan and even, most recently, Rwanda and the DRC:
https://youtu.be/0N34UFbWpFk?feature=shared
Sadly in the real world the “strong “will always win over the” weak “-in territorial disputes as in all other areas
The answer is to be as “strong “as possible – this obviously will take many forms but a believable deterrent armed force is the basic foundation to all other areas
Currently the Europeans believe this is a secondary consideration to climate change,gender politics,immigration etc
Probably not a sustainable set of stances without armed forces unfortunately
xxd09
Platitudes like the strong will always win over the weak do not inevitably determine international relations.
The US ended WW2 as the world’s sole nuclear power. They could have just nuked Russia into being a vassal state. (Something Betrand Russell urged, for example).
More to the point they poured billions into plans to rebuild Germany and Japan. To make them strong again.
Why do you think they did this? Why were Germany and Japan afforded the chance to remake themselves and become some of the most potent players and greatest industrialists over the past 80 years, producing incredible products that brought so many of us joy?
It was a choice made by wiser and yes kinder Americans for not entirely selfish reasons.
The current administration would have offered to buy the rubble for landfill.
As for climate change and immigration et cetera, this stuff is integrated. Making the world poorer, more disaster stricken, and more migration prone isn’t in any Western countries’ interests.
These policies are some combination of cravenly populist (defined as good for appeasing base instincts of voters, for their votes or their approval where voting isn’t allowed), jingoistic, short-termist, and stupid.
It’s not some inevitability.
@TI: On the USA (“the US ended WW2):
America was late to join the fight against the Central Powers (in 1917) and the Axis (in 1941).
Isolationism was strong and, in the latter case, America only committed its men when directly attacked.
As for “kinder Americans” yes they were, it’s true.
But Marshall, Morgenthau, Kennan, Kissinger, Brzezinski and their political masters in the White House did not act merely out of altruism. It was American self interest to rebuild and defend their overseas markets and to help their allies to contain America’s rivals.
As the world naval power – with America supplanting Britain, just as Britain supplanted Spain and Portugal in prior centuries – the US used the powers on the periphery of Eurasian World Island (Germany, Britain, France, Japan, South Korea, Taiwan, Indonesia, Philippines, Thailand, South Vietnam etc) to try to contain the powers of the Eurasian Heartland – Russia and China.
America supported and sustained brutal and kleptomaniac autocrats in Asia, Africa and Southern and Central America and the Caribbean provided that they spurned Soviet influence. The ideological dimensions exacerbated this.
That was first and foremost an act of self interest and pragmatism, not one of kindness.
Trump is an truly appalling person and unsuitable for any office. But at least he pulls the wool away from the world’s eyes and enables us to see that America is not (and never has been) a ‘shining city upon a hill’ as Regan put it.
Sadly the Europeans chose to use that “American “ 70+ years of “peace” to give their citizens the good life-free healthcare.good welfare benefits etc but spent little on defence as though “good times “ would go on forever under the Pax Americana
Now the tough/normal times are back with predatory Russians,Anti Semitism everywhere etc
The Americans are now not going to to pay anymore for a Europe that refuses to live in the real world
The Europeans are going to have to rearm quickly-that’s very expensive especially with an set of economies deeply in debt
Other European priorities will have to give -NHS,State Pensions etc
Tough times coming indeed
xxd09
You are just repeating a bunch of populist talking points.
Europe’s posture for the past eighty years was entirely in Americas interests, which is why they did it.
This new position is in Trump and MAGA’s self interest, which is why they did it.
@Both it’s all just values and relativism. There’s no first principles for ethics, only preferences and priors. It turtles all the way down. @xxd09’s tribalism and populism is Robert A. Heinlein’s Starship Troopers. @TI’s attachment to classical liberalism (with a dash of neo-liberalism / pragmatic managerialism) is Hari Seldon in Isaac Asimov’s Foundation. I’d like to identify with the Special Circumstances Agents from Ian Banks The Culture, but I’m more inclined to the bleak world view of Case in Neuromancer or the God Emperor in Dune.
As for the US sell out to Russia, and where that leaves the UK now, the paradigmatic one nation Tory Harold Macmillan (precursor, perhaps, to Rory Stewart, aka ‘Sir Lawrence of Remainia’? 😉 ) put it best way back in 1943 when, as Churchill’s Minister Resident in North Africa, he wrote to Oxford Don Richard Crossman thus: “We… are Greeks in this American empire. You will find the Americans much as the Greeks found the Romans – great big vulgar, bustling people, more vigorous than we are and also more idle, with more unspoiled virtues, but also more corrupt. We must run AFHQ (Allied Forces Head Quarters) as the Greeks ran the operations of the Emperor Claudius. These Americans represent the new Roman Empire and we Britons, like the Greeks of old, must teach them how to make it go. We are the Greeks of the Hellenistic Age: the power has past from us to Rome’s equivalent, the United States of America, and we can at most aspire to civilise and occasionally to influence them.”
Very well put Delta Hedge -that is the position one again that the U.K. is in with an added Brexit boost
Have our current political and diplomatic leaders got the ability to “ride the tiger” which we have done so successfully many times before with our rumbunctious old colony across the Atlantic?
Interesting times-history doesn’t repeat but it does rhyme
xxd09