Losing At War, Black Swans Everywhere, Baffle Them With BS

Friend George reminds us that in war games underestimating your opponent and ignoring reality are two sure ways to lose. Unfortunately for the EU crowd, the Ukraine war games are being played for keeps. Here’s a portion of the discussion from a recent missive from Friend George:

Remember when Tom Luongo talked about the war between the Fed and the ECB? But neither side admitted they were at war. No declaration of war. The UN’s Guterres had called upon the Fed to “pivot”, i.e., stop raising rates, and stop squeezing liquidity out of the markets, including in Europe. Great stuff: the UNO chief shows the flag! Now the EU’s foreign policy “chief”, Borrell (Here Comes The Open Revolt: A Reeling Europe Lashes Out At The Fed For "Bringing Us To A World Recession")

the high representative of the 27-member EU bloc, lashed out all too publicly at the Fed when he said that central banks (across Europe where the recession will be far, far worse than in the US) are being forced to follow the Fed’s multiple rate rises to prevent their currencies from slumping against the dollar, and compared the US central bank’s influence to Germany’s dominance of European monetary policy before the creation of the euro.

As Luongo predicted. And he also predicted that the Fed would ignore the squeals of pain. As the Fed is doing. And Jamie Dimon is offering them no sympathy.

As zerohedge points out,

the last thing central banks need, when they are seeking to effect an extremely unpopular global economic recession that will leave millions without a job (think inflation is bad? just wait until you have no job and inflation is still bad) is growing discord among the ranks of the technocrats who have a simple script: no matter how unpopular or stupid a given policy is, you never, never, disagree in public, as this risks sparking popular outrage and toppling the entire house of cards at the hands of a suddenly very angry public.

So Lagarde at the ECB is going to be mighty pissed off at Borrell, but she agrees with him, because she has to agree, and she will not say so in public, because she can’t. Zerohedge continues,

Of course, back then the solution to the super deutsche mark was simple: pool all nations under a common currency umbrella, even if it means misery for the less productive, and less mercantilist countries (hence the never ending European sovereign debt crisis which remains in hibernation only thanks to the ECB's bond buying). This time however, there is no simple solution taking advantage of gullible states, instead now that they've broken the seal of silence, the "leaders" of Europe admit to just how powerless they truly are when the custodian of the world's reserve currency has to do what's best only for itself, allies and friends be damned:

“Everybody has to follow, because otherwise their currency will be [devalued],” Borrell said to an audience of EU ambassadors, the FT reported. “Everybody is running to increase interest rates, this will bring us to a world recession."

Admitting how powerless you are goes directly to the heart of the EU’s stance on Ukraine at just the time when the Russians are upping the ante and there is a frantic attempt in the US to cut loose from Zelensky to get talks with Russia. That does not at all mean that they know what they want to talk about or what they are willing to talk about. But they are forced to invent a new script. White House “National Security Spokesman” John Kirby: “This war has gone on for too long we are all interested in putting an end to it.”

...

... Two-front wars are rarely won. There are ways out of a “world recession”, but not for Europe, nor for defossilization, not for the Green New Deal, and not for Davos. Inflation, i.e., ECB money-printing, “Euro-bonds” and the like would, according to the delusions of the Euro-elite, enable them to spread the money around and...well, how did that genius; the German Economy Minister Habeck put it? ”Oh, if the fuel and electricity prices rise, it doesn’t mean a company goes bankrupt. It just means it stops producing and selling for a while.” Everyone laughed because they thought he was being stupid. No, not stupid, not at all: just print money and pretend your economy is not collapsing. Jerome Powell at the Fed has put the lid on that fantasy and he can get away with it because even the Biden Administration has to “fight inflation” or lose the mid-term elections and then another two years of revolutionary upheaval if he doesn’t.

Because if you’re the GOP, even of the GOPe variety, what price do you demand from the Dems for doing them the favor of getting rid of Zhou before 2024? As I’ve said before, these are uncharted waters. A GOP Congress is not obligated to confirm a new VP, and a GOP House can name a Speaker who isn’t a US Representative. It can, of course, impeach. That’s a lot of moving parts when you plug them into an unprecedentedly fluid political situation. George posits “two years of revolutionary upheaval”, and who’s to gainsay him?

So you see that we have moved beyond the ideology vs. reality game and into the game of pure power. Not everyone’s currencies are being devalued. The ruble is doing fine. But the dollar is rising against the Euro as a result of capital flight. For other countries, BRICS countries, SCO countries, the rising dollar means to forget about finances and get trade going on a dedollarized basis. Some are chasing interest rates, others are fleeing deindustrialization. It’s all quite easy and you would think some AI – Artificial Intelligence – algorithms would have informed the EU about such connections. That is how to lose war games: underestimate the adversary, underestimate the reality.

Compare and contrast. Zerohedge ran a piece this morning that quoted more of Borrell’s “surprisingly frank and plain-speaking address.” Not to say, amusing, in a black-humor sort of way.

"This Is A Perfect Storm" - EU Leader Warns Of "Black Swans" Everywhere, Says 'Propaganda Is Our Battlefield'

Borrell begins by bemoaning the way the war on Russia has turned into a quagmire of unprecedented proportions for the EU. But he wants his listeners to believe that it was no one’s fault that everything has turned to sh*t. Nobody could have foreseen it, really! Although Vladimir Vladimirovich did warn them:

At this pace, the black swan will be the majority. It will not be white swans – all of them will be black – because one after the other, things have happened that had a very low probability of happening, nevertheless they happened, and they had a strong impact and certainly they happened.

The gambler’s lament. Not my fault. If only …

Then he indulges in a bit of reality, but ends up trying to deny it:

Our prosperity has been based on cheap energy coming from Russia.

…

And the access to the big China market, for exports and imports, for technological transfers, for investments, for having cheap goods.

And he blows a pathetic kiss to the Zhou outfit:

On the other hand, we delegated our security to the United States. While the cooperation with the Biden Administration is excellent, and the transatlantic relationship has never been as good as it is today – [including] our cooperation with the United States and my friend Tony [Anthony] Blinken [US Secretary of State]: we are in a fantastic relationship and cooperating a lot; who knows what will happen two years from now, or even in November?

What would have happened if, instead of [Joe] Biden, it would have been [Donald] Trump or someone like him in the White House? What would have been the answer of the United States to the war in Ukraine? What would have been our answer in a different situation?

In other words, we chose war, everything turned to sh*t, but the war is still great—and, dang, what a great relationship I’ve got with Tony. As we used to say in my youth, that and a quarter will get you a bus ride.

He admits that the world he just described is no longer there. No cheap Russian energy, no China market, and the US security blanket … well, maybe we have to start contributing more. That’ll be a trick, won’t it? Rebuild the EU militaries into something that wouldn’t be a laughing stock to the Russians—while deindustrializing and paying through the nose for super expensive non-Russian energy? Dream on.

Does Borrell have a plan, what to do while waiting for this fantasy to become reality? He does, sorta, and here’s how Zerohedge summarizes it:

So, the EU is planning to jawbone/propagandize its way out of dependence on China for its economic growth (internal cross-border trade?), Russia for cheap energy (by becoming more reliant on US?), and US for security (Macron's European army rejuvenated?).

As Borrell noted at the very start of his speech: this is a perfect storm indeed... and winter is coming

It’s almost beyond belief, but here are Borrell’s actual words:

Communication is our battlefield: we fight in communication.

We provide you with materials and I have the feeling that you do not transmit the message strongly enough. 

I need my delegations to step up on social media, on TV, in debates.

Retweet our messages, our [European] External Action Service materials. Certainly, my blog, which is the everyday “consigna”...

I need you to be much more engaged in this battle of narratives. It is not something secondary. It is not just winning the wars by sending tanks, missiles, and troops. It is a big battle: who is going to win the spirits and the souls of people?

...

Our fight is to try to explain that democracy, freedom, political freedom is not something that can be exchanged by economic prosperity or social cohesion. Both things have to go together.

Otherwise, our model will perish, will not be able to survive in this world.

Again. Just unbelievable.