Sunday Roundup: More Luongo, Ukraine, China

I’ve got work to do to get ready for guests, so I’ll get this out—there are important things happening.

Following on from yesterday’s Ukraine Hawks Run Into Economic Reality, I’ll start with a transcript of the next section of Dimitri Simes, Jr.’s chat with Tom Luongo. This section is relatively brief and self explanatory, but it’s important because it sets the stage for the coming economic debacle in Europe:

How did Europe get to this point?

DS: Europe does seem to be in a pretty precarious position? How did Europe get to this point? Because we all know that last year the European Union joined the United States in imposing sanctions against Russian energy and that obviously complicated things for European industry. But is this just a question of sanctions backfiring or is there a deeper backstory to why Europe could be on the brink of a banking crisis?

TL: The Europeans put themselves in this position. They destroyed any chance that the Euro could ever compete with the United States when they went to the negative interest bound, when they went to negative point six percent for deposit rates, and then sent more than 12 trillion dollars worth of European sovereign debt into negative nominal yields for years.

Negative interest rates were a policy in Europe for nearly a decade. No one ever talks about the Japanese Yen becoming any kind of global Reserve currency because the Bank of Japan has been doing QE and yield curve control for more than a generation, and they were still at the negative point--one percent. Negative interest rates are destructive, they're capital destructive, and so the Europeans just basically put themselves in that box. Now I believe they may have done so for their own weird globalist agenda reasons--Klaus Schwab's Agenda 30 and all the rest of it, and Build Back Better and all that stuff.

The reality is is that things don't work in the real world like they work on paper and in Academia. This is one of the big big criticisms that Austro-Libertarians like myself have about the Fed. And then the Fed gets everything wrong. Well, guess what? The ECB is just the old Fed under Bernanke and Yellen times 10. It's even more politicized, it's even more agenda driven, and it's even more beholden to economic models that have zero applicability in the real world. So Europe put themselves in this position.

I think everybody really did think that if they put shock and awe sanctions on the Russians it would break the Russian economy. They would be able to come in and scoop up Russian assets for pennies on the dollar, and then secure themselves for the next hundred years--cheap energy from a compliant and Balkanized remnant of Russia. I really do believe that they thought that. Again, these people live in their own bubble. They live in a bubble of Academia, power politics, Real Politik, and they're all built on a foundation of sand. Meanwhile I've been saying for years that President Putin understood all of this, and set Russia up perfectly to just say, 'You know what? That's nice, but I've got other friends now.'

This is a war, and this war has been going on since February of 2022--or really it's been going on since October of 2013, between the West and Putin over Syria and Ukraine, which are intertwined. This has been going on for a decade. I've been watching Putin since the ruble crisis of 2014 and even earlier and, to me, it's very obvious that he's made almost every right move--financially and politically and regulatory--and in terms of the legislation needed to set Russia up to be able to defend itself adequately against a massive sanctions wave, a sanctions wave that didn't work, because it was ordained not to work because no one over in the West listened.

The longer I talk about this in public, and the longer I make these arguments more and more nuanced to try and explain what's been happening, the more I get people coming out of the woodwork to tell me behind the scenes, 'Well, yeah, I just talked to this guy and he's like a senator's aide,' or 'He works at this bank,' and I keep getting the same story over and over again: They don't have any clue as to what's really going on. They believe their own press clippings, they believe their own ideas, and they all just talk amongst themselves and reinforce each other's ideas. So it's a dangerous place to be in when all you can hear are other people who are telling you the exact same thing you want to hear, and then when it doesn't work out that way then they're shocked and they're surprised and then they have to do things that are really out of character. Like, send the Treasury secretary to a hastily put together meeting to go to the Chinese and beg them to buy a couple hundred billion dollars worth of--I don't know how much they've spent. They only had to buy like 20 or 50 billion dollars worth of U.S Treasuries. The may have bought a lot. I don't know. We'll find out in the TIC report the Treasury International Capital Report from the United States, if I'm right, in September when the July data finally comes out.

Note that last part, which came up in the comments this morning. Luongo was talking, in yesterday’s installment, about how much Treasury needs to finance in total—not how much they needed China to kick in by buying treasuries.

Speaking of China, Pepe Escobar has a fun and interesting piece that Zerohedge has republished:

The Neocons Want War With China

In this article Escobar discusses Kissinger’s recent surprise trip to Beijing to chat up Xi Jinping—chat up, gaslight, your choice of words. Escobar ties that in to recent statements by Edward Luttwak, Neocon geostrategist and long time adviser—or gaslighter, again, your choice of words—to the Pentagon. Luttwak has all sorts of crazy things to say about China, but Escobar’s thesis is this. The US is desperately flailing about—using CIA Director Burns heavily—trying to make a deal with Putin so that Putin will join the Neocons in a crusade against China. Apparently, the Neocons believe they can con (!) Putin into believing that they wouldn’t turn against Russia after defeating China. Here’s a sample of Luttwak’s delusional worldview:

The World Through Washington’s Eyes

What’s really going on in the back rooms of the current American administration was not reflected by Kissinger’s high-profile peace initiative, but by an extremely combative Edward Luttwak.

Luttwak, 80, may not be as visibly influential as Kissinger, but as a behind the scenes strategist he’s been advising the Pentagon across the spectrum for over five decades. His book on Byzantine Empire strategy, for instance, heavily drawing on top Italian and British sources, is a classic.

Luttwak, a master of deception, reveals precious nuggets in terms of contextualizing current Washington moves. That starts with his assertion that the US – represented by the Biden combo – is itching to do a deal with Russia.

That explains why CIA head William Burns, actually a capable diplomat, called his counterpart, SVR head Sergey Naryshkin (Russian Foreign Intelligence) to sort of straighten things up “because you have something else to worry about which is more unlimited”.

What’s “unlimited”, depicted by Luttwak in a Spenglerian sweep, is Xi Jinping’s drive to “get ready for war”. And if there’s a war, Luttwak claims that “of course” China would lose. That dovetails with the supreme delusion of Straussian neocon psychos across the Beltway.

Luttwak seems not to have understood China’s drive for food self-sufficiency: he qualifies it as a threat. Same for Xi using a “very dangerous” concept, the “rejuvenation of the Chinese people”: that’s “Mussolini stuff”, says Luttwak. “There has to be a war to rejuvenate China”.

The “rejuvenation” concept – actually better translated as “revival” – has been resonating in China circles at least since the overthrow of the Qing dynasty in 1911. It was not coined by Xi. Chinese scholars point out that if you see US troops arriving in Taiwan as “advisors”, you would probably make preparations to fight too.

But Luttwak is on a mission: “This is not America, Europe, Ukraine, Russia. This is about ‘the sole dictator’. There is no China. There is only Xi Jinping,” he insisted.

And Luttwak confirms the EU’s Josep “Garden vs. Jungle” Borrell and European Commission dominatrix Ursula von der Leyen fully support his vision.

Luttwak, in just a few words, actually gives away the whole game: “The Russian Federation, as it is, is not strong enough to contain China as much as we would wish”.

Hence the turn around by the Biden combo to “freeze” the conflict in the Donbass and change the subject. After all, “if that [China] is the threat, you don’t want Russia to fall apart,” Luttwak reasons.

So much for Kissingerian “diplomacy.”

Exactly the strategizing that commenter Darek was talking about this morning.

Here’s some really shocking stuff coming out about the slaughter going on in Ukraine. Read this and believe it—it’s not a parody, it’s coming from the WSJ:

The_Real_Fly

@The_Real_Fly

“Western military officials knew Kyiv didn’t have all the training or weapons, that it needed to dislodge Russian forces. But they hoped Ukrainian courage and resourcefulness would carry the day.” WSJ

What sort of bullshit military planning is this?

12:13 PM · Jul 23, 2023

Or you could also ask that question in this way: What sort of sick and cynical abuse of human life is this? Ask Victoria Nuland. If you can’t get through, try this substack:

Conventional Warfare Meets Wishful Thinking

Reality-Based Theory Conquers Abstract Theory in Ukraine

The substack begins with a quote from Tolstoy’s War and Peace, which perfectly capsulizes the Neocon mentality:

“He did not see in the outcome of that war the least proof of the incorrectness of his theory. On the contrary, to his mind, the departures from his theory were the only cause of the whole failure…Pfuel was one of those theorists who so love their theory that they forget the purpose of the theory—its application in practice; in his love for theory, he hated everything practical and did not want to know about it. He was even glad of failure, because failure, proceeding from departures from theory in practice, only proved to him the correctness of his theory.”

- Leo Tolstoy [War and Peace, III.1.X]

Also, embedded in the substack are a number of tweets from a much longer thread by Will Schryver from a year ago:

Will Schryver

@imetatronink

Observations on the Ukraine War

2022-06-28

I've watched a LOT of drone footage from this war. I've seen, from a bird's eye view, the construction and logic of the field fortifications Ukraine constructed, with US guidance, over the course of eight years.

1/

8:48 AM · Jun 28, 2022

The logic of these ubiquitous pre-prepared fortifications harkens back to the 1864-65 Battle of Petersburg (US Civil War), with many WW1 innovations – a logic where victory depends on:

- you not running out of men and ammo

- the enemy being comparatively stupid

2/

That sounds about right to me. The Neocon strategy rested—and still rests—on the assumption that Russians are stupid.

Meanwhile, in the real world:

Trollstoy

@Trollstoy88

The Ukrainian front on the Zherebec River at Svatovo direction has collapsed.

The Ukrainian command is directing intervention reinforcements from other zones to prevent the expansion through which the Russians are introducing armored and mechanized forces.

Russian forces entered in the village of Novoegorovka from east, and breached the frontline on a second place at Raygorodka, thus entering in the village of Nadiya.

The breakthrough at this moment is more than 7 km.

11:34 AM · Jul 23, 2023

This breakthrough is in the Kharkov direction, where the Russians have been pressing hard in recent days. No doubt the Russians are keeping a close eye on where Ukrainian reinforcements are coming from to see whether those movements will open new opportunities for Russia offensive action.