Sleepwalking down a road to Armageddon — Part three

Wednesday, 12 April 2023 — Melbourne

[8 min read]

Dear Reader,

The key to avoiding nuclear war is simple — avoid escalation.

This was demonstrated in the Cuban Missile Crisis when the US and Soviet Union were on an escalating path leading to nuclear war. Both sides relented.

The Soviets agreed to remove their missiles and bombers from Cuba, and the US agreed to remove some Jupiter missiles from Turkey. The US also agreed not to invade Cuba again, as it had done at the Bay of Pigs in 1961. De-escalation prevailed, and nuclear war was averted. The lesson ever since for nuclear powers is to avoid direct confrontation and do not escalate.

These decades of experience, training, and study suddenly seemed obsolete after the dissolution of the Soviet Union in 1991. The Cold War was over. The US had won. A Russian Federation emerged from the former Soviet Union. There was no more talk of nuclear war except with respect to the ambitions of rogue nations like North Korea and Iran. The days of scenario planning for nuclear war between the US and Russia were over.

The superpowers began cooperating on the removal of nuclear weapons from parts of the former Soviet Union, including Ukraine. US experts descended on Moscow to promote central banks, stock exchanges, IPOs of state-owned enterprises, and democratic norms.

A young cadre of Russian experts emerged in the 1990s, including Jeffrey Sachs, Fiona Hill, Victoria Nuland, and George P Kent, convinced that Russia was on a path of democratic capitalism and would soon be ‘just like us’.

But Russia is not like us

The fantasy ended in ruin in the late 1990s. Instead of the liberal-democratic pipedream, Russia looked more like Chicago in the 1920s, with gangsters shooting each other in the streets with machine guns or using more exotic techniques like radioactive poisoning. The public companies ended up in the hands of a small number of oligarchs who became billionaires exploiting Russia’s resources.

The country was bordering on chaos in the late 1990s when the alcoholic Boris Yeltsin resigned as president, and Vladimir Putin stepped in as acting president on 31 December 1999. Putin has been president or prime minister of Russia ever since and has restored order and saved Russia’s economy, albeit through autocratic means.

The expert cadre, including Hill, Nuland, and Kent, felt betrayed by Putin, and have sought his removal ever since. In fact, the experts’ plan was always a pipedream. The hubris was theirs. Putin actually saved Russia, but the experts won’t admit it. They are now the core of the warmonger party in the US, along with Susan Rice, Antony Blinken, and Jake Sullivan. Biden is their willing puppet.

The situation today

Talk of nuclear war between the US and Russia because of Ukraine has emerged over the past year. It’s a shocking development after 30 years, during which nuclear weapons and nuclear war between superpowers were almost forgotten.

What is as disconcerting is the fact that the discussion of nuclear war is casual, almost flippant, and carries none of the seriousness with which the topic was formerly addressed.

It also carries no comprehension of the existential consequences and sheer horror that the use of nuclear weapons entails. It’s almost as if the warmongers in and around the White House were playing a game of chicken without realising the other driver had no intention of changing course.

All nuclear war experts warned that such a war would emerge from lesser events that took on an escalatory dynamic. Herman Kahn developed a 44-step escalation ladder to illustrate the point and to guide policymakers away from escalation.

Here are some of Kahn’s key points (using his original numbering sequence):

1. Ostensible crisis

2. Political, economic, and diplomatic gestures

4. Hardening of positions — confrontation of wills

6. Significant mobilisation

7. ‘Legal’ harassment — retortions

9. Dramatic military confrontations

12. Large conventional war (or actions)

13. Large compound escalation

14. Declaration of limited conventional war

15. Barely nuclear war

16. Nuclear ‘ultimatums’

18. Spectacular show or demonstration of force

19. ‘Justifiable’ counterforce attack

20. ‘Peaceful’ worldwide embargo or blockade

21. Local nuclear war — exemplary

22. Declaration of limited nuclear war

23. Local nuclear war — military

Kahn’s checklist contains much more, including step #44, which is a full-scale global nuclear war. Kahn also wrote this in a generalised fashion; any particular confrontation will have its unique elements and sequence.

We’re halfway there already

It requires no special training to see the escalatory dynamic in Ukraine tracks Kahn’s scenario closely. In particular, step #6 tracks the Russian mobilisation, and step #7 tracks the reciprocal economic and financial sanctions, including the seizure of bank accounts and property. When the discussion turns to the use of dirty bombs and tactical nuclear weapons, which it has, we are nearing items 15–22 on Kahn’s list.

Based on this clinical analysis, a limited nuclear war is a real possibility in the not-too-distant future.

What are the elites and warmongers in the US saying about this? They’re acting like kids playing in a sandbox instead of serious policymakers.

Their first mistake is a cavalier approach. On 6 October 2022, Joe Biden told a group of billionaires at a fundraiser, ‘We have not faced the prospect of Armageddon since Kennedy and the Cuban Missile Crisis’.

Did Biden do this in an Oval Office address? Or in a joint address to Congress? No, he did it casually over drinks at a fundraiser. Was it the first thing he said? No, he mentioned Armageddon en passant after going down a list of Democratic talking points about abortion and gender transitions.

This was not serious. It was reckless. It was also dangerous.

Now the US elites have started psychological operations (psyops) aimed at Putin with nuclear weapons as the bait. They claim that Putin has threatened to use tactical weapons in Ukraine and possibly other parts of Eastern and Central Europe. That’s a lie; Putin never said that.

When asked, both Putin and Prime Minister Dmitry Medvedev said that if attacked, Russia would defend itself by all means necessary — including the possible use of nuclear weapons.

That’s not news. That has been Russian or Soviet policy since the early 1950s. It has also been US policy since then. Neither side has ever renounced the first use of nuclear weapons. Putin’s expected answer to a question posed has been turned into a threat he never made. This is US and UK propaganda at its worst (and most dangerous).

False flag accusations are the false flags

The lie about Putin’s intentions quickly morphed into another psychological operation (psyop) about a ‘false flag’ operation. That’s when you stage an attack disguised to look like an attack by your enemy in order to justify your own ‘retaliation’, which you were planning all along.

The narrative that Putin would use nukes or conduct a false flag operation morphed into a related narrative that Putin would use a ‘dirty bomb’. In effect, Putin would detonate a dirty bomb and then blame the Ukrainians and Americans.

A dirty bomb is not a nuclear weapon — but it does employ radioactive material wrapped around conventional explosives. When detonated, the radioactive material is dispersed and can poison or kill any people or livestock in the area. It’s akin to what happened at Chernobyl in 1986. That nuclear reactor meltdown was an accident, not a bomb. But the effect of spreading radioactive material was similar to a dirty bomb.

Not to be outdone, the Russians countered by saying the US or Ukraine would conduct the false flag by detonating a dirty bomb and then blaming the Russians as an excuse to escalate Western involvement in Ukraine.

At this point, we have both sides warning the other side will conduct a false flag with a dirty bomb in order to justify their pre-planned escalation. If a dirty bomb does go off, each side will blame the other, and the truth will be a casualty of war.

Looking ahead

It’s difficult to know what comes next. It could be that Russia uses a tactical nuclear weapon. Russia might detonate a dirty bomb and blame Ukraine. The US may use a tactical nuclear weapon if it suspects Russia is about to do so, an example of a first-strike advantage. The US may detonate a dirty bomb and blame Russia in a classic false flag operation.

Either way, it’s not difficult to know that we’re on a path to nuclear war. All the actions of both sides conform to Kahn’s escalation ladder. We also know that Putin doesn’t bluff. When George W Bush raised NATO, Putin invaded Georgia. When Obama staged a coup in Kyiv, Putin annexed Crimea. When Biden green-lighted a Ukrainian assault in Donbas, Putin invaded Ukraine.

So again, Putin doesn’t bluff. It would take a policymaker as blind as Nuland or as senile as Biden to believe otherwise. Still, we are sleepwalking down a road that leads to Armageddon.

All the best,

Jim Rickards,
Strategist, The Daily Reckoning Australia

This content was originally published by Jim Rickards’ Strategic Intelligence Australia, a financial advisory newsletter designed to help you protect your wealth and potentially profit from unseen world events. Learn more here.

Dear Reader,

‘Labor Market Adds 236,000 Jobs in March — Lowest Since 2020 — As Economists Worry Recession May Be ‘Underway Now’’:

‘As waves of layoffs ripple through the long-booming labor market, the Labor Department's jobs report on Friday showed a continued slowdown in employment — adding to a slew of signs this week that the economy may be cooling more quickly than believed, potentially risking the hard landing Federal Reserve officials have long tried to avoid.’

Really? What are they ‘worried’ about?

Ask almost anyone; they’ll tell you that a ‘recession’ is a bad thing. Lower stock prices are also bad. And higher interest rates are bad too.

They must assume investors, speculators, and entrepreneurs never make mistakes…that everyone is a stock seller and not a buyer…and that high interest rates are some form of curse — like the plague — and not just a way of making the supply of available funds meet the demand for it.

Back into whack

‘Things that are out of whack have a way of getting back into whack.’ This is just another way of saying that there is a ‘normal’ state of affairs…and that when they go too far afield, it’s a fairly good bet that they will soon be headed home. Economists call it ‘regression to the mean’; it’s one of the most powerful forces in finance.

And now, the US economy needs to back up…it needs to go ‘back into whack’. The Fed’s negative (below inflation) rates affected almost every financial transaction in the whole economy. Low mortgage rates caused a bubble in housing…and commercial real estate. They also caused a huge boom in borrowing — household, corporate, and government. They financed businesses that never should have been started…and allowed zombie enterprises to squander billions in real capital. They helped the feds fund programs that never should have made it to the drawing board…much less to the launching pad…made it possible for them to give pensions, grants, loans, and stimmies that they couldn’t afford…and imagine that they could right wrongs from more than 150 years ago (reparations) as well as those committed on the other side of the planet (wars in Iraq, Afghanistan, and Ukraine).

A recession is badly needed. It’s how an honest economy gets itself back into whack.

And what ho! Here it comes. In addition to the fall off in the job market, let’s look at the housing market. Prices hit an all-time high last year. Since then, there have been seven consecutive months of decline, for a total loss of 5% — the largest seven-month decline in more than 10 years.

5% isn’t much. House prices are still nearly 40% higher than they were three years ago. They’ve got a lot further to go before they get back into whack. But here again, why is cheaper housing such a bad thing? Back in 1971, it took the average American about 36 hours of labour each month to pay an average mortgage on an average house. Now, the figure is 110 hours — or three times as much. A recession in the housing market would make it a lot easier for people to keep a roof over their heads.

A treacherous correction

Commercial property may be facing an even more treacherous correction. From USA Today: ‘Commercial real estate is headed for a crisis worse than 2008, Morgan Stanley analysts say’:

‘...a PIMCO-owned office landlord defaulted on an adjustable rate mortgage on seven office buildings in California, New York and New Jersey when monthly payments rose due to high interest rates.

‘Brookfield, the largest office owner in downtown Los Angeles, that month chose to default on loans on two buildings rather than refinance the debt due to weak demand for office space.

‘They are a bellwether for what is likely to come, as more than half of the $2.9 trillion in commercial mortgages will be up for refinancing in the next couple of years, according to Morgan Stanley.

‘“Even if current rates stay where they are, new lending rates are likely to be 3.5 to 4.5 percentage points higher than they are for many of CRE’s existing mortgages,” wrote Morgan Stanley Chief Investment Officer Lisa Shalett, in a recent report.’

And there’s more good news. Bank lending is also getting back into whack. From Bloomberg: ‘US Bank Lending Slumps by Most on Record in Final Weeks of March’:

‘US bank lending contracted by the most on record in the last two weeks of March, indicating a tightening of credit conditions in the wake of several high-profile bank collapses that risks damaging the economy.’

Time is money

The most recession indicator comes from interest rates themselves. One of the surest precursors of a recession is an ‘inverted yield curve’, or when rates are higher for short-term loans than for long term.

Risks increase with time. So, normally, the interest rate you pay when you borrow for a long time is higher than for a short-term loan. And when the two are reversed, it is a signal that something is out-of-whack. Here’s Reuters:

‘NEW YORK, March 7 — Hawkish comments by Federal Reserve Chairman Jerome Powell helped push a closely watched part of the U.S. Treasury yield curve to its deepest inversion since 1981 on Tuesday, once again putting a spotlight on what many investors consider a time-honored recession signal.

‘…they believe that higher borrowing costs will eventually hurt the economy, forcing the Fed to later ease monetary policy. The phenomenon is closely watched by investors as it has preceded past recessions.

‘For the last six recessions, a recession on average began six to 36 months after the curve inverted, [Anu Gaggar] said.’

How will the inversion be corrected? How will the housing bubble get popped? How will money-wasting corporations get liquidated…bad loans get written off…and discipline be returned to the financial world?

A recession will help.

Regards,

Bill Bonner,
For The Daily Reckoning Australia