Grand Gestures While Children Die

Either fold your arms and say, “this is not my problem,” or give an overwhelming uncompromising response. We are doing neither, and, despite heroic Ukrainians and heartfelt emotion, the West is either shockingly naïve or impressively foolish to think that any other choice is on the table.

As President Biden states, “We will not fight a war in Ukraine against Russia, because it will start World War III,” he does not quite grasp that World War III has already started. The US and the Western world are at war with Russia, whether that is physically located in Ukraine or elsewhere is beside the point.

There Are No Half-measures

There is a global chess game among the US, the EU, Russia, and China, and the West’s failure at decisive action means that the real winner so far is China. The US is not doing anything substantial and it, along with the EU, look more like bumbling idiots than impactful decisive leaders.

The Russia-Ukraine war is magnifying how foolish Western leaders are, and China is noticing. Putin and his Ukrainian war crimes will ultimately be a sideshow because Russia isn’t much more than a nuclear-armed oil and gas field. Russia provides some commodities and not much else. They are 2% of the world’s GDP and do not matter on the world’s economic stage.

Answer Prayers. Don’t Send Them.

Ukraine matters because sovereign democratic nations matter. The EU and NATO are good at speeches and well-intentioned outrage but lack any courage or fortitude to do something meaningful. They are less than useless because the belief that a good speech and an appeal to humanity somehow stops a Russian tank from rolling is tragically comical.

Idiots, Sound, and Fury

Real work, strenuous effort, and personal sacrifice are essential – all of which are avoided by the EU, US, and NATO – replaced with hollow gestures, blue and yellow pins, and well-intentioned websites accomplishing nothing.

            That struts and frets his hour upon the stage,

then is heard no more. It is a tale told by an idiot,

full of sound and fury, signifying nothing.

Shakespeare had a profound understanding of NATO, the EU, and the US.

Suffering is Putin’s Game Plan

A big uncompromising response now is the most likely strategy to settle this tragic war. The US and the EU need to grow up and start acting like global leaders. But they won’t.

Western sanctions make those issuing sanctions feel good about themselves but will have little effect. Remember, this is Russia. Let’s not be misguided, a severe sanction is not the equivalent of a bomb falling on a maternity ward killing children. The Russians have unique fortitude in the face of deprivation, and sacrifice is part of the plan. The West does not have the same resilience.

Europeans are dependent on Russia’s oil, gas, and other commodities such as nickel and palladium, and cannot replace them in the short run. Given that the West simply doesn’t have the stomach for a Russian counterpunch, current sanction strategies will be ultimately fruitless.

You Want Us to Pay What?

The chances are excellent that the EU goes into recession. The US will probably stagnate, and the economy will be moribund for a while. The Fed will play a much more active role because the economic impacts from Ukraine and Russia will have a much longer-term reverberation on prices, supply, and economic activity.

Plague, War, and Pestilence, and It’s Only March.

Inflation appears almost uncontrollable as Russian oil, Ukrainian wheat, nickel, palladium, and all other commodities produced in Russia and Ukraine are cut off.

Control inflation without causing a recession – so much for that.

Market volatility is soaring and approaching a correction, or worse, bursting growth and “transformational” stock values and putting a series of risky and highly leveraged hedge funds at risk of an LTCM-like blowup (several are already occurring).

Don’t Worry – We’ve Got Predictions

“Years ago, I noticed one thing about economics, and that is that economists didn’t get anything right.” – Nassim Nicholas Taleb

Europe won’t avoid a recession from the full impact of the Russia-Ukraine war, increasing overall uncertainty and market volatility, not just in commodity markets. Expect extreme volatility daily, ranging from optimism to despair, and the markets will accelerate it.

Supply chain disruption, the fact that Russia and Ukraine are 30% of global wheat, Russia is 12% of global oil, and 17% of global natural gas – that’s just to name a few before we get into things like nickel and palladium. The cost of buying and running your EV and the gas-powered car just went up an awful lot.

China is Watching

“See the whole board” is good advice for any chess player. This is an obvious opportunity for China to step in to strike energy and commodity deals, even currency and financial transactions that will strengthen China disproportionately. It is in their self-interest to defy Russia’s global political and economic isolation. A charming and passionate speech from the EU is not going to change that, either.

China will strengthen its position via Russia. Now the United States has to assert itself as a global leader not only in the allocation of financial resources and trade but, in dealing with a nuclear-armed tyrant and a totalitarian regime on a global stage. The US can’t pretend it doesn’t face an existential threat and needs a disproportionate economic, military, and political response. It’s time to act like the guy with the big stick. It is already World War III.