By Christian Takushi, Macro Economist, Switzerland – 4 Jun 2022  (truncated text for the public)

Let’s remember with gratitude the brave US torpedo and dive bomber pilots – around this time on a day like this June 4th 1942 the Japanese and US navies launched their first attacks on each other. Three days later the four attacking Japanese aircraft carriers had been sunk – Midway turned the war in the Pacific.

In our geopolitical analysis we are not detecting a major deviation from consensus in one single hot spot, but rather a simultaneous gradual build-up across the board around the globe. And we are paying attention, because as we have learnt from studying the Cuba Nuclear Crisis, it is the overlap of frictions in different but interdependent areas and geographies that can lead to a major crisis or war.

The Cuba Missile Crisis could have never taken place without the preceding Turkey Missile Stand-Off. To address the NATO-threat from Turkey, Russia decided to threaten the USA from Cuba and to risk nuclear war at that. Our GROM Model (Global Risk Overlap Model) began to point to a war in Europe back in 2020 and we see that Russia and China are likely to take the hostilities to a different theatre: Taiwan being a diversion for Central America.

As promised – in order to add value – I will focus on that which we believe is being underestimated by consensus. Not surprisingly, the most pressing area is the least covered by our Western press.

Premature celebrations?

While many were celebrating victory laps or exchanging congratulatory greetings in recent weeks, we were warning that the world had entered an unprecedented volatile period. A shift is taking place – a period of hostilities lies ahead. Not only are we just at the beginning of it .. the final outcome of this major conflagration is still open, so such celebrations are premature. Those EU and NATO celebrations preceded indeed a change of fortunes in the Eastern Ukraine theatre. You don’t celebrate victory while a war is still raging. But this shows the state of mind of our current leaders. They seek popularity rather than doing the right thing.

In this grave hour for mankind we need to be watchful and ponder wisely before rushing into premature conclusions or actions. This doesn’t mean we should be inactive. But what we see may be a smoke screen. What the media is bombarding us with may be a diversion. And what may look like a great step regionally in the short term, may be a horrible mistake from a strategic global perspective. With popularity-seeking leaders of limited integrity, social media (the ‘rule of the digital mob’ as I call it) can become a great threat to humanity. Emotions are good, but we have to hope that people are informing themselves objectively. Otherwise they could soon plunge the world into a greater tragedy than the one they are trying to fight. I am talking about a crisis that could kill or decimate two billion human lives in a very short period of time.

When the Arab Spring started and I saw European bankers celebrating the West-sanctioned killing of Arab dictators, I said “friends, beware what we are sowing here – this may lead to a greater evil yet and the inexorable destabilisation of the Middle East, because we are likely to assassinate  Arab leaders, but end up shielding Shia leaders in Teheran”. I was almost chased away by an angry mob .. and only one of those bankers would later acknowledge he was sorry for how he behaved and that they had been carried away by mass media – by a powerful collective ire that burst into hatred. It was an apology that opened my eyes: Actually only one out of seventeen saw through what was really going on over the past ten years in the Middle East. Since the turn of the century, emotions and sensitivities seem to be ruling the West’s elites, not reason and wisdom.

On the global landscape President Macron is probably the Western leader that is being briefed most accurately about the gravity of the current global geopolitical convergence. Followed by PM Johnson. France has a long tradition of strategic geopolitical awareness and of independent military intelligence. Both are a ‘must’ to be able to read this complex of multiple theatres somewhat correctly. This is the main reason, I humbly believe, why President Macron is the only Western leader that from the onset of this crisis has had the most credible, “stable”and cautious course, very much aware of the multiple dangers that lie ahead – in a nutshell not very popular. Others have zig-zagged under pressure, gone from pacifism to war-footage and others yet want to go head-on to war with Russia to score politically at home or to save their jobs.

Their fiery Churchill-like speeches are being seen by many as an insult to the memory of the great WW2 leader who led the West through its darkest hour. Sir Winston Churchill spoke boldly about a great threat (den Führer Hitler), one he had understood and opposed many years before anybody else did in London. Churchill made himself Hitler’s greatest enemy at a time when most Western leaders were appeasing Hitler and trying to court his favour. Mr. Churchill may have had some weaknesses, but he had the sharpest strategic geopolitical foresight of any other leader of his time.

Our current leaders that are trying to pose like Mr. Churchill did not see this coming. Not at all. Actually, most of them led Europe into this dangerous place or were naïve Russia & China enablers. They dismantled our armed forces and made us utterly dependent on Russia and China – all of that to favour their friends at the helms of big corporations and big banks – Shareholder value was it called. Our top universities gave it their blessing, so nobody would dare to object. Along the way they impoverished their own citizens. Only the top 1% of Americans are better off than in 1980. Western Europe is not far off that. To top all this .. Western leaders rushed the energy transition in renewable energies prematurely, sparking a massive squeeze in our energy supplies  (i.e. inflation) and making Europe even more dependent on Russian Gas in 2021 – thus lowering the threshold for Moscow and exposing Ukraine to an invasion.

Our leaders haven’t apologised or taken responsibility for their failures  – They blame all our current evils instead on Covid and Mr Putin. How convenient .. only partially correct. Thus, really remarkable that our press and experts don’t challenge our leaders responsible for all those flawed decisions. The energy transition has been a disaster that very much enabled Russia to invade Ukraine – The well-meant transition should have been studied more carefully and a more diverse set of experts should have been included. The Ideology of like-minded leaders and scientists prevailed with total disregard for geopolitical realities.

Let’s face the truth: Most of our current Western leaders have very little idea of what strategic foresight or strategic forward thinking is. They only seem to care about short term social media and opinion polls. How sad the predicament of the West in the year 2022.

Ladies and gentlemen – To read European or US newspapers is no longer enough to be well informed since the beginning of the 21^st century. You don’t have to agree with what you read elsewhere, but you can’t afford to read only what you can agree with. Too much is at stake and I humbly believe the West needs to smart up to survive this decade.

Markets are still in denial

When you see the nine areas (which is only the tip of the iceberg) that are converging over the world, and you are aware of the gigantic debt bubble and money printing that has been driving our Western economies and artificially inflating our Western financial assets (wealth), you begin to ascertain how unprepared investors, businesses and private households are for what is coming. What is coming could “wipe out” the West as we know it.

When I listen to financial commentators talk about the market correction and the potential bear market, I am overcome by disbelief and sympathy.

One the one hand, I am surprised that the bear market so many experienced investors are expecting is actually the “best case” scenario in a holistic analysis. One where policy makers intervene prematurely again .. way before the economy has gone through its cleansing process. There are no free capitalistic markets anymore, rather a centrally administered market where the state is artificially pricing “risk” for markets for 14 years now.

On the other hand I feel “sympathy”  for professional and institutional investors. I have been in those “trenches” for a few decades and so I don’t blame them as so many do. I know the huge amount of pressures they face. Restrained by a massive corset of regulatory measures and ESG criteria they have to deliver performance on a monthly basis – aided by the outlooks of their strategists and economists, an ever tighter financial consensus with “closed-ranks” mentality.

Allow me to be open and frank, please: We still talk as if we know it all and as if we had the moral high ground. We still talk condescendingly to other nations, telling them what to do. I am warning about the growing isolation of the West around the world. Fact is we have been living beyond our means for over 40 years now – printing money to pay our bills and printing money “out of thin air” to pay the rest of the world for the huge amount of goods we import from them. We even print money to give hand-outs to our own people (i.e. Covid). Our investors even feel “proud & smart” they have become rich by holding risk assets. Think of it: Rich with debased paper money – how smart is that? In a normal healthy world, no one would accept our Dollar or Euros. No one really sounds the alarm, because everyone is in the same boat in the West: central banks, financial press, pension funds, investors, consumers, retirees, governments etc. Everybody wants to get a handout or a tax break (all financed with printing yet more paper money we don’t have).

Yes – Nobody wants the central bank to normalise its balance sheet – Nobody wants for interest rates to go back to normal. But the world has had enough of us. Why? If a country outside the West behaves the way we do, we rush to punish it: When Argentina prints money to pay its bills, we mobilise market forces and investors demand that Argentina pays 20% to 40% interest rates for us to hold their debt. We do more evil amounts of money printing than Argentina, but since we set the rules, we allow our central banks to manipulate and fix our interest rates at roughly 1%. In reality European nations should be paying 7% to 13% interest for anyone to hold their 10 year government debt. That is the gigantic sin of covering up the greatest debt bubble in history and the reckless “borrowing” money from our children and grand-children, that I believe future generations will judge us for.

Currently relevant geopolitical developments

1. Israel, having been let down repeatedly by Washington, expands its multi-alignment strategy of multiple alliances to hedge against the US letting it down
2. Controversy as Iran enriches uranium domestically at fast pace, but not talk about the fact that it was able to purchase a multiple of that on black market since 2015
3. Fiasco in the Far East: Biden says US will defend Taiwan and encourages Japan to defend it if attacked by China, but as soon as he boards the plane, Washington denies he said it. US is losing committed allies in the Middle East and Asia, where Pentagon says it needs them the most. After five years of disappointing signals, Japan and South Korea begin to build their own alliances
4. China increases provocations and incursions as Taiwan prepares for an invasion
5. Russia prepares military move in US backyard: Nicaragua, Venezuela and Cuba open for buildup of strategic Russian military base

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On all these fronts or hotspots we are getting closer to a significant delta between our analysis and consensus. But nowhere is the delta as big as on point number 8. So I want to expand on it in this newsletter.

Over the next few minutes you may come to the conclusion that the USA and Europe have not thought through their plans for their GREEN SHIFT – the shift to the Green Economy – as well as they assume. In fact I think they knew their GREEN SHIFT on the back of 14 years of reckless MONEY PRINTING would lead to massive inflation, but it is in the realm of geopolitics, where some things are not going as planned.

As Latin America shifts hard left, the supply security of key commodities fades away

Let’s focus on the most forgotten crucial battleground: Although Latin America is geopolitically a highly contested continent and critical for the world’s push into green energies, it is grossly overlooked and misunderstood. Let me give you a clue: The sustainable green economy our leaders are envisioning is a very metal-intensive economy.

The West is making big plans to cut off from Russia-China and to rush into a greener economy without fossil fuels. But this grand plan is likely to fail utterly, because the USA – and the West with it – is losing the battle for Latin America. Thus, we may potentially win the battle for Ukraine, but lose the battle for Latin America. Since Washington’s decision in 2008 that it wanted to see Georgia and Ukraine in the Western security sphere, Russia and China have been preparing for confrontation and advancing their strategy in Latin America, very successfully. I have been warning for years .. to no avail.

The Green Economy our Western leaders have conceived is a metal-intensive  and capital-intensive economy. Compared to our current fossil-fuels-run economy the new economy will be more dependent on massive long term investments. Those investments need political and economic security. But with the West being bankrupt and over-indebted and printing money to pay for current bills & imports, where will the money come from?

I could go here through more than 7 metals where I see massive bottlenecks. But one key metal suffices to expose the fragility of the GREEN SHIFT that Europe and North America have envisioned: Copper. It is key for the Green Economy, at least for the crucial transition into it.

President Obama, President Trump and President Biden have all taken Latin America for granted. It is the backyard of the USA. Obama and Biden knew they needed the metals of Peru and Chile (as the two model economies of the region) and the resources of Brazil, Argentina and Venezuela to realise their plans. They felt Peru and Chile are such successful examples of economic developments and the Latin giants (Brazil & Argentina) so dependent on good relations with the USA, they will cooperate with the plans of Washington and Brussels. Just a few years later this is history, but the warning signs were there for years.

What happened? China and Russia had willing NGOs and 14 years time to

• To destabilise the US-friendly Pacific Alliance and especially its neoliberal fast growing champions: the free-market economies of Chile, Peru and Colombia.
• To grow deep and strategic relations with ..

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Tactical comments?

I do make brief comments at the tactical & short term level – This is done primarily on Twitter, but also on Spotify (via podcasts) and radio interviews, seminars and conferences. You can find me on Twitter (@ChrisTakushi). You can also write to us (info@geopoliticalresearch.com) if you are interested in one of our geopolitical seminars. These geopolitical newsletters remain decidedly strategic in nature.

By Christian Takushi MA UZH, Independent Macro Economist & Geopolitical Strategist. Switzerland – 4 June 2022

Geopolitical and economic conditions need close monitoring, because conditions can change quickly. 

No part of this analysis should be taken or construed as an investment recommendation. 

 

Remembering Midway: only four of this featured bomber squadron made it back. The first three major US attack waves were obliterated. They were poorly equipped, but their courage used up the Japanese fighter planes .. which proved vital when -by almost divine appointment- the final squadrons converged simultaneously over the Japanese fleet as it was refuelling. Like in the Battle of Britain, America and the free world owes much to a few brave pilots that sacrificed themselves selflessly in those first three waves and to those that proved their worth on those SBD dive bombers.

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