Economy

Economics of war | The club

Economics of war |  The club
Written by on100dayloans

“Dozens of dead in the bombing of Kramatorsk station”, “Russian power is determined for a major conflict with the West”, “overthrow the world order”, “thirst for revenge of the Russian army”, “continuum of terror and horrors specific to the Red Army”… it is not the bold headlines of Mediapart that will cast doubt on the thesis developed here, namely the beginning of the end of Europe at best, the end of humanity at worst.

Where the bat wounds, it is obviously on the side of the political and economic analysis of the factors which led to this crisis. It goes without saying that the simplistic care-bear vision (we the good ones, them the bad ones) promoted by Mediapart is confusingly blind and particularly unwelcome, provided that the goal sought is something other than total war.

Today, the planetary economy is divided into 2 parts: one under direct control of the economic structures put in place by the American empire since the Second World War, with the $ as a weapon of mass destruction (and instrument of the of extraterritoriality of American justice) and the other, represented mainly by China and Russia which resists the empire of $ insofar as no large Russian or Chinese company is under the control of US capital, and c It is exactly here that the origin of the crisis is to be found: the enormous energy and mineral reserves of Russia as well as the exponential development of the Chinese economy represent fabulous profits which escape western capital and their planetary domination, whereas their own margins are stagnating, relocations having reached their limits…

Obviously, I will be objected that, beyond this perspective reduced to the economy, we live here in the West not too badly (so far) in a free world where elections do indeed take place, which I do not dispute not. But elections for what? The answer is very simple: for almost nothing, because any deviation from the wishes of the shareholders is destined for failure. When Macron rolls out the red carpet in front of Fink, the CEO of Blackrock (the most powerful US investment fund), he has in front of him a guy who manages more assets than the budget of France. So, coming to talk about democracy in an economic system such that an unelected quidam that no one knows has more power than the one who has been, is at best a farce, at worst an accomplice silence. And when I say power, you must understand above all power of nuisance, because relocations and other social plans to increase margins, it was not Macron who decided on them or promoted them, he only ratified the decision taken by boards of directors in the most total opacity.

What relationship with Ukraine? The US strategy is to sideline China’s most likely economic allies, particularly Russia, Central Asia, South Asia and East Asia. The question was where to start cutting and isolating.

Russia was seen as presenting the greatest opportunity for this isolation operation, both from China and from the NATO eurozone. A sequence of increasingly severe sanctions against Russia has been drawn up to prevent Europe from trading with it.

The escalation of the New Cold War could have been unleashed in the Middle East – because of resistance to the US grab of Iraqi oil fields, or against Iran and the countries that help it survive economically, or in East Africa.

But Ukraine, embroiled in an eight-year US-backed civil war since the Maidan coup in 2014, offered the chance to score the biggest first victory in this confrontation against China, the Russia and their allies.

Thus, the Russian-speaking regions of Donetsk and Luhansk were bombarded with increasing intensity, and while Russia still refrained from responding, plans were reportedly drawn up for a major confrontation which was to begin at the end of February – starting with a blitz attack from Western Ukraine organized by US advisers and armed by NATO with the aim of retaking Crimea.

Russia’s preemptive defense of the two eastern Ukrainian provinces and its subsequent military destruction of the Ukrainian army, navy and air force over the past two months has been used as an excuse to begin imposing the designed sanctions program by the United States, the one we see Mediapart promoting today.

Western Europe dutifully followed all the script imposed on it. Instead of buying gas, oil and food grains from Russia, he will buy them from the United States, as well as weapons. But that’s not all. It is therefore appropriate to examine how this is likely to affect the balance of payments of Western Europe and therefore the exchange rate of the euro against the dollar.

European trade and investment before the war to impose sanctions had promised increasing mutual prosperity between Germany, France and other NATO countries vis-à-vis Russia and China.

Russia was providing abundant energy at a competitive price, and that energy needed to leapfrog with Nord Stream 2. Europe needed to earn the hard currency to pay for this rising import trade by exporting more industrial goods to Russia. Russia and was to provide investment capital in the development of the Russian economy; for example by German car manufacturers and financial investments.

This bilateral trade and investment has now come to a halt – and will remain so for many, many years, given NATO’s confiscation of Russian foreign exchange reserves kept in euros and sterling, and European Russophobia stoked by the media. of American propaganda of which Mediapart is a part.

In its place, NATO countries will buy much more expensive and polluting American shale gas – but they will have to spend billions of dollars to build sufficient port capacity, which could take until 2024. (Good luck so far). The energy shortage will sharply increase the world price of gas and oil. NATO countries will also increase their arms purchases from the US military-industrial complex. Near-panic buying will also increase the price of weapons. And food prices will also rise due to the desperate grain shortages resulting from the halt in imports from Russia and Ukraine on the one hand, and the shortage of ammoniated gas-based fertilizers.

These three trade dynamics will strengthen the dollar against the euro. One might wonder how Europe will balance its international payments with the United States (Now that Europe has definitely ceased to be a politically independent entity, it is starting to look more like Panama and Liberia – “flag of convenience” offshore banking centers that are not real “states” because they do not issue their own currency, but use the dollar). For Europe, the alternative is that the dollar cost of its external debt contracted to finance its growing trade deficit with the United States for oil, weapons and food will explode. The cost in euros will be all the higher as the currency falls against the dollar. Interest rates will rise, which will slow investment and make Europe even more dependent on imports and US desiderata, which of course implies an even more repressive social policy to counter reactions to general impoverishment and avoid inevitable consequences in the style of yellow vests.

In conclusion, if Europe manages to avoid the escalation that pushes Putin to his last entrenchments, the euro zone will turn into an economic dead zone. It is for this, and whatever Plenel says, that Mélenchon is the only one worth going to the polls for.

This text is inspired by the reading of economist Michael Hudson: https://michael-hudson.com/

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