Year 2022 – Time of Great Chaos

One mustn’t look at the abyss, because there is at the bottom an inexpressible charm which attracts us.” – Gustave Flaubert, a French novelist from 19th century

”Sanctions from hell”, was the theme by which the EU, UK and the US were threatening Russia, if invading Ukraine. Now, it seems that “you get what you pay for”. Nightmarish economic scenario is materializing worldwide and especially in the EU, UK and in the US. Let’s take a closer look.

The EU and UK failed to stop Russian invasion by these sanctions but “succeeded” in precipitating European economies into stagflation, later obviously depression and finally in “stagflationary collapse” as some US economists call this. This analysis can be found here .

Energy crisis

Crude oil prices have already jumped to their highest levels since 2008, amid fears of a ban on Russian oil imports due to Moscow’s military operation in Ukraine, as well as delays in talks on a nuclear deal with Iran. Global benchmarks, Brent crude and West Texas Intermediate (WTI) crude, both surpassed the $130 per barrel threshold for the first time since July 2008.

US gasoline prices at the pump followed the surge in crude prices, jumping 11% over the past week and exceeding $4 per gallon for the first time in almost 15 years and right now making a record of all-time-high. Analysts from JP Morgan have said oil could soar to $185 per barrel this year and in the case of total Russian oil ban, the crude may approach up to $300 per barrel.

Gas prices in Europe have skyrocketed, reaching over $3.900 per 1.000 cubic meters for the first time in history. The April futures at the TTF hub in the Netherlands soared to $3.899 per 1.000 cubic meters, or nearly $374 per megawatt-hour in household terms, according to data from London’s ICE exchange.

Prices continue to grow as market players fear the outcome of the ongoing Russian military offensive in Ukraine. Meanwhile, Russian state energy giant and major gas exporter Gazprom said Monday it continues to routinely supply Russian gas for transit to Europe through the territory of Ukraine. However, in the case of total Russian oil ban, Gazprom may close the existing pipelines to Europe. Total “carnage” is waiting for Europe.

No doubt, soaring energy prices have major impact on inflation expansion on the both sides of the Atlantic. “Stagflationary total collapse” is approaching rapidly.

Food crisis

Increasing energy prices have a direct, strong impact on the production of fertilizers and these both key inputs of the agriculture production will confirm rapidly growing prices of food.  Worldwide soaring of agricultural products has already been shocking and much worse is to come.

This chain of events pushes up inflation and will worsen the desperation of both American and European consumers and may put many developing countries facing famine in Africa, which highly likely trigger a migration avalanche to Europe.  

Stagflation, depression, economic collapse

Stock markets in America and Europe are right now experiencing “ugly times”, all indexes are nearly in free fall down, clear signs of panic selling are seen everywhere in American and European the stock markets.

The big picture of Markets of Metals and Food and other Materials seems to be quite opposite, price growth rates are directing straight up, indicating even more inflationary pressure.

Skyrocketing prices of energy, food, transportation, supply chains and other things make or “force” central banks (Fed, ECB) to check interest rates and increase them from the current zero-level. This in turn put in motion of the vicious circle spiraling in hyperinflation, stagnation, depression and finally economic collapse.

The first outcome of this vicious circle (sky-high energy prices, interest rates and inflation) is the avalanche of bankruptcies and cracking of European industrial structure. Germany is facing a particular horrifying view, due to its totally failed national energy policy.

Societal crisis

In the context of industrial and business crisis, combined with growing desperation of European (and American) citizens living in depression with sky-high food prices, all this in turn adds societal anxiety and disorder.

Food inflation has been the catalyst for many popular uprisings and the path from empty shelves to the guillotine has historically been a direct one.

In Europe, we have an extra surprise still. Some short-sighted European governments/ministers have provoked war in Ukraine and instigated omnifarious mercenaries, jihadists and other militants worldwide to come to Ukraine to fight against Russians. This has been totally irresponsible and reckless action. Who takes responsibility that those criminals, after the crisis, leave Europe? Highly likely, they will stay in Europe and resume terrorist activities here. “Body counting“ may be a curious hobby of some European politicians. Poor Europe, you have fixed your wretched destiny.

Great economic juncture

Given the current Ukraine crisis and the West’s collective sanctions regime to it, one can’t help but wonder, whether we are on the cusp of Great Economic Juncture in which the laws and bedrock beliefs that formed the foundation of international economic order for decades break down. The consequences are fully unknowable but we suspect a great reset may indeed be upon us. Even if a ceasefire is announced soon, shocking damage to the global economic system has undoubtedly already been done.

The most earthmoving action by the US and its allies was cutting off the Russian central bank’s access to most of its $630 billion of foreign reserves. Without access, one wonders if these funds are really “its” reserves at all? What is ownership without access? No matter how justified that move might seem today, the ramifications of this action will be fatal to the present finance and monetary world.

In the Wall Street Journal, reporter Jon Sindreu said in his article “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock”. In essence, Sindreu’s piece argues that this move substantially increases the risk that the US dollar loses its privileged status as the global reserve currency and likely ensures a polarization of the global economy into at least two camps – the West in one and Russia/China/Iran/Saudi Arabia plus other targeted or aligned countries in the other.

Another shocking development is the US Department of Justice’s establishment of the ominously-named Task Force KleptoCapture, which has the stated intent of seizing (not freezing) the assets of Russian oligarchs. This raises questions like Who has right to define “oligarch”, What qualifications and criteria? Who has the jurisdiction and Do the accused have any due process and a fair trial? If assets in the West are subject to swift confiscation without due process, what wealth they can preserve? Have those American authorities thought through the dominos that fall by fundamentally rewriting property laws?

In addition, Russia and Ukraine are among the most prolific producers and exporters of critical foodstuffs, numerous critical metal and other natural resources in the world. Now the crisis and especially the massive sanctions, imposed by the West, have totally cracked the trade, market, delivery chains etc. regarding these urgently needed materials.

Everything will be destabilized now …

Biden administration is sleepwalking into economic abyss …

Sanction actions of EU and UK elite will cause a dismal outcome to Europeans …

“das Tolle Jahr” 2022 in Europe.