Does Anyone Care Anymore?

Is Ukraine still a thing for Americans? Of course, a brutal and tragic war is going on there with momentous geopolitical consequences. But do Americans care?

Attention spans are short, and Americans have already moved on to stories about political scandals, the next election, and the usual celebrity glamour gloss. Outside of the U.S. warmonger elites and a few critics (myself included), Americans don’t seem to care.

That’s a mistake. The war is as hard fought as ever and the geopolitical stakes are even higher than at the start of the war as we keep climbing up the escalation ladder.

Today I’ll look at the military situation, the economic sanctions, the bigger picture of global recession, and the impact of the war on energy prices.

Almost nothing in this report is being covered by The New York Times, the Washington Post or other legacy media. Their coverage consists almost exclusively of lies propagated by the State Department, CIA or MI6 and should not be taken seriously except by counterintelligence experts interested in knowing what the U.S. and UK are lying about.

The Counteroffensive Disaster

On the battlefield, Ukraine is losing badly and is in danger of having its offensive military capacity annihilated. The famous Ukrainian spring counteroffensive has met with disaster and been reduced to a series of impotent pinprick attacks.

The original Ukrainian plan was to punch through Russian defenses with an “iron fist” armored attack, retake the city of Melitopol, and from there reach the Sea of Azov. This would cut Russia’s land bridge (from Rostov-on-Don to Crimea) and divide Russian forces into two groups that could not reinforce each other.

This would open the way for Ukraine to take more territory and possibly retake Crimea itself.

The Ukrainian counteroffensive began on June 4. The iron fist quickly turned into a piñata. From the outset, Ukrainian armor was badly mauled in Russian minefields. Additional damage was done by Russian artillery, missiles and aviation.

Over a month into the offensive. Ukrainians are still fighting in a gray zone short of the first of three Russian fortified lines. If the offensive went according to plan, the Ukrainians would have broken through these forward positions in the first couple of days. But here they are.

They claim to have taken a few villages, but some are no more than a single farmhouse. None are of strategic importance.

The Russians are repelling the Ukrainians, in most cases inflicting high casualties and loss of Ukrainian armored vehicles and tanks. It’s a war of attrition that Ukraine will certainly lose.

Western Duds

What about all those advanced weapons the U.S. and its NATO allies have been sending to Ukraine?

Well, they don’t work as expected, they’re easily destroyed by the Russians, the training periods take too long to be of any short-term use, or that they haven’t yet been manufactured or delivered.

Look at the fancy Patriot air defense systems we sent Ukraine. The Patriot systems cost $1 billion each, but at least two have been destroyed by Russian hypersonic missiles.

And after some initial successes, the HIMARS precision artillery systems we gave Ukraine have proven ineffective because the Russians have successfully jammed the GPS transmissions, so the missiles go off-course. Eventually they’re destroyed by Russian artillery.

In some cases, reportedly, the Russians have actually been able to redirect the projectile back in the direction of where it was launched. Talk about a boomerang!

The bottom line is that while the U.S. military was knocking down mud huts in the Middle East and Afghanistan, Russia was developing high-tech weapons to counter the best weaponry that NATO has on hand. NATO tanks and other armored vehicles have certainly not made much impact.

Kill the Children!

The U.S. is now promising to deliver cluster munitions to the Ukrainians. These are heavy bombs (shells in this case) loaded with hundreds of smaller bomblets that detonate shrapnel in all directions. They’re banned by almost every country in the world because they kill and maim civilians indiscriminately.

A certain percentage of these bomblets fail to detonate initially, but remain active. Civilians come along later, often children, who trigger the explosions. The U.S. will send older cluster munitions, meaning the dud rate will be even higher, leaving behind even more unexploded bomblets that will kill civilians.

But the U.S. still will be sending them to Ukraine on orders from Joe Biden.

The military failures by the U.S. and NATO go beyond losses on the battlefield. By supplying so much equipment to Ukraine, the U.S. has depleted its own arsenals. It’ll take years to retool assembly lines and restock the arsenals.

Shooting Yourself in the Foot

In the meantime, the U.S. will find itself short of weapons and ammunition in case of a war with China or a wider war in Europe.

Meanwhile, the impact of economic sanctions on Russia has been the reverse of what the U.S. intended. I advised my seminar at the U.S. Army War College of this likely outcome over a year ago, and I repeated the warning at my seminar last month.

Russian oil sales are near all-time highs; they have simply shifted their sales from Europe to India and China. Russian financial reserves are at all-time highs also, despite asset freezes by the U.S. The Central Bank of Russia has moved its asset allocation toward physical gold along with Chinese yuan and Indian rupees.

The Russian economy is expected to outperform the U.S. economy in 2023 based on World Bank estimates. The EU and Japan are already in recession and the U.S. is likely entering one, if not there already.

The sanctions have failed badly and have hurt the U.S. economy more than the Russian economy. Since U.S. Treasury Secretary Janet Yellen does not understand international economics or the impact of sanctions, one should expect the damage imposed on the U.S. to get worse.

Escalate, Escalate, Escalate

Despite military and economic losses suffered by Ukraine and its Western backers, many want to double down rather than negotiate a possible peace settlement. They simply cannot entertain the possibility of a Russian victory.

This means the greatest danger now is not losing ground, but instead engaging in escalation that might lead to World War III. For example, Michael Rubin of the American Enterprise Institute has recommended giving Ukraine tactical nuclear weapons.

Given Russia’s success (at high cost) and U.S. escalation, the short-term prospects for peace talks are low. More likely the war will drag on into late 2023 before actual talks begin.

By then, Russia will have the upper hand because the Ukrainian Armed Forces will be badly depleted, Russia will have taken additional territory and Biden will be looking for a face-saving way out of the fiasco ahead of the presidential elections.

The ace in the hole for Putin will be the coming winter of 2024. Last winter was unusually mild in Europe and the EU muddled through with the energy supplies it could muster. The weather may not be so cooperative next year. Russia may be more ruthless when it comes to actually turning off the natural gas supplies.

The Only Winner in a 1970s-Style Economy

This convergence of factors could lead to much higher energy prices even as the U.S. and EU fall into a severe recession. The combination of weak growth and high prices is called stagflation, last seen in the late 1970s and early 1980s. It could happen again.

This is one of the worst economic outcomes possible. It means losses for stocks (because of recession), losses for government bonds (because of inflation), losses for corporate bonds (because of business failures), and major losses for commercial real estate (because of low occupancy rates and mortgage defaults).

The only winner, as was the case from 1977 to 1980, is gold.

The Daily Reckoning