Everything They’ve Told You About Russia Is A Lie

Buongiorno from beautiful Northern Italy!

The great Austrian School economist Murray Rothbard once said: “Everything the government touches turns to crap.”

I think we need a corollary to this statement, regarding the media.

“Everything the mainstream media feeds you is bull crap.”

And for the last year at least, and for much longer on the fringes, there is no story more lied about, falsified and fabricated than the Russia-Ukraine War.

The Rude Awakening has covered this since I’ve been its editor. And much of the factual content in this piece is taken from my Rude newsletters.

But as we’ve only just become acquainted here at the Morning Reckoning, I’m going to show you why I always thought it was lunacy to start in with the Russians.

Russia Is Not Iran, Iraq or North Korea

It’s not just Americans who misjudge Russia. The United Kingdom – America’s faithful lapdog – is utterly delusional when it comes to the Russians.

A few weeks ago, I had a conversation with a great old friend of mine and what struck me when we spoke about the Russia/Ukraine kerfuffle was how he referred to Russia as a “little” country.

Little?

It’s typical BBChé brainwashing.

I’m not just talking about landmass. (Russia is 70x larger than the UK. Times… not percent.)

I’m not just talking about population. (Russia: 144.7 million; UK: 67.4 million.)

Let’s compare their economies as well…

Look at the difference between their GDPs on a PPP (purchasing power parity) basis:

Credit: Wikipedia

Notice anything there?

Yes, Russia’s economy is bigger than the UK’s.

“Russia is just a gas station!” you say?

How about “The UK is a giant laundromat!” in return?

Russia has stuff. The UK launders money and has castles.

And Russia’s stuff really, really matters to the world.

Sanctions and Price Caps

Even if you’ve taken a macroeconomics course from the most Keynesian-brainwashed professor, he’d tell you that both sanctions and price caps are stupid and never work.

Both The Wall Street Journal and Politico wrote how even Iran, of all countries, escaped the full force of Western sanctions.

What’s most galling is we’ve had recent proof that sanctions not only didn’t hurt Russia, but they also helped Russia develop expertise that didn’t have before!

But before I prove that to you, let’s look at the stuff Russia has that we need.

There’s nothing the US, EU, and UK has that Russia needs.

Coca Cola, Harley Davidson and Gucci bags are all nice-to-haves.

Don’t get me wrong, Russia’s Instagram “stars” have been crying for months. But there will be other avenues for them.

There’s nothing in Europe or North America that Russia absolutely needs.

And when I write, “nothing,” I mean nothing.

Zip, zilch, nada.

Sure, closing markets are never nice, but Russia isn’t going to starve anytime soon. And Russia has all the raw materials it could ever need to continue to build, operate, and grow.

There are many things Russia has that the US and EU need.

This is where the “English majors,” as Dmitry Orlov calls them, have really miscalculated.

The US and France need Russian uranium for their nuclear power plants to operate.

Not “want,” but need.

Even if the US ramps up domestic production, it doesn’t have the technology right now to enrich uranium.

Quite the pickle.

Another example: remember how you were taught the US has the best oil in the world, “light, sweet” crude?

Well, that’s great for making gasoline.

But you can’t make diesel with it.

You need heavy oil like Russian Urals to make diesel.

What about palladium for catalytic converters?

Here’s what the nutcases over at the World Economic Forum had to say:

In terms of raw materials, Russia is also the second-largest exporter of cobalt, one of the key elements used in making rechargeable batteries. It is also the world’s second-largest supplier of vanadium, which is used in large-scale energy storage and in steelmaking.

The country is the sixth-largest exporter of gold, accounting for 4.4% of the world’s supply, and the 10th biggest supplier of lead.

Russia accounts for 10% of the world’s supply of nickel, which is used to make stainless steel and vehicle batteries. The price of nickel soared by 250% in a day on fears that sanctions would hit supplies, and the London Metal Exchange even suspended trading of the metal because of the unprecedented price rises.

Russian exports of platinum account for 12.3% of global supply, and the country is the world’s fourth-largest exporter of tungsten. The country also supplies smaller quantities of manganese (which is used in glassmaking, drinks cans and as paint pigment) and zinc (used in making car bodies).

Russia covers about 3.5% of global demand for copper, and copper prices have hit record highs this month.

After knowing this, would you want to fight these guys, or cut a very large peace/free trade deal?

And that’s not all!

Watch this video in which Putin bragged about how sanctions made the Russians use their brains.

If you doubt Putin’s words – I don’t blame you. But on the topic that the 2014 sanctions helped Russia become the world’s number one wheat exporter, have a look at this chart from Progressive Farmer from before the war:

Russia never built helicopter and marine engines before. It does now.

And while it doesn’t dominate the world stage, watch this video (with the captions on) to see Putin brag about how the ruble is now more stable because they’re not just an oil and gas country anymore.

Sure the ruble bobbed and weaved when the war started…

First it hung around $78 in the beginning, popped up to over $110 shortly thereafter, and crashed to almost $50 as we neared July.

But since then, it’s slowly been building back up to the $70 it finds itself today… the rollercoaster seems behind us.

And let me remind you: The people who look at those numbers and scream “CAPITAL CONTROLS!” are the same people who frantically watched CNBC yesterday wondering what its central bank would do to manipulate interest rates.

It’s important to call out that kind of hypocrisy.

The bottom line is this: these sanctions aren’t fit for purpose. No sanctions are.

Russia Isn’t Losing This War

I wrote the previous sections into this piece because I want you to know where I’m coming from.

Now we look at the war and forward.

This is important: Russia is not – I repeat “not” – losing this war.

Sure, Russia was sloppy at first. And Putin really thought he’d be welcomed as a liberator (sound familiar?).

But Russia is not only NOT losing this war but may very well win it soon.

Why would I say such a thing?

First, because I don’t listen to the numbskulls at ABC, CBS, NBC or BBC.

Second, the people I do listen to are either on the ground or ex-military.

To wit, Gonzalo Lira uploaded a great video to YouTube yesterday that I watched with mouth agape.

To summarize quickly, he says NATO doesn’t have the weapons to fight the full war the neocons are egging on. And he also says the Pentagon and its allies want to negotiate a settlement with Russia.

The RAND Corporation just published a document called “ Avoiding a Long War” to that effect.

But the Russians don’t trust the West at all… so the Russians won’t negotiate.

And it gets worse for the West…

NATO Is Toothless

Russia has mobilized some 650,000 soldiers for the next phase of the war. They won’t be that underprepared or sloppy again.

But what about NATO?

Not even 100,000 soldiers.

NATO just doesn’t have the resources. And even if they did, they can’t move them around. The Ukrainian railroad and road systems are gone. Bombed out.

And what’s scarier is that for every Russian soldier that’s been killed in battle, Ukraine has lost eight.

This won’t end well for the Ukrainians.

The Russians simply can’t lose this war because they’re building something much bigger.

An Age-Old Existential Battle Between Land and Sea

Another good friend of mine always likes to say I’m overexaggerating the threat to the US and the USD.

“As long as the US Navy is patrolling the seas, the world isn’t going to change all that much.”

Which is technically right… if you believe we still live in a sea-based world.

But what the Russians, Chinese, Iranians and Indians (and Turks as well, perhaps) are building is a land-based world.

That’s why China’s Belt and Road Initiative is now a must for the “World Island.”

Halford Mackinder, a British geographer, summarized his Heartland Theory thus:

Who rules East Europe commands the Heartland;

who rules the Heartland commands the World-Island;

who rules the World-Island commands the world.

Mackinder’s map looked like this:

Credit: Wikipedia

Why is Eastern Europe, and hence, Ukraine, so important?

Because it’s the only flat land route to invade Russia.

And that’s what this is ultimately all about.

The Heartland itself is mostly Russia.

One can argue the warming of the Arctic is the best thing that could happen to Russia.

That’s because they’ll have their own sea routes and won’t need even China’s ports.

By the way, feast your eyes on the map below:

Credit: Wikipedia

That’s China’s Belt and Road Initiative and it essentially obviates the need for an open water navy.

AKA what American taxpayers have been spending so much money on.

Rail is faster and cheaper than water, if – and it’s a big if – they can get the whole thing off the ground.

Just look at that map and ask yourself one question: If the Russians have all the resources they need, demand to be paid in rubles for them and can rail them anywhere on this world continent, what on earth do they need US dollars for?

Answer: they don’t.

And that’s the onion.

I can’t overstate how disastrous this will be for the Western standard of living.

If the West loses this war, and it most likely will, there would be no more petrodollar on which most Western consumers get a free ride.

Wrap Up

It’s time to look at the world with facts in hand.

We never should’ve started with the Russians.

And in all likelihood, they’re going to finish this war with a victory.

After a decent interval of watching Europe stew in its own juices, the Russians will open up talks.

But not before Europe throws off its status as an American vassal.

The world is changing before our eyes.

And I think we’ll have to let the chips fall where they may before we make a move.

I’ll be back on Thursday to give you more of my take on the state of our financial world.

Let me know what you think so far by emailing me here. Be sure to tell me if there are any topics you’d like me to cover in future articles.