Time period: February 26 – March 4 2022
Top news story. The main news is the consequences of those “sanctions” (reminding the legal sanctions can only be imposed by the UN Security Council) imposed on Russia by a number of countries. The final picture is still blurred – more or less obvious features it will take in about a month – but some very important circumstances can be noted.
First, there is an increasing likelihood that US sanctions policies are being used to pump capital out of EU countries. In particular, the Apple company, which was the first to announce that it no longer works with Russia and which was followed by many European companies, has already returned to the Russian market. The US has lifted sanctions against Alisher Usmanov, and there are other similar examples.
Second, the EU economy is suffering. Gas supplies are already under serious threat, among other things because Russian companies that are unable to service their obligations due to the ban on payments in dollars and euros are likely to be forced to default. Arrests of their property have already started in the EU countries, and similar processes have been announced in Russia, in such a situation, the gas pipeline is under serious threat.
Third, fertilizer supplies have virtually stopped. The main suppliers of potash fertilizers to world markets are Russia and Belarus, nitrogen fertilizers in the EU are either imported from Russia or produced from Russian gas. In this situation, the EU yield will be much smaller than usual. Adding that the main suppliers of wheat to world markets are Russia and Ukraine, the picture is even more stark.
There are other things, but enough already mentioned to say for sure that if the EU does not quickly back down, its economy will suffer very unpleasant consequences. Even more unpleasant than what awaits Russia and Belarus, as the markets of China, India, Iran and some other large countries remain available to them. In this situation, the US plan (recall, the projected) is likely to succeed, with the aggregate scale of the capital thus obtained being somewhere between 1.5 and 2 trillion dollars.
Note that the US can abandon sanctions without any problems, for the EU it is extremely problematic, because it does not have subjectivity – any active member of this community (for example, Poland) is able to shout louder than the crowd and to obtain the rejection of even quite reasonable initiatives. Note that today one of the main provocateurs is a former member of the EU United Kingdom (see the last section of the Review).
Attention! Almost all of the above indicators refer to data obtained before the beginning of the Russian operation on the territory of Ukraine.
Industrial production in Japan -1.3% per month, 2nd consecutive negative:
PMI (industry peer review index; below 50 indicates stagnation and decline) of the Chinese industry remained in the stagnation zone according to both versions, although it improved:
The service sector is also stagnating:
Japan’s PMI service industry is in recession and is at its lowest for half a year:
The PMI of the Russian industry went into recession even before the beginning of hostilities:
The US PMI was the worst in a year:
Chicago PMI is the weakest in 1.5 years:
In fact, we remind you that the results are even worse, given that by lowering inflation, the results of the industries have been significantly adjusted for the better.
New Zealand Business Confidence is weakest in almost 2 years:
United States Goods Trade Balance is a record – imports soared, exports collapsed:
Germany’s trade surplus is the weakest since 2000 and is at the levels of the 1980/90s:
Dwelling Approvals in Australia -27.9% per month, which is a 39-year record drop:
Mortgage applications in the US continue to decline rapidly (-0.7% per week, 4th straight loss), although at a slightly slower pace:
With inflation, everything is usual in recent months – new records are fixed.
Italy’s CPI (Consumer Price Index) +5.7% per year, at its highest since 1995 and nearing its peak since 1992:
Spanish CPI +7.4% per year, the highest since 1986:
The Euro Area CPI is 5.8% per year, the highest recorded since 1991:
The Euro Area core inflation rate (less food and energy, alcohol and tobacco) +2.7% per year, a record high since 1997:
It should be noted that, against this background, the sanctions that the EU has announced are tantamount to economic suicide.
The Euro Area PPI (Producer Price Index) +30.6% per year, a record for 40 years of the survey:
Turkey CPI 54.4% per year, the highest in 20 years:
Turkish PPI +105.5% per year, at its peak since 1995:
In such a situation, increasing political activity is extremely dangerous, but has Erdoğan ever been afraid of anything?
Canada’s PPI again began to increase rapidly (+16.9% per year), although it has not yet reached a 48-year peak (+17.3%):
Consumer sentiment in Japan is extremely gloomy for 9 months:
And New Zealand – in the entire history of statistics:
French retail sales -0.9% per month, 2nd negative in a row:
Retail in Japan -1.9% per month, the same picture:
The same -1.9% per month for South Korean retail:
The Bank of Russia has skyrocketed the rate to 20%, a record high in this century. The Central Bank of Canada raised the rate by 0.25% to 0.50%. The Central Bank of Australia left the rate unchanged.
Summary. Above, we did not provide a chart of oil prices:
And the chart for natural gas in EU:
These charts clearly show how critical the situation is, and it seems that Saudi Arabia and other OPEC member states are leaning towards supporting Russia in the coming conflict. In any case, the Saudi crown prince was not inclined to accede to the US request for more investment in the American economy. In fact, the actions of the EU and, in part, the US, have led to a forceful collapse of the global dollar system.
If Russia fails to pay with dollars (the euro in this situation is a subsidiary currency against the dollar), it will be forced to create an alternative financial system. At the same time, investments in import substitution and development of the economy can be carried out exclusively in rubles, for which it will be necessary to change the basic policy and structure of ruble money supply (in which there is practically no investment component today). As a result, this process is likely to be accepted by a large number of countries, especially since the risks of dollar transactions (the risk of confiscation and numerous trade bans) have grown to an enormous extent.
At the same time, the US has a very strong interest in reducing the dollar zone, as maintaining its liquidity requires huge resources, in particular, in the event of abandoning the euro, the EU’s disintegration is almost inevitable, because it will simply not be able to meet all its obligations to support its individual members. It should be noted that this mechanism has become an objective reason for the disintegration of the USSR, so that there will be no surprises.
Above all, Russia is likely to be forced to abolish intellectual property, including medicines and critical technical imports. In this case, the US will not be able to retain one of the world’s most important sources of power. By the way, this will inevitably cause a sharp decline in the capitalization of a number of large corporations, whose intellectual property constitutes an important part of assets.
Russia has already virtually shut down some American social media outlets and imposed stricter penalties for the dissemination of news fakes. Taking into account that events are interpreted (including on the territory of Ukraine) by different countries in sometimes opposite ways, measures will be taken to limit mutual information presence. In particular, almost all information channels of Russia and Belarus in the EU have already been banned, a similar process has begun in Russia. As a result, mutual trade processes will be more rigorous, as companies will inevitably be accused of spreading fake information and participating in public events that disseminate such information.
In fact, it can be concluded that the process of the global dollar system collapse has entered a new stage (in Russia, after the downgrade, rating agencies, and auditing and consulting companies associated with the IMF and other Bretton Woods institutions will virtually stop working). At the same time, since many other countries have claims to rating agencies (China tried to fight them, but did not succeed at that time), Russian policy will be approved.
In general, it can be concluded that the Russian operation in Ukraine initiated a chain reaction of the global dollar system collapse, but did not become a cause or even one of the basic factors of this collapse. The situation was preceded for many years, and even the smallest factor could cause a collapse, theoretically, the situation may still be anchored (although every day it becomes more difficult to do this), but it doesn’t make much sense – anyway, in a few months everything will head back to normal again.
But what can be noted, in the current scenario, the role of the victim is clearly intended for the European Union. At the same time, one of the main actors in this process will be the UK, which will try to form its own (albeit limited) currency zone on the pits of the EU. It should be noted that, depending on the results of the US election in November this year, this country will either support Britain (in the event of a flawless republican victory) or try to prevent the eventual disintegration of the German-dominated EU.
We wish a successful working week to our readers, and in Russia and the CIS countries we congratulate women on International Women’s Day!