Monday, September 26, 2022

26: Putin

Why the pound is falling, what it means – and what can be done about it An emergency Bank of England interest rate rise is on the cards to calm markets ...... Kwasi Kwarteng's tax-cutting mini-Budget has sent the pound into a tailspin ....... Investors have dumped UK assets in the wake of the statement, selling off the pound and sending government borrowing costs surging. Britain has suddenly become a riskier bet. ....... “If the Government goes on frightening markets in the way that it has, then [the pound] is going to go on showing a vote of no confidence," said Martin Weale, a former member of the Bank of England’s Monetary Policy Committee. ....... The Government is betting that radically reducing the tax burden will help grow the size of the economy and eventually pay for itself, through higher tax receipts that can pay for the borrowing binge required. ....... Most economists are sceptical. Former Bank of England rate-setter Willem Buiter has branded the plans “totally, totally nuts”. Jacob Kirkegaard from the think tank Peterson Institute for International Economics meanwhile called it

“the epitome of casino macroeconomics”

........ Many economists worry that the wide-ranging tax cuts will add too much to the national debt. ...... The Chancellor’s boosting of demand through £45bn of tax cuts - with the promise of more to come - has fuelled expectations that the Bank will need to start raising interest rates even faster to tame stronger price pressures. ......... as the Chancellor borrows to fund the tax cuts. ....... Kwarteng’s fiscal stimulus is coming at a time when the Bank of England is trying to dampen demand by tightening monetary policy, both by raising interest rates and selling the gilts it holds. It is described by economists as the equivalent of a driver putting one foot on the accelerator and the other on the brake at the same time. ........ Ex-MPC member Danny Blanchflower has been calling for people to short the pound since last week. Paul Donovan, global chief economist at UBS Wealth Management, said: "Investors seem inclined to regard the UK Conservative Party as a doomsday cult."

The War Won’t End Until Putin Loses Offering the Russian president a face-saving compromise will only enable future aggression. ........ The first assumption is that Russia’s president wants to end the war, that he needs an off-ramp, and that he is actually searching for a way to save face and to avoid, in French President Emmanuel Macron’s words, further “humiliation.” It is true that Putin’s army has performed badly, that Russian troops unexpectedly retreated from northern Ukraine, and that they have, at least temporarily, given up the idea of destroying the Ukrainian state. They suffered far greater casualties than anyone expected, lost impressive quantities of equipment, and demonstrated more logistical incompetence than most experts thought possible. But they have now regrouped in eastern and southern Ukraine, where their goals remain audacious: They seek to wear down Ukrainian troops, wear out Ukraine’s international partners,

and exhaust the Ukrainian economy, which may already have contracted by as much as half.

.......... Buoyed by oil and gas revenues, the Russian economy is experiencing a much less severe recession than Ukraine. Unconcerned by public opinion, the Russian army seems not to care how many of its soldiers die. For all of those reasons, Putin may well believe that a long-term war of attrition is his to win, not just in southern and eastern Ukraine but eventually in Kyiv and beyond. Certainly that’s what Kremlin propagandists are still telling the Russian people. On state television, the Russian army is triumphant, Russian soldiers are protecting civilians, and only Ukrainians commit atrocities. With a few minor exceptions,

no one has prepared the Russian public to expect anything except total victory

. ........... In the run-up to the war, senior Russian officials repeatedly denied that they intended to invade Ukraine, Russian state television mocked the Western warnings of invasion as “hysterical,” and Putin personally promised the French president that no war was coming. None of that was true. No future promises made by the Russian state, so long as it is controlled by Putin, can be believed either. .......... assume that any Ukrainian populations handed over to Russia would be subject to arrests, terror, mass theft, and rape on an unprecedented scale; that Ukrainian cities would be incorporated into Russia against the will of the public; and that, as in 2014, when Russian proxies in the Donbas agreed to a truce, any cease-fire would be temporary, lasting only as long as it would take for the Russian army to regroup, rearm, and start again. Putin has made clear that destroying Ukraine is, for him, an essential, even existential, goal. Where is the evidence that he has abandoned it? ......... The third assumption is that this Ukrainian government, or any Ukrainian government, is politically able to swap territory for peace. ....... Russian cruelty also means that any territory that is temporarily ceded will, sooner or later, become the source of an insurgency, because no Ukrainian population can promise to endure that kind of torture indefinitely. Already, guerrillas in the city of Melitopol, occupied since the first days of the war, claim to have killed several Russian officers and carried out acts of sabotage. An underground is emerging in occupied Kherson and will appear in other places too. To concede territory for a deal now will simply set up another conflict later on. The end of one kind of violence will lead to other kinds of violence. ........ This does not mean that the war can or should go on forever, or that diplomacy has no place at all. Nor does it mean that Americans and Europeans should be blind to the real challenges that a long conflict will pose to Ukraine. The Western coalition backing Kyiv could certainly fray; the wave of adrenaline that has so far propelled the Ukrainian army and leadership could crash. Ukraine’s economy could grow worse, making the fight much harder or even impossible to sustain. ........

our goal, our endgame, should be defeat.

........ the American administration clearly knows that the defeat, sidelining, or removal of Putin is the only outcome that offers any long-term stability in Ukraine and the rest of Europe ..... Any cease-fire that allows Putin to experience any kind of victory will be inherently unstable, because it will encourage him to try again. Victory in Crimea did not satisfy the Kremlin. Victory in Kherson will not satisfy the Kremlin either. ........... His generals make calculations and weigh costs. They were perfectly capable of understanding that the price of Russia’s early advances was too high. The price of using tactical nuclear weapons would be far higher: They would achieve no military impact but would destroy all of Russia’s remaining relationships with India, China, and the rest of the world. ....... Only failure can persuade the Russians themselves to question the sense and purpose of a colonial ideology that has repeatedly impoverished and ruined their own economy and society, as well as those of their neighbors, for decades. Yet another frozen conflict, yet another temporary holding pattern, yet another face-saving compromise will not end the pattern of Russian aggression or bring permanent peace.


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