"Nyet Means Nyet"

Russian tanks, rising bond yields and a national debt that just won't quit...

(The Soviet Victory Day marks the capitulation of Nazi Germany to the Soviet Union in the Second World War. Photo: Getty Images)

Bill Bonner, reckoning today from Poitou, France...

There are some things that are obviously disastrous…but apparently irresistible.  Driving drunk…invading Russia… spending more than you can afford – sooner or later, all are bound to lead to trouble.

US deficits are now tending towards $2 trillion per year. At that rate, it won’t take very long to go broke. And since the US Treasury has the ability to ‘print’ all the money it wants, it’s only a matter of time until the presses are running hot, day and night.

At least…that’s our baseline assumption.

Another of our assumptions is that the Primary Trend has reversed. After a 4 decade bull market, both stocks and bonds are now in a sustained downtrend. Bond yields hit their bottom in July 2020; the mainstream financial press is catching on. Reuters:

US bond market signals the end of an era

The…age of low interest rates and inflation that began with the 2008 financial crisis has ended. What follows is unclear.

The market's view has come into sharp focus in recent days amid a dramatic run-up in 10-year Treasury yields that hit 16-year highs.

"We have moved into a new era here," said Greg Whiteley, a portfolio manager at DoubleLine. "It's not going to be a matter of struggling to get the inflation rate higher. It's going to be working to keep it down."

New Era? 

Not exactly. A very old era…in which the chickens come home to roost, just like they always do. And with prices rising and interest rates going up…along with a bigger and bigger pile of debt to finance…there’s sure to be some squawking in the henhouse.  

Our focus last week was on the biggest single item of federal spending – the cost of maintaining the sprawling empire…military bases, aid programs, weapons procurement, ships, planes…and the whole shebang of ‘dominance.’ It is usually lumped into a category called ‘national defense.’ But the ‘defense’ part is probably only about a third of the budget. The rest is for projecting power and influence, not protecting the Homeland. Right now, for example, $100 billion in the most recent price tag for the war in the Ukraine. The money has nothing to do with the defense of the 50 states; au contraire, it puts the US into conflict with Russia, a nuclear power, generating risks far beyond any possible rewards.

What causes this kind of delirium…where you look at the gates of Hell, and can’t stop from entering therein?

It begins with voluntary stupidity. You ignore history. You make a list of the pros…and study it carefully. You list the cons too – and dismiss them. Most important, you take out all the ‘ifs’…the ‘buts’…and the ‘maybes.’ This is where people like Tom Friedman are so helpful.  

The Western media and US weapons giants – prominently aided and abetted by the New York Times columnist– reduce the conflict in the Ukraine, for example, to a simplified meme for the masses: Putin is evil…and that if he isn’t stopped in the Ukraine, there will soon be Russian tanks rolling down the Champs-Elysees. 

This, of course, is nonsense. As subsequent events have shown, there was no way Putin posed a risk to Europe; he couldn’t even conquer a country on his own doorstep, where roughly a third of the population was sympathetic to him. Europe has an economy 7 times larger than Russia’s…and much more sophisticated; there was never any danger of a Russian conquest.

No Middle Ground

Tom Friedman spent 3 days in the Ukraine. He reported to New York Times readers:

One need only look into the eyes of Ukrainian soldiers back from the front, or talk to parents in the streets of Kyiv, to be stripped of any illusions about the moral balance of this war. I was in the country for just three days …

This is as obvious a case of right versus wrong, good versus evil, as you find in international relations since World War II.     

How could the journalist have an opinion on the ‘moral balance’ without taking a glance at the other side of the scale? Did he attend a conference in Moscow? Did he talk to Russian veterans? To any of the victims of the Ukraine’s firepower…or to any of the 2 million refugees who fled – to Russia? No? We didn’t think so. 

Thank Tom Friedman, the sultan of sap, for removing all the hesitations and second thoughts that might have saved a sensible person. Friedman merely clarified that Putin was a devil. There was really no reason to say more. You can’t compromise with the archfiend from Hell. You can’t try to ‘see it from his perspective.’ There’s no middle ground.

Friedman, though, had another full page to fill. So he launched into the Great Game, with one of the lamest geo-strategic justifications for war since the Wehrmacht invaded Poland.  

“Without the Ukraine, Russia ceases to be an empire…” This left us stunned. Where were the question marks? Really? Why? There are plenty of other foundling countries Mother Russia could take in. And why would we care whether Russia were an empire, or not?

Russia has made no claim on the Ukraine. It has only taken over the Eastern provinces. It says it has done so partly because that is where the people live whom it wants to protect. The Kyiv government banned the Russian language; Russian speakers are fined for using their language in public. Naturally, they welcomed a ‘regime change’ led by Vladimir Putin.

The other reason Russia has provided for its invasion is that it is afraid that NATO  might pose a threat. An attack from ‘the West?’ Seems unlikely to us. But Russia’s been down that road. The last time 1941-1945, the Soviet Union suffered 26 million deaths; it doesn’t want to go there again.  

Casus Belli

Justified or not, those are the things Putin seems to care about. But the mainstream media barely mentions them. It describes the war in terms that leave no space for exploring ‘the other side.’ So often are the adjectives “brutal” and/or “unprovoked” used to describe the invasion, there is probably a whole generation of young people who think the words are permanently attached, like ‘high dudgeon’ (we’ve never heard of someone stomping out of a room in ‘low dudgeon’)…or ‘gratuitous insult’ (whoever gets a ‘gratuitous compliment?’).

The attack was not especially brutal. The war began in Feb. 2022. By September, 2023, 18 months later, The New York Times said about 500,000 people had died.  The last time Kiev was a battleground, in 1941, German and Soviet forces lost that many men in just 10 days of fighting.   

Nor was the attack un-provoked. Instead, it appears to be just what America’s empire architects wanted. The deal made in the early ‘90s, between Russia and the leaders of the US, France, Britain and Germany was that Russia would allow re-unification of Germany and in exchange ‘the West’ would not allow NATO to creep to the East. US Ambassador to Moscow, William Burns, who later became head of the CIA, reminded the Bush administration of this promise in 2008. His memo – ‘Nyet Means Nyet’ – famously recalled that bringing NATO up to Russia’s border was a ‘red line’ that shouldn’t be crossed.

Unless, of course, you really wanted to provoke a war.

Even Zelensky’s own team admitted that the real cause of the war wasn’t Putin’s desire for conquest; it was NATO enlargement. Oleksiy Arestovych, former Advisor to the Office of the President of Ukraine under Zelensky, declared that “with a 99.9% probability, our price for joining NATO is a big war with Russia.” 

Russia tried to avoid war; it was the US that was eager for it.

Stay tuned...

Regards,

Bill Bonner

Joel’s Note: Two weeks ago today, the US national debt surpassed $33 trillion for the first time ever. A dubious milestone, to be sure. But with $2 trillion deficits as far as the eye can see, it’s certainly not the last…

Just how much is $33 trillion, really? Well, it’s about 22% more than the U.S. gross national product as of June 30 (about $27 trillion). It’s also six times what the national debt was when George W. Bush took office, back in 2000 ($5.6 trillion). And if the government were to pay it back at the rate of $1 million an hour, interest free, it would take…oh, about 3,750 years…

Of course, the debt is not interest free (and the empire probably don’t have three and three-quarter millennia to pay it back.)

In fact, the current upper limit on the federal funds rate is at its highest since 2001. That puts huge pressure on debt that needs to be rolled over from historically low rates. From The Daily Caller:

Almost 60% of the debt that the U.S. currently owns originated when the average interest rate on U.S. ten-year Treasury notes was less than 3%, while 75% of debt held in three-month Treasuries was acquired at that same rate, according to the CRFB. That debt is now being rolled into new Treasuries at much higher rates, with ten-year Treasuries at a rate of 4.61% and three-year Treasuries at a rate of 4.89% as of Sept. 27, according to FRED.

Currently, the US is spending just over $800 billion per year to service its debt pile, or about 15 percent of the total annual federal spending. That’s before manning a single foreign military base… rolling out a single tank… launching a single ship… piloting a single F-16… firing a single missile, and the myriad associated costs with maintaining a vast empire abroad.

One wonders how many more blank checks Uncle Sam can write to countries afar… when its own financial house appears to be on fire.