Good Friday Morning, and welcome to 2022, or as the kids call it, 2020-2. As the year kicked off, I thought that was a good joke. But it’s kind of funny how 2020 kicked off with accusations that Trump was trying to start WWIII with Iran after killing Solemani. 2022 is kicking off with people believing that Biden will kickstart WWIII with Russia over Ukraine. We still have a global pandemic, and China is still engaged in brutal lockdown procedures.
2022 is starting with some impressive rhyming. We’ll see where things go. The issues we face are different, as are the leaders and circumstances around them. This week, I’m diving into the significant storylines driving things in the first quarter of the year — with special attention on the US economy and the Russia/Ukraine situation. Links to follow.
Where you can find me this week
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Biden’s administration lacks a single accomplishment – Conservative Institute
Putin plays Biden’s weakness like a fiddle – Conservative Institute
Biden’s incompetence drives the Russia/Ukraine and US economy storylines.
Have you ever stood on the edge of the ocean before a storm hits? The clouds darken, the wind picks up, you smell that shift in the air, and if you’re looking at the ocean waters, they get really choppy. Waves are crashing, the water on the beach is foamy, and there are plenty of warnings to stay out of the water. That’s how I feel about 2022 so far. The waters are incredibly choppy, and all the signs of the moment point to worsening trends.
Maybe the storm stays offshore, and we experience the side effects like this at the moment, or perhaps the storm crashes ashore. If you don’t have a radar, it’s harder to read.
I’m stretching that metaphor a bit because it’s the most accurate description of where I am while watching events. Everything is extremely choppy. Writing during the Trump administration was like riding through a billion mini-whirlwinds with a press trying to amplify all of them. The press doesn’t want to cover the incompetence with Biden, but it’s just impossible to miss. What’s also hard to forget is that Biden is several levels below Trump’s incompetence.
I’ll give you an example from Thursday evening while I’m writing.
CNN National Security Correspondent Alexander Marquardt reported the following:
A Russian invasion is now virtually certain once the ground freezes, Biden said to Zelensky, a senior Ukrainian official told @mchancecnn. Kyiv could be “sacked,” Russian forces may attempt to occupy it, “prepare for impact,” Biden said, according to this official.
The White House turned around and denied this call description; Ukraine followed suit in a denial statement. But Christopher Miller, a similar style reporter for BuzzFeedNews, confirmed Marquardt’s reporting and said the call lined up with his description, but the Ukrainian government pushed back more against Biden’s description of events in the call.
What’s true? Who knows. The first statement sure sounds like something Biden would say, and then the White House comms team would rush out to clean up the mess. Republicans in Congress naturally started calling for a release of the transcript of the call.
The entire thing is bizarre. Early on in the Trump administration, there was a slew of “explainers” who would jump on cable television shows to “explain” Trump’s statements and try to make them make sense. Usually, these people would last about 6-8 months before getting canned because nothing they said made sense after a while because Trump was erratic and didn’t have a cohesive plan to run things.
Biden is similar in that he says bizarre things, which you could chalk up to age, health, or he believes some of the bizarre stuff he says. But because Biden has a reasonably competent comms team, they can run out and do what Trump’s explainers did.
The Biden team ran as the “adults back in charge,” comparing themselves to the Trump administration. The problem is that the Biden folks have managed to mess up every single thing they’ve gotten their hands on. And as I’m watching some of the major storylines of the first quarter of 2022 unfold, I’m not convinced this is an administration capable of navigating a storm. They ran into the dock in calm weather. And now actual events are starting to unfold, the kind of things that define eras and Presidencies.
The storylines driving 2022, so far.
Here are the major storylines I’m watching this first quarter. Some I’ve written about here, some I haven’t, but they’re all forming larger and louder waves.
- As I already mentioned, Russia’s potential invasion of Ukraine.
- China’s real estate crisis. The latest news is that China is talking about breaking up Evergrande to contain the crisis/fallout.
- The European (and global) energy crisis.
- European energy crisis making it weak against a more assertive Russia.
- Inflation is continuing to remain high. Shortages are persisting. Supply-chain continues to remain mucked up.
- The Federal Reserve signaling interest rates are on the way to combat inflation.
- Stephen Breyer’s retirement from the Supreme Court signals a new nomination battle is on the way — potentially locking up the Senate for any other work soon.
These are things actively happening, and more could occur. Intelligence Quarterly put out a list of some of the most likely risks heading into 2022 — and some of their risk suggestions have been highly accurate.
The choppiest waters this week have been in the markets, as investors try to reposition where they think this year is headed. We’ve had 1,000, 800, and 500 point swings in all directions in the DJIA, and other indexes are responding in kind. The Wall Street Journal reports:
The Federal Reserve is about to end America’s era of easy money. That is prompting investors to reverse course on two years of investing strategies, kicking off this month’s broad market rout, the worst selloff since the early days of the pandemic.
Major U.S. stock indexes have dropped between 6% and 15% in January, through Thursday, with some investor favorites during the pandemic—including Covid-19 vaccine maker Moderna Inc., Peloton Interactive Inc. and Netflix Inc.—falling around two or three times as much. Wall Street’s fear gauge, the Cboe Volatility Index of expected market swings, has almost doubled this year. Some well-known hedge funds are down 10% or more, said people familiar with the results.
The one false point in that WSJ report is that they’re saying investors are pivoting off the last two years of investing strategy. That’s not true. The Federal Reserve’s current easy money strategy goes back to the Great Recession of 2008. We’ve not come out of that mindset yet, where accommodative monetary policy has led the way. Inflation is forcing their hand because you can’t make economic policy easy like this and combat inflation. You must pick one.
I agree with Nicholas Glinsman’s assessment that the Federal Reserve is mainly guessing at the best policy because it’s impossible to project where inflation will be a year from now. This inflationary moment arrived from the accommodative policy of Congress in combatting COVID-19 and the explosion by consumers for goods and services after being prevented from buying or selling for a year. Where things head from here is anyone’s guess because there’s no road map. Glinsman adds:
On the surface a US recession appears at first a rather remote risk considering the Bloomberg consensus GDP 2022 growth estimate is 3.8%. Nevertheless, with retail sales way above trend and consumers incredibly negative on purchases of houses, cars and durables the downside risk to that forecast is sizeable. Moreover, the following comparison of the University of Michigan to the Conference Board consumer sentiment series warns of recession. This seems more like a 2023 story unless of course financial conditions tighten dramatically and feedback into economic data. At this point that is more a dystopian forecast, but stranger things have happened.
The reason he’s pointing to 2023 is that that’s when the full impact of the Fed’s interest rate hikes would start being felt across the broader economy. However, that timeline can speed up if some external event accelerates things.
I’ve suggested that China’s economy could serve as that kind of accelerant in the past. Russia’s potential invasion of Ukraine is another thing that could impact global markets. If Russia declines to invade and instead seeks to squeeze concessions out of the West by restricting the flow of oil, a distinct possibility, that would trigger a spike in oil prices and trigger an even more profound energy crisis across Europe.
I do not think Russia invading Ukraine and taking over the entire country is the sole end of Putin and Russia, nor is it inevitable. I wouldn’t doubt Russia would make a move. But the conditions aren’t right, nor is war the sole objective of Putin. George Kennan once wrote of the Soviets that they wanted the spoils of war without the war; the same was generally true of the Tsars that preceded pre-communist revolution Russia. I tend to believe the same is true of Putin. He wants to flex Russia’s might to expand territorial powers and create a new sphere of influence while not going into a full war.
Russia will want favorable weather conditions for moving around heavy armor, which is why we should be looking for weather reports that the ground is fully frozen and a good stretch of sub-freezing temperatures. Weather conditions in Ukraine are not optimal for a Russian ground attack with heavy forces right now, and there is a short window before the normal March thaw. The ground is not fully frozen yet due to a mild winter; even if it does freeze in the next two to four weeks, that only gives the Russians a maximum of one to two months until March. When the ground thaws, heavy forces would slow significantly, extending the invasion timeline and making it a riskier campaign.
We also haven’t seen any evidence that Russia is making final medical preparations for a ground invasion. If it intends to attack Ukraine with a heavy force, the presence of large amounts of medical equipment and manned mobile field hospitals will be an indicator. Field ambulances are easy to identify because of the red crosses. There have been sporadic reports of Russian field hospitals, but we should be looking for reports that they are fully manned with medical personnel. Especially during the COVID-19 pandemic, it will be a difficult decision to pull medical personnel from civilian or garrison hospitals for a feint or a training exercise.
The other thing they note is that to sustain an effective military campaign against Ukraine, they’d need about double the military forces they currently have called up.
Could all of this change? Sure. I’m not in the same position as the White House, so I find the “imminent invasion” and Ukraine being sacked talk very strange. Ukraine doesn’t concur with Biden on this either. The White House could be right, or they could be overselling the Russian invasion threat because they’re terrified of looking bad after the Afghanistan meltdown. So they’re claiming Putin’s invasion is imminent and will claim a victory if Putin does nothing.
I see this in the vein of Russia invading Georgia and Crimea. A limited excursion meant to drive a lesson home and gain broader powers elsewhere. Putin wants to walk out of this with a win, and he’ll take whatever he can get. Biden is perceived as weak and ineffectual, so whatever you can get could be quite a bit. Putin knows Biden’s threat of military forces being used is empty talk. The United States doesn’t have enough troops in that area to make a massive difference. We’re not risking the potential of nuclear war over Ukraine.
Ultimately, this is all conjecture, and Putin’s actions will depend on what the West does as any other factor. If the US heads into a recession or shows recessionary signals, that will encourage Putin further. A weak President dealing with a recession does not have a broad hand to deal with foreign policy.
Like storm predictions, there are many variables at play. There are more than I’ve even mentioned here. But in my mind, the reason I see darker clouds and a potential storm is because I don’t believe the Fed will ace this inflation issue, and I’m not confident in Biden handling a hawkish Russia. Biden’s approval ratings (hitting new all-time lows this past week) are at rock bottom for a reason: he’s terrible at his job.
The Carter comparisons are looking too kind.
Links of the week
Trump faces MAGA revolt over endorsement in Tennessee 5th Congressional District: The former president’s pick in an open congressional primary has sparked pushback from some of Trump’s closest House allies and MAGA activists. – Politico
The Case Against Masks at School: Districts should rethink imposing on millions of children an intervention that provides little discernible benefit. – Margery Smelkinson, Leslie Bienen, and Jeanne Noble, The Atlantic
How Biden will choose the next Supreme Court nominee – Tom Goldstein, SCOTUSBlog
DHS Secretary Had a Disastrous Meeting with Border Patrol Agents – Julio Rosas, Townhall
‘Betraying the American people’: Leaked video reveals Joe Biden’s ‘hush hush’ migrant invasion – Miranda Devine, NYPost
A Covid Origin Conspiracy? Newly released emails make more plausible the contention that Anthony Fauci and Francis Collins presided over the suppression of the lab-leak theory for political reasons. – Nicholas Wade, City Journal
Nearly two dozen US citizens and legal residents escape Afghanistan with the help of US veterans and civilians: Project Dynamo co-founder says ‘more and more’ US citizens are trying to escape Afghanistan every day – Paul Best, Fox News
Twitter Thread(s) of the week
Satire of the week
Thanks for reading!