Dec. 12, 2022

This World Order Won't Be Put Back Together

Like Humpty Dumpty, today's "World-Order" won't be reassembled. All the King's horses and all the King's men won't put the Western Hegemony back together again.

No less an authority than Angela Merkel has declared it so. Merkel is the former Chancellor of Germany. While it's unusual for a retired politician of any nation, much less Germany, to make world headlines, that's just what Merkel did last week. In a far-ranging interview in Der Speigel, Merkel provided some much-needed background on the Conflict in Ukraine.

After all, Merkel was one of the central figures in the events leading up to the current conflict. As the leader of Germany for 16 years, Merkel was one of the few who saw the entire scope of events in Ukraine. Interestingly, she began her political career in East Germany, then under the influence of the old Soviet Union. Two years later, after the reunification of Germany in 1991, she was appointed by Chancellor Helmut Kohl to Minister for Women and Youth, a position at the national level. She remained in Berlin until she retired last year.

Merkel was considered one of the few who could speak frankly to all the other EU Leaders. She was assumed to be close to Vladimir Putin, The Russian Federation President; this may explain why Putin took Merkel's comments last week so personally.

Most relevant to today's discussion, Merkel was Chancellor during the entire Minsk Process, which took place in 2014-15. Germany and France were the mediators for the two Minsky agreements, so Merkel had a personal "hands-on" part in securing those agreements.

The Minsk I and II Agreements attempted to stop the fighting in the Donbas region of Ukraine. Donbas is inhabited principally by ethnic Russians and was a left-over of the old Soviet Union. When the USSR fell, and the Russian Federation began, the people of the Donbas were stranded in this part of the newly formed Ukraine.

A minority population without significant military assets, the Donbas Russians would be forced to fight for their existence.

The primary enemy of the Donbas Russians was the Azov Battalion, now called the Azov Regiment. A Nazi para-military force, you read that right! The Azov targeted pro-Russian "Forces" in Donbas, read ethnic Russians.

The Azov Regiment was officially recognized in 2014, the same year as the Minsk 1 Agreement, and fully incorporated within the Ukraine National Guard later that same year.

So, in 2014, we have the parties for Minsk 1, Ukraine, Russia, and an international third party called the Organization for Security and Cooperation In Europe, all under the watchful eye and good offices of Angela Merkel of Germany.

Unfortunately, the Minsk 1 Agreement failed utterly. The fighting continued.

By any independent review of this history, it's hard to come to any conclusion other than the aggressors in this conflict were/are the Azovs. In any event, negations resumed in 2015, and a second agreement, the Minsk II Agreement, was concluded that year.

Again, an utter failure.

The fighting continued for seven years until the recent Russian occupation/annexation.

Today, the fighting has intensified and encompasses far more territory than just the Donbas. One can't help but think, "if only the Minsk Agreements had worked." Suppose Russia and Ukraine could have reached a genuine agreement. What if the Minsk Agreements could have concluded a real honest peace back then? Perhaps Ukraine could have been spared from all this bloodshed and violence.

However, according to Chancellor Merkel, peace may not have been objective. From that Der Spiegel interview, Merkel had concluded that both sides in the dispute were "frozen." The Agreements did not solve the problems. So, she pivoted and changed her position. Instead of seeking peace, her objective now would be to give Ukraine enough time to fortify itself. To build up its military capabilities for future conflict.

For Putin and the Russian Federation, this now looks like pure deception. Merkel, the objective "third party" leader, had taken the side of Ukraine. She used Minsk I and II merely to give Ukraine more time to prepare for an even great conflict.

Putin reacted to Merkel's comments this way:

"I thought the other participants of this agreement were at least honest, but no, it turns out they were also lying to us and only wanted to pump Ukraine with weapons and get it prepared for a military conflict," Putin said. "We got our bearings too late, to be honest. Maybe we should have started all this [the military operation] earlier, but we just hoped that we would be able to solve it within the framework of the Minsk agreements."

It is now apparent, if it wasn't before, that whatever bonds existed between Europe and Russia are now irretrievably broken. If taken at face value, Merkel's comments tell us that the Collective West and NATO never trusted Russia. And now, clearly, Russia will no longer trust the Collective West.

And if all that's true, then a new multi-polar world will surely supplant today's old and tottering “World Order.”



Econ Briefs


Three important manufacturing reports this morning. Japan, Great Britain, and India all reported substantially lower manufacturing levels in November. Japan's manufacturing was lower by 3.6%, Britain's by 4.6%, and India's by 5.6%.

Analysts are increasingly concerned about a worldwide economic slowdown, leading to a potential recession. This will, no doubt, be topic number one this week as four central banks decide on interest rates.

Interest rates, after all, are the most visible of monetary policies. And all the Central Banks are expected to continue tightening by raising rates. First up this week will be the Federal Reserve, which is expected to raise rates by 50 basis points. That's lower than analysts expected last week and an indication that the Fed is concerned about an economic slowdown.

On Thursday, we'll get three more interest rate decisions: by the Bank of England, the Swiss Central Bank, and the European Central Bank. All three expected to follow the Fed's lead and raise their interest rate by a fraction.

Some significant moves in the pre-markets. Pharmaceutical company Inotiv is trading lower by double digits, while cloud-based software company Coupa Systems is trading higher by double digits. Both are in reaction to earnings.

A little later today, we will get earnings from bus maker Blue Bird, sewing supply company Joann Fabrics, and West Coast-based Oracle Systems.