The world is currently engaged in a financial war and the ruble collapse is just one battle

Make no mistake the world is currently engaged in a financial war and the ruble collapse is just one battle. The 2008 Great Financial Crisis ushered in a new currency war that has morphed into a financial market war, with oil as the weapon of choice.

I am not trying to be a fear monger, I am simply pointing out what is occurring in the financial markets. In the beginning, a financial war seems like a no-brainer, i.e., use financial might to damage your enemy’s economy. The flaw in this logic is it assumes no impact on the economy of the attacker. In the age of open economies investors are correct to be concerned about the collateral damage.

he latest battle in this financial war is the engineered drop in oil and subsequent collapse of the Russian ruble. Now that this battle has been waged investors need to know what/where the next battlefield may be.

order to answer this question we need to understand what has transpired over the last few days. Many have been shocked by the lack of intervention by the Central Bank of Russia (CBR) in the days leading up to the currency collapse. Implicitly or explicitly, it appears Russian President Vladimir Putin has allowed a raid on the central bank currency reserves to benefit the oligarchs and state owned corporations. These corporations have issued debt in rubles and either immediately converted into US dollars or have used the debt as collateral at the CBR. The CBR had a choice to defend the ruble and give its foreign currency reserves to speculators or give those reserves to the state owned corporations. The lack of serious currency intervention suggests the CBR has chosen the latter.

The economic impact of this decision is likely to be felt by Russian citizens as they encounter double-digit inflation. If Putin does not handle the internal situation correctly then Russia could face social unrest which may threaten Putin’s leadership. Therefore, Putin’s next move will define the next battle in the global financial war. The leading battlefield candidates are the wheat market, U.S. Treasurys and Gold.

The currency collapse could accelerate Russian aggression in Ukraine. In my view, the purpose of the invasion has always been to control the port cities along the Black Sea. Since roughly 30 percent of the global wheat supply moves through these ports, control gives Putin a formidable economic weapon. Since further aggression risks more economic sanctions it is unclear if this is the most probable move.

Read  more here  : http://www.cnbc.com/id/102285208

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How much does the ancient game of Go, or weiqi, reveal about Chinese military strategy?

Orginal post is here : http://thediplomat.com/2014/12/maritime-southeast-asia-a-game-of-go/

Over at The National Interest last week, Asia-Pacific Center professor Alexander Vuving ran a nifty longish essay explaining China’s grand strategy in the South China Sea in terms of the Japanese game Go, or weiqi as the Chinese call it. It’s well worth your time. Read the whole thing.

Explaining strategic behavior in terms of the games inhabitants of a civilization play is a cottage industry. Henry Kissinger, to name just one major figure, has drawn the parallel between Go and China’s deportment around its periphery.

For Alex, insisting that Beijing’s moves in the South China Sea are trivial is misguided. That’s thinking inspired by chess. Pawns as largely expendable, strategy largely linear in character. Yet by deploying seaborne counterparts to the pawn — white-hulled coast-guard ships, the fishing fleet, reclaimed islands and reefs — China encircles and exerts influence if not control over swathes of sea and sky where it bills itself as the rightful sovereign. Sovereignty means physical control of territory within certain boundaries on the map. Pawns backed by more powerful forces bring about control over time.

The geospatial thinking of a Go master, then, may be on display in maritime Southeast Asia. This supplies Beijing a psychological advantage. What looks unimportant to Westerners steeped in chess constitutes steady, incremental progress toward permanent control of territory that Beijing has pronounced an inalienable part of the motherland. It also represents steady erosion of freedom of the seas in the China seas — a process that could discredit the principle of freedom of the seas across the globe, with unknowable but certainly baneful results. Unless, that is, you think surrendering a principle on which the liberal system of trade and commerce is built is a price worth paying to appease Asia’s big brother.

But — and you knew a but was coming — I would affix an asterisk to Alex’s commentary. People are not cultural automatons. The games they play may influence how they think, but they do not determine their actions. Or, if they do, it verges on impossible to demonstrate how such factors shape conduct in the real world. If policymakers, executors of policy, or ordinary people report that Go, or chess, inspired them to do this or that, then fine. That’s about as close as it gets to proving causation. Short of that, tracing the impact of strategic culture is largely a matter of conjecture. We know culture exists, and we know it’s important. Measuring it or forecasting its effects is an elusive task, fraught with ambiguity. Hence the asterisk.

It’s also crucial not to oversimplify. Cultural influence isn’t uniform within a given mass of people. I’m virtually sure, to name one Western example I know well, that chess — linear strategy employing cost/benefit logic and pieces with varying capabilities — exerts zero influence on what I say and do. The Naval Diplomat has played little chess, has no talent for it, and — perhaps not coincidentally — has no interest in it. That would nullify Alex’s analysis if — heaven forfend — I ever attained high office. One doubts, moreover, that Go is that all-pervasive among the Chinese that it overrides ordinary cost/benefit logic, Confucianism, the tenets of Marxism-Leninism, and on and on. Go is not all-important. In short, let’s not oversell the social and cultural dimension of strategy.

And lastly, even if you assume Go or chess do provide thumb rules for appraising Eastern or Western behavior, there are countervailing strands of culture within any society. Culture is a mélange, not a simple list of traits or influences. Asians like surrounding and controlling territory? Sure they do. But they have also proved receptive to the Western strategic canon, in particular the writings of Carl von Clausewitz. Mao quotes Clausewitz repeatedly. And Clausewitz was a thinker and martial practitioner who urged statesmen and commanders to subordinate the chaotic, nonlinear world of armed conflict to rational — linear — logic.

Do Westerners prefer the linear approach? Sure, I suppose you can say that. But they also like to encircle and crush opponents. The Battle of Cannae, where Carthaginian forces surrounded and annihilated a Roman army, became a metaphor for European strategists that endured into the twentieth century. That’s rather Go-like. Westerners are direct? Sure, but the figure of Odysseus, who embodied craft, guile, and cunning, also runs through Western strategic thought. Deception has its place in Western warmaking and diplomacy.

And so forth. It’s helpful to think of civilizations as possessing dominant and recessive characteristics. Policymakers or strategists may have certain strategic preferences — Asians for the geospatial approach and gradualism, Westerners for punching opponents in the mouth — but certain situations can bring forth the recessive traits. Trying to discern what action will summon forth what response from an antagonist is more enlightening, and informative, than projecting behavior solely from the games people play.

That is all.

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