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Tuesday, 6 December 2016

Follow the Money (1)

There is a lot of talk about the impact of Russian disinformation on the 2016 American presidential and the 2017 European parliamentary and/or presidential elections (eg, WP). There is also a lot of talk about the global display of force by China (eg, South China Sea islands) and Russia (eg, Baltics, Kaliningrad, Syria). There is however little talk about the Chinese and Russian disinformation on their own state of affairs.

The ancient Chinese military strategist Sun Tzu wrote the following in his famous book The Art of War: "All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near."

Building a military is expensive. Anyone who has ever played a strategy game (eg, Age of Empires) knows that all too well. Money is crucial. That fact brings me to a modern catchphrase, Follow the Money (IMDb-1, IMDb-2), which has its roots in an ancient Latin phrase: Qui bono? Or in English: for whose benefit? Wiki: "It is an adage that is used either to suggest a hidden motive or to indicate that the party responsible for something may not be who it appears at first to be."

Since late November 2016, the Wall Street JournalNew York Times reported that China is further restricting foreign use of its currency and today even dividends to EU companies (FT). Capital controls are usually a sign of fragile or weak economies. European countries using capital controls are: Cyprus, Greece and Iceland (Wiki). Other countries using capital controls are: Argentina, China, India, Russia, Ukraine and Venezuela (eg, Bloomberg, Economist, IMFLiveMint, June 2015, Wiki).

The Russian situation is worse. On 11 February 2016, George Soros wrote on op-ed article in the Guardian claiming: "The Putin regime faces bankruptcy in 2017, when a large part of its foreign debt matures, and political turmoil may erupt sooner than that." Others have claimed something similar: George Friedman in GPF, Independent, MarketWatch, ZeroHedge. Others disagree: Forbes.

Combining Sun Tzu's military wisdom and the concept of "Follow the Money" suggests that Russia's military display of power is actually hiding its fundamental weakness. George Friedman's GPF article of 25 October 2016, "The myth of Putin", confirms this view: "Russia is an enormously weak country that Putin is working desperately to make appear far more powerful than it is. He is doing extremely well at creating that illusion."

The obvious conclusion would be that things are safer than they looked like before. I am afraid that would be the wrong conclusion. A strong Russia is much less of a threat than a weak Russia. Please remember the proverb "desperate times call for desperate measures" (quote by Hippocrates) or "There are no desperate situations, there are only desperate people" (quote by Heinz Guderian, a German general during World War II).

Moreover, the forthcoming Trump Presidency is not helpful in this respect as it's not clear where Trump's loyalty would rest: Europe (eg, Deutsche Bank) or Russia (eg, Russian business ties).

The Proclaimers - Follow the Money (1994) - artists, lyrics, video, Wiki-1, Wiki-2