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War – Second fase

Written by Pablo González and Pedro Nonay trying to understand War’s consequences.

Entry 4 – War (second phase)

Are we trying to avoid the worst?


November 5, 2022

The big world-changing events have not yet happened, but I still believe they are not far off. The meeting between Scholz and Xi Jinping, to which I dedicate a special section below, may be the beginning of it all. I hope so.

As always, I begin this article with my usual press summary, selected for clues as to what is going to happen. I mix well known news, but which I consider important, with others that circulate in less usual media, which I come across in my searches, or to which I am led by notices from reader friends. Today’s summary is as follows:

Interfaz de usuario gráfica, Texto, Aplicación

Descripción generada automáticamente
Gráfico

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Gráfico, Gráfico de barras

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Imagen que contiene Tabla

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After the press summary, I will now turn to the issues that seem to me to be relevant to the search for global peace, albeit temporary.

I make special mention that, in this entry, I have changed my usual system. I have decided to provide less of my own opinions, and to focus more on explaining opinions of third parties that I think are important and need to be highlighted. Of course, even the selection of these third parties is based on my own criteria, so there is always some bias.

Pact vs Total War

The experts are disoriented. I am referring to experts in almost everything (geopolitics, economics, commodities, …). 

And the markets are crazy (because of the above).

This is so because the present situation has only two very different ways out: either we make a pact on almost everything very soon (the new Yalta conference), ...or we start World War III.

The results are completely different in each case.

Therefore, the forecasts of the experts who are confident in the first case have nothing to do with those who believe that we are going to the second case. And that is happening everywhere.

It is interesting to see how Jamie Dimon (the CEO of JP Morgan) sums up the situation. He says he doesn’t know yet if we are facing a minor hurricane, or the superstorm. Neither case is pretty, but there are big differences (you can see it here).

Scholz and Xi Jinping meeting.

I consider very important the most recent news that has caught my attention. It is about what Xi Jinping said after the visit of German Chancellor Scholz to China (news here, and here).

Xi says that “the use of nuclear weapons in Ukraine must be avoided,” which seems to be a warning to Russia, which is something China has not done so far. But he has done so without in any way disdaining his declared friendship with Russia.

He has also called on Germany and Europe to “play a major role in peacemaking and mediating negotiations.” In other words, he is starting to promote the peace proposal, and is trying to get Europe to step back a bit from the USA for this.

At the press conference, together with Scholz, Li Kequiang said: “we both hope that this crisis will soon be over“. And, as these places, with these interlocutors, are not the place to make pretty declarations without realities behind them, this must mean that China sees this peace as very viable, and that it will try to achieve it. 

It is also striking that Scholz has said, at the press conference, that “any change in Taiwan’s status quo can only come about through mutual agreement, and peacefully.” Here one has to remember again where Scholz says that. He would never say it there if the statement were not very covenantal. China seeks such a peaceful settlement on Taiwan, and asks Germany to support it in that, before the West, to include it in the global pact.

The framework of the statements was Scholz’s visit to China to strengthen trade between Germany and China. Perhaps it would be more appropriate (but less diplomatic) to say that what Germany is looking for is for China to help it save its finances, and its access to energy, and its loss of power before the rest of Europe and the USA, … And, if for that, it has to sell parts of Germany to China, it will do so. The German demonstration of “humility, recognition and dedication”, prior to the visit, has been the sale of part of the port of Hamburg to a Chinese company.

It seems that the bases and paths to reach a peace agreement are beginning to be defined. Right after the re-election of Xi Jinping. And, the agreement may be similar to what I have been exposing in previous entries (sorry for the self-publicity).

The agreement could be, as I always say, of the relevance of the Yalta Conference. Something like:

If this happens in some form similar to the one described above, and if it is done well, we could be looking at the “new normal” and have long-term peace.

If done poorly, it could be a stopgap that gives us only temporary peace.

The truth will only be known with the passage of time.

The risk of not accepting the agreement is in the USA. I do not see other parties very opposed to it. And, in the USA itself there are already many forces supporting similar lines, even among moderates. 

The other risk is the classic risk of any agreement. It is the discussion of details. We will see, …

Growth crisis vs. decline

I really liked this article in FPIF, which is a media linked to the American left, a bit populist, but with a lot of level.

He tries to deduce whether China is going to replace the USA as the center of power, or whether we are heading for other scenarios. He wonders if the world is facing a moment of transition of hegemonies.

After his study, he concludes that the USA is in a crisis of decline, and China is in a crisis of growth.  In the meantime, neither country is strong enough to impose itself on the other.

He says that, with the current (American) hegemony, globalization and “financialization,” acting in concert, have created great inequalities, and have eroded American production capacity. 

I find it very significant what you say that, with the deindustrialization of the West, not only have jobs been lost, but more importantly, the ability to pass on knowledge from one generation to the next in the West has been lost. 

Going further, he says that the West has lost (and poor countries have gained) the synergy between production and technological innovation. In other words, “outsourcing production” has preceded the outsourcing of high technology. I consider this reasoning to be very accurate.

He also says that the West’s loss of hegemony is not only economic, but also ideological and political. He says that the masses of the West have lost their middle class sentiment to become indebted consumers, with great economic insecurity, which is radicalizing them. This seems to be an issue that can hardly be refuted.

On the other hand, speaking of China, he says that it has managed, in a few decades, to become the world’s leading superpower in terms of industrial capacity. And it has gone from being a recipient of Western technology to now being the innovator. He gives the data that, between the years 2013 to 2018, China has accounted for 28% of the world GDP growth, which is more than double what the USA has accounted for.

But, precisely because of this accelerated growth, China has problems of social and regional inequalities, excess productive capacity, real estate bubbles, and environmental issues. It is what he calls the growth crisis.

However, although he recognizes some corruption problems, he thinks that China has sufficient support from its society in terms of politics and ideology. Moreover, it is gaining the support of the South (Africa, South America and Asia) with its investment policies without imposing its ideology.

After analyzing all this, including military issues, he believes that the time has not yet come for China to aspire to world supremacy. He therefore believes that we are facing a time of transition, where the two powers will have to coexist, without either being hegemonic.

Ray Dalio (the oracle) has written again

Whenever Ray Dalio writes, it is a luxury to read him, … and almost an obligation. I have already spoken about him, his circumstances and his book (in Entry 1), so I will not repeat the presentation.

The fact is that, on November 1, he has published his new article, as a continuation of his book (“The Changing World Order”).

I’m not going to contribute anything of my own here, but I see it very necessary to make my little excerpt of what he says (especially for those who are lazy to read him in English). 

Among many other things, in a long and dense article, he says:

The following day, on November 2, Ray Dalio published another article, as a continuation of the previous one, but much more optimistic.

He is saying that, not only can we avoid the risks of war, but we can reach the best times in history. And it tells us what we should all do to achieve it, based on adaptability and human invention. 

It states that:

And he tries to convince us that it is worth making that effort, because the damage will be much worse otherwise. We will see if people will listen to him (individuals and leaders).

Hopefully they will listen to him, but we already know that people are very particular, and that they arrive at unexpected results after applying unsuspected reasoning.

Marshall Plan – good news

Interesting news is that the USA and Ukraine are setting up a working group to restore Ukrainian infrastructure (news here).

That’s like preparing the Marshall Plan to fix the country after the war. 

Of course, there are economic profit interests involved. In addition, it will have to be seen who can tackle these jobs after the new global pacts.

What is important is not those much-needed repairs, nor those speculative interests. What I see as essential is that, if someone is already fighting for these contracts, it is because they think that the time for breaking things is over and the time for fixing them is beginning. In other words, they believe that the end of the war is near. Let’s hope they are right!

The most important of all that has been commented in this entry is that there is a possibility that the parties will sit down to try to settle the conflict. It would be best if they did so before the end of the year, when winter starts to make energy supply more difficult, and before it becomes necessary to introduce new economic sanctions. If they do so, we shall see whether they reach a definitive or provisional agreement, but something is always better than nothing.

That’s as far as I’ve gotten for today on this entry. If you liked it, I appreciate you passing the link to the blog to whomever you like.

If you have any feedback or comments on what I’ve written, feel free to send me an email at pgr@pablogonzalez.org.

You are allowed to use part of these writings. There’s no property rights. Please do it mentioning this websitte.

You can read another writings of Pablo here:

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