Russia Sanctions Blowback Only Beginning: Globalization in the Crosshairs, Russian Retaliation Coming? — Yves Smith

It’s surprising that the business press has not gotten to be apocalyptic about the worst case downside of the economic war on Russia. And by that we are not including nuclear winter. Due to the fact that financial and real economy effects occur in very different time scales, we are in a phase similar to the runup to the global financial crisis, where it was clear Something Bad to Horrible was underway, yet the press and pols were largely sanguine. I gasped out loud in May 2007 when Bernanke declared that subprime was contained.

The reason the blowback from the sanctions could be cataclysmic is that trying to isolate one of the biggest commodity producers in the world, with significant market share in many critical ones, will soon hit Covid-stressed supply chains. And if the economic brinksmanship isn’t dialed down soon, we’ll see tightly-coupled systems start to go critical. Because the hollowed out business press is much more fixated on finance than nitty gritty real economy operations, some bad outcomes will be noticed quickly because they affect visible companies, while others could be just as detrimental but not be picked up until the effects were advanced.

And recall that the defining characteristic of a tightly coupled process is that a shock moves through the system so quickly that it can’t be interrupted (or may not be reversible at all. Mind you, that does not necessarily mean it moves quickly in clock time....

The fixation is on finance when it is about real resources (as MMT posits). First sanction Iran, then Venezuela, then Russia — and then be shocked when oil price rises and so does pass-through inflation. Duh. But it is not just about energy. It is also about vital natural resources and also food. Did the good folks in charge think through the effects on the world system sufficiently, or at all? Yves Smith explores.

Yves mentions the plane kerfuffle but fails to mention that Russia and China are engaging in a joint venture for commercial aircraft production. Russia has the technical expertise and China the manufacturing capacity to scale production. This will inevitably hurt Western aircraft producers since China buys a lot of them. This type of substitution also provides work for workers that would otherwise be furloughed owing to decoupling, and it is the strategic intention of the US to decouple from China.

So Yves is likely correct that these effects will build, many of which are unforeseen, postponing Western capitalist globalization for some time, or forever depending on the outcome of the zero-sum game that the US is playing against Russia and China to maintain global hegemony, a euphemism for world domination by Western elites and their compradores in the colonies. It is important to understand and keep in mind the end-game so as not to get lost in the details and distractions.
 
Naked Capitalism
Russia Sanctions Blowback Only Beginning: Globalization in the Crosshairs, Russian Retaliation Coming?
Yves Smith