Now What?

Dear Readers,

It’s been an eventful week around the world, with Ukraine, Georgia, and Moldova signing a landmark economic cooperation agreement with the EU, and the US suddenly ‘fessing up that its economy tanked in Q1.

Ukraine Crisis

As you read this, news may have broken regarding the Russian response to three former Soviet states realigning themselves with the West. Whatever the Kremlin says, I think it will be more important what the Russians do—and beware, their actions may be considerably more subtle than sending in the tanks.

I’m sure Putin and his allies are smart enough to realize that East and West still face each other in a balance of mutually assured destruction, though the focus is now economic rather than nuclear conflict (though that threat is still there and should never be forgotten). Russia and China may be more than happy to see the wealth, power, and influence of the West decline, but they also know that a crash in the West will take their economies down as well.

The smart response is a sort of 12-step plan to wean the East from the West economically—always pushing for greater independence and internal strength, until things reach a point at which the West no longer matters to the East.

Unfortunately, smart people often do stupid things, so there are no guarantees. It may yet turn out that the signing of this agreement on the anniversary of the assassination that sparked World War I is prophetic.

Makes me glad I own gold.

US Economic Crash

Meanwhile, back in the USA, Toto has pulled back the curtain, revealing the government’s GDP figure for Q114 to be a shocking -2.9%. It’s striking how unanimously the mainstream press reported this, in the voice of Oz, demanding that we pay no attention to the crash: “It was the weather! The recession is over! Everything is much better now. Honestly, I promise!”

Fact: In almost 70 years of US data, there’s never been a time when GDP went so deeply negative and the US was not in recession.

This implies that Q214 is going to provide a very unpleasant surprise for most analysts, investors, politicians, and pundits… or, if there’s a dead-cat bounce this quarter, that Q314 is really going to pack a wallop.

It’s either that or all of economic history is irrelevant now, trillion-dollar deficits are the new normal, and everything really is peachy.

Uh-huh.

Makes me doubly glad I own gold.