The world is unraveling; the depth of the disorder is alarming; its pace is accelerating; and its potential impact on your investments is far-reaching.
Just last week, Russian President Vladimir Putin — until recently the warmly-welcomed eighth member of the G8 Industrialized Nations — lashed out viciously against the West.
In a defiant, combative state-of-the-nation speech before the Russian parliament, he compared Western leaders to Adolph Hitler, implicitly threatening that they could meet a similar fate for their “hateful ideas.”
He accused them of plotting the dismemberment and demise of the Russian peoples, saying they’d be “delighted” to see the country fall apart like the former Yugoslavia “with all its tragic consequences.”
He declared they are surrounding Russia with “a new Iron Curtain,” making no pretense of disguising his paranoia.
|Putin fired up, addressing Russian Parliament last week.|
And he scoffed at the West’s anger over the Ukraine crisis. “If this did not happen,” he insisted, “they would come up with another excuse to hold Russia back, to contain Russia, to influence Russia, or to take advantage of Russia for their own interests.”
This was a landmark speech — not just in the bravado of his chest-pounding, but also in the audacity of his actions, including:
* Putin’s annexation of the Crimea this past March — the watershed event that will go down in history as ending the post-Cold War world order of the late 20th Century and beginning the new, not-so-cold conflicts of the 21st Century.
* Putin’s de-facto annexation of Eastern Ukraine into the Greater Russia, staking his claim to territory that’s double the size of Crimea.
|Putin says the West’s actions remind him of Hitler’s. But ironically, the 31,000 square miles he has taken over in Ukraine is almost the same as the area of today’s Austria, the nation Hitler annexed 76 years earlier.|
* Putin’s takeover of 31,000 square miles of territory overall, more than the areas of Maryland, New Jersey and Massachusetts combined — and almost as much as Hitler’s Anschluss (annexation) of Austria 76 years ago.
* Putin’s moves to take personal control over Russia’s entire defense industry with the aim of spurring development of modern weaponry.
* Putin’s multi-pronged efforts to build up Russia’s nuclear power, including major exercises by forces responsible for Russia’s strategic nuclear arsenal.
* Putin’s recent incursions into European airspace by fighter jets and long-range bombers, including larger, more complex formations of aircraft, flying more provocative routes than usual. (Even those over international airspace in the Baltic Sea, North Sea and Atlantic Ocean violated civil aviation agreements for filing of flight plans.)
* Putin’s dramatic pivot to China, redrawing some of the same lines that divided the communist East from the capitalist West during the worst years of the Cold War.
However, the immediate — and most salient — consequences of his actions are neither political nor military. They are massive new waves of flight capital from East to West.
Russian money is the first to move. Regardless of their political leanings, Russian oligarchs see the obvious — the exodus of foreign capital, the crumbling ruble, the sinking Russian economy. Putin specifically acknowledged as much in his speech when he offered a kind of blanket amnesty to all Russians who agree to bring their money back home.
East European money is the next to make a beeline for safer havens:
In the Baltic states, the Russophobia is exceeded only by the hatred and vitriol.
In Poland, anti-Russian sentiment is a complex mix of bad memories, negative emotions, aversion and derision that are only exceeded in countries that have suffered recent invasions, such as Ukraine and Georgia.
|Top: Mass grave uncovered in the Katyn Forest, three years after Stalin’s massacre that virtually wiped out Poland’s elite in 1940. Bottom: Site of 2010 crash accident in same forest, again killing many from Poland’s elite.|
Even new-generation Poles cannot forget Stalin’s 1940 massacre of 22,000 Polish officers, priests and intellectuals in the Katyn Forest.
Nor have they forgiven the Russians for their bungled handling of a 2010 crash of a Polish Air Force plane, killing Polish President Lech Kaczyński, his wife, the president of the Polish central bank, 18 members of the Polish parliament, and relatives of Katyn massacre victims.
I do not share these resentments and nor should you. The Katyn massacre is history and Russia has formally apologized. The crash was an accident, and no one can be blamed.
But among many East Europeans, these are intensely emotional, deeply-embedded memories that are unerasable. As long as people feel secure, they can suppress them; as soon as they feel threatened, the memories return in a flash. And the desperation to move money explodes.
Money is also moving from East Asia, where China’s President Xi Jinping — worried about economic stagnation and paranoid about internal revolt — has mounted a sweeping anti-rights campaign, which could be among the worst since the end of the Cultural Revolution in 1976.
It’s flowing from Syria and Iraq, where the largest international alliance since World War II, including 60 nations large and small, is still unable to achieve more than symbolic gains in pushing back 30,000 rampaging jihadists.
Big money is also coming from Japan, where investors now see signs that Abenomics, their last great hope to end decades of stagnation, is already collapsing.
And most of this money is flooding into the one safe country that’s big enough to absorb it: The United States.
Does that wash away America’s fundamental debt troubles, political gridlock and long legacy of policy blunders? Of course not. But it does drive up U.S. asset values, opening up new, untold opportunities for investors.
So stay tuned.
Good luck and God bless!