What is the only provocation that could bring about the use of nuclear weapons? Nuclear weapons. What is the priority target for nuclear weapons? Nuclear weapons. What is the only established defense against nuclear weapons? Nuclear weapons. How do we prevent the use of nuclear weapons? By threatening the use of nuclear weapons. And we can't get rid of nuclear weapons, because of nuclear weapons. The intransigence, it seems, is a function of the weapons themselves.” - Martin Amis

Over the last decades the mix of interacting and self-reinforcing phenomenons including globalization, new technologies, and the liberalization of capital flows, have radically transformed the world from a Western dominated paradigm to the gradual (re)emergence of regional economic and political players.

We repeated a number of times that this increases the risks of serious breakdowns, including war. When the world economy was growing, the risks were somehow contained because all actors had an incentive to keep the status quo. However, since the Great Financial Crisis we are seeing serious cracks appearing both domestically and internationally.

The biggest of them is the Ukraine crisis, the theater of a violent proxy war between the West and Russia, which echoes the Cold War and brings back alive buried fears about an all out war in the European continent.

As usual, misunderstandings, old resentments and cunning strategies on both sides are plaguing the peace process. Europeans and Americans see an attack on democracy while Russians are threatened at their core. So far, the use of proxy engaged in conventional warfare is keeping the conflict localized, but this raises a wider question: to which extent can state actors of the 21st century manage to keep control over the events, and what will happen if they don't?

The biggest lesson of the 20th century is that war has become very, very expensive. Wars have always been so, but the nuclear peace raised the stake so high that direct conflicts have been avoided so far, but even nuclear peace does not guarantee peace. In other words, should event slip badly out of control,  conventional weapons are likely to rapidly produce a stalemate from which the remaining options include only status quo, surrender, or total nuclear destruction.

The new development in weaponry (such as cyber attacks) are offering very powerful solutions to military commanders but it remains to see whether they will be able to produce effective breakthrough. Looking at historical precedents in which forces are more or less balanced (for example the Iran/Irak war or even the current Ukraine conflict), massive firepower doesn't translate into anything more than tactical and often Pyrrhic victories.

At some point, leaders are always tempted to look for a decisive action, and in a nuclear world there is nothing more powerful than The Bomb. This is why disarmament is necessary if we want to avoid the currently small but terminal risk that comes with nuclear weapons.

History & Geopolitics

There Are Far Fewer Terror Attacks Now Than In the 1970s – "Obviously, a huge number of innocent Americans – 3,000 – were killed on 9/11 … a single terror attack. However,  9/11 – like the Boston Bombing (and the Paris terror attack) – happened because mass surveillance replaced traditional anti-terror measures. (…) And the “War on Terror” has been counter-productive, and only increased the terrorism problem. If we had stuck with tried-and-true anti-terror techniques, high-fatality events like 9/11 would never have happened." (emphasis original)

Guantanamo Bay's Place in U.S. Strategy in the Caribbean – "The only constraint on Washington is the requirement to disband the detention camp at Guantanamo to accommodate Cuba's demands, though this does not mean that the United States will give up the naval base easily. Once played, the Guantanamo card will be gone and Washington's long-term leverage over Havana will be forever altered."

Argentina's President Fends Off Challenges from the Intelligence Service – "Moreover, though the reform appears to be immediately motivated by concerns over the SI's loyalty to Fernandez, it may significantly affect how the Argentine security apparatus functions long after her term in office ends."

Dangerous cracks at Europe’s centre – (Hat tip Lao Ho) – "Fortunately, comparisons with the interwar years still seem far-fetched. Europe back then was a continent still traumatised by the mass killing of the first world war. European states lacked welfare systems — which meant that a prolonged slump quickly translated into mass destitution."

Battle for Ukraine: How the west lost Putin – (Hat tip Lao Ho) – "After a year of crisis, the west realised that it had been pursuing an illusion: for all its post-communist tribulations, Russia was always seen to be on an inexorable path of convergence with Europe and the west — what a senior German official calls the notion that “in the end, they’ll all become like us”."

Convicted Fraudster Jonathan Hay, Harvard’s Man Who Wrecked Russia, Resurfaces in Ukraine – "You cannot make this stuff up. One of the sorriest chapters in recent American history was how we allowed an unprecedented opportunity to assist Russia in managing the end of its Communist era to turn into a looting exercise by well-placed insiders, including advisors under contract to Harvard."

Conversation: Recent Developments in the Ukraine Conflict – [Video] – "Stratfor Military Analysts Paul Floyd and Sim Tack discuss how Russia's strategy will maintain options as violence in eastern Ukraine continues."

Falling Oil Prices Reverberate Through Indonesia and Malaysia – [Video] – "Stratfor East Asia Analyst John Minnich examines how falling oil prices create challenges and benefits for Southeast Asia's largest energy producers."

Finance & Economics

What Thomas Piketty and Larry Summers Don’t Tell You About Income Inequality – "We’ve got to have a real social consensus that the way things are going is dangerous and unacceptable, and an understanding that it will take seriously progressive taxation to make a dent in the problem. But I am not optimistic about the prospects. Through various channels ten percent of national income has been transferred to an über class. Without the political will, that sort of change is difficult to undo."

The Long-Run Cop-Out – (Hat tip Lao Ho) – "Faced with mass unemployment and the enormous waste it entails, for years the Beltway elite devoted almost all their energy not to promoting recovery, but to Bowles-Simpsonism — to devising “grand bargains” that would address the supposedly urgent problem of how we’ll pay for Social Security and Medicare a couple of decades from now."

Economy grows, incomes shrink – "So long as government policy favors the richest among us, shields bankers from criminal and personal civil liability and removes regulatory controls on corporations, the trend line that began 34 years ago is likely to continue even with upswings in the economy."

China: Overborrowed and overbuilt – (Hat tip Lao Ho) – "Today China is the world’s biggest trader of goods and the biggest consumer of everything from iron ore to powdered milk. So unlike the 1890s, when its economy was still largely self-sufficient and had little impact globally, the rest of the world now needs to pay close attention to half-built office towers in the suburbs of Beijing."

Will China de-peg? – "If it’s hot money outflows that are driving the currency tension, then there seems little point going beyond the obvious, that global (and local) speculators no longer see a one-way case for yuan appreciation. That’s not going away."

Michael Masters on speculation, oil, and investment – "And that, fundamentally, is the irony of the speculative run to $145 per barrel in 2008, according to Masters. Even if it was fanned by those who saw profit in exploiting society’s fears about energy and resource shortages, in the long run it did lead to a paradigm-shifting efficiency surge which will be impossible to reverse."

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About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi