The Humiliation of Vladimir Putin

HIS TROOPS IN DISARRAY, his economy about to crash — Vladimir Putin is cornered and irrational, even threatening the use of tactical nuclear weapons — as his standing in Moscow suddenly looks shaky.

THIS COULD BE ONE OF THE MOST VOLATILE WEEKS the world has seen since 1945, beginning with a potentially ugly opening in the financial markets this morning as a liquidity crisis looms for the SWIFT financial-messaging infrastructure that links the world’s banks.

WITH SOME RUSSIAN BANKS NOW EXCLUDED FROM SWIFT, there’s a threat of missed payments and giant overdrafts, which could force monetary authorities to flood the system with dollars, according to a report yesterday from highly regarded analyst Soltan Pozsar at Credit Suisse.

THE FED, AGAIN: Just as the U.S. central bankers are finishing their asset
purchases, there could be a need in the next few hours to expand the Fed’s balance sheet to cope with a SWIFT crisis; at the least, a period of aggressive monetary tightening for the rest of this year now looks less than certain (even as the price of energy and grain surges).

THE ELECTRIFYING DEVELOPMENTS on the battlefield this weekend surely humiliated Putin, whose forces were thwarted in most Ukrainian cities. Western military experts mocked the inept Russian invasion, which has run out of weapons and food — as morale plunges.

NOW PUTIN FACES A DECISION: He can dramatically increase bombing of Ukrainian cities, and rely on help from Belarus, whose loathsome dictator, Alexander Lukashenko, will be sending his troops into northern Ukraine.

EVEN THAT MAY NOT BE ENOUGH to subdue the brave patriots in Kyiv, who are willing to die for their country (one wonders how many Russian troops are willing to die for Putin). As Russian casualties mount, the key question will become clear: how long can Putin hold on before someone in his tiny group of cronies takes him out?

THE NEW YORK TIMES REPORTED THIS MORNING that Russia’s most senior military officer, Valery Gerasimov, sat stone-faced as Putin decreed that Russian nuclear forces should go on alert, “leaving some wondering what (Gerasimov) was thinking, and how he might respond.” Friction between Putin and his military could become a major part of this narrative.

WHILE PUTIN HAS BECOME A GLOBAL PARIAH, the beleaguered U.S. President enters tomorrow night’s State of the Union address with a 37% job approval rating in the latest Washington Post survey. Joe Biden will barely mention his moribund Build Back Better bill; like virtually every Western leader, he will wrap himself around the superstar hero, Volodymyr Zelensky.

WE BEGIN THIS WEEK with little optimism that talks between Russia and Ukraine will produce much; it could take many more days of Russian military defeats and a collapsing ruble before there’s a meaningful cease-fire. In the meantime the markets face extreme volatility, with war raging on the streets of Kyiv.

Related: Corporate World Builds up Fortress To Isolate Russia From the International Business Community

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