You read that right. Ukraine announced today that it is cutting off a third of the natural gas flow to Europe:
Gas Transit Services of Ukraine (OGTSU) declared force majeure on Tuesday, saying that it was impossible to continue the transit of gas through a connection point and compressor station located in the Lugansk area. As OGTSU personnel “cannot carry out operational and technological control” over the Sokhranovka connector point and Novopskov compressor station, the company cannot continue to fulfill its contract obligations, it said.
Gas from this connection will not be accepted into the transit system of Ukraine starting at 7 am on Wednesday, OGTSU said.
The motive behind this move is irrelevant. The “why” does not matter. It is the negative effect it will have on an already shaky European economy. First, when the supply of an essential good or commodity like gas is reduced significantly the price will increase dramatically. That adds to inflation in Europe. It is akin to a game of musical chairs. But instead of having 10 players competing to snag a seat from 9 chairs, we now have 10 players but only 5 chairs. The competition will be fierce.
Second, the reduced supply will probably force some businesses to close shop. That means some unemployed people. So not only will the affected countries face higher costs, they also will be burdened with more jobless people.
Third, there is a ripple effect. The price surge and the loss of product or services from businesses forced to close their doors will spread outward and produce negative effects in the countries that are trading partners with nations forced to curtail use of natural gas.
If this a ploy by Ukraine to put pressure on Europe in order to secure more support in terms of money and weapons it is a stupid move. It is the proverbial angry dog biting the hand of its feeder. Dogs are smart but they cannot run a can opener. Unopened cans mean no food.
The inflation that is now surging in Europe and the United States (and in other countries for that matter) is doubly dangerous because it is not the traditional inflation. What do I mean? Traditional inflation is a product of printing too much money and that money chases a relatively fixed amount of goods. Here is the Investopedia explanation:
Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.
This current beast is different and more dangerous. First, there are increases in production costs, specifically labor, that is a consequence of the Covid shutdowns. Many employers are having to raise wages in order to entice workers to come back.
Second, there are supply shortages. One of the biggest supply shocks involves computers chips and automobiles:
According to a study released by the US Department of Commerce, the median inventory of computer chips held by consumers — like automakers and medical device manufacturers — fell from 40 days in 2019 to less than 5 in 2021. The implications of this are dire. “If a COVID outbreak, a natural disaster or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential to shut down a manufacturing facility in the US, putting American workers and their families at risk,” the report noted, a danger that isn’t lost on car companies.
Three guesses who is the largest producer of this chips? China, China and China. Car lots that were loaded with new vehicles three years ago now stand vacant. I shot the following at a KIA dealership in Sarasota, Florida a couple of months ago. This was at 1030 in the morning on a normal business day:
If you do not have cars on your lot then you cannot sell cars. Remember those pushy car salesmen? They are having to find other work because there is no inventory.
Now for a newsflash (I am burying the lede)–China is using Covid as a convenient excuse to sabotage the U.S. economy and it is helping fuel inflation. The recent lockdown in Shanghai, for example, makes no sense. For the first two years of the pandemic, China reported one of the lowest infection rates in the world and did not embark on massive lockdowns. Now, out of nowhere, China claims to be battling a deadly disease.
One of the major consequences of this effort to quell Covid in China is a further disruption of critical exports to the United States. Instead of coming out and declaring it was retaliating economically against the United States, China is using Covid as a convenient excuse to damage the import dependent U.S. economy.
Making the picture even more complicated is that the United States is demanding stridently that China sign on to draconian sanctions to punish Russia. China ain’t playing that game.
Inflation in America is rising like a massive Tsunami wave and will sweep over all of the economy. We are already experiencing shortages of chips and baby formula. Food shortages will continue to appear and multiply and desperate consumers will have to pay more for a limited number of key commodities. We are not talking about an isolated event. This is the equivalent of a nuclear bomb going off over New York City and Washington, DC. It is a perfect storm–shortages of key commodities, rising fuel prices, massive cuts imposed by sanctions of key minerals only available from Russia, and trillions of U.S. dollars floating around the globe as key international trading partners shift to other currencies.
If you hold a loan interest loan, hang on to it for dear life. I fear we are on the verge of an inflationary disaster on a global scale. Ukraine has just added a new log to the fiery pyre that is starting to consume the international financial structure.
Is this an attempt to section Europe?
The gas is coming from Lugansk, which Russia has recognized as an independent republic. Could this be an attempt to cut revenues to Lugansk? But is Lugansk getting the gas revenues or Ukraine?
Either way this makes no sense.
There is a piece missing in the puzzle unless Zelensky is getting so unhinged and desperate he will try anything. But then I am sure that Zelensky isn’t really calling the shots here.
Very strange development indeed.
Larry Johnson says
It is an act of desperation. The West plays poker. Putin plays chess (and judo). Advantage Russia.
…and China plays Go !
If Germany does nothing to mitigate this, like opening Nord Stream 2, are they complicit in this action with Ukraine as part of the deindustrialisation plan?
Did you mean low interest loan?
Larry Johnson says
Yes. If you have a mortgage at 2.5%, sit tight. DO NOT REFINANCE with an adjustable rate.
Renewed my mortgage last year. 1% for the next five years. Reckon I’m good now right up to when we all embrace the cleansing nuclear fire.
so it came to this , the US masters ordered ukraine to stop gas transit to europe. European leaders knew about this and knew the impact on their economy but this is next stage of western plan to enable / enact what exactly ? pre-requiste Joint Polish and Baltic peacekeepers entering ukraine and shut off any complaint from europeans ?
there will be a next big escalation by the west since the ukrop miitary collapsing everywhere and their fantasy of ukrop victories will be exposed as massive lies as usual (hello , afghanistan 20 years winning ?)
let see if the escalation will be the entrace of Polish and Baltic NATO peacekeepers into lviv , and if russia responded by hostile action then it will be real WW3
btw LJ , seem like senile col lang already marked you as russian IO.. this while the senile col lang and his minder TTG unashamedly continue posting their own IO on SST supporting NEOCON / WARMONGERS by daily fake news
“pl : Stevelancs is IMO an obvious Russian IO operation, something like Larry Johnson. I would like to see a citation on Ukraine statement of intent to develop nuclear weapons”
Wow! Mentioned in dispatches!
lol thanks for your service and bravery , the cowardly old senile col lang need to be taken down by commenters like you. too many shills and bootlickers on SST comment section too scared to post their honest opinion on col lang’s sanity
In wars of choice the idea seems not to win but to devastate and cause chaos. You keep that war going 10 years and entire generations have no idea how to build a viable country, so more disillusionment, more chaos, more poverty, brain drain of everyone with money and brain to West, the rest of the poor sods left to rot with youth that are incapacitated by trauma and have no idea to rebuild.
So when you withdraw. Job done. They can’t recover any time soon. Which is why a China annoys West with belt and road initiative. It says to these crapped out countries, hey, there is s way to build. Let us show you. They do so for selfish reasons no doubt but they still do it. Then the youth see. Hey. This can happen here. And all the hard work of the long war begins to unravel.
I stop by Turcopolier every day or so to keep an eye on PL’s bitchiness and TTG’s smug lunacy.
It’s getting real entertaining watching the two of them trying to pass off their source material as something to be taken seriously.
Re the Shanghai lock-down, I believe the term is ‘plausible deniability’.
Those extreme consequences made no sense from the start, if it was truly Covid.
However, your view it’s sabotage rings true from a full blown ‘trade war’ angle, having been escalated for five years since the previous administration threw down that gauntlet.
A bit like the initial US claim that Covid in Wuhan was due to ‘zoonotic transmission’, or the subsequently updated ‘lab leak’ theory.
Effectively, that tag team duo deflected all attention from the more probable bio-warfare attack that Ron Unz evidences in his analyses.
It seems the Empire of Lies is revealing itself as the black hat of evil, as it goes up against Eurasia, in this gloves off, winner takes all showdown.
I expect it’ll climax once the neocons finally accept they’ve lost, and have just one, final, option left.
Eric Newhill says
Covid has served its purpose, creating inflation via artificial monetary supply increase/increased demand and artificial low supply (supposed supply chain issues).
UKR v Russia = phase 2 = further, and insurmountable, economic stress.
You’re really gonna love phases 3 and 4.
Eric Newhill says
As an aside, if UKR is kicking Russian ass and repelling the blood thirsty Orks, then why can’t UKR deliver the fuel?
so far the ukraine govt and military are acting like evil orcs from tolkien fantasy lore
truly disgusting the level of western propaganda in making saints and heroes of these evil people
the empire of lies is now finishing the last stages of dropping the mask and become full totalitarian.. and the funny thing their subjects are too busy noticing because they fight each other
Ron refuses to acknowledge that subsequent bat coronaviruses much more similar to Covid 19 have now been found in Indochina. He has a backgound in physics not organic things.
“Coronaviruses with a SARS-CoV-2-like receptor-binding domain allowing ACE2-mediated entry into human cells isolated from bats of Indochinese peninsula.”
America and most Western countries have been hijacked. Democracy is almost dead. People don’t have a say and they are censored and controlled.
What is the Evil Empire or Empire of lies. Specifically who exactly runs this show.
where have you been ? america’s face is like this for decades , it is only recent times they dropped their mask of benevolence toward their own citizens and showed their real face. the illusion of democracy is the best thing since man invented fire , and american took this hook line and sinker..
Hi Larry, ever since Mr Martyanov suggested to visit your site I’ve become a regular reader. I’m now hoping you’ll eventually start making a video blog once or twice a week to compliment your articles one of these days.
Eric Newhill says
This punk Zelensky needs to go. In the role of “tail”, he’s been wagging “the dog” way too much. Yeah, I know he has some help writing his scripts. Nothing we can do about the helpers in the short run.
I hope the EU remains at least on speaking terms with Russia – even if only behind closed doors – so they can get the energy delivery system back online after UKR disintegrates.
Totally agree on interest rates. They will go up. They must as the only remedy to run-away inflation. In turn, the stock market is damaged along with 401Ks, housing market, construction, automobiles – anything that relies on financing for sales (pretty much everything today). On the bright side, the US $ retains some value, but the economic hardship will be intense and outweigh the bright side.
One contention with your assessment – as far as I can see, the current inflation in the US is indeed due to increased money supply – but, yes, supply shortages are contributing too. So a double whammy; high demand due to an influx of money chasing an artificially low supply (alleged supply chain issues), which is a perfect storm in and of itself.
The Chinese are vastly more intelligent, more disciplined and more long term oriented than anyone in US leadership. I consider the Chinese to be the enemy, but I can give the devil his due.
When UKR loses to Russia, there will be no be no thoughtful postmortem in the US. It ill onto the next crisis/distraction. Thus we will spin in an ever tightening downward circle toward the drain until we disappear completely down the tubes. I know a lot of people that say America is too big to fail, to which I reply “Where is Rome? Where is the British Empire?”. Great nations dissipate. We are witnessing that process now. What a time to be alive. At least there re no more mean tweets from Trump.
cant wait to see trump return to twitter , but unlike the delusional americans i see this musk allow freespeech is just nonsense .. there something sinister behind all this , someone want americans to get busy fighting each other in the so called illusionary choice left/right.. easier to control america when the powerful citizens fight each other
Eric Newhill says
Americans are so desperate, lost and hopeless at this point that they take a knee before any barely realistic savior. Thus Musk.
Who is to know what Musk’s real motives and intentions are?
The “enemy” for the US is and will always be from within. No human force on this planet can successfully invade the US mainland, hell not even it’s overseas bases without receiving complete destruction in return.
Why do you consider China the enemy?
I wonder if this Ukraine gas stupidity isn’t just more of the Davos insanity as no group of psychopaths pulls more strings than Davos. Below is a link to Dr. Robert Malone exposing a great deal about Davos, showing their infestation in so many governments with the young leaders programs from 1993 to the present.
This is by an American who lives in Shanghai, and this is his opinion on what’s going on there. The vid is in two halves.
Looks like blackmail. The EU has taken out a 15 billion euro loan for Ukraine but Ze wants more. So he is making that sulky liverwurst an offer he don’t refuse: kiss my ring, and bring lots of cash, or kiss your industry goodbye.
Bill Wade says
If you’re thinking about buying something get it today, it will cost more tomorrow, better yet – buy two of them.
It will cost more tomorrow assuming you can even get it tomorrow.
I have hearing alarming reports of difficulty to impossibility of getting spare parts for our cars, domestic or imported. The big secret is that “domestic” cars have huge percentages of imported components.
In my business I do industrial automation. Devices like motor variable speed drives are nearly impossible to get these days.
Here is the strange thing:
My vendor is quoting me delivery times measured in months. This equipment is manufactured in many countries, Indonesia, Japan, Italy, Taiwan, Singapore, Philippines, Canada, Mexico and the US.
I have a relationship with a distributor in Shanghai that is fast and reliable. I just ordered a drive from him. Got it in 4 days via UPS. I looked at the label, it was “Product of USA” with a March 2022 manufacturers date code!!
This same item from an American distributor was quoted to me at nearly double the price with a Sept delivery date!
I am not exactly sure what to make of this, but no explanation for it gives me a good feeling.
Chris Chuba says
“OGTSU personnel “cannot carry out operational and technological control” over the Sokhranovka connector point and Novopskov compressor station”
And that is all our MSM needs to told to blame it on ‘Putin’ and claim, ‘Putin is cutting off gas supplies to Europe’. This is what happens when you give one side a blank check to create narratives.
Title should read Amerika tells it’s puppet ukraine to turn off the gas.
Sorry, Larry. Inflation is a monetary event and still is. It was going on for years before covid and is accelerating now even more. I suspect the whole psyops about covid and jabs is a cover for the global monetary crisis now unfolding. We are above 15% per year annual inflation in the US for years too. 8% number is official and is nonsense. We are at about 1980 at this rate.
China? I suspect China is making a victim of itself in the same manner as the US and other countries. They are panicking. China fears any kind of economic downturn because its population would become hostile to the government. Only Europe seems to be dumb enough to shoot itself in the foot at the behest of Washington, and China would not shoot itself to harm its own trade. IMHO.
Our population are proper sheep. If there in inflation they will just put on a mask to stop it spreading.
Larry Johnson says
What we will experience is much more than just a monetary event. I agree with you on the numbers, but I think the Chinese have embarked on a campaign to sunder the US economy. If we’re broke we won’t be able to mount a war against China.
Eric Newhill says
That is what I also think (for whatever that is worth). Also, the hard times in the US will cause further civil unrest and we will be at each others’ throats and not unified to fight China when they make their moves.
“If we’re broke we won’t be able to mount a war against China” – is that a negative for you?
Do you want to mount a war against China?
It was the USA’s decision to close its manufacturing industries and buy from China, so they could make more money. They threw your workers out of jobs, not the Chinese.
The Chinese do not seem to have a government favouring war. They have enough land and can make stuff you want to buy, so what is there to fight about?
Taiwan perhaps, if the USA pushes hard enough.
Larry Johnson says
You are familiar with the concept of irony? That’s my intent with that phrase.
How can we go broke when our currency is based on fiat? I’ve realized currency, nowadays, is Monopoly created by the rulers to create order and create a social structure. I realized long ago that a person stuck on an island and had the choice of a trillion dollars, or a years worth of food rations, and a tiny boat, the intelligent people would opt for the boat. It appears to me that money is an illusion and real wealth is the control of resources, technologies, weapons, and the ability to mobilize large groups of people in a structured and controlled way. I think this is what makes China a serious threat because of the control they have over their people, even implementing a social credit system watching their every move, and their control of industries like you mentioned about the car dealerships and chip manufacturing. China produces so mucin within its borders, which is about the same size as the USA, they could sustain themselves if cut off from the rest of the world, especially if Russia and China Unite.
If China and Russia unite we could be facing the extinction of the way we have lived. China has a massive population to make up for Russias much smaller population, while Russia ironically, has a much larger country in terms of land, which holds massive amounts of oil and natural resources like rare earth minerals etc for chip making. It appears we are pushing Russia and China even closer together.
If Japan and Germany were neighbors, it would have changed the situation of WW2 drastically, but this situation is far worse than even if Germany and Japan had been land neighbors because of the sheer size of Russias borders and Chinas population of over a billion citizens. Each they compliment each other perfectly.
It’s as though we are purposely pushing these two nations, which both have similar political systems, which are hybrids between communism and capitalism. I don’t understand why we are doing what we are but I do know that WW3 with Russia and China being the axes of evil will pose a far more dangerous foe than Germany and Japan ever did.
The Proper Definition of Inflation: It’s a Wealth Transfer
The reality of inflation is its association with the diversion of real wealth from one individual to another by means of an expansion in the money supply.
Eric Newhill says
One strategy is to inflate oneself out of debt. On a micro level, you buy a house for $400K and have a $350K loan on the house. Your debt is far greater than your equity. If you can inflate home prices to where yours is now worth $1 million, you now have a very positive equity to debt ratio. But clearly this is a short term artificial tweak to the market with wide ranging ramifications; most not good. That said, it is a wealth transfer in that those who were able to get and use the most credit, win (short term) and those struggling to pay the bills lose b/c their wages do not keep pace with the inflation.
Low Voltage says
“The inflation that is now surging in Europe and the United States (and in other countries for that matter) is doubly dangerous because it is not the traditional inflation.”
I appreciate your work too much to criticize, but I’m afraid you’re not seeing things for what they are. There’s an almost infinite supply of derivatives that can sprout into M1 at the click of a mouse. Of course, 99% of them will evaporate, but even a small percentage chasing real goods will manifest in hyperinflation.
Larry Johnson says
Dude, you miss my point. I’m not an oracle. I post in order to elicit reactions like yours. An informed discussion helps everyone.
@Larry I think it’s about a third of volume that goes through Ukraine, not a third of total that flows to Europe from Russia.
Agree with the general gist of the article. The only thing that has surprised me is how long it’s taken to get to this point.
On the issue of the ukranians shutting down the gas flow, my guess is someone (‘cough’ zelensky) bought a large amount of futures and has now made a bundle.
I believe the economic collapse that is upon us is the result of those in power wanting to create a situation in which war will seem like the only answer to the American, British, and European people. When WW2 began, Americans didn’t want to get involved, until Pearl Harbor, which completely changed their mind. Right now, most Americans and Europeans don’t feel the need or desire to fight a war, but if the economy falters, and people begin to really suffer, those in power can direct that anger towards Russia and China. They need something to push the people into wanting to wage a large scale war, a WW3. The New American Century group that Dick Cheney and George Bush subscribed to believed America needed another Pearl Harbor like event to get us into battle in the Middle East, and that’s exactly what ended up happening. Whether it’s economic, or some other event, the powers that be are conspiring for some sort of large scale event, and I’m quite concerned. I also think people are not aware of how much influence super computers and artificial intelligence is being used to help guide the decisions we are making, which should be highly concerning to all because China, Russia, and the USA are developing these technologies that are incredibly powerful. When President Eisenhower left office he warned us of the military industrial complex, and that’s what everyone likes to focus on, but they don’t seem to pick up on how he began talking about new technologies and computers which will, in the future, possibly pose a significant threat to ourselves and the world. He clearly was privy and knew something few did at that time because he seemed genuinely concerned. Where have our great leaders gone?!