The messaging from the White House on the state of our economy is confusing, to say the least. Depending on which speech, figurehead, and time of day, the story zags from one of three different excuses.
First, it’s all Putin’s fault, or maybe it’s the Republicans, or perhaps it’s still that pesky COVID.
Second, what the hell are you talking about? The economy is actually great! How dare you believe your pocketbook over the Biden administration?
And finally third, there isn’t anything they can do about this bad and/or good economy!
Is this a messaging problem? Maybe it’s just a policy issue.
What appears to be clear is that President Biden’s sanctions on Russia aren’t producing the intended results – which would be pain for Russia.
Americans, on the other hand, have economic pain to spare.
Russia just posted an *all time record* in oil profits. The effect of the Western oil embargo appears to have pushed prices to all time highs for all Western consumers, created a discount market for China/India, and enriched the Putin war machinehttps://t.co/rVlAbT2D0H
— Saagar Enjeti (@esaagar) June 14, 2022
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A Balancing Act Between Exports And Prices
Russian fossil fuel revenues skyrocketed in the first 100 days of the war in Ukraine. How could that be if they were supposedly being punished economically with sanctions?
Lauri Myllyvirta, an analyst at the Center for Research on Energy and Clean Air, believes the answer is rooted in economic principles. She states plainly:
“The current rate of revenue is unprecedented, because prices are unprecedented, and export volumes are close to their highest levels on record.”
Export volumes close to record levels after devastating sanctions from the U.S. and Europe? Say it ain’t so!
Just how unprecedented are the revenue and prices? Get ready for your draw to drop.
According to the same Center, Russia earned 93 billion Euros in revenue from oil, gas, and coal exports since their invasion of Ukraine.
So how does this sort of thing happen? It’s all about the price and loopholes.
The European Union decreased its imports of Russian crude oil by about 18% in May of this year. That sounds good; decrease is a word we want to hear when sanctioning a country.
However, India and the United Arab Emirates increased their imports, effectively offsetting what the European Union did with their decrease. But, wait, the United States isn’t accepting Russian oil, right?
The United States did indeed ban all Russian fossil fuel imports. However, we have been importing refined oil from the Netherlands and India. And where do you suppose the Netherlands and India got the fossil fuels to refine? You guessed it, Russia.
The sanctions against Russia were an attempt to damage them enough to stall the assault on Ukraine. However, as Oleg Ustenko, the economic advisor to Ukrainian President Volodymyr Zelensky, highlights, it’s not enough.
“You can stop importing Russian caviar and Russian vodka, and that’s good, but definitely not enough. You need to stop importing Russian oil.”
40 billion pissed away as mainstream media has now dropped the narrative that Ukraine is winning. They are now desperate for a settlement with Russia.https://t.co/mviEo27QET
— RAMZPAUL (@ramzpaul) June 15, 2022
Fighting Two Wars; Winning The Economic War
Russia has not been haphazardly preparing for challenging economic times. It’s a misconception to believe that Russia isn’t strategic in its moves, both militarily and economically.
In 2021, 45% of Russia’s budget was made up of oil and gas sales, according to the International Energy Agency. With the surge in prices offsetting the decrease in exports, Russia has a nice surplus to live off of.
… don't forget the Russian economy! https://t.co/Kk7kxiZzbg
— FOXTROT DELTA SIERRA 🇺🇸 (@RodWag14) June 15, 2022
Just how nice? It’s estimated that the surplus could reach $250 billion. Compare that to the $300 billion frozen in central bank assets and foreign currency reserves at the start of the war. That’s not a bad position to be in.
But you might be thinking, mainly because that’s what the talking heads want you to think, that once Russia’s stockpile runs out, they will start to feel the pain. Sure, I suppose that would be true if it weren’t for key European countries buying them time.
Germany has agreed to a gradual phase of energy sanctions to protect its economic structure. Do you know what that sounds like? Valuable bought time.
If managed appropriately, surpluses can stretch for quite some time. For example, Russia’s account surplus was $37 billion in April alone.
Sanctions Against The American People
So what does this all mean? Well, fill up your car on any given day or go to the grocery store, and you’ll feel the sanctions in your bank account.
Tatiana Orlova, the lead emerging markets economist at Oxford Economics, articulates what we all feel:
“Commodity prices are currently sky-high, and even though there is a drop in the volume of Russian exports due to embargoes and sanctioning, the increase in commodity prices more than compensates for these drops.”
On top of gas, we now see a possible food insecurity issue in a country that no one would ever believe would face food insecurity. A term generally reserved for third-world countries, it relates to food inflation.
Yeah one eviction at a time. This is a disaster. We have never seen so many eviction and homeless cases ever. Inflation is crushing our at risk families. They cannot absorb these increases in gas, food, rent and energy. It is just too much.
— Code of Vets ™ (@codeofvets) June 14, 2022
Pork is up 14%, Beef is up 20%, and eggs are up 14.2%. The President of the World Bank warns of a global recession due to the increase in commodity prices.
But don’t stop there. Airline fares are up 37.8%, electricity bills up 12%, and rent is up 5.2%. And today, the national average for gas is $5.014 a gallon, with the high at $6.435 a gallon.
Do You Guys Smell Something? It Smells Like S**t In Here!
To add insult to injury, the Biden administration, to slow down inflation, is pressuring U.S. agriculture and shipping businesses to buy and carry more Russian fertilizer on the down-low.
That ought to make Putin happy with the fertilizer price index up 14%, according to Green Markets North America.
Biden admin is encouraging companies to buy more Russian fertilizer as inadequate deliveries could put next year's crops at risk. #AgTwitter #fertilizer #food #supplychain https://t.co/CZJXosyANw via @markets @bpolitics by @ElizabethElkin @JenniferJJacobs @DanielPFlatley
— Kim Chipman (@KimChipman1) June 13, 2022
Since January, the Russian ruble has been up 40% against the U.S. Dollar. ‘Analysts’ originally predicted Russia’s economy would plummet between 7.6% to 8.4% with Biden’s sanctions.
Now they are amending that to about 5%. As a result, Russia is poised to be insulated from the economic punishments bestowed upon them.
President Biden bellowed at the AFL-CIO union convention this week in Philadelphia:
“I don’t want to hear any more of these lies about reckless spending. We’re changing people’s lives!”
Changing them alright, but not for the better.
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