Putin does not back down and unfortunately gold will shine…

Written by Kostas Stupas

1) Putin will go all the way …

The Putin regime’s decision to enlist 300,000 Russians to meet the needs of the front it opened in Ukraine is an admission of the failure of operations there.

According to Mikhail Zygar, a Russian journalist and author of “Endgame – Transformations of Vladimir Putin” who took refuge in Berlin, conscription is a sign that “the disintegration of Russia has already begun.” According to him, Russia has entered a new phase of the war in which many Russians suddenly realize what this means, as developments directly affect themselves or the people they know.

A feature of the prevailing climate in Russia is that the word “Mogilisazega” was coined as a result of mixing the words “recruitment” and “dangerous”.

This means that a large section of society feels they are being treated as “cannon fodder” as they are sent into a war they feel is none of their business, and where the professional Russian army has failed to win.

We all remember that this war began with the prospect of “walking” where in a week at most, without any resistance, they will overthrow the Kyiv government and install a puppet government there.

But things turned out differently as the vast majority of Ukrainians insisted on defending the country’s western orientation with weapons.

It is clear that the Ukrainians were eager to sacrifice many things to achieve their goals. The result was that although the Russian army was considered superior, it still had difficulty controlling the eastern and southern provinces of the country where many Russians lived.

The effort cost tens of thousands of deaths and debunked the strength and organization of the Russian armed forces. When the operations did not go according to plan, as Hitler did, the removal of the failed generals began, because the “commander” had to load his failed options somewhere …

As expected, the replacement of personnel in various areas did not lead to the expected results. Indeed, in recent weeks, the Ukrainian army has recaptured important areas of the eastern provinces, pushing the Russians, who left behind their equipment, on a disorganized journey …

Now the regime was forced into conscription. Unlike the Second World War, now Russia is not subject to any invasion, but is itself trying to annex neighboring countries that do not want to be under its influence. The Russians, enlisted and already fighting, have no motive for sacrifice and it shows…

The recruits, having trained for a few months, are likely to be sent to the front as part of a counter-offensive plan being prepared, after the Russian winter spring.

It is also likely that hesitant recruits will fail more easily than those already fighting the invaders.

But authoritarian regimes like Putin cannot afford to lose the war because their leaders would find themselves in the position of the oppressor, that is, where their opponents are now…

It is very likely now that if Ukrainians continue to suffer losses in the fields with conventional weapons, he will be inclined to use nuclear weapons regularly, capable of inflicting multiple strikes and demoralizing Ukrainians.

But the use of such weapons will escalate the reactions of the West and worry its Chinese supporters. From the use of tactical nuclear weapons to the use of strategic weapons, the distance will have narrowed more than at any time in recent decades…

The situation is thus complicated because it is not clear whether a weak Putin is any less dangerous than a strong …

Compounding the situation is the fact that Russia does not seem to have a successor state ready to reconcile with its troubled neighbors and the West.

2) At last the gold shines…

Dear Mr. Stupa, my dear friend Kostas, Warm and unobtrusive request to you, with all that has happened in this last period of time, don’t you think the price of gold has to be at much higher levels to act as a hedge with all this where are they going?

There’s something I don’t see, I’m sure you’ll look into.

Thank you very much

Michael Konstantinidis

Answer: I believe that the recent correction in the price of gold is related to the rise in the dollar exchange rate and the rise in interest rates.

In the medium and long term, I believe that there are sufficient conditions for an increase in the price of gold.

Here are some of the reasons why this might happen.

The dollar cannot rise forever. It has already come a long way and its exchange rate is expected to hurt US corporate profits with consequences for stock prices and the wealth effect on the American consumer. The US economy’s 70% growth depends on consumption, so unemployment and social and political calm depend on it as well.

Higher interest rates are pushing the global economy into recession. Recession and especially the accompanying deflation are not factors that have a positive impact on gold.

The most likely scenario, however, is that we will enter a stagnant state of inflation. This is stagnation and high inflation. In conditions of high inflation like the 1970s, gold gave the best returns while pursuing stocks of companies with inelastic demand (cost pass-through).

Unlike the 1970s in 2022, countries, companies and individuals have very high debt. Thus, an increase in interest rates increases the cost of servicing this debt.

It is only a matter of time due to the rising dollar and rising debt before we see Dominoes default.

So today’s central banks cannot keep interest rates high in order to tame inflation. Because in recent years they have “forgotten” their institutional role and their work as branches of governments, which have in mind how to win the next elections (quantitative easing, zero interest rates, etc.)

If this happens, it will become difficult to control inflation.

High inflation has many causes. Among them: quantitative easing programmes. Supply chain disruptions. declining globalization.

One of the factors revealed during the epidemic that has not been given due importance is demographic aging. More people have left their jobs in Western societies in recent years than those entering the labor market.

As a result, the supply of labor falls below the level of demand, and this raises (and will increase further) labor costs. Labor costs are a particularly important factor in inflationary pressures.

It is expected that this problem, along with the restriction of (deflationary) migration flows due to problems caused by cultural frictions and demographic changes, will be exacerbated until algorithms and automation offer some solutions. But again, if the production of Western goods leaves the developing countries and unemployment and poverty increase, then migration flows will increase … The problem is complex.

So the strength of the dollar and the rise in interest rates are the main reasons for the decline of gold in dollars. In the euro it fell less and in the sterling a few days ago it approached its historical highs …

So aside from inflation and both factors that will reverse at some point, there is a third reason for gold in the long run.

It’s the geopolitical tension. Looking back, the lowest gold prices were during the 1990s to the 2000s when the Soviet Union collapsed and China was economically and militarily comparable to countries in Africa.

In recent years, this picture has been reversed. Russia and China have re-emerged as a great power.

The above are some of the reasons why I believe interest in gold will rebound, which could push the price to all-time highs given the declining purchasing power of the dollar over the past few decades.

Unfortunately, the rise in the price of gold is not accompanied by conditions of prosperity and peace in the world.

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